Wednesday seen as day for final Greek push

Euro zone finance ministers gather on Wednesday evening in Brussels for what is undoubtedly the final push to secure an agreement on the stalled Greek bailout which expires next week.

Finance ministers are keen to sign off on the details of the latest Greek reform plan, but with Greek Prime Minister Alexis Tsipras facing dissent from within his own party and his junior coalition partner about signing up to further austerity measures, the room for compromise is narrow.

A list of the headline figures contained in the latest Greek proposals under consideration on Tuesday in Brussels show a number of concessions on the Greek side. On VAT, Greece appears to be willing to agree to abolish the current VAT discount that applies on the Greek islands. However, it proposes that electricity and restaurants will be taxed at 13 per cent instead of 23 per cent as proposed by the lenders, while a VAT rate of 6 per cent rather than 11 per cent will be applied to medicines.

The latest Greek proposals include little in the way of pension reform, a key demand of creditors who have argued that there must be some movement on pensions in light of the fact that the pension bill represents a huge chunk of Greek public spending. Greece does however suggest a gradual phasing-out of early retirement from next year, with a few exceptions, though it wants to keep the supplement paid to low-income pensioners.

A special “solidarity” tax for high income earners, including a tax of 8 per cent on earnings above €500,000 is to be introduced, while the government is ruling out further cuts to public sector pay from their 2014 levels.

Other proposals included in the latest document include a reduction in defence spending, which is expected to yield €200 million in savings in 2016, an increase in the corporate tax rate from 26 per cent to 29 per cent, and a one-off 12 per cent tax on corporate profits above €500 million in 2014.

Overall, the Greek government claims that the new reform measures are expected to save €2.7 billion in 2015 and €5.2 billion in 2016.

While the proposals were given a tentative welcome by leaders on Monday as the most substantive proposals yet presented by Greece, already there has been criticism in the Greek media and opposition figures about the impact €8 billion in further austerity measures will have on the Greek economy.

There is still a resistance among many euro zone member states to cede significant ground to Greece. In a sign of the continuing tough line being taken by Germany, Manfred Weber, the influential head of the European People's Party (EPP) said on Tuesday that the Greek proposals "should not be overrated. "They are only a starting point for further discussions," the German MEP said, criticising the Greek government for "months of confusion and time-wasting."

While the political will undoubtedly exists on all sides to sign off on a revised programme, the latest reform plan is likely to see a number of changes before a final text is agreed. Expect another long night in Brussels on Wednesday.