Athens to propose €12bn compromise

Greek prime minister Alexis Tsipras has called his Syriza party deputies to a meeting this morning as he prepares the ground for a last-minute compromise with lenders to avert Greece leaving the euro zone next week.

Greece was due to send proposals to its creditors last night, with reports in Athens suggesting they would set out spending cuts and tax increases worth €12 billion – more than previously planned, reflecting the need to offset a return to recession and the damage caused by almost two weeks of capital controls.

In return for those savings Greece is looking for a €50 billion bailout and a commitment, at a minimum, to discussions on ways to alleviate its enormous debt burden, which the IMF and senior EU figures, including European Council president Donald Tusk and economics commissioner Pierre Moscovici, have said must be eased.

A concession from the creditors on debt would improve Mr Tsipras’s chances of persuading his far-left party to support the deal, but the likely support of the conservative New Democracy and the centrist Potami for the deal means Syriza could afford to lose a number of its MPs and still push the deal through parliament. If the creditors respond positively to the document, a vote of the Greek parliament could take place on Saturday.

Cash shortage

As the government scrambled to finalise the proposals before last night’s deadline, the problems caused by capital controls were growing more acute. A daily ATM withdrawal limit of €60 remains in place, and many cafes, shops and restaurants are struggling to get their hands on cash. Some ATMs have run short of €20 notes, in effect reducing the withdrawal limit to €50.

Pensioners without bank cards have been particularly hard hit as they have been unable to access their accounts. While banks have been closed since last week, some branches have been opened so the elderly can withdraw a maximum weekly sum of €120.

Hundreds lined up outside banks yesterday morning, many facing hours-long waits in the heat.

The leader of Greece's junior coalition partner, defence minister Panos Kammenos, said the Greek proposal had been approved by the cabinet and would be submitted on time. Finance minister Euclid Tsakalotos was being assisted by a team of French officials in drawing up the proposals.

Tough measures

Having won a thumping referendum majority to reject the austerity terms of a previous bailout plan, and having gained support from opposition party leaders after the resignation of his confrontational finance minister, Mr Tsipras is in a stronger position to impose tough measures and face down resistance at home.

But he could meet strong opposition within Syriza if he presents a deal that may, notwithstanding any commitments on debt relief, amount to a deeper set of cuts than were on the table in recent weeks.

In a reminder of the challenge he faces, the leader of Syriza's far-left wing denounced any imposition of harsh measures. "We don't want to add to the past two failed bailouts a third bailout of tough austerity which will not give any prospects for the country," energy minister Panagiotis Lafazanis said.

According to Athens daily Kathimerini, Greece is planning a reform package worth €12 billion over two years, a figure that reflects the country's return to recession and the damage the economy suffered in recent months.