Is the end in sight, again?
So, here we are again on a Friday and looking at a do or die weekend for Greece. Have we now finally reached the 11th hour of the Greek saga? Will there finally be a deal reached or will this spell the end of the line for Greece and the Eurozone?
Having achieved the vital “no” vote last weekend, PM Tsipras has submitted the Greek plans of reform to its creditors and it looks suspiciously similar to the Juncker Plan which was rejected by the Greeks on June 26th. This possibly begs the question, what was the point of the Referendum if PM Tsipras is just going to go along with all that was proposed prior to the vote? We may see some concessions on debt relief and growth measures which will be a bonus but could show the Greek population that Tsipras was fighting to the very end and this will make it a bit easier to implement reforms. He could also argue that the point of the Referendum was to give him a mandate to strike a deal without leaving the Eurozone.
What are the main points of the proposed reforms? The 3 documents in the proposal consisted of a letter from PM Tsipras, a letter from FM Tsakolotos and a longer document with the action plan. There have been major concessions regarding VAT and pension reforms. They have agreed to move the VAT rate to 23%, with hotels at 13% and pharmaceuticals at 6%. The pension age will be raised to 67 by 2022.
The timeline for action is as follows
Today – at noon, the Greek Parliament will vote on the proposal. This should be passed. It will then up to the Troika to approve the deal
Saturday – The Eurogroup will meet to discuss the proposal
Sunday – The EU leader summit will either pass or decline the plans
If it’s passed, expect market volatility. If it’s turned down, expect market volatility.