What’s holding up a deal on Greece’s bailout?

After four and a half months of back and forth, Greece and its creditors remain far from a deal on what reforms the country must make to get more rescue loans. It needs the money to avoid defaulting on its debts and save itself and Europe from an even nastier mess.

The creditors – fellow eurozone states and International Monetary Fund – are little inclined to budge from the policies they have pushed on Greece for five years: heavy cuts that have succeeded in taming government spending but otherwise mauled the economy and society.

The differences between the two positions do not appear to be so large, and for some there are no budgetary implications at all, so it’s a wonder why an agreement cannot be reached.



Here are the main points the sides are locked over.


Creditors want cuts worth 1.8 billion euros to pensions this year. They also want Greece to end state financing now for auxiliary, contribution related pensions – a top-up to pensions that many Greeks receive.

Greece recognises the need for reforms to make the pension system sustainable. They say however that ‘cuts are not reforms’. They refuse to implement any more cuts to pensions.

Creditors also wants to immediately make it more difficult to qualify for early retirement, whereas the government in Athens is offering a staggered increase in the required age, as has happened in the rest of Europe. They offer alternatives such as substantial pension reductions for early retirement to make it less attractive.


There are currently three rates of tax on the sale of goods: 6.5, 13 and 23 percent. Creditors want two rates, 11 and 23 percent, with all but a few goods such as medicines and books on the higher rate, which would automatically hike the cost of most food, medicine, electricity bills and – in a tourism-reliant economy – hotels and restaurants.

Greece is proposing rates of 6.5, 12 and 23 percent, with key consumer staples, hotels and restaurants in the low and middle brackets.


The Greek government wants to gradually restore the minimum wage from around 580 euros) monthly to 750 euros starting next year, and reintroduce collective wage negotiating. Creditors reject that.


Creditors want primary budget surpluses – which exclude interest payments on debt – of 1, 2 and 3 percent of GDP for 2015, 2016 and 2017, respectively.

The government is offering 0.75, 1.75 and 2 percent of GDP. Because the country is back in recession and GDP is shrinking, any surplus will require substantial belt-tightening.


The elephant in the room, for creditors, seems to be Greece’s bloated debt – a daunting 317 billion euros , or 176 percent of the country’s annual economic output.

Tsipras’ government insists it won’t sign an agreement unless it contains some provision on debt relief. Creditors promised last year to discuss the issue, but never did. None of the recent proposals leaked from the creditors mention debt relief.


Both sides agree to a certain degree on opening up closed professions and markets – for example by allowing supermarkets to sell non-prescription medicines that only pharmacies currently sell.