(UPD-21:30) 

Negotiations between Greek Minister Tsakalotos and Stathakis with the Quartet are continuing late Sunday. According to government sources, the creditors want the post labor terminations effects to be set at 3-months, instead of the current 6 months. Regarding the 100 instalments arrangements the annual interest rate is expected to be raised from 3% to 5%, not only to those above with liabilities to the state exceeding the 5,000 Euro threshold liabilities, but also to people owning less than that. The below 5,000 threshold will apply to:

1. Those with property exceeding 150,000 Euros in value,

2. Have annual income over double their debt.

A basic condition in order for someone to remain in the 100 instalment arrangement is to not fall behind on any of their monthly tax payments. On the issue of the non-serviceable loans, according to sources, talks are focusing on the Greek government’s proposal for the creation of a loan management fund and the imposition of a clause that would block the sale of non-serviceable loans to hedge funds.

Negotiations have to be wrapped by midnight, Monday or the latest early on Tuesday paving the way for the prior actions and the new MoU to be voted by the Greek parliament on Thursday. Meanwhile, Reuters says the goal of the Greek government is to close the deal until Tuesday, August 11, citing government sources. The news agency reports that the new deal will come to the Greek parliament in as one bill with two articles.

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After a marathon meeting between the Greek negotiating team and its EU creditors, which lasted for 6 and a half hours and ended after midnight, a list of prior actions to be included in the Memorandum of Understanding (MoU) was reportedly agreed upon. According to government sources, the measures to be included before the first tranche of the 86bln Euros ESM bailout is released are:

-VAT changes: An imposition of a 23% VAT on full cariculum private school fares, in order to avoid unfair treatment with other educational services in the private sector (frontistiria) that deal in languages, information technology and preparatory classes for university entry exams which went from 0% VAT to 23%. To avoid confusion on the VAT on meat products, it was decided to transfer beef from the 23% VAT bracket to 13% as is the case with poultry and pork

-Changes in the 100 instalments arrangement: There will be income criteria for debt over 5,000 Euros to the state and a 5% hike in interest. The higher the income the higher the instalments will be, which will results in an increase of the monthly payments the debtors will be obliged to pay to the tax office.

-Farmers: Subsidies to farmers will be scrapped in two stages. Changes to farmers’ taxation will be postponed till Autumn when the new tax bill will come for discussion.

-Solidarity contribution: There seems to be disagreement on the matter, with the creditors desiring the abolition of the 8% coefficient on incomes over 500,000 Euros and an increase from 4% to 6% on incomes between 50,000-100,000 Euros. The Greek side on its part, wants to retain the high income coefficient to avoid burdening the middle income citizens.

-Non serviceable loans: The institutions want price ceiling to be imposed on foreclosures for people’s first residences according to the ‘Katseli Law’, which protects people’s main residence from foreclosure. This is seen as a positive development compared to their previous position on the matter when they demanded foreclosures on all property owners, including first residences.

The thorny early retirement issue will not be included in the prior actions, while there is a difference of opinions on the liberalisation of energy markets, as the creditors want a total liberalisation while the Greek side disagrees. The Greek negotiating team wants to have voted the MoU with all prior actions in parliament by the middle of the upcoming week. A government source said that no reference was made of a bridge-loan, something Germany has been pressing for. The Quartet and the Greek team are expected to continue talks Sunday to wrap up all other prior actions to be included in he new bailout plan.