Key points of latest Greek proposal

In the latest stand off between the Greek government and the Euro zone creditors continue. The Greeks have proposed a draft. Important points in the proposal-

• Greek government challenges the role of TROIKA (ECB, IMF, and European Commission) and says that citizens have rejected their role, but the government has not completely rejected their involvements in the future.

• Government will undo the minimum wage level imposed and take it back to the level of 2012. This we believe will be difficult to agree.

• € 9.5 million addition to pensioner through the reduction in cuts. We believe this will be easier to agree on.

• Change the primary surplus target to 1.5% of GDP instead of current 4.5%. The new agreed number could come out somewhere in the middle. 

• Europe to transfer the remaining tranche of € 1.9 billion to IMF as a repayment of due debt. This is a definite no go for the creditors without the extension of the current programme along with conditions attached.

• Negotiation on payment to ECB of € 6.7 billion due in 2015. This is another no go if austerity is not agreed on.

• Extension of the deadline of bailout expiry, currently on 28^th February, 2015. This could happen anyway if any solution does not come out till then.

• Greek government expects larger tax revenue from its war on corruptive practices. We really doubt this position.

Greek government already halted the privatization of various assets like Greek ports.

We see at this stage, the gap is quite large between the negotiating parties and Greek drama to continue further. We have discussed the possible come outs in our previous post.

Euro is currently trading at 1.143 against the dollar up 0.4% for the day. We expect the exchange rate to remain range bound until some resolution comes out or situation deteriorates.