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Agreement reached with creditors

Greek government's agreement with the institutions was reached early Tuesday. According to well informed sources "We have white smoke, we have an agreement" said the same source after the end of the meeting with the institutions on Tuesday morning.

According to information, both sides made compromises on issues regarding the 'non performing loans, the privatisation funds and the deregulation of the energy market. However, some details regarding the prior actions remain open and will be examined by the technical groups. The agreement was reached after marathon-long discussions that lasted 22 hours.

Following the conclusion of the negotiations with the institutions delegates at the Athens Hilton, the Minister of Finances Euclid Tsakalotos and the Minister of Economy Giorgos Stathakis headed to Maximos Mansion, where the informed the Prime Minister Alexis Tsipras on the developments.

According to government sources mutual compromises were made on the issues that had remained unresolved, namely the new privatization fund, energy deregulation and non-performing loans. During the talks at the Athens Hilton, the targets agreed upon are for a primary deficit of 0.25% GDP in 2015 and primary surpluses of 0.5% GDP for 2016, 1.75% GDP for 2017 and 3.5% for 2018.

Regarding the “red loans”, the creditors appear to have backed down regarding the legal protection against foreclosure, with the Greek side accepting a cap on the value of protection, which will likely be 300,000 euros. The creditors however want a provision so that problematic loans can be sold to special funds.

The government has counter-proposed the settlement or haircut of such loans by a special management body. As for the new fund to carry out privatizations of public assets, the creditors are in favor of upgrading and further improving the existing privatization fund HRADF (TAIPED), so that outstanding privatizations can be completed as soon as possible. Athens wants to set up an entirely new body though, with a ‘loose’ timetable that will allow it to best take advantage of public assets.

The technocrats of Greece’s international creditors are pressuring for the deregulation of the natural gas market and demand the separation of networks from energy providers, to which the government objects. Although it has been agreed to discuss collective bargaining, collective dismissals and union legislation in the autumn, the creditors insist that the terms of collective labor agreements only roll over for 3 months during negotiations, rather than six.

Other issues included the abolition of early retirements, with the Greek government wanting to address the matter in October. Furthermore, the special tax of heating oil for farmers will occur in tow installments, in October 2015 and October 2016. It was also agreed to raise the VAT on private tutoring to 23% in order to offset a reduction of the VAT on beef from 23% to 13%.

Finally, the solidarity tax will remain unchanged for incomes up to 30,000 euros. It will, however, increase for incomes over 500,000 euros frp, 2.8% to 8%; for incomes up to 50,000 euros it will go from 1.4% to 2%; for incomes up to 100,000 euros it will increase from 2.1% to 4% and for incomes up to 500,000 it will increase from 2.8% to 6%.