Greece crisis: Here's a breakdown of the proposals submitted by Athens to Brussels
As the sides appeared to move closer to agreement, here's a breakdown of the proposals submitted by Athens to Brussels.
The proposals appear to go further than the austerity demands rejected by the Greeks in last Sunday's referendum. Should they be accepted by Greece's creditor institutions, the proposals will be handed on to the Eurogroup of eurozone finance ministers and form the basis for final negotiations on a new three-year bailout for Greece that could amount to more than €50bn.
• Primary budget surplus: The government has agreed to hit targets of 1pc, 2pc, 3pc, and 3.5pc from 2015 to 2018. This is in line with what has already been proposed, but they are still very ambitious, particularly as economic activity is set to have deteriorated even further while the country is under capital controls and the banking system is temporarily shut down.
• VAT: The government will abolish VAT exemption for Greek islands - the 30pc discounted rate will go, as demanded by creditors but previously fiercely resisted by the government. The proposals say they will start with "islands with the highest incomes and which are the most popular tourist destinations" first.
Hotels will remain in lower 13pc bracket, but restaurants will be hit by the highest 23pc bracket. Books, medicines and the theatre will remain at a super reduced 6pc rate.
Greek farmers will also have all fuel subsidies abolished, another concession demanded by creditors in previous plans.
Importantly, the proposals note that these VAT measures will be reviewed before the end of 2016, if "additional revenues are collected through tax evasion" and other improved collection measures result in higher tax income.
• Higher income tax: Should any of the proposals result in "fiscal shortfalls" the government is proposing hikes on income tax for the poorest earners. This would result in:
• incomes below €12,000 taxed at 15pc (up from 11pc)
• incomes above €12,000 taxed at 35pc (up from 33pc)
• Pensions: Greece have agreed to phase out their supplementary pensions for the poorest by December 2019, rather than 2020. There is no mention of replacing them, and importantly, the top 20pc beneficiaries will also not be protected from the cuts. The government has also agreed to hike the basic pensions retirement age to 67.
Interestingly, the government also seems to have agreed to nullify previous court rulings that have deemed the 40pc cut in pensions unconstitutional. The authorities will adopt legislation to fully offset the fiscal effects of the implementation of court rulings on the 2012 pension reform.
• Defence spending: This will be cut by €100m this year and €200m in 2016. Creditors previously demanded a €400m cut next year.
• Corporation tax: This will be raised to 28pc, rather than 29pc first set out by Athens.
The letter was signed by Alexis Tsipras, the Greek prime minister, and addressed to Jean Claude Juncker, the president of the European Commission; Mario Draghi, the president of the European Central Bank; and Christine Lagarde, the managing director of the International Monetary Fund. They represent the three "institutions" that were formerly known as the Troika.
The creditor institutions will meet on Friday morning to discuss the proposals while the Greek parliament simultaneously votes to ratify a deal.
Greece's movement towards compromise came as the country's creditors appeared for the first time to countenance debt relief.
Donald Tusk, the European Council president, said: “The realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors.”
A report by the IMF suggested that Greece's debts should be reduced by 30pc. This is likely to be achieved by increasing the maturity of the loans and reducing the interest paid on them rather than reducing the nominal value of the debts.