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Greek debt crisis: Greeks offer a new proposal to European creditors

Greek Prime Minister Alexis Tsipras.
Greek Prime Minister Alexis Tsipras.
Michele Tantussi/Getty Images
  • The Greek government has submitted a new package of spending cuts and economic reforms aimed at winning a new round of financing from Greece's European creditors.
  • The plan, whose text is available here, features concessions on pensions, value added tax, and defense spending that Greece had previously resisted.
  • To conclude a deal and secure desperately needed bailout money, the proposal would have to be endorsed by both the Greek parliament (which may vote on the proposal on Friday) and the finance ministers of eurozone member nations.

The prospects for a deal have been improving

In recent days, Treasury Secretary Jack Lew has been pressing Greece's European creditors to write down some of Greece's debts and prevent a Greek exit. While the United States doesn't have a direct stake in Greece's future, US officials are concerned that a Greek crisis could have spillover effects on the rest of the world economy. The US also seemed anxious to avoid a rift among America's European allies at a time of growing tension with Vladimir Putin's Russia.

In a Thursday tweet, Donald Tusk, the president of the European Council, tweeted his support for "debt sustainability":

According to the New York Times, Greece also received last-minute help from the French in formulating its reform package. The French advised the Greeks on how to craft a proposal that would be most likely to get a positive reaction from European negotiators, especially Germany.

The deadline is Sunday — but that could slip again

European leaders have been saying that Sunday is the final deadline for a decision on Greece's future. That's the day they've called a summit of all 28 members of the European Union, which will provide an opportunity to ratify a plan — if Greece can come up with one that's acceptable to European leaders.

"We have only a few days left to find a solution," German Chancellor Angela Merkel said on Tuesday. Jean-Claude Juncker, the president of the European Commission, said Tuesday that European leaders are preparing to eject Greece from the common currency if a deal isn't reached by Sunday.

It's possible they were telling the truth, and Sunday really is Greece's last chance to reach a deal. But it's also possible the deadline will slip, as it has several times before.

If you've been following the Greek crisis for the past few weeks, you might remember that Greece invoked a little-known rule to delay a payment to the International Monetary Fund from June 4 to June 30. Then June 30 was supposed to be the hard deadline for making a deal. People feared that Greece defaulting on the IMF could precipitate a financial crisis and Greek exit from the eurozone.

But that's not what happened. A few days before the ostensible final deadline, Greek Prime Minister Alexis Tsipras announced that a referendum would be held on July 5. Greece skipped its June 30 payment to the IMF. The IMF chose to describe Greece as being "in arrears" rather than "in default," helping to delay a crisis.

After that, the July 5 referendum was supposed to be Greece's last chance for a deal. European leaders warned that a "no" vote would end any chance of remaining in the eurozone. Greece voted no anyway. And European leaders decided to give Greece another chance.

That's not to say that Greece will be given an infinite number of do-overs. At some point, European leaders really might get fed up and force Greece out of the eurozone. But European leaders know that a Greek exit could trigger a financial and humanitarian crisis. So as long as they still feel a deal is possible, they might choose to continue negotiating rather than cutting Greece off.

Correction: I originally described the European Council as less powerful than the European Commission, but I'm told that's debatable.