Will Europe trust Greece? That’s the crucial question that will be answered between now and Sunday.
The Greek government has done multiple policy U-turns over the last few weeks. But the indebted country must now convince its European creditors to agree to turn over billions in new loans.
Greece is asking for a third bailout, despite receiving roughly 233 billion euros in rescue financing over the past five years from European and international partners.
It has presented detailed plans about how it will fix its economy in exchange for more cash, and the Greek Parliament is set to vote on them Friday night.
The proposals look eerily similar to the ones previously tabled by eurozone leaders — the same ones then rejected by the Greek prime minister just 10 days ago and by the Greek people in a referendum on Sunday.
Time is running out. Greece’s plan will be considered by 28 heads of state in the European Union over the weekend, meaning Europe’s top leaders hold the key to any new bailout money.
But there are lingering concerns that Greece will take the money, but won’t deliver on its promises.
Slovakia’s finance minister, Peter Kazimir summed up the situation poetically: “Listening to Greece government officials, one can wonder how quickly [a] caterpillar [can] turn into butterfly.”
Greece also wants creditors to help it ease its enormous debt burden, but some European leaders deeply oppose debt relief. This opposition could kill any new Greek deal, causing the government to default on more debt and potentially go bankrupt in a matter of days.
On top of it all, Greece finances are far worse now than they were just weeks ago. Some skeptics wonder whether a third bailout will be enough to help Greece out of its economic hole.
The IMF recently estimated Greece will need at least another 50 billion euros ($55 billion). But analysts say the figure will be much higher since the IMF analysis was conducted before Greek banks were forced to shut down, wreaking even more havoc on the economy.
Here are some of the key proposals that the Greeks are putting forward, which are designed to raise more tax revenue and cut back on spending:
–Streamline the sales tax system and raise sales taxes on Greek islands, which currently receive discounts.
–Clamp down on income tax avoidance and phase out preferential tax treatment for farmers.
–Raise the corporate tax rate to 28% from 26%.
–Slash military spending.
–Overhaul the pension system in a bid to discourage people from quickly tapping government pensions. For many Greeks, the new retirement age will be raised to 67.
But some lawmakers in the Greek parliament are upset with these reforms.
Five politicians who are part of the the leading Syriza party have championed the option of leaving the eurozone altogether, a move that would see the country hastily introduce a new currency.
“Exit from the eurozone is a tough but feasible procedure that would allow the country to follow a different route away from the absurd [reform] proposals,” the members of Parliament said.
But this potential ‘Grexit’ would also lead to further economic pain and a range of knock-on effects across Europe.
–CNN’s Chris Liakos in Athens contributed to this article.