'Grexit not an option' - Muscat

Prime Minister Joseph Muscat warned that a Greek default and subsequent exit from the Eurozone will not be in anybody’s interests.  

“Grexit is not an option,” Muscat told Parliament while delivering a summary of Monday’s EU summit. “However, Greece and its creditors must agree a deal by the end of the week or Greece will go bankrupt on 30 June.”

He praised Tuesday’s summit and said that, while differences remain, the Greek government and its creditors are “finally speaking the same languages”.

“This is the first truly concrete set of proposals that Greece have put forward so far,” Muscat said. “The previous ones were not worth the paper they were written off. They were so vague and generic, and there was no way that the European Commission was ever going to accept them.”

Among the Greek proposals is a commitment to improve VAT collection, with the authorities expected to adopt legislation changing parameters to significantly broaden the tax base at a standard rate of 23%.

On the other hand, to protect the disposable income of low- and middle-income households, there will be a reduced rate of 13% to cover a limited set of goods.

Greece admits that much more ambitious and courageous steps are required to complete the pension reforms. A first package of measures will be adopted immediately, targeting 1.05% of GDP in enhanced savings annually by 2018.

The Greek side is proposing adopting a legislation to create strong disincentives for early retirement by adjusting early retirement penalties and by gradually eliminating grandfathering to statutory retirement age and early retirement pathways, applicable for everybody retiring after 1 January 2016. This excludes “arduous professions, mothers with children with disabilities and other very few selected special categories”.

Muscat pointed out that 75% of the Greek government’s expenditure goes towards pensions, public salaries, and other social benefits.

“Greece is facing a profound crisis and, although it may not sound socially just, there is simply no way for Greece to cut down on its expenditure without reforming pensions.”

However, he called for more solidarity with the Greek people. 

"At this point, it is very easy to attack Greece, but the reality is that the Greek political class got Greece into this disaster and the Greek people, particularly the most vulnerable ones, are now paying the brunt for their decisions," he said. "They need some breathing space to pay their debts back."

He said that general consensus is moving towards a restructuring of Greece’s debt, such as lengthening the time period by which Greece will have to repay its debts. 

“This will help Greece remain in the EU and allow EU member states, including Malta, who had lent money to Greece to get repaid.”

However, he insisted that the possibility of pardoning Greece’s debt is “not on the table”.

He said that the Greek Parliament must impose important measures this weekend, but admitted that it could seriously damage Greek Prime Minister Alexis Tsipras’ leftist Syriza party.

“The Greek government is not strong enough, and it is clear that some of the measures will contradict Tsipras’ electoral mandate,” Muscat said. “Three members of the Greek government have already said that they won’t vote in favour of it, but on the other hand, the Greek Opposition are ready to vote in favour of it. Therefore, the package could be approved in Parliament but the Greek government could split up and Tsipras could lose his Communist faction.”

He said that, in a “dramatic” situation, the Greek people could be asked to vote on the financial package in a referendum.

In a rare moment of consensus, Opposition leader Simon Busuttil said that he agreed with the government’s stance on the Greek crisis, but called on them to discuss such serious issues with the Opposition beforehand, as the previous administration had.

“The Greek crisis has been going on for five years now, Greek people have suffered and we hope that Greece will be able to stand back up on its feet,” Busuttil said. “However, while we agree with solidarity with Greece, .such solidarity must be accompanied with responsibility by the Greek government.”