Leaked: Creditors’ counterproposal to Athens

Protesters take part in an anti-austerity pro-government demonstration in Athens at the height of the Greek crisis.
Yannis Behrakis | Reuters
Protesters take part in an anti-austerity pro-government demonstration in Athens at the height of the Greek crisis.

As expected, the standoff between Athens and its creditors that exploded into the open on Wednesday has focused on pension reforms – a point made clear in a document obtained by the FT's correspondent in Athens, Kerin Hope.

According to the five-page list of "prior actions" – which are always the real nitty-gritty in any bailout agreement, since it lists the specifics that the sitting government must implement and the calendar for implementation – creditors have asked for wholesale changes to the pension proposals made earlier this week by Alexis Tsipras, the Greek prime minister.

The Financial Times posted the document here.

In order to achieve savings of 1 per cent of gross domestic product – or about €1.8 billion – starting next year, creditors are demanding a significant rewriting of Tsipras' pension reform plan.

There will be a last-minute Greek deal: Goetti
There will be a last-minute Greek deal: Goetti   

First, rather than gradually raising the effective retirement age to 67 by 2025 as Athens has proposed, creditors want that moved up to 2022 (Athens had originally shot for 2036 in one of its earlier proposals). The creditor plan would allow for retirement at 62, but only for those who have paid into the system for 40 years. Those measures would become law immediately, under the counterproposal.

It would also phase out a so-called "solidarity grant" – a special top-up payment given to poorer pensioners – by the end of 2017. The original Greek proposal had wanted to start phasing it out by 2018, with the grant only abolished in 2020.

This new proposal from creditors closely mirrors the original creditor offer given to Alexis Tsipras, the Greek prime minister, three weeks ago and would eliminate most of the new contributions and fees that were in the Tsipras' new plan – including a 3.9 per cent increase in employer contributions to the main pension plan, which accounted for the bulk of the savings in the 11-page document Athens gave creditors on Monday.

Read MoreGreek crisis: Tsipras says 'no deal' with creditors

On the other point of dispute, overhauling the value-added tax system, creditors have interestingly backed down on a demand that electricity be included in the higher VAT rate of 23 per cent; the new plan allows electricity to be levied at a new middle rate of 13 per cent. A "super-reduced" rate of 6 per cent would be created for pharmaceuticals and books.

Importantly, it looks like Tsipras has also backed down on maintaining exemptions from VAT for Greece's islands, a major "red line" for Syriza's coalition partner, the Independent Greeks party. That could cost Tsipras their support in next week's vote. Under the "VAT reform" heading, the unedited proposal includes "eliminate discounts, including on islands".

The creditors also slashed most of Tsipras' biggest revenue-generating taxes, including a one-off 12 per cent tax on all corporate profits over €500,000 that was to come into effect this year. In their Monday proposal, the government had projected getting €1.3 billion from that measure alone, by far the largest revenue generator outside the pension system. A big red line is drawn through that one.

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In addition, instead of the increase in the corporate tax rate from 26 per cent to 29 per cent, as the government suggested, creditors are pushing for a rise to only 28 per cent, a sign of their concern that the raft of new taxes will just make the economy dip back into an even deeper recession.

In the place of these new taxes, creditors are seeking new spending cuts, including abolishing subsidies for diesel oil purchased by farmers and doubling cuts to defense spending – from a proposed €200 million to €400 million – by reducing personnel and weapons procurement.