Negotiations drag as Tsipras seeks political support at Riga meeting

Ahead of a meeting late on Thursday between Prime Minister Alexis Tsipras, German Chancellor Angela Merkel and French President Francois Hollande on the sidelines of an EU leaders? summit in Riga, the Brussels Group continued its negotiations.

Despite expressions of optimism from the Greek side, European officials indicated that little progress has been achieved in the talks.

Apart from the key sticking points of pension and labor reform, officials were said to have different views on how to reform value-added tax rates. The Greek side wants three VAT rates ? at 7 percent, 14 percent and 22 or 23 percent ? while the creditors are said to want two rates ? one at between 10 and 12 percent and one at between 20 and 23 percent.

In the event that the creditors? ?two-rate? scenario prevails, the cost of several products currently in the low 6.5 percent VAT bracket, chiefly medicine and books, will increase significantly as will the cost of services on many Greek islands which enjoy a reduced VAT rate of 6.5 percent. Alternate Tourism Minister Elena Kountoura said yesterday that Finance Minister Yanis Varoufakis assured her there would be no changes to VAT this summer. She noted that rival destinations to Greece have a VAT rate up of to 10 percent.

Pensions remained a point of contention, with creditors pushing for the abolition of early retirements and for the so-called 13th pension not to be restored, as well as labor reforms with the government insisting on the gradual restoration of the minimum wage and collective bargaining.

Talks also focused on primary surplus targets which are said to be close to 1 percent of gross domestic product this year and 1.5-2 percent next year. There was also discussion about a 30 percent reduction to...