European Commission President Approached Greek Prime Minister Alexis …

30 Jun 2015 | Author: | No comments yet »

Crunch time for Greece as IMF debt looms and bailout ends.

ATHENS—The president of the European Commission approached Greek Prime Minister Alexis Tsipras on Monday night about a last-minute financing deal that would require the government in Athens to campaign in favor of the deal in a referendum, a commission spokesman said. It’s crunch time for Greece, with the European part of its international bailout expiring Tuesday and with it any possible access to the remaining rescue loans that it needs to pay its debts.Athens: Last-minute contacts were underway between Athens and Brussels on Tuesday to try to reach an accord over bailout terms for Greece, a Greek official said, just hours before the package is due to expire.

This last minute deal, which would still need to be considered and approved by eurozone finance ministers, would include the budget cuts and policy overhauls that were discussed by negotiators Friday night, when Mr. The referendum, which is scheduled for next Sunday, is now a source of deep uncertainty, with Greeks lining up outside of ATMs to withdraw whatever euros they can, while the whole country is teetering on the brink of financial free-fall. Without an 11th-hour deal, the government is unlikely to repay a debt of about $1.9 billion to the International Monetary Fund also due Tuesday — a move that would amount to default and would increase fears the country could fall out of the euro currency bloc. The first document is titled ‘Reforms for the completion of the Current Program and Beyond’ and the second ‘Preliminary Debt Sustainability Analysis’. Many believe that the Greeks have grown so wary of spending cuts and tax increases, which successive governments have adopted in return for a series of bailouts, that they would be bound to reject any kind of new austerity package, no matter its merit.

But that was not before pressure from the IMF, Europe and other creditors forced Mr Tsipras to shut Greece’s financial market and block citizens from withdrawing money from banks. Both sides had been within a few billion dollars of finding acceptable terms for a deal to allow Greece more time to repay the IMF, World Bank and the European Central Bank, thereby extending the bailouts of the past five years. The costs of not agreeing to a deal in terms of lost market value, economic damage and human suffering far outweigh any concessions required by both sides. But Europe wanted to dictate more precisely what Greece’s elected government can and cannot do to limit the austerity measures creditors have demanded to get the nation’s finances back into shape.

In Brussels, European officials said the Commission chief was willing to help give Tsipras a belated way out of his financial crisis if he accepts creditors’ conditions on the bailout standoff and campaigns for staying in the euro. An EU official, who asked not to be identified because of the sensitivity of the talks, called it “a sort of last-minute offer” before Tuesday’s dual deadlines.

Tsipras would have to send a written acceptance to creditors’ latest draft by Tuesday and agree to campaign for a “yes” in the referendum planned for July 5. Tsipras, who advocates a “no” vote in Sunday’s popular vote, argues that the demands from creditors for further, tougher austerity measures cannot be accepted after six years of recession. As such, Mr Tsipras has been unwilling to cede any more than moderate pension cuts and consumption tax rises, fearing further economic contraction, even if that might avoid a fate even worse. However, on Tuesday morning, the line of communication had changed, with one Greek official saying that Athens “is taking initiatives in order to end the impasse.” According to Greek and European officials Mr.

Each respondent was presented with a slightly different version of tax increases and spending cuts, to gauge whether there were subtle conclusions about Greek public opinion that have until now gone unnoticed. In that statement, finance ministers pledged to bring Greece’s debt down to below 110% of gross domestic product by 2022 as long as Athens was implementing the terms of its bailout program. Despite all the talk of a sweeping “big ‘no”’ to austerity, we found that only a fifth of the public was “fundamentally opposed” to it and would vote down any proposal that we put forth to a vote. The next few days will tell whether the price of European unity is so great for Germany, France and the other 16 EU nations that they will shift towards Greece’s demands. The news came after the Greek finance ministry said some Greek banks were expected to reopen Wednesday for pensioners who don’t have debit or credit cards.

The branches will open despite the closure imposed on Greek banks until July 6 and will only serve pensioners and those who can’t withdraw money from automatic cash machines. The battle on passing a referendum, therefore, will depend on the rest of the electorate — the roughly three of every four voters who are open to at least some of the packages under proposal. Less than half of the austerity scenarios with which the voters were presented gained such a majority, suggesting that there are some austerity conditions that are just too hard for the general public to stomach.

For example, adding a 15 percent pension cut to an austerity proposal would cause public support to drop by about 7 percentage points (and a 35 percent pension cut would shrink public support by almost 15 percentage points). Sensitive to this concern, the government’s proposal has avoided direct cuts to pensions, and has instead offered to place limits on early retirement and to raise employers’ social security contributions. Meanwhile, irate depositors called in to television stations to report that some ATMs had run out of 20 euro notes, leaving them dispensing 50 euros only.

As Adjunct Professor of Education at the University of Technology, Sydney, James Athanasou wrote in the Herald this week, the Greek crisis “is a social struggle for independence and self-respect. Not only that, but such measures could potentially increase support for an austerity package, suggesting that the public has accepted the creditors’ warnings about Greece’s massive deficit. It is about the right of a poor nation to be kind to its citizens.” Voting to accept the bailout terms would condemn Greeks to years more austerity and likely leadership by politicians unwilling to challenge European diktat purely out of fear. We found, for example, that Greeks are strongly opposed to increases in the marginal income tax, but are much more open to increases in both the sales tax and corporate tax. Perhaps heeding this sentiment, the most recent Greek proposal focused on increases in those two taxes, including a substantial increase in the value-added (consumption) tax, a large increase in corporate tax rates and a one-off levy on corporate profits above 500 million euros.

In the meantime, all our thoughts are with so many Australians of Greek descent who are worried about loved ones struggling to survive in their ancestral homeland, and so deeply concerned for its future. If the Eurogroup is serious about reaching a deal with Greece that not only addresses the objective of deficit reduction but would also be politically viable, it should take these findings to heart. “Europe only succeeds if we work together,” Chancellor Angela Merkel once said.

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