Greece Seeks Emergency Bailout From Eurozone

30 Jun 2015 | Author: | No comments yet »

Euro to hold emergency meeting.

ATHENS — With just hours to go before Greece hits a deadline for a debt payment it cannot afford, Prime Minister Alexis Tsipras on Tuesday asked the other nations that use the euro to extend another bailout and buy Athens time to renegotiate its crippling debt load.“The Greek government today proposed a two-year agreement with the European Stability Mechanism (ESM) to fully cover its financing needs and the simultaneous restructuring of debt,” the prime minister’s office said in a statement.Greece adopted the euro in 2001 despite severe structural problems and very high deficits and debt-to-G.D.P. ratios, using creative accounting to cover up that reality. He was formerly a deputy director in the International Monetary Fund’s policy and review department and the chief emerging market economic strategist at Salomon Smith Barney.

There were no signs that the last-minute Greek proposal would be accepted, but the plan, coming after top European Union officials made another offer to Mr. Tsipras on Monday night, suggested that the two sides were both at least interested in getting back to the negotiating table ahead of a national referendum scheduled for Sunday in Greece. This comes as the European Commission’s normally cautious chief Jean-Claude Juncker said Mr Tsipras was lying to his people over the financial crisis and the European Union felt betrayed by his “egotism” that ended the political talks over the troubled nation’s financial future. The Greek government, in the name of democracy, has thrown its “negotiating” failure to the Greek people, sending them to the polls to respond to a vague question. Jeroen Dijsselbloem, the head of the Eurogroup of finance ministers, wrote on his Twitter account that the ministers would hold a teleconference at 7 p.m.

The stunning rebuke was made of Mr Tsipras and his negotiating team as markets across Europe fell sharply yesterday and Greece officially defaults on its loans. While we Greeks are supposedly being called to vote “Yes” or “No” to the latest bailout proposal of the institutions, in reality – even though the government refuses to acknowledge it – the real question is a “Yes” or a “No” to the euro. Mr Juncker never really known for making blunt or undiplomatic statements, said he felt “betrayed” and sad by Greece’s “egotism, tactical games, populist games” during the failed debt talks, interpreted as meaningless by its leader. He questioned the Greek plan that was delayed and handed to finance ministers just hours before a summit and had been “deliberately altered” in an attempt to play one great democracy against 18 others. A principal cause of the Greek economic depression of the past six years, which is now on a scale of that of the United States in the 1930s, has been the pursuit of excessive budget austerity within a euro straitjacket.

With the banks being shut just for a couple of days and citizens allowed to withdraw a maximum of 60 euros per day from their bank accounts, Greeks have a foretaste of how lives would be outside the common European monetary system. The statement said the aim was to help the country meet its debt obligations, while Greece would remain in the eurozone and continue to seek a solution. In the meantime, no major political party was willing to undertake the much-needed reforms that both the Greek economy and society needed to move forward.

People will line up in front of banks, at super markets, at gas stations; tourists will cancel their bookings; the private sector will be unable to make all sorts of payments. The lack of specificity in the statement made it unclear whether it was just a repackaging of previous requests — already rejected in Brussels — or if the prime minister had offered new substantive proposals that could help the negotiations. To this day, the authorities are unable to enforce even a smoking ban because so many people are unwilling to conform to the existing laws on smoking in public places. You should say ‘yes.”’ In Germany, Chancellor Angela Merkel said Europe had to find compromises but also stick to its principles and aid could only be offered in exchange for efforts by other sides. “If this ability to find compromises is lost, then Europe is lost, and that’s the sense in which the sentence I have often said should be understood: If the euro fails, Europe fails,” she said.

She said she was still open to negotiate and having a third bail out package for Greece if an aid-for-reforms deal could be struck but warned Greece “no one can get 100 per cent” of what they wanted. Yesterday Greek officials already said it would not repay the 1.6 billion euros it needs to pay today to unlock further aid from the troika of EU creditors, the move taking the nation one step closer to leaving the euro zone. Tsipras had spoken by telephone with Jean-Claude Juncker, president of the European Commission, Mario Draghi, chief of the European Central Bank, and Martin Schulz, president of the European Parliament.

There are now other formal triggers toward a Grexit that could see the uncertainty and crisis extended by another month, well beyond the July 5 referendum. Instead, a succession of governments enforced anti-growth and anti-social policies as part of the bailout programs rather than making the tough decision to leave the euro.

Alternately, it could abandon the euro and give itself the chance to promote economic growth that is so necessary to address its economy’s imbalances and to arrest its political rot. The Syriza-led government followed in the footsteps of the previous governments, refusing to embark on a national dialogue about the pros and cons of the euro. This is not to suggest that opting for its own currency is without its risks and will not require careful economic management and far-reaching structural economic reform to modernize its economy. Asked on Tuesday whether Greece would make the payment, Finance Minister Yanis Varoufakis replied, “No.” When asked by a reporter about the possibility of a last-minute aid deal with international creditors, he answered, “We hope so.” Included in the new Greek proposal was a request that the current bailout program be extended for a short period to avert a technical default Tuesday night on the payment to the I.M.F.

The markets have already reacted to the uncertainty with up to 4 per cent drops on national EU markets but analysts say things will only get worse after the referendum with a no vote as bad as a yes vote. Negotiations have been going on for months, as Greece has sought to unlock a frozen €7.2 billion bailout payment and complete a new comprehensive agreement that would include more funding and major debt relief. Tsipras unexpectedly announced that a “yes or no” national referendum would be held so that voters could decide whether to accept the terms proposed by creditors.

Tsipras has called on voters to choose “no” and has denied that the referendum is the equivalent of choosing whether to leave Europe’s currency union, something that most Greeks do not want to do. “From the first moment, we had made it clear that the decision to carry out a referendum is not the end but the continuation of negotiations, with a better outcome for the Greek people,” the statement released by Mr. The government responded by closing banks this week and instituting broader capital controls. “How is it possible the creditors are waiting for the I.M.F. payment while our banks are being asphyxiated?” Mr. Tsipras said. “If they decide to stop the asphyxiation, the installments will be paid.” Closing the banks has upended the lives of many Greek pensioners, who usually withdraw their pensions in person at a bank branch. Merkel insisted there had been no change in the situation since Monday. “I do not have any other reliable indications” to the contrary, she added. “That does not mean that we will cut the lines of communication.

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