Greece willing to give up some anti-austerity policies for a deal

31 May 2015 | Author: | No comments yet »

Greece Creditors at G-7 Say Budget Is Red Line as Payment Looms.

Two centuries ago, the celebrated English poet Lord Byron published a poem that aptly captured the contrast between ancient Greece and the Greece of his own time. Greek officials and creditor institutions are locked in talks for another weekend as both sides work against a payment deadline to avert default and a euro-region exit. “The key issue is to resolve the situation so that Greece can remain a member of the euro area,” the European Commission’s vice president, Jyrki Katainen, told Finland’s YLE TV1. “Unfortunately over the past six months things have turned for the worse in Greece, purely for political reasons.” The standoff between Greece’s anti-austerity coalition and creditors over the terms attached to the country’s emergency loans has triggered a liquidity squeeze, tipping the economy into a double-dip recession.

Madrid: The Greek government said it can survive another week without defaulting on the International Monetary Fund as European officials warned the window for accessing aid is closing.The euro area’s largest economies told Greece its efforts to get more aid will come to nothing if the debt-swamped nation doesn’t overhaul its finances. Greece will be able to scrape together enough cash to make a payment of about $329 million (300 million euros) due to the IMF on June 5, Economy Minister George Stathakis said in an interview with Real News newspaper published Friday. Euro-region finance officials told Greece in a teleconference this week that there won’t be time to get a disbursement approved by European parliaments before the bailout expires at the end of June unless they reach a technical agreement next week. Since Syriza’s arrival in power, with its radical approach to debt negotiations, doubts have increased as to whether Athens can clinch a deal at all.

German Finance Minister Wolfgang Schaeuble, who hosted the event, signaled growing irritation with Greece by warning that policy makers need to consider Europe’s broader future, and his U.S. counterpart Jacob L. For the past five years, Greece has experienced an economic and social catastrophe of unparalleled proportions for an advanced economy in peacetime conditions.

The government has remained optimistic about its ability to reach a deal with its creditors by 31 May, but with each confident statement in recent days has come a careful qualification from the European side. Bailout talks “are progressing faster but not yet fast enough to conclude.” Greek stocks and bonds rose this week amid optimism a deal is within reach. “There has been real progress and we remain convinced an agreement can be reached soon,” French Prime Minister Manuel Valls told Italy’s la Repubblica. “We’re absolutely not working on the hypothesis of a Greek exit from the euro.” Failure to reach an agreement that will pave the way for the disbursement of bailout funds risks leaving Europe’s most-indebted state unable to meet payments to its creditors.

Greek Prime Minister Alexis Tsipras (R) and Greek Finance Minister Yianis Varoufakis (L) smile after their meeting at the finance ministry in Athens in May 2015. How could a nation’s economy that was apparently growing faster in the early to mid-2000s than the economy of any other nation in the eurozone become a basket case in only a few years’ time and be treated like a colony by Germany?

In the course of the rise and fall of nations, internal and external pressures work in tandem – and this is no different in the case of early 21st century Greece. And this uncertain climate has sounded the death knell for thousands of businesses that had been clinging on in the hopes of change after Syriza’s electoral triumph. “Since the elections, the market is completely frozen – people won’t spend a dime because of the insecurity.

Still, most of Greece’s current problems are of its own creation, although they were truly intensified as a result of its entry into a monetary union in which it was not fit to compete. They don’t know what to do with their money, [whether] to spend it or to hide it,” says Efi Chrisolomou, a shoe shop owner who is in the process of closing her business in the central neighbourhood of Kypseli after nearly 20 years. Greece’s paternalistic political culture and thoroughly corrupt public institutions have hindered sustainable economic growth and blocked the changes and adjustments that all societies need to make in the contemporary world in order not to remain static and backward-looking. When it joined the euro, Greece’s political elite took advantage of the cheap borrowing costs and engaged in reckless spending, pushing debt and deficits to unsustainable levels. Negotiations between the country and the institutions that led its rescue have stumbled over issues including reform of Greek pensions and labor markets and its budget surplus.

Indeed, how could anyone lend hundreds of billions of euros to a country that was already posting the highest debt-to-GDP level in all of Europe, had a political regime that was notoriously corrupt, and lacked structures and processes of transparency, democratic accountability, and openness? The first transfer is due June 5, marking it as a potential deadline for a deal unless Greece makes the repayment or finds a legitimate way to postpone it. “There’s the possibility that June 5 is not the real deadline, that there’s a later date in June,” Lew told reporters. “There’s been some discussion about the possibility of bringing some of the payments to a later date.” Under IMF policy, Greece can bundle the four payments due next month and make them all together on June 19. The power company is threatening to cut her electricity as she’s been unable to pay her bills, and even the bank keeps calling her every other day to ask her to repay her loan. Euro-region finance ministers were told by their leaders to conclude negotiations in the next few days, Spanish newspaper El Mundo newspaper reported, citing a senior diplomat it didn’t name with knowledge of the talks.

Not only was the bailout package not meant to rescue the Greek economy, but it’s actual intention was to punish the Greek people for bringing the eurozone to the brink of collapse. Indeed, the policy measures imposed on Greece secured repayment of the loans and thus kept the country from defaulting, but wiped 20 percent off the national output, caused the unemployment rate to soar to stratospheric levels, and created a man-made humanitarian crisis.

Ms Chrisolomou says she’s disappointed by Syriza, who rose to power promising the Greeks it would negotiate a better deal with the country’s international creditors. “The problem starts with the EU but the government also promised all sorts of things – promises it hasn’t delivered,” she says. The IMF won’t support a bailout accord unless Greece commits to a credible medium-term primary budget surplus and changes to its pension system, an official involved in the G-7 talks said on Thursday on condition of anonymity because the discussions are confidential.

All Greek governments up to early 2015 went along willingly with the destruction of the country as they were politically and ideologically committed to the vision of a neoliberal eurozone. The tussle with Greece is only over its current bailout, and that needs to be settled before any third aid plan can be considered, European economic commissioner Pierre Moscovici said in a Bloomberg interview. “We first need to close the review of the second program, to conclude the program, and then we’ll be capable of talking about further arrangements,” he said. “Let’s not confuse those two problems.” Foreign companies now demand that shopkeepers pay up front, making it difficult for recession-hit businesses to survive. “We no longer have the credit we used to have. Riot police line up outside a closed branch of the National Bank of Greece during a 24-hour general strike in 2010 in Athens, Greece. “We’ve come to the point where we prefer a bad deal [between the EU and Greece] than this devastating question mark of what comes next,” he says.

Businesses across the country are closing at a rate of 59 a day, according to a study conducted by the Greek commerce confederation, at a cost of 613 jobs and €22.3m to GDP. “The situation of the economy is desperate. There is no demand whatsoever,” says Nikolaos Kogioumtsis, the deputy president of the ESEE, Greece’s commerce confederation, which represents a sector accounting for 18 per cent of working people.

Yet the German side appears unwilling to give ground, although Syriza has already made major compromises on German demands for economic reform, including the privatisation of many assets still left under state control, a ‘compromise’ that does not sit well with the very radical elements inside Syriza. Moreover, they seem to believe, as several of them proclaimed at the party’s latest central committee meeting held just this past weekend, that a ‘Grexit’ is quite manageable.

Maybe they are right, or they can turn out to be complete wrong, especially if they fail to provide a vision and chart a strategy for transforming Greece’s public institutions, which is key to reviving the economy and securing a sustainable future outside the euro. A man who wanted to remain anonymous because he is in debt closed down his business in late 2014 because he could no longer afford to pay his taxes and maintain his social security fund.

He owes the authorities €20,000. “I had no choice,” he says. “Now I live day by day, am grateful I don’t have a family, as couldn’t afford it, and pray I don’t fall sick.” Syriza championed a call for universal access to medical services, to help the uninsured and unemployed. But if the government increases VAT on islands and makes Greece not competitive compared with Turkey or neighbouring countries, this will be just the worst possible scenario.

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