Greeks eke by on little cash

30 Jun 2015 | Author: | No comments yet »

Greece Offers Last Ditch Bailout Plan Before Clock Runs Out at Midnight.

With just hours to go before its international bailout program expires and it defaults on a $1.8 billion International Monetary Fund (IMF) loan, Greece submitted a last-minute proposal for a new two-year rescue deal on Tuesday. The offer involves a proposal to tap the European Stability Mechanism — a $560 billion bailout fund — and restructure Greece’s debt, but no other details were given. The Greek leader lodged a request with Dutch finance minister Jeroen Dijsselbloem, who also chairs the euro zone’s rescue fund, for a two-year, €29.1 billion ($32.5 billion) loan to cover the country’s debts coming due over that time. “As you are aware, the republic faces urgent and pressing financial problems,” Tsipras wrote, with much understatement, in the letter obtained by Politico.

With Prime Minister Alexis Tsipras having broken off talks with the country’s creditors, exit from the single European currency union looms closer, with all its near-term pain and long-term unknowns – for Europe as well as Greece. Jeroen Dijsselbloem, the eurozone’s top official, said the currency union’s finance ministers would have a teleconference Tuesday evening to assess the proposal. Currently, the IMF is demanding that Greece, which is in the midst of a multiyear recession, slash its expenses by billions more dollars, and slap heavy taxes on just about everything to raise revenue.

The prime minister also asked for Greece’s existing debts to be restructured and for its existing bailout agreement to be extended in the meantime, “to ensure a technical default is not triggered.” The expiry of the bailout—which has already been extended twice in the past six months or so—will take some €15 billion ($16.7 billion) in potential funds available to Greece with it. But more important to the final outcome now will be the result of a snap referendum that anti-austerity Tsipras has called for Sunday, at which the terms of further bailouts for Greece will be put before voters.

ET on Tuesday, Greece must come up with a 1.6-billion euro ($1.9-billion Cdn) payment to the IMF on the bailout funds it received roughly five years ago. They deserve it, because the issue is now bigger than contentious questions that collapsed the talks like pension cuts, or recriminations between German and Greek commentators over whether Greek profligacy or harsh austerity measures did more damage to the economy.

According to the Financial Times, if a cash-strapped Greece does not pay its debt it will instantly lose access to IMF resources, and if no resolution is reached, the country could eventually lose its voting rights and be expelled from the fund. Eurozone finance ministers are holding a teleconference to discuss the proposal, though Merkel’s comments indicate they would not try to reach a deal before Sunday’s vote. The question for ordinary Greeks buckling under austerity with no relief in sight is whether they are prepared to take the leap into the unknown of abandoning the euro. If that does not happen, IMF managing director Christine Lagarde would immediately report to the global lender’s board at close of business, Washington time, that Greece is “in arrears” — the official euphemism for default.

Indeed, German chancellor Angela Merkel says that a new bailout package won’t be considered before the Greek referendum on July 5 on the previous rescue deal. A Greek withdrawal would not only cripple its credit rating and risk the stability of its banks, but it would do nothing for the credibility of the single currency. The prime minister’s plea also excludes any involvement by the IMF, which he has previously dubbed “criminal” but which other euro member states insist should be part of any rescue deal. German leader Angela Merkel has warned: “If the euro fails, Europe fails.” European leaders have warned that Sunday’s vote will be a referendum on euro membership. There would be a negative message that euro membership is reversible,” said Spanish Prime Minister Mariano Rajoy, who a week ago declared that he did not fear contagion from Greece. “People may think that if one country can leave the euro, others could do so in the future.

When Tsipras unexpectedly called a referendum a few days ago, all work on negotiating reforms in return for an extension of the current bailout came to a halt. To secure a “Yes” vote they have to overcome a sense of injustice that much bailout money has not been used to rebuild Greece’s economy but to repay interest and principal on past loans from big banks in creditor countries while Greeks suffer austerity.

The officials, who spoke on condition of anonymity because contacts about the program were still ongoing, said three sources of money would disappear in the event of no agreement to extend the bailout. Greeks are more likely to vote to stay in the euro zone if creditors propose meaningful debt restructuring, including substantial write-offs, that gives some incentive to undertake the reforms lenders demand.

These include 1.8 billion euros from the EU’s financial stability fund, 10.9 billion euros from a Greek bank rescue fund, and a further 3.4 billion euros in central bank profits. Leftist Finance Minister Yanis Varoufakis argues that Athens has had no benefit from the money, which largely went to repay German and French banks which had imprudently lent large sums to successive Greek governments. In that case, an assessment would first have to be made on whether Greece is eligible, what kind of terms the new package would function under and the kinds of reforms that Athens would undertake in return. The Greek economy has shrunk by more than 25 per cent since 2009 and unemployment has soared to over 25 per cent, including more than 50 per cent of young job seekers. Yesterday, thousands attended an anti-austerity protest in Athens encouraging people to vote ‘no.’ Protests continued on Tuesday, with a huge pro-European rally in the capital’s Syntagma Square.

The prime minister’s office says Greece remains at the negotiating table, and that the government has proposed a two-year deal with Europe’s bailout fund. Pedestrians in Athens on Tuesday pass a banner that reads ”NO”, hung up by supporters of the No vote in the upcoming referendum on creditor propoals. (Thanassis Stavrakis/Associated Press) While the Tsipras government blames German-driven austerity for this economic disaster, EU officials note that other euro zone countries such as Ireland, Portugal and Spain that received bailouts for the state or banks have carried out similar reforms and returned to economic growth, even if unemployment remains high. It provides fodder for his government to claim that lenders are bullying them, refusing to release the financial aid that it needs to reopen its banks and repair its shattered economy. But under Greece’s capital controls imposed Monday, the pensioners will only be able to withdraw a maximum 60 euros per day if they have bank cards and just 120 euros this week if they don’t.

Juncker’s final offer incorporated a proposal from Greece to set value-added tax rates on hotels at 13 per cent, rather than the 23 per cent in the lenders’ original plan. UEFA, European soccer’s governing body, says it will look at adapting its regulations to help Greek clubs should the financial crisis in the country turn “really bad.” Speaking after UEFA’s executive committee met in Prague on Tuesday, general secretary Gianni Infantino says clubs in Greece “could find themselves in a very difficult situation due to something they’re not responsible for.” Turkish prime minister says his country is ready to help Greece overcome its economic crisis and is offering to expand cooperation in areas such as tourism, energy and trade.

Ahmet Davutoglu said Turkey wants to live “in peace,” and has no interest in seeing Greece “languish.” Turkey and Greece have been long-time foes but the two countries have sought to build bridges over the past few years. The offer would be conditional on a letter to Juncker, Eurogroup chairman Jeroen Dijsselbloem, Merkel and French President Francois Hollande arriving in time to arrange an emergency meeting of the Eurogroup on Tuesday. A Greek official said Tsipras has spoken with European Commission President Jean-Claude Juncker, European Central Bank chief Mario Draghi and European Parliament president Martin Schulz.

I think that would be the most serious problem that this could generate.” Stock markets across Europe trimmed earlier losses amid speculation that the Greek government is considering a last-minute effort by the head of the European Commission to break the deadlock between the country and its creditors. Meanwhile, irate depositors called in to television stations to report that some ATMs in Athens had run out of 20-euro notes, leaving them dispensing 50 euro notes only.

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