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Greece: What will happen?

  • June 16th, 2015
  • Posted by EU Australia

athens and parthenon Greece ambassador 2015The new count-down for Greece to make a major debt repayment — €7.2-billion (A$8.5-billion, xe.com, 11.6.15) by the end of the month – looks more serious and final than any before; yet, so did a series of earlier approaches to a deadline … see also, Ambassador comments.

DESPERATE STATE

Only one part of the problem for the country’s creditors is that there is little or no money in its coffers to meet such demands; another powerful factor is that it is a committed member of the European Union with no intention to depart from it; a third factor is the distinct lack of appetite within the EU to losing a valued member; and there is the resolve of the Athens government, with strong public support, not to over-dose on the poisonous medicine of austerity.

Greek leaders of any complexion have been pointing to the desperate state of society and as they explain, the impossibility of making a recovery while resources are exhausted.

ONE DEADLINE AFTER ANOTHER

Greek flag 7-12 EU flagg - EUIn the background, the “golden years”, when Greece joined the Euro, opening access to borrowing at attractive rates, collapsed suddenly with the Global Financial Crisis. Along with stiff austerity measures being demanded to maKe money available for repayment, the overall demands on Greece are estimated at US$100-billion (A$129.2-billion). The crash has meant that 400 000 people have been obliged to leave the country; thousands of small businesses have closed; 1.5-million out of the 10-million population are unemployed, including half of all young people; debt has now mounted to  €35 000  (A$509 700) per person; pensions have been halved, and the minimum wage also, from €900 (A$1310) per month to €450 – all of that undermining the chances of getting a needed plan for growth.

It has been made clear from the outset there will be no across-the-board debt forgiveness, no Marshall Plan for Greece, while its chief creditors, most based in Germany, emit the mantra of “solidarity, with responsibility”.

That has been the position at each point on the long journey, as payment dates have approached, with payments made, or given a limited delay, or rescheduled against some further guarantees from Brussels. There’s been no execution-by-firing-squad of the debtor, but no let-up in the pursuit. Business specialists in the news media listed 20 crisis dates to watch out for, in the first eight months of 2015.

PROPOSALS

Left with scant alternatives, the left wing government of Greece, once again, has been exchanging many words in negotiations, hard at work on proposals it hopes will allow for some compromise, summarised in a BBC report last week:

“Greece has submitted a revised reform plan to the European Union (EU) and International Monetary Fund (IMF). It comes days after Greek Prime Minister Alexis Tsipras rejected a set of reforms put forward by EU Commission President Jean Claude Juncker. The EU and IMF want further economic reforms before they release €7.2-billion of bailout funds. It is believed Athens has conceded ground on VAT reforms, pensions and the country’s primary surplus target. The reform plan comes a day before Mr Tsipras meets the French president and German Chancellor. Last week, Greece “bundled up” a €300-million (A$437-million) payment to the IMF…”

Mr Tsipras and his Ministry have become adept at looking for deals that will permit them to at least provide a defensive program, to hold the line on jobs, services, pensions or pay. They have been arguing for adjustments to the demand for massive structural savings designed to reduce the ongoing indebtedness.

While the creditors are wanting a “primary surplus” of 1% of GDP, Greece says its budgeting should hold this to 0.6%; while they want value added tax increased, Greece suggests a three-tiered tax with easier rates for food, medicine and accommodation in the tourist industry; while they say the squeeze on pensions and public employment should continue, it wants to relent on those, off-set by alternatives like an increase in pensioners’ co-payments for healthcare.

In the last week the International Monetary Fund has given up on the current talks, breaking off the meetings.

WHAT IF?

What if there is a terminal default and final impasse over the position of the Greek people in the Eurozone and the EU? Will the other Europeans find themselves, in effect, showing them the door? What resources can be found in Athens for finding a solution?

Recent talk has turned to the possibility of new elections in Greece, perhaps to get the government a better margin than its current precarious majority, and so get the point made — through the ‘verdict of the people’.

Greece ambassador 2015Haris Dafaranos, the Greek Ambassador in Australia, last Wednesday spoke of  the “breathing space” being sought for Greece to put more measures in polace, to restore the economy.

Addressing members of the Australian Council for Europe in Brisbane, he emphasised principles guiding the European architecture: democracy, prosperity and solidarity, and stressed that these were inseparable.

STATEMENT BY GREEK AMBASSADOR

Making a retrospective, the Ambassador underlined that over-borrowing and overspending were the primary causes for the vulnerability of Greece to be severely touched by the global financial crisis in 2009.

He also touched on the subject that Greece should not have entered Eurozone so promptly and that, even after joining the Euro, a more prudent economic governance should have been in place, committing the country to the required budget constraints.

Mr Dafaranos underlined the importance of a breathing space, a demand supported last January by a petition of forty Australian economists and the Australian Council Trade Unions. This breathing space, in the form of reasonable annual budget primary surpluses would permit the Greek Government to tackle the humanitarian crisis touching one third of the population. Another appeal is for a European development plan for Greece which would focus on growth and jobs.

As well, the Ambassador spoke about the high unemployment, the ‘brain drain’ of scientists as well the closure of many Small and Medium Enterprises, underlining that “even at the most dramatic turn of the economic crisis, Greeks feel European and believe in the European Dream.”

See also, EUAustralia Online, Greece: Heading for default on loans? 25.4.15

Reference

BBC News, London, Greece submits new reform plan to EU and IMF, 10.6.15. http://www.bbc.com/news/business-33062202, (11.6.15)

David Powell, Here Are the Most Important Dates Ahead in the Greek Crisis , Bloomberg, NY, 26.3.15. www.bloomberg.com/, (11.6.15)

David Rodriguez, What are the Critical Dates for Greece and the Euro?, Daily FX, NY, 22.4.15. http://www.dailyfx.com/forex/fundamental/article/special_report/2015/04/22/forex-euro-timeline-greece-debt-repayment-imf-ecb-ela.html, (11.6.15)

Picture Embassy of Greece

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