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Another deal for Greece

  • June 24th, 2015
  • Posted by EU Australia

Greece protest 2015Compromise talks at Brussels have seen the outlines of a deal that should, yet still might not avert the debt payment crisis looming for 30 June – achieving little else than to clarify possible terms of any permanent settlement.

How will it play with the angry, and desperate crowds in Athens, and the citizen-voters or investors in the other European states? Early signs were not so good.

Lee Duffield writes.

HIGH NOON AT BRUSSELS

One more stand-off at High Noon in the watery skies over Brussels: Greece was due to pay €1.6-billion (A$2.3-billion; xe.com, 24.6.15) by 30.6.15, to clear the release of €7.2-billion (A$10.4-billion) in back up funds to follow.

Looking for guarantees of ability to pay, the creditors wanted further concessions including rises in indirect taxation in Greece and more cuts in government spending – the sticking point being an increase in Value Added Tax on electricity and reductions in pensions.

Finance Ministers from the European Union countries in Brussels on Monday, began studying an alternative proposal from Athens; after four days of talks they would have no agreement among themselves, as to exactly what they might agree to.

Some complained, as often before, about poor data and crafting, arguing that backward standards of management and governance have been a key part of Greece’s problem all along; yet observers noted more willingness to look at a Greek proposal than on previous occasions.

CHANGE TO THE POLITICAL LEVEL

The day’s events at Brussels were set up to be a possible fulcrum for getting a settlement in the longer term, by matching a business meeting of the Foreign Ministers, with a summit of Heads of Government to come later.

It would move the business from a technical and even policy level, to a political level, which might help. More summitry was scheduled for the weekend.

In realpolitik the Heads of Government have had one main question to face, whether they want Greece in or out; then to decide what it might take to keep Greece as a Eurozone member, one of the states using Euro currency, or even as part of the European Union; or, what it might mean to let the Greek government default on debt, start a new currency, and even fully go broke.

In that one sense it has been a hostage drama since the first break-down of finances and intervention from the institutions – the European Commission, International Monetary Fund and European Central Bank– in 2010.

Those ‘outside’ partners have made no concessions beyond what they saw as immediately necessary, matching their insistence on a renovation of the national system of government and administration that for decades was notoriously extractive, expensive and slow.

The ECB did provide capital supports for Greek banks against a heavy flow of withdrawals during the last week.

SHAPE OF A DEAL – ONCE MORE, ‘FOR NOW’

Tsipras Alexis 2015The left-wing government elected in Greece last January, under Prime Minister Alexis Tsipras (picture), has  this time put up proposals that the creditors might accept and which it hopes to be able to sell to its constituency back home.

Under the deal, estimated to entail cost savings of €8-billion (A$11.6-billion), Aged Pension eligibility would be extended a few years to 67, the scope of much-urged VAT extensions would be restricted, corporate taxation would rise, and so would member contributions to the pension funds.

“Hopes” of acceptance could be a large word in this case.

The coalition in power in Grece includes communist groups with demonstrators on the street, highly vigilant against any weakening of the stand against an enforced austerity; and it includes also the Independent Greeks party, patriotic conservatives who joined the government because of entrenched opposition to ‘austerity from outside’. Protests rolled out in Syntagma Square, picture above, and elsewhere, under the outwardly sunnier skies. How would the government go in parliament, with its knife edge majority?

What of the signs, also, of second-thoughts building up back in Western Europe later in the week? Those were thougths that more tax on business would hinder growth, (as if stiffer VAT hitting consumer outlays would not). Business first, perhaps. A key player, Chancellor Angela Merkel of Germany, was quoted complaining about creditor states being held to ransom, and the need to get a decision before the markets opened on Monday.

DEBT WRITE-OFF, ANYBODY?

While putting up its compromise, the Tsipras government has not relented in promoting one other logical conclusion, that if austerity stops prosperity, and therefore blocks ability to pay back debt, a debt write-off might do much better.

In opposition, the creditors, while faced with a long wait for proper repayment, can point to significant deficit reductions that have been achieved in Greece under their insistence, suggesting that the hard policy, very costly in human terms, might yet ‘work’.

They would see debt forgiveness as a transfer of pain to themselves, and, not only in Greece, there is a constituency problem to deal with in domestic politics in the member countries. That remains notably true in Germany where most voters have been hostile to any ‘Marshall Plan’ for the Greeks.

Any agreements reached at Brussels this week must go to national parliaments as part of a ratification process, requiring some intense management around the application of the end-of-June deadline.

Longer term, how can this ever end?

Reference

The Guardian, Manchester, Greece debt crisis: Alexis Tsipras faces Athens backlash over concessions, 23.6.15.

Pictures  Wikipedia, populaesistance.org

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