Greece

by Maria Spiliopoulou

After five years of a debt crisis and recession that wiped out a quarter of the Greek GDP, two harsh bailouts that kept Greece afloat with major sacrifices by Greek people and five months of negotiations over the next steps Greece and its international creditors near the breaking point. Greece
On June 30 Greece will either continue efforts to achieve economic recovery with a new deal in Prime Minister Alexis Tsipras’ hands or face default, the prospect of a subsequent exit from the euro zone and political and social turmoil, Greek and foreign officials and analysts warn.
Following last week’s inconclusive round of talks in Brussels on technical and political level, which continue this weekend, all sides agree on one thing: the moment of truth is near.
The new decisive Euro Group meeting which could give the green light to unlock vital funds to Greece on time is scheduled for June 18.
On June 30 expires the extension of the second bailout Athens agreed with creditors in February in order to find a viable solution to the crisis in the meantime, and on the same day it must repay 1.5 billion euros (about 1.7 billion U.S. dollars) of delayed loan installments to the International Monetary Fund (IMF).
Greek state coffers have hit bottom and without another helping hand by lenders the Leftist SYRIZA government can no longer cover its financial obligations.
Should the day come and rift wins over compromise, the countdown to Greek bankruptcy and its repercussions will begin. The IMF will launch within a month the relevant procedures leading to a credit event.
Greeks seem to retain a hard negotiation stance expecting last minute concessions from lenders based on the fact that they will also suffer great losses from a Greek meltdown.
“Grexit will cost the euro zone at least one trillion euros,” Finance Minister Yanis Varoufakis said.
Greece will suffer more, respond Greek opposition parties, European officials and analysts who argue that bankruptcy and Grexit would shrink by an extra 40 percent Greek peoples’ purchasing power and lead to a financial, social and political chaos which would start with capital controls.
As the clock ticks, the Greek government and creditors express hope that an agreement is around the corner one day, while the next day the picture turns gloomy. Both sides state that main sticking points remain unresolved, urging the other side to embrace realism.
The Leftist government that was elected on an anti-bailout agenda, demands a substantial solution to the Greek issue instead of an interim deal that will just marginally resolve financing problems.
For Athens the final solution should include debt relief to ensure the sustainability of the huge debt load and growth boosting policies.
Athens resists creditors’ suggestions for new hikes on VAT, high primary surplus targets, cuts on pensions and labor market reforms. The government argues that further austerity will keep Greece trapped in recession and Greek people suffering for several years to come.
Greece’s interlocutors point out that the country’s pension system is unsustainable, tax collection remains problematic, fiscal adjustment should continue to achieve targets to exit the crisis and the labor market should be flexible to increase the economy’s competitiveness.
Greece’s government rejects the lenders’ recipe to recovery as absurd. Ministers say that the similar formula implemented by previous governments failed to resolve the crisis and instead fuelled the worst economic and social crisis Greece dealt with after WWII.
They point to official statistics showing that unemployment rates doubled to 27 percent in five years, 20,000 people were left homeless, one out of four households struggles with poverty, more than 100,000 small and medium enterprises — in a country where SMEs are the backbone of the economy — have closed.
There is no time for more talks on a comprehensive deal by June 30 and Tsipras has stated that he will not make more concessions and sign a third bailout which would cause strong reactions by SYRIZA MPs and voters, triggering new elections, a referendum or a cabinet reshuffle in the best case.
Some research fellows from the Center for Planning and Economic Research, expect a deal before June 30, adding that the Greek government may backtrack in negotiations as Greece has no other option.
According to the most likely scenario at the moment in order to stave off default the two sides will clinch an interim deal this June and extend the bailout for a few more months to provide to Athens adequate funds to meet its imminent obligations in return of a minimum set of measures and continue negotiations on debt relief and more reforms throughout 2015. Enditem

-Xinhua

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