The Greek Prime Minister’s state visit to Germany Monday
(March 23) helped resolve any misunderstandings between the two countries, and
the frozen tensions were resolved. Both leaders met to talk on issues relating
to the European Union, Greek – German bilateral issues and the Greek liquidity
problem.
It is true that the Greek PM sent a letter to the
German Chancellor before his state visit, describing the dramatic condition the
Greek economy is in, and that Greece may face default. The letter was revealed
by the financial times, where the Greek PM said that in April Greece may run
short of cash, and if faced between paying wages and pensions, and its
responsibilities towards creditors, in this case the IMF, Greece would do the
former, thereby creating a credit default.
The outcome of the state visit can be summarized into several
points. First, the Greek PM went to Germany to seek political solution to the
liquidity problem of Greece. The German chancellor reminded the Greek PM that
Germany is only one of the 17 member euro group countries, and that it should
bring the problem to the upcoming euro group for solution. It is true that on
February Greece signed an agreement in the euro group meeting to bring about
reforms, as a prerequisite to release funding.
However in that agreement where Greece handed a list
of reforms, they were outlined, with no specifics, and no costs attached.
Greece committed itself to present to the euro group this week, specific
reforms, bringing back to the table, privatizations (like airports, where
German interest is high), tax reform and management, perhaps an increase in
value added tax in certain cosmopolitan islands, the new property tax (the
Greek government said that it would abolish it, and bring a high net worth
property tax). The reality is that under the current law, the treasury
collected over 2 billion euros.
Second, the two leaders discussed for a balance
budget, which means that the 1.5% or 4% budget surplus (under the memorandum)
may not be enforced, which gives Greece financial
headway to breath and have available funds. Third, the Greek PM managed to
bring to discussions the German reparations as well as the occupation loan during WW II. The German chancellor said that the issue is closed but will set aside a
fund to discuss the issue at a later time. He also brought the issue of
Siemens, and called for collaboration in revealing the bribes it gave to Greek
officials in the past years so as to have dominance in the Greek market and get
contracts.
The ECB has also frozen funding to Greece but the
paradox here is that the ECB is not acting as an independent organization. It
is politically dictated and is among the pressure the EU partners have mounted
on Greece with economic asphyxia, so as to accept the fifth memorandum review.
If one looks back in 2010, the ECB provided funding and time to the former administration.
Greece said it
is not accepting the plan review, as it is not accepting the Troika to visit
the ministries to obtain financial data for that review. This would be the
equivalent of accepting the old memorandum. Despite that, the Greek PM in the
press conference said that, among other things, the good things of the
memorandum will not be abolished.
The fact is that Greece has returned to the bargaining
table of talks and suspiciousness has gradually subsided, although, if Greece
wants to be credible and receive funding, it must act quickly and bring those
reforms with costs attached to Parliament. This way it will show its EU partners
that it is not bluffing and thus receive funding.
What led to this state visit? The US had a key role as
a mediator since the US president called numerous times the German chancellor
to find a solution to the stalemate with Greece. The US president said that it
is to the US interest and to the US economy, since recently the stalemate in
talks spilled over to the dollar – euro currency, where now it is at a parity
(1:1).
And finally one last note worth mentioning. The IMF is
releasing annual reports on all economies: the US, Germany, France, etc.. and
in order to collect financial data its staff is visiting the ministries to do
that. Greece cannot be the exception…..
