After about three months of negotiations between
Greece and the Brussels group (its creditors, formerly the Troika), and with
Greece holding on to its “red lines”, there seems to be a stalemate between the
two sides on the negotiations involving financial assistance.
Numerous cabinet members have said that negotiations
are in good progress, and that an agreement is imminent, but suddenly the IMF
has raised red flags, and is unrepentant on several issues, thus blocking the
interim agreement (before June) for allowing financing. For example, the IMF is
against the government’s intention of reinstating the collective bargaining agreement,
increasing the tax free salary to 12,00 Euros per year, the viability of the
insurance – pension system in Greece, it is a staunch supporter of massive
layoffs (as if unemployment is not a problem), and seeks measures of immediate
returns. For example, the imposing higher value added tax (VAT), reinstating
the old rate of 3% (now at 2.1%) on income salaries greater than 50,000 Euros (the
solidarity tax), maintaining the property tax (it had an immediate effect of 2
billion Euros in the state treasury). Recently it called the humanitarian bill
a one sided act. This bill subsidizes rent, electricity, for low income
families.
This month Greece has to pay an installment payment to
the IMF of 200 million Euros, on May 6, and 700 million on May 12. Thus far
Greece has yet to receive any financing for over 12 months, and Greece has KEPT
its promise and has paid its creditors from its own funds (taxes). By all
accounts, there is to agreement in sight, as one minister put it, its futile,
so the Prime Minister is seeking a political solution, and a total one, which
will encounter the agreement supposed to commence on June on the debt.
On Wednesday there is a critical meeting of the ECB to
discuss on increasing liquidity to Greek banks, thru the Emergency Liquidity
Assistance. Meantime the irony is that the IMF has ordered a report on what
went wrong and the program in Greece has failed. Greece has been under the IMF
now for 5 years and all the measures brought was unemployment, austerity, high
taxes, poverty, and businesses closing, as well as people owing to the
government.
Lastly, on what constitutes act of default, the IMF
last week said that it is OK if a country delays a few days its installment
payments. But who decides are the credit agencies, and most likely they will..
Bill T. Alexandratos
