After a week of what seemed to be close to an
agreement between Greece and its creditors, suddenly the IMF instigated a sort
of a veto to the proposals by the Greek government. They claimed that the
proposals were not in the direction of cutting government spending (i.e.
pensions), they insisted on sales tax for food, restaurants, and tourism at
23%, while they rejected a proposal by the Greek government for alternative equivalent
measures (they sited prior example of Ireland and Portugal where the creditors
accepted those proposals).
The creditors also rejected an extension of the
current program to 6-9 months, while the creditors offered 3 months. Today, the
president of the EU revealed that the EU proposed another offer to the Greek
government which was flexible as far as the sales tax issue on restaurants and
Hotels. The Greek government refuted the claim by saying it never received the
new proposal. The creditors maintained their position on cutting immediately
early retirement, and not gradually as proposed by the Greek government. The
maintained their opposition on raising corporate taxes, they wanted the Greek
government to come up with a proposal to counter the highest court’s decision
on the unconstitutionality of cutting pensions.
They also showed persistence on the issue of the discount
on sales tax for the Greek Islands, tax farmers as free lancers and not at the
13% rate, they are against a special contribution to businesses for profits
exceeding 500,000 euros, privatizations especially for the public power
company, immediate application of free trade (OECD toolkit), immediate
abolishment of the social security poverty allowance for low income pensioners
by 20% of current beneficiaries, persistence in imposing tax on Greek shipping (the Germans want the
shipyard business for themselves). The Greek government maintained that a
complete package cannot exclude a written statement on the debt and its sustainability,
while it accused the creditors that they seek the overthrow of the government,
and not seeking an agreement.
Developments are constant and while this weekend the
banks were closed, the government announced a referendum on the issue for next
Sunday. The parliament brought the issue to parliament and it past the
resolution, while the Bank of Greece, in cooperation with the European Central
Bank, and the Greek government, decide for a mandatory bank holiday until next
Monday. While this will take place, there are reports that a capital control
will be imposed, with a daily withdrawal from ATM’s between 50 and 60 euros per
day.
Just this past Saturday people rushed to the ATM’s and withdrew 1 billion
euros. Nervousness prevails, uncertainty in the economy is evident, and who
knows what will be the outcome of the referendum, and what comes next. It is interesting to point out that the ECB in its emergency meeting decided not to increase liquidity to the Greek banks
On the referendum, the Greek Prime Minister called the
US president, the German Chancellor, and others on the decision. Athens also
provided a new request to the Institutions for an extension, and on Wednesday
an emergency Eurogroup will be held for Greece, with perhaps a new proposal on
the table. Hopefully it will not be an ultimatum as was the previous one.
Bill T. Alexandratos
billalex60@gmail.com
