June 30th is the deadline of the extension
of the bailout program for Greece and yet there has not been an agreement
reached between the country and its creditors. Since this new government took
office, I was hopeful in the beginning that there was going to be an agreement
reached, since I personally consider the Prime Minister a realist.
However I have stopped being hopeful since for the
past five months now, every different cabinet member, each week, publicly
claimed that the agreement is imminent. Even the minister of finance, who is
very vocal and contradicts himself on other issues, has said many times that
the agreement is “almost done”. Also his political sought solution failed,
rather that fiscal, since his proposals were not accepted by the institutions.
The reality is that on June 30 Greece needs to come up
with the payments to the IMF in repayments and amortizations, which amount to
11.6 billion euros. The other reality is that Greece has no more money and is
seeking an agreement in order to receive financing to make the payments.
If an agreement is reached (intermediate extension 3
or 9 months) Greece will receive, among other, 9 billion euros from the profits
of its T Bills owed to it. There are press reports that mention the IMF will
not be a part of the intermediate extension agreement. The reason is that there
is disagreement with the European Commission with the sustainability of the
Greek debt. The IMF believes it must be restructured, so if an agreement is
reached it will consent even though it believes that the debt should be
included in the agreement.
So why did the talks fail last week between the Greek Prime Minister and the President of the European Commissioner, who acted as an intermediary? The creditors remain solid on certain policies as part of reaching an agreement. They maintain on reducing pensions, abolishing the social solidarity allowance for low income pensioners, insisting on two rates on the value added tax, with 23% on food, and electric bills, on abolishing the low tax rates on Greek Islands, maintain the property tax, the abolishment of heating allowance for low income families, tax farmers as free lancers, abandon the exemption from seizure of bank deposits up to 1,500 euros for those owing to the public treasury (like pension fund contributions), commit on privatizations of the two ports, airports, and create a private electric power company, by spinning off the Public Power company.
Last week Greece decided to postpone the payment of
300 million euros to the IMF, in contradiction to what Greek officials were
maintaining publicly: that the payment will be made. IMF expressed its
discomfort, although in my view they were hypocrites since it is projected in
the statute, and they knew it.
Greece resubmitted a new proposal and it insists upon
maintaining three rates on the value added tax(vat), disagreeing with bringing
the electricity rates to 23% vat, and will like to postpone the tax increase on
hotels and on Greek island until the summer season is over. It also wants to
keep the primary surplus for this year under 1%, commitment to debt
restructuring, and have access to markets, and permit the ECB to allow Greece
on participating on the Quantitative Easing program.
Last, if not least, in 2010 the Greek government had
the opportunity to sign an agreement and borrow 30 billion euros, and instead
it borrowed 110 billion, and had the opportunity to restructure the debt!
I will not mention the opposition voices inside the parliamentary deputies of the ruling party, some of whom want Greece to exit the eurozone, return to the drachma, default, and the like. It is thankful that the Prime Minister looks the other way, that is why i am sticking to characterizing him a realist, and ignores these dangerous, anarchist idiots, for the future of the Country.
Bill T. Alexandratos
