The Greek Parliament
today approved the third memorandum by a vote of 222 in favor, 64 against, and
11 present, with one absent. The vote is in time of the Eurogroup meeting in
progress, also today, meeting to ratify the agreement between Greece and its
creditors. Following the approval it will then go to the European parliaments
for approval of financing by August 18. The plan is for a three year bailout
with Greece receiving €85 billion in time to pay off the ECB coming due on
August 20th.
The ruling party has lost
about 40 deputies from its left wing platform and the government is now below
the threshold of 120 deputies, which means that it does not have majority rule.
The prime minister is now considering to bring up next week a vote of
confidence in parliament, otherwise all options are open for early elections.
In his speech to parliament today, the Greek PM said he does not regret his
compromise ( concession, I call it) and that this was a much better decision
rather than Greece going bankrupt and exiting the euro.
The agreement includes
the most important item which is the restructure of the Greek debt, to be
discussed in October. The Wall Street Journal claims today, it has at its
disposal information that the Greek Debt will inflate above 180% of GDP in the
coming years. The IMF considers the Greek debt unsustainable and thus is
unwilling to take part in the financing until the Greek debt is restructured or
cut.
The financing will help
Greece pay off its upcoming obligations, it will provide about €25 billion to
restructure the Greek banks, avoids bridge financing which was initially
favored by the German finance ministers and its satellite clown states,
provided for lower primary surpluses for the next three years (<1%), which
means less fiscal measures, financing needs will be covered up to 2019, as well
as cover debt due by the Greek treasury to the private sector (providers to the
health care system, although this will be scrutinized as to the extent of the
truthfulness of the amount).
The agreement reinstates
the collective bargaining agreement, allow into law of 100 installment payments
those that owe to the revenue service, does not include the concession of bad
loans of Greek banks over to distress funds, allow profits and revenue from the
sale of public assets – property to return to the real economy up to 50%,
rather than taking 100% of those revenues and place them into the current debt.
It also does not provide for the subordination to the English Law, and waiver
by state immunity.
As far as the
recapitalization of the Greek banks the goal is to be completed by years’ end,
the total lift of capital controls, and allow private investors to participate
in the process. Creditors agreed during the talks in Athens that depositors
should not be sacrificed by a haircut in deposits, and that there should be no
contribution by depositors on deposits. The asset quality review has begun and
stress tests will be completed by December 2015.
On the fiscal side of the
agreement, they agreed on the abidance of property tax, impose criteria on
those that have enlisted in the law for those that owe less than €5,000 to
insurance funds (100 installment payments), the taxation of farmers starting
next year (from 13 to 26%), the abolishment of allowance of heating oil to
farmers, cuts or abolishment of allowances
to public employees, open up closed trades (I have doubts on this myth since
nothing was gained nor did it add anything to the economy on the opening up of taxis,
truck drivers transportation). Incidentally, Germany has closed trades and
maintains them with devotion.
Provisions also include
the gradual abolishment of the allowance to lower income pensioners, with its
replacement by the lower guaranteed income, the increase in rent tax from 11 to
15%, and the gradual abolishment of early retirement. Of course it goes without
saying the increase in value added tax, the abolishment of the special tax
privileges to the Greek Islands, the increase in tax of hotels, and the
increase by 100% of advance tax prepayment for free lancers, partnerships,
corporations.
The financing will be
comprised of €52 billion by the European stability mechanism, €16 billion by
the IMF, and €18 billion from privatization. And on this issue, Greece agreed
to create a super investment fund which will manage €50 billion and will
exploit public assets, such as oil reserves, infrastructures, long term leasing
of public assets, and the liberalization of natural gas.
