While no “white smoke” expected from Monday’s Eurogroup, German Chancellor Merkel is meeting this with IMF’s Lagarde and Jean Claude Juncker
Athens.- (GreekNewsOnLine, ANA-MPA, Reuters)
The latest act of the “Greek Drama” is expected to go beyond Monday’s Eurogroup meeting in Brussels that is not expected to end in an agreement on Greece’s bailout. Greek Finance Minister Euclid Tsakalotos blamed IMF and Germany’s Finance Minister Wolfgang Schaeuble for insisting on terms that Greece cannot accept. Tsakalotos blames the IMF for the delay, as the fund disputes the sustainability of the country’s finances and demands more pension cuts and a lower income tax-free threshold.
At the same time there is a deep division between IMF and the EU, while some of the Europeans criticize Germany’s stance.
The bailout, signed by Greece and eurozone lenders, says 3.5 percent of gross domestic product (which would be by far the highest in the eurozone). The International Monetary Fund, the other major lender, says that is undoable without further Greek belt-tightening. It says 1.5 percent of GDP and some form of debt relaxation — for example, over what is paid when — would be more realistic and sustainable.
The IMF, furthermore, says it won’t participate in any bailout that it does not believe to be viable. Germany and others say that the IMF must be a part of the bailout or there is no deal.
Both lenders have told Greece they want about €3.6 billion in additional savings, including a reduction in the tax-free income threshold, now at about €8,600 per person per year, a number the IMF maintains lets some 56 percent of wage-earning Greeks escape paying income tax. Greece says no. Its economy contracted again in the fourth quarter of 2016, and nearly one in four Greeks is unemployed.
There is no imminent cash liquidity problem for Greece. Some eurozone officials have been briefing privately that Greece has enough money to see it through for now, even if it fails to get the next tranche of bailout funds by the July deadline for paying back as much as €7.5 billion of debt falling due.
But it would not be trite to say that another festering row with Greece is the last thing the eurozone needs when faced with a protectionist U.S. president, Britain leaving the European Union, and anti-euro politicians vying for power or presence in French, Dutch and German elections.
So EU officials have been urging speed in finding agreement and calmly warning of instability ahead if none is found.
“There is a common understanding that time lost in reaching an agreement will have a cost for everyone,” the European commissioner responsible for the euro, Valdis Dombrovskis, told Greek news portal Euro2day.
It would be a bad advice for Greece to leave the eurozone, Günther Oettinger, member of the Christian Democratic Union (CDU) and European Commissioner for Budget and Human Resources, said in an interview with the German edition of Huffington Post.
No bank would ever lend Greece money if it wasn’t for the solidarity of the EU member states, he added on the sidelines of the Munich conference.
“Greeks may have not met all their commitments, but Tsipras’ government has made most reforms than ever on budget issues, the labour market and the pensions,” he underlined.
The German politician sent the message of no more austerity measures on Greece saying that a lot of people in Greece are already on the verge of poverty.
Asked on the increasing opposition of Greek politicians to austerity, Oettinger replied: “We persuade more and more citizens everyday that the changes in structures and the economy may be very difficult and harsh, but they have positive results.”
German Chancellor Angela Merkel appeared to have undertaken an effort to bridge differences between Berlin and the International Monetary Fund over the best way to deal with Greece. According to daily Die Welt, Merkel spoke with IMF chief Christine Lagarde and determined that the Fund will participate in Greece’s third bailout after all. Der Spiegel went further, reporting that the Fund would contribute 5 billion euros to the third bailout, significantly less than had been initially expected.
Chancellor Angela Merkel will meet separately the chiefs of two of the institutions auditing Greece’s bailout this week, IMF Managing Director Christine Lagarde and European Commission President Jean-Claude Juncker.
“We have said over and over again that for us the IMF’s participation is indispensable and we are working on this path,” Government Spokesman Tiesenhausen said. “We have already said this week – there are also comments from Brussels on this – that there is convergence between the institutions.”
Merkel, who faces a federal election on Sept. 24 and has fallen behind her Social Democrat challenger Martin Schulz in some opinion polls, needs the IMF on board to make good on a promise to her Christian Democrat-led caucus that the fund will play its role in overseeing Greek compliance with the conditions laid down in the program.
Anti-euro Alternative for Germany, a party which has also sapped support for Merkel, would likely seek to capitalize on any parting of the IMF, which has been presented by the government to Germans as a guardian of strict compliance with the program’s conditions.
Merkel’s meetings are scheduled to take place two days after euro area finance ministers gathering in Brussels will evaluate Greece’s progress in complying with the terms attached to the bailout, including an overhaul of labor market rules. The review is already one year behind schedule and no final decision on its conclusion will be taken at Monday’s meeting, Tiesenhausen said.
In Parliament meanwhile on Friday, Tsipras and Mitsotakis blamed each other for the deadlock. Tsipras called on the ND leader to take a position on the “irrational” demands for additional austerity being made by Greece’s creditors, intimating that Mitsotakis was identifying with the IMF by not distinguishing his stance.
The conservative party leader, for his part, lashed out at Tsipras for the impasse, claiming that Greece’s creditors are only demanding additional austerity from Athens because of the left-led administration’s foot-dragging.
“We are getting closer to a solution,” Interior Minister Panos Skourletis said in an interview with the Athens-Macedonian News Agency (ANA). However, he admitted that a disagreement can hinder the conclusion of the programme review.
He also said that an agreement that will stop the development course of the country, an agreement that will not offer Greece the hope of exiting austerity is an impasse.
Skourletis also lashed out at New Democracy that insists on the issue of early elections without having specific proposals.
On the issue of contractual staff, he said that he is favour of a solution based on the Greek Constitution, the EU Law and the reality. Moreover, he called on all parties to cooperate in order to give an end to that situation.
If the government cannot conclude the programme review, the country will be inevitably led to elections, main opposition New Democracy (ND) parliamentary spokesman Nikos Dendias said on Saturday in an interview with Efimerida Ton Syntakton newspaper.
The current situation cannot be further extended, ND parliamentary spokesman stated adding that a different handling would have better results. The participation in the ECB quantitative easing programme would have offered a liquidity breather to the real economy.
He also accused the government that it managed to unite the creditors as regards their demands from Greece.