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Thursday, March 12, 2015

Creditors press Greek government to meet bailout conditions

- Greece submitted a draft list of reforms to the Eurogroup and "institutions" -formerly known as the Troika- on Friday ahead of a crucial meeting next week that the Greek government hopes will result in the release of more aid.
In an eleven page letter, there were seven reform proposals. They include measures to improve government budgetary procedures, to help stamp out tax evasions, but also to deal with what Syriza describes as the humanitarian crisis, particularly among the poor. Greece is trying desperately to keep some of its campaign promises. However, the agreement for the bailout stipulates that any such humanitarian measures must not negatively impact on Greece's fiscal status. The proposed 200 million euro anti-poverty campaign would be offset in part by cutting central government spending by 61 million euros. The rest might come from the new tax regulations on internet gambling.
As part of the tax reforms, the Greek government proposes that the length of time for repayment of tax arrears should be extended. There would be new rules that would regulate and tax internet gambling providing a new source of tax revenue. The government estimates that up to 500 million euros could be generated by these new regulations.
While an agreement with EU creditors was reached last month to extend the current bailout of 240 billion euros ($263 US) for four months, Greece is still required to flesh out its reform program and gain approval of the reforms before any further funds will be released.
Meanwhile Greece has been scrambling to find cash to pay for debts coming due this month as its cash reserves dwindle. Greece was able to repay 310 million euros just last week but only through "borrowing" from pension funds and issuing more treasury bills with high interest rates. Greece has not so far been allowed to participate in the bond buying program that will help other euro zone members. Only if Greece presses ahead with reforms demanded by creditors is there any hope of Greece being allowed to participate. Creditors are making use of Greece's perilous financial position to force it to implement reforms that are often counter to campaign promises made by Syriza.
The Eurogroup of the euro zone 19 finance ministers is set to meet on Monday March 9th in Brussels to consider the Greek reform proposals. Even if the group approves of the Greek proposals, officials said no decision was expected on Monday to release more aid. Technical experts from the Troika or "institutions", the European Commission, European Central Bank, and International Monetary Fund need to meet to assess the Greek proposals. However, the Syriza government no longer recognizes the Troika and does not want their experts coming to Athens. There were still discussions with Greece as to where the meeting might take place. In the old days when there used to be a Troika they would simply go to Athens.
A senior EU official in Brussels claimed that Greece could obtain early access to funds if it reaches a comprensive agreement with the Troika or "institutions":"The institutions will look at all these measures. Then they will come to an agreement with the Greek authorities. Then you agree on prior actions, and when the prior actions have been fulfilled then comes the disbursement,"The same official noted that technical discussions on reforms had not even begun. Spokesperson for the German Finance Ministry Martin Jaeger thought it unlikely that there be an early disbursement of funds. While admitting that an earlier disbursement was possible he thought it unlikely in the present case. Jaeger said: "From our point of view there is no basis for that."
Some within Syriza are suggesting that hopes for any reform within the euro zone system are misguided and that the Greek government should be making plans to default and restore use of the drachma. Costas Lapavistas, a Syriza MP and economics professor, argues this case in a Guardian article.


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