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Monday, March 23, 2015

Greece receives over $2 billion from European Commission to avoid cash crunch

Head of the European Commission(EC), Jean-Claude Juncker says that 2 billion euros($2.15 billion) in unused funds will be made available to help Greece avoid a looming cash crunch.
The offer of the funds, comes just a day after talks between Greek Prime Minister Alexis Tsipras and European leaders in Brussels dealing with Greece's compliance with the terms of the extended bailout loan. The leaders, including German Chancellor Angela Merkel said that Greece has agreed to draft a new reform plan that would allow it to receive further funds as part of the loan. Tsipras said that he was now "more optimistic" subsequent to the talks. Greek authorities also claimed that they were gradually coming closer to meeting the requirements of the loan extension.
The Troika of creditors, the European Commission, European Central Bank, and International Monetary Fund now rebranded at the insistence of Greece as "the institutions", agreed they would extend the current bailout program until June of this year. However, there have been constant conflicts between Greek's creditors and the Greek government.The Syriza government has been passing humanitarian legislation that will help the poorest Greek households with free food and electricity and will also allow taxes that are in arrears to be paid by instalments. The European Commission has in effect vetoed such legislation on the grounds that it was introduced without consultation and violated the terms of the loan extension. The creditors demand reforms in the economy including cutting government expenditures and continuing with privatizations
Since the two bailouts in 2010 and 2014, and the implementation of austerity conditions, the Greek GDP has shrunk by 25 per cent. One third of Greeks now live below the poverty line. Unemployment is around 30 percent but half the young people are unemployed. Gaining access to this new money is a victory of sorts for the Greek government.
Juncker, the EC president, said that the new funds will not be tied to the existing bailout loan. but can be used as aid for people and companies hardest hit by the debt crisis. This sounds very much as if even the EC recognizes the need behind the very legislation it had just vetoed. No doubt, Juncker hopes that this move will.make it easier for the Greek government to propose reforms that will meet the approval of creditors as Greece has pledged to do. Since these funds are not tied to the bailout, they can be used for purposes that might run counter to the conditions for the bailout funds. Greek Prime Minister Tsipras praised the decisionsaying:"It is a good sign. It was recognized that there is a humanitarian crisis in our country and that there must be a common effort against it — because it was the not the result of some natural catastrophe."
The EU creditors have been complaining that Greece is not cooperating with technical staff who are trying to monitor Greece's compliance with the bailout terms. The IMF calls Greece the least cooperative client they have ever had. EU leaders have told Tsipras that within the next few days he must come up with detailed budget cuts, and also tax increases, and other reforms before any more bailout money will be released. Tsipras refused to specify a date for delivery of the reforms. What is happening may be another case of kicking the can down the road only to face the same issues within a short time. For now, however, Tsipras seems finally to have gained more breathing space and some recognition of the political problems he faces in Greece.


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