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Friday, April 3, 2015

Greece still has no deal with its EU creditors

On Tuesday negotiations between Greece and international lenders ended with no deal reached on reforms that would allow the release of more bailout funds.
Greece must reach a deal with international institutions, formerly known as the Troika of the European Commission, International Monetary Fund(IMF), and the European Central Bank(ECB), before it can receive the next instalment of bailout funds. Technical talks have halted for now but could begin again next week. Greece could be unable to make debt payments in April if it does not receive more cash.
Greek creditors said that the package of reforms submitted by Greece were ideas rather than a concrete plan of reform. Greek representatives had been meeting with what are called the "Brussels Group" of representatives from both the European Union and the IMF. Creditors are intensifying efforts to collect data in Athens. On Monday, prime minister Alexis Tsipras had appealed for an "honest compromise" with his creditors but warned it could not be won at any cost. He stressed that the government had "red lines" such as avoiding wage and pension cuts, mass layoffs, and a fire sale of state assets.
Spokesperson for the European Commission, Mina Andreeva, told reporters: " The constructive talks are ongoing since Friday, but we are not there yet, so this is why the talks should continue. The Eurogroup working group will discuss the matter at its next meeting,The talks are constructive and are ongoing,"There was to be a conference call of the Eurogroup working group on Wednesday that would provide an opportunity to appraise the debate so far.
The Financial Times reported on the new list of economic reforms that Greece sent to the euro zone authorities on Wednesday. The document was 26 pages long. The reform measures are estimated to generate about 6 billion euros this year. Greece is attempting to unlock 7.2 billion euros in bailout funds. Many of the reforms tackle tax evasion a continuing problem in Greece. There is also a new lottery scheme. In a short introduction the document states: “The larger purpose of this document is, in the first instance, to unlock short-term financing that will permit the Greek government to meet its immediate obligations. The Hellenic Republic considers itself to be a proud and indefeasible member of the European Union and an irrevocable member of the eurozone.”In spite of the lack of a deal so far, the atmosphere of the talks appears improved. Even so, several EU officials said they did not expect a deal until the next meeting of the eurozone finance ministers on April 24. Greece claims it has the necessary funds to make a payment of 450 million euros to the IMF on April 9.
The new list of reforms fails to address an overhaul of the Greek pension system and greater labour market liberalisation. The new reforms even suggest 1.1 billion euros in new spending, partly on pensions. The document also suggests a suspension of the "zero deficit clause" since this would force more cuts to state pensions. These measures are not likely acceptable to creditors.
The reforms in the labour market include a gradual increase in the minimum wage and the strengthening of collective bargaining laws. These measures point in the opposite direction of policies already adopted in earlier reforms. On privatisations the document appears to grant concessions even though this conflicts with the express statements of some Syriza ministers. However, the document does estimate that privatizations would bring in 1.5 billion euros this year as against the planned 2.2 billion in the original agreement.
Economy minister George Stathakis said he expects a deal next week. The reform list presented on Wednesday, included the leasing of 14 regional airports and the privatization of the largest port Piraeus to raise 1.5 billion euros through asset sales and leases. Yet, Stathakis said the government had no plans to sell all of its 67 percent stake in the Piraeus Port Authority. He claimed that government would pursue a joint venture. There seem to be inconsistent statements given by different officials. It seems unlikely that the Greek government will be able to pursue any substantial reforms and reduction in austerity as promised to voters during the election campaign and at the same time satisfy its creditors and obtain the release of more bailout funds. Even Warren Buffet thinks that it might not be such a bad thing if Greece left the euro zone.


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