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Tuesday, April 21, 2015

Greece tackling impossible task of keeping election promises and pleasing creditors

Greece said it will keep election pledges to end austerity measures even as its creditors demand pension and labour market changes that go counter to those pledges.
Deputy Prime Minister Yannis Dragasakis said Greece wanted a viable solution with the euro zone but still would not budge from their red lines. It is because Greece has not been willing to budge much from these red lines that the Eurogroup and the European Commission, European Central Bank, and International Monetary Fund(IMF), the Troika, have not agreed that Greece has met the conditions of the bailout loan with the reforms presented so far.
Other Greek officials were equally defiant in refusing to countenance cuts in wages, pensions, selling state assets or increasing taxes. Energy Minister Panagiotis Lafazanis said the country won't agree to any privatizations, a position at times contradicted by other officials. It would appear the privatization of Piraeus port is going forward. Lafazanis also claimed creditors were trying to blackmail the government to force it to take measures that would hurt the working class, but the government would not betray the mandate of the people. Spokesperson for the major government party Syriza, Rania Svigou, said:“The Greek government has presented a realistic reform plan that doesn’t contain recessionary measures or burden the weaker layers of society, yet gives the economy breathing space. The government will exhaust all possibilities for a solution that respects the mandate of the Greek people.”That may be the case, but it does not meet the terms of the bailout loan Greece agreed to and as understood by their creditors and until they meet those terms there will be no further cash forthcoming from the loan.
Greek banks so far still are eligible for Emergency Liquidity Assistan according to Mario Draghi, the head of the European Central Bank(ECB), but there has been a heavy withdrawal of funds and transfers outside of Greece as depositors worry about a possible exit of Greece from the Euro zone. However, Draghi ruffled markets and spooked some investors when he said financial buffers were sufficient to prevent any contagion should Greece default on its debt. He also warned that if Greece defaulted on its payments the EU would be entering "uncharted waters."
Draghi urged Greece to work out and implement detailed reforms that would satisfy creditors and release funds. Draghi told reporters in Washington on Friday at a meeting of the International Monetary Fund that much more work needed to be done:"It's urgent. We all want Greece to succeed. The answer is in the hands of the Greek government."Even US Treasury Secretary, Jacob Lew , joined the chorus of those urging Greece to reach a deal, and warned a default would "create immediate hardship for Greece."
Some observers, such as Der Spiegel, are suggesting Russia's Putin will come to the rescue of Greece. As Zerohedge puts it: According to Spiegel, citing a senior figure in the ruling Syriza party, Greece is poised to sign a gas deal with Russia as early as Tuesday which could bring up to €5 billion into the depleted Greek coffers.Russia needs an alternative pipeline that would bypass the Ukraine.and bring Russian gas to Europe through Turkey and Greece. Greece would not need to repay the advance until after the pipeline began to operate about 2019. While these funds may provide a temporary stopgap, Greece will still require more cash later this summer and so the Russian injection would simply be another stage of kicking the can down the road, but at least could buy Greece some further time to work issues out. The deal with Russia could be a sign that Greece is willing to begin moving away from the EU orbit into a closer relationship with Russia.


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