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Sunday, May 10, 2015

Greece manages to scrape up funds for another payment to the IMF

The Greek government managed to scrape together enough cash to pay off $222 million that was due to the International Monetary Fund yesterday.
To raise the cash, the government has been borrowing from pension funds and also from the reserves of local governments. The government is also placing a surcharge on withdrawals of cash and financial transactions. This surcharge will not only raise revenue but also discourage capital flight. Greece is also considering a special levy on the country's 500 richest families to collect more cash.
Next Tuesday, Greece faces an even larger payment of 770 million euros to the IMF. Greece also is required to pay salaries and pensions later next week. Greek officials have been talking with their creditors and EU officials to help push for a release of funds from their bailout loan, but so far creditors have insisted Greece must present and implement reforms that have been demanded as part of the original bail-out agreement. The reforms include changes to pensions and in the labor market that so far the government has refused to countenance and would go completely counter to their election pledges. Alexis Tsipras, the Greek Prime Minister, discussed with French President Francois Hollande how negotiations could be fast forwarded.
Greek officials are meeting with members of the Troika, the European Commission(EC), European Central Bank(ECB), and International Monetary Fund(IMF) or as they are now called "The Institutions" before a meeting of the Eurozone's 19 finance ministers next Monday at which the group could decide whether Greece has done enough to merit release of the remaining 7.2 billion euros of their bailout loan. In Brussels, technical talks had been extended beyond yesterday. An unidentified Eurozone official claimed that there had been visible progress after weeks of stalemate. The Greek Finance Minister Yanis Varoufakis was in Rome to discuss issues with the Italian Finance Minister, Pier Padoan and was then to talk with Spanish finance minister Luis de Guindos. Prime Minister Tsipras consulted with EC president Jean-Claude Juncker yesterday and they both affirmed that "constructive talks should continue."
Tsipras and Juncker issued a joint statement that seems to indicate that Greece may be reconsidering its opposition to demands for pension reform. The two spoke of the remaining reforms Greece needed to implement. These included modernizing the pension system "so that it is fair, fiscally sustainable, and effective in averting old-age poverty". The EC will no doubt stress the fiscally sustainable aspect aspect. The Troika have been demanding pension reforms that Greece has so far resisted. The other main issue was labor market reform and that also the two agreed must be addressed and they said they had discussed "the need for wage developments and labor market institutions to be supportive of job creation, competitiveness and social cohesion."
While the statements sound optimistic, there are reports members of the Governing Council of the ECB are growing impatient at Greece's reluctance to agree to and implement reforms demanded. They also worry about their exposure to Greek bank debt and are reluctant to bend the rules any further to help Greece out of its cash difficulties. German Finance Minister, Wolfgang Schaeuble, who has taken a hard line against Greece said that it was in Germany's interest to help Greece but not at any cost and that just giving more aid without changing the conditions under which Greece was operating made no sense. He also said that Greek demands for World War II reparations were nonsense. We should find out next week whether there is any breakthrough in negotiations. If there is a breakthrough, it would appear that is because Greece has basically caved in to the demands of the Troika.


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