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.

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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.

European Commission vetoes Greek government's humanitarian crisis bill

The European Commission has vetoed what the government calls a "humanitarian crisis bill." The bill was meant to address poverty among pensioners and homeless families.

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The bill said:

"The deep recession due to austerity policies and the economic crisis in the past six years had a dramatic social impact. This draft law aims at tackling the humanitarian crisis through measures which ensure access to basic goods."

Free electricity and food would be provided to some poorer households under the legislation. The Commission sent the notice just 24 hours before the bill was to go before the Greek parliament. Another bill that would have allowed tax arrears to be paid in installments was also vetoed. Of course the Greek parliament can still pass the bills, but if they do they can forget about more funds being released under the extension of the bailout program. The agreement with Greek creditors is that no policy that might impact the financial objectives that are part of the extension deal would be passed unilaterally, that is without the agreement of the creditors. I might add, that includes the Troika of the European Commission, IMF, and European Central Bank now called "the institutions."

According to a communication seen by Channel 4 News, Declan Costello, director of the EC's directorate for economic and financial affairs, ordered the Syriza government to kill the legislation. Costello's letter said:During our teleconference last night, you mentioned the planned parliament passage tomorrow of the ‘humanitarian crisis’ bill. We also understand that other policy initiatives, including the installment scheme law, are in train that are to go to parliament shortly.We would strongly urge having the proper policy consultations first, including consistency with reform efforts. There are several issues to be discussed and we need to do them as a coherent and comprehensive package. Doing otherwise would be proceeding unilaterally and in a piecemeal manner that is inconsistent with the commitments made, including to the Eurogroup as stated in the February 20 communiqué.”

In effect, the letter states that if the Greek government goes ahead with this legislation it will be in violation of the deal Greek Finance Minister Varoufakis signed on February 20. It should be clear that Greece simply cannot expect to pass its reform program as promised to the voters, but only such reforms as its creditors agree can be presented. The Syriza government has been carrying on with rhetoric that has no relationship to reality. There is no new deal that avoids the strictures of the Troika. It is the same deal with the Troika now called "the institutions." Legislating reforms that might use funds that could be sent to pay off loans will not be allowed, unless the debtors also agree. The Greek government thinks that it can assure creditors that the new measures will not burden the budget, but obviously the Commission does not see it that way.

Syriza MP and economist Costas Lapavistas in a joint interview with the German paper Der Tagesspiegel and The Press Project International said that Greece and its EU creditors were "flogging a dead horse" by trying to keep the bailout deal going. He suggests that the two sides should be working on "an exit that will be negotiated and consensual." Lapavistas points out that in 2011, the German Finance minister Schauble was in favour of a negotiated exit. A majority of Germans now also want to see Greece exit the euro zone:A poll by German broadcaster ZDF found that 52% of Germans think Greece should leave the eurozone, and only 40% think it should stay. In February, the figures were reversed — with a 52% majority wanting Greece to stay.

Even the business news outlet Bloomberg has an article by Mark Gilbert saying that a Greek exit from the Eurozone seems inevitable.

Germany rejects Greek loan extension proposals sabotaging a deal for now

Moments after the European Commission had called the Greek proposals "positive" Germany rejected the proposal. Greece was requesting a six-month extension of its loan program. The complete text of the letter sent to the Eurogroup finance ministers can be found here. A spokesperson for the German finance ministry complained that the Greek proposals were attempting to obtain "bridge financing, without meeting the requirements of the programme. The letter does not meet the criteria agreed upon in the Eurogroup on Monday." The spokesperson also said that the suggestions were "not a substantial proposal for a solution". In the BBC article, at least, the spokesperson does not say exactly why the proposal is not a substantial proposal for a solution nor how exactly the proposals fail to meet the requirements of the program.

Syriza has caved on almost every demand including the demand that there be a new agreement and not an extension of the original agreement. The Greek proposals show Syriza has caved on debt reduction and in effect accepted the bailout terms:"The Greek authorities honour Greece's financial obligations to all its creditors as well as state our intention to cooperate with our partners in order to avert technical impediments in the context of the Master Facility Agreement which we recognise as binding vis-a-vis its financial and procedural content."

 As this Wall Street Journal article explains Greek officials think that they can sign on to an extension of the terms of the loan agreement under the Master Financial Assistance Facility Agreement (MFAFA) without signing on to the bailout austerity conditions in the MoU or original memorandum of agreement. There is only one problem with that position and that is that getting a loan under the MFAFA is part and parcel of the MoU. You cannot get a loan without signing on to the austerity conditions of the MoU. "The availability and the provision of Financial Assistance under this Agreement... shall be conditional upon (i) the Beneficiary Member State’s compliance with the measures set out in the MoU and (ii) the Guarantors deciding favourably, on the basis of the findings of the regular assessments carried out by the Commission in liaison with the ECB ... that the economic policy of the Beneficiary Member State accords with the adjustment programme and with the conditions laid down by the Council in the Decision and any other conditions laid down by the Council or in the MoU. " I have omitted some of the legalese in this quote. For the entire quote in its original form see the article.

Another section of the Greek proposals accepts the supervision of the Troika without using that term:" f) To agree on supervision under the EU and ECB framework and, in the same spirit, with the International Monetary Fund for the duration of the extended Agreement. " So Syriza will not negotiate with the Troika but agrees to their supervision.

Some of the proposals do suggest that the Greek government should reverse some of the austerity measures: "The Greek government expresses its determination to cooperate closely with the European Union's institutions and with the International Monetary Fund in order: (a) to attain fiscal and financial stability and (b) to enable the Greek government to introduce the substantive, far-reaching reforms that are needed to restore the living standards of millions of Greek citizens through sustainable economic growth, gainful employment and social cohesion. " Some of the reforms mentioned in b) would no doubt be inconsistent with present austerity policies tied to the bailout program.

 Mark Lowen of the BBC suggests that there is a rift at the highest level between authorities in Brussels and Berlin. European Commission president Jean-Claude Juncker took the Greek proposals as a positive sign that could pave the way for a reasonable compromise. Any vote on the Greek proposals must be unanimous so Germany can determine the outcome. A Greek government source said after the German rejection of its proposals: "Tomorrow's Eurogroup has just two choices. To accept or reject the Greek request. We will now discover who wants to find a solution, and who does not". Perhaps Germany wants Greece to  exit the euro zone and get rid of what it no doubt considers a trouble maker with uncivilized official who do not wear ties.