German Grexit plan offer probably better than bailout plan accepted by Greece

Greek negotiators finally arrived at a deal for a further bailout from the European Stability Mechanism (ESM) and the IMF. The deal has harsher austerity conditions than the one rejected by over 60 percent of Greeks voting in a recent referendum.

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The details of the agreement with the European Stability Mechanism can be found here. Accepting this deal meant ignoring any red lines that remained for Greek negotiators. The deal imposes even harsher austerity conditions on Greeks, as well as forced privatizations of state assets. Even so, many leftists and others still support the deal as better than a Grexit. A Grexit was actually mentioned as a possibility by the German Finance Minister Schaueble and the German Foreign Ministry as an alternative to another bailout. The German newspaper Frankfurter Allgemeine Sonntagszeitung (FAS) reports the latest reform proposals from Greece did not go far enough and suggested two alternatives in a position paper:"... the ministry set out two alternative courses for Greece. Under the first, Athens would improve its proposals quickly and transfer assets worth 50 billion euros ($56 billion) to a fund in order to pay down its debt.

Under the second scenario, Greece would take a "timeout" from the euro zone of at least five years and restructure its debt, while remaining a member of the European Union."During the timeout period of the second scenario Greece, as a member of the EU, would still qualify for "growth enhancing, humanitarian, and technical assistance." The majority of creditors apparently regarded this second scenario as not worth discussing and a Greek official claimed that indeed the Grexit plan was not even discussed in the Eurogroup. Instead we find in theactual agreement the first scenario with precisely the same amount in the fund as suggested in the German Foreign Ministry position paper:".. to develop a significantly scaled up privatisation programme with improved governance; valuable Greek assets will be transferred to an independent fund that will monetize the assets through privatisations and other means. The monetization of the assets will be one source to make the scheduled repayment of the new loan of ESM and generate over the life of the new loan a targeted total of EUR 50bn of which EUR 25bn will be used for the repayment of recapitalization of banks and other assets and 50 % of every remaining euro (i.e. 50% of EUR 25bn) will be used for decreasing the debt to GDP ratio and the remaining 50 % will be used for investments.This fund would be established in Greece and be managed by the Greek authorities under the supervision of the relevant European Institutions. "

Note that the process while carried out by Greek authorities is under the "supervision of the relevant European Institutions." The Greeks no longer control their own privatization process, nor do they control what happens to the proceeds, half of which go to pay back the bailout loans! So foreign investors can buy Greek assets and half the funds just go back to the "institutions." Only one quarter can be used for investment and no doubt that investment must be approved by the institutions.

The new agreement ensures not only that all Syriza's red lines have been breached but that with one exception, anti-austerity legislation passed earlier that might have breached the conditions of the previous bailout must be rescinded and any new legislation must be approved by the institutions:".. to fully normalize working methods with the Institutions, including the necessary work on the ground in Athens, to improve programme implementation and monitoring. The government needs to consult and agree with the Institutions on all draft legislation in relevant areas with adequate time before submitting it for public consultation or to Parliament. With the exception of the humanitarian crisis bill, the Greek government will reexamine with a view to amending legislations that were introduced counter to the February 20 agreement by backtracking on previous programme commitments or identify clear compensatory equivalents for the vested rights that were subsequently created."

No wonder in social media the new agreement is called a coup. John Pilger notes just a few of the ways in which Tsipras not only jettisoned almost completely the Syriza program but also went quite counter to his promise to negotiate a better deal:Prime Minister Alexis Tsipras has pushed through parliament a proposal to cut at least 13 billion euros from the public purse – 4 billion euros more than the “austerity” figure rejected overwhelmingly by the majority of the Greek population in a referendum on 5 July. These reportedly include a 50 per cent increase in the cost of healthcare for pensioners, almost 40 per cent of whom live in poverty; deep cuts in public sector wages; the complete privatization of public facilities such as airports and ports; a rise in value added tax to 23 per cent, now applied to the Greek islands where people struggle to eke out a living.

Had Syriza planned for Grexit in the early stages of negotiations, it would have been able to press for Germany's alternative scenario as a far better alternative to a fire sale of its assets with the money used mostly to pay debt. It really does not matter that Germany and other countries want a Grexit because they consider Greece a burden to the eurozone and its taxpayers, a Grexit would still free Greece from being ruled by creditors and at least give them control of their own legislature and resources. Surely that is better than a promise of three years of debt slavery and a possible debt restructuring but no "haircut." What is required immediately by the deal is proof that Greece is serious about cutting pensions, boosting taxes even on those least able to pay and other wholly regressive policies. All of this being implemented by those the media calls "radical leftists."

Greece caves on some of its anti-austerity plans in order to reach deal with creditors

Athens May 31st--The Greek government is signaling that it will compromise on some of its anti-austerity demands in order to reach a deal with its creditors.

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Greek Interior Minister, Nikos Voutsis, said he was confident a deal could be reached within a week. To reach a deal the government would be willing to push back parts of its anti-austerity program. Greece and the "institutions" or Troika of the International Monetary Fund (IMF), European Commission, and European Central Bank have been negotiating for months as Greece has tried to no avail to convince creditors that austerity provisions that are part of the condition for releasing funds from the bailout loan should be cut back considerably. The Greek government has already given way on two of its former "red lines" of privatization and taxation reforms. The main remaining red lines are pension and labor market reforms that would entail pension and wage cuts. The creditors probably will grant the Greek government a lower surplus target since a higher target was probably unreachable in any event. Voutsis said on TV: "We believe that we can and we must have a solution and a deal within the week,Some parts of our programme could be pushed back by six months or maybe by a year, so that there is some balance."Voutsis did not indicate what aspects of the program could be pushed back. There was no mention of any "red lines."

Earlier in the week the government suggested there could be a deal by Sunday May 31 but lenders were less optimistic. The lenders cited the Greek government's continued refusal to address the labor and pension reforms demanded by creditors. Voutsis claimed a powerful majority of those involved in negotiations realized there could be no further austerity strategies imposed as a way of solving the Greek problem. Nevertheless, it seems clear that a powerful group of creditors is insisting that the austerity conditions in the original bailout deal must be honored. The bailout deal terminates at the end of June and a deal to release the remaining funds must be reached before then.

Many critics of the ruling Syriza party argue that it should develop a Plan B to deal with a situation where no acceptable deal can be reached. You would think that this would be done even as a negotiating strategy. So far the narrative usually is that the Greek government will do whatever is necessary to reach a deal, although statements from Greek officials are sometimes inconsistent. This stance provides absolutely no leverage to force creditors to compromise to achieve a deal. Today, Economy Minister George Stathakis told a newspaper:"The idea of a Plan B doesn't exist. Our country needs to stay in the eurozone but on a better organised aid programme, Otherwise, mainly Greece but the European Union as well will step into unchartered waters and no-one wants that."Stathakis was confident of an agreement being reached and also claimed that Greece will be able to make its next payment to the IMF in early June.

Stock markets were lower in Europe and in North America on Friday partly on worries about Greece but the US Dow Jones index gained almost a full percentage point for May. The S & P 500 gained over one per cent and the NASDAQ 2.6 per cent.

Divisions in Syriza party emerge over Greek bailout deal

While Greek Prime Minister Alexis Tsipras insists he wants a deal with Greece's creditors, many in the ruling Syriza party want the government to refuse to accept further demands and instead develop alternative plans in case there is no deal.

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There is increasing pressure on the Greek government to accept changes to pensions and wages that would represent crossing its former "red lines." It has already crossed the lines on the issues of privatization and taxes. However, Prime Minister Tsipras faces strong pressure within the Syriza party to refuse any further demands that would go against the anti-austerity policies for which the party campaigned and helped it win the last election.

The "Left Platform" within Syriza argued Greece should simply stop paying its loans if the "institutions," formerly the Troika" of the IMF, the European Central Bank and the European Commission, continue what they call the blackmailing of Greece by holding up release of loan funds until their demands are met. The group opposes further cuts to pensions and wages and also the changes to taxes and privatization that have already been agreed to by the government. A resolution by the "Left Platform" to simply default on debt payments and develop a plan for dealing with the consequences was defeated narrowly by a vote of 95 against to 75 in favor.

Even the final agreement for negotiating terms contains elements that creditors are quite unlikely to accept:The Central Committee agreed on a text saying any deal with creditors must involve no pension cuts, a small budget surplus before interest, increased public investment and a restructuring of Greece’s debt—terms that lenders are unlikely to accept. The text isn’t binding on Mr. Tsipras’s government but indicates how hard it will be to sell a deal to Syriza.

The leader of the Left Platform Panagiotis Lafazanis, the energy minister, said default was preferable to surrender even if this involved departure of Greece from the euro zone. Dimitris Keridis, an associate professor at an Athens university, said Syriza may be threatened more by independent members of the Syriza coalition who will not accept party discipline unlike the Left Platform members: “The biggest threat may not end up being Mr. Lafazanis, but other parliamentary members who lack party discipline, who are newly elected and are completely unpredictable.” But Parliamentarian Ioanna Gaitani, a Trotskyite member of the Left Platform argued that Greece could survive a debt default and that creditors showed no respect for Syriza’s mandate:“When faced with the pseudo-dilemma of ‘euro or national currency,’ the answer is a unilateral write-off of most of the debt, the taxation of large wealth, and the implementation of Syriza’s program. For the Left, the needs of the people are above profits and debts.”

If Tsipras reaches a deal that caves on all the Syriza red lines, the Left Platform could show solidarity within the group, rather than party discipline, by all the members rejecting the deal.

Greece shuffles negotiating team with Varoufakis moving to the sidelines

Feisty Greek Finance Minister Yanis Varoufakis has reportedly been relegated to the sidelines in negotiations with EU and IMF creditors for a deal that would release more funds from the bailout loan.

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Varoufakis was unable to strike a deal at a recent meeting of the Eurogroup of finance ministers in Riga, Latvia. There was considerable criticism of his performance by some ministers. However, Greek Prime Minister, Alexis Tsipras, voiced support for Varoufakis and said that he would supervise a new team negotiating with the institutions responsible for the loan. At the same time, Deputy Foreign Minister Euclid Tsakalotos, another economist more acceptable to creditors, and soft-spoken, has been appointed coordinator of the group. A Reuters' article suggests this move pushes Varoufakis to the sidelines.

An article in the New York Times also suggests that although Varoufakis remains the leader of the negotiating team, that Tsakalotos would co-ordinate the day-to-day discussions of the group. Giorgos Houliarakis will lead the discussions at the technical level. He had already been involved in negotiations. Both Tsakalotos and Houliarakis are said to be closer to Tsipras than Varoufakis.

These moves are seen as an attempt by Tsipras to lessen tensions with creditors and create an atmosphere more conducive to a deal. There was even an interview with the new Greek president, Prokopis Pavlopoulos, with the German news source Spiegel Online who assured creditors that there was no possibility of a Grexit and who promised that loans would be paid back. However, other leaders including Varoufakis have also promised this continually. In spite of the fact that he is not from Syriza, the ruling coalition, but the conservative Nea Dimokratia party, his criticism of the austerity provisions of the loan echoed those of the ruling party. The international law professor supported Syriza objections to the creditors' criticism of minimum wages and other labour rights, noting that Germany guaranteed its citizens a minimum standard of living:"Some of the measures imposed on us go beyond EU law. We want to be equal members of Europe.We are not asking for anything more than for the Greek people to enjoy what Germany's Constitutional Court considers as an established social right for the German people."He also claimed that parts of the austerity program demanded measures that would stunt Greece's growth , making it even more difficult to pay its debt. According to a Guardian article insiders say that Varoufakis still has a lot of say in negotiations.

The new team appears to be using the same narrative as the old team and Varoufakis. So far the creditors have not been willing to yield at all to any anti-austerity demands. Cosmetic changes of this sort and a change in tone are hardly likely to produce a deal. Perhaps it is the other side that needs a change in tone and in players. While Varoufakis has been abrasive, the other side is adamant that it will continue to impose austerity conditions that it must know the Greek government cannot accept. So unyielding have the creditors been, that analysts are beginning to speculate that the aim is to destroy the Syriza government and produce regime change or alternatively force Greece out of the eurozone.

Greece denies that it is making plans to default on debt payments

As has happened often during negotiations with its creditors, mixed and contradictory messages are coming from the Greek Syriza government.

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The Financial Post reports that the Greek government is preparing to default on its debt if it can't reach a deal with the Eurogroup creditors by the end of this month. One government official claimed:“We have come to the end of the road . . . If the Europeans won’t release bailout cash, there is no alternative [to a default].” There are 2.5 billion euros of payments due to the International Monetary Fund in May and June. The government may be using the threat of default as leverage to receive a better deal from creditors but there is little sign that it is working.

Negotiators for the creditors appear to be exasperated by the Greek government's lack of movement towards presenting and implementing a set of acceptable reforms. There is no sign that any funds from the extended bailout loan will be released until that happens. European Commission Vice President Valdis Dombrovskis said that the mood between the Greek government and negotiators had been tense:"Talks are very complicated. Time is running out. Greece should come up with an ambitious reform list in line with its bailout program and also start to implement it."The Euro Working Group of deputy finance ministers gave the Greek government a deadline of six working days to present a revised economic reform plan. The next meeting of the eurozone finance minister is set for April 24. Dombrovskis claimed that the finance ministers had done their best to be flexible but Greece had to do more.

Whether the Greek negotiators are using the threat of default as a negotiating tactic or not, the depletion of Greek government coffers and the need for more cash is a reality as payment of pensions and salaries become due as well as loan payments. Investors are unsure whether there will be a forced exit of Greece from the eurozone or even perhaps an election called again if no agreement is reached.

Syriza has not only passed legislation on poverty and home foreclosures condemned by its creditors but also has steadfastly refused to address what the Financial Times calls "politically sensitive structural economic reforms":

These included an overhaul of the pension system, including cuts in the payments received by Greek pensioners, and measures to permit mass dismissals by private sector employers.

In spite of promising to meet Greece's international debt obligations, the finance minister Yanis Varoufakis said that the government's top priority is its domestic commitments and this included an obligation to continue paying pensions. Surely, it should be evident by now that Greece cannot do what its creditors demand while also meeting its "domestic commitments."

Nevertheless a Greek government spokesperson denies that it is preparing a default if it cannot reach an agreement with creditors on bailout terms or that it might call an early election afterwards. The spokesperson said that negotiations were proceeding swiftly towards a solution. A solution is needed since the Greek government needs 2.4 billion euros to pay salaries and pensions this month. On the first of May it needs to pay the IMF 203 million euros and another 770 million euros on May 12. Greek prime minister Alexis Tsipras maintains that Greece will simply be unable to service its debt without funds from the European Union.

Creditors press Greek government to meet bailout conditions

- Greece submitted a draft list of reforms to the Eurogroup and "institutions" -formerly known as the Troika- on Friday ahead of a crucial meeting next week that the Greek government hopes will result in the release of more aid.

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In an eleven page letter, there were seven reform proposals. They include measures to improve government budgetary procedures, to help stamp out tax evasions, but also to deal with what Syriza describes as the humanitarian crisis, particularly among the poor. Greece is trying desperately to keep some of its campaign promises. However, the agreement for the bailout stipulates that any such humanitarian measures must not negatively impact on Greece's fiscal status. The proposed 200 million euro anti-poverty campaign would be offset in part by cutting central government spending by 61 million euros. The rest might come from the new tax regulations on internet gambling.

As part of the tax reforms, the Greek government proposes that the length of time for repayment of tax arrears should be extended. There would be new rules that would regulate and tax internet gambling providing a new source of tax revenue. The government estimates that up to 500 million euros could be generated by these new regulations.

While an agreement with EU creditors was reached last month to extend the current bailout of 240 billion euros ($263 US) for four months, Greece is still required to flesh out its reform program and gain approval of the reforms before any further funds will be released.

Meanwhile Greece has been scrambling to find cash to pay for debts coming due this month as its cash reserves dwindle. Greece was able to repay 310 million euros just last week but only through "borrowing" from pension funds and issuing more treasury bills with high interest rates. Greece has not so far been allowed to participate in the bond buying program that will help other euro zone members. Only if Greece presses ahead with reforms demanded by creditors is there any hope of Greece being allowed to participate. Creditors are making use of Greece's perilous financial position to force it to implement reforms that are often counter to campaign promises made by Syriza.

The Eurogroup of the euro zone 19 finance ministers is set to meet on Monday March 9th in Brussels to consider the Greek reform proposals. Even if the group approves of the Greek proposals, officials said no decision was expected on Monday to release more aid. Technical experts from the Troika or "institutions", the European Commission, European Central Bank, and International Monetary Fund need to meet to assess the Greek proposals. However, the Syriza government no longer recognizes the Troika and does not want their experts coming to Athens. There were still discussions with Greece as to where the meeting might take place. In the old days when there used to be a Troika they would simply go to Athens.

A senior EU official in Brussels claimed that Greece could obtain early access to funds if it reaches a comprensive agreement with the Troika or "institutions":"The institutions will look at all these measures. Then they will come to an agreement with the Greek authorities. Then you agree on prior actions, and when the prior actions have been fulfilled then comes the disbursement,"The same official noted that technical discussions on reforms had not even begun. Spokesperson for the German Finance Ministry Martin Jaeger thought it unlikely that there be an early disbursement of funds. While admitting that an earlier disbursement was possible he thought it unlikely in the present case. Jaeger said: "From our point of view there is no basis for that."

Some within Syriza are suggesting that hopes for any reform within the euro zone system are misguided and that the Greek government should be making plans to default and restore use of the drachma. Costas Lapavistas, a Syriza MP and economics professor, argues this case in a Guardian article.

Greek government to reform policies on immigration

Greece has long been a destination and transit point for migrants from Senegal to Pakistan because of its long coastline with numerous islands as well as its border with Turkey beckoning migrants from Asia.

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At present, many migrants come from Syria, escaping the civil war, and Afghanistan, escaping conflict there. Many simply intend to use Greece as a transit point to western or northern Europe. Up until Syriza took power the main aims of policy were to deter migration and to detain migrants if they did come. The United Nations High Commissioner for Refugees(UNHCR) claims that 45,500 migrants and asylum seekers were detained by Greek police last year.

In spite of the fact that Syriza is in a coalition with the Independent Greeks, a party that has anti-immigration policies, Syriza's emphasis will be on protecting migrants who enter the country illegally rather than detaining and then often deporting them. Tasia Christodoulopoulou, the Greek immigration minister, has proposed granting citizenship to second generation migrants born and raised in Greek. She also proposes to close the detention centers and use detention only as "an exceptional measure". She said:"Our first priority is the immediate release of unaccompanied minors and their safe removal. Abolishing the 18-month detention period and rescission of asylum seekers' detention are urgent measures for us." The present law requires the repatriation to the migrant's home country if there is no application for asylum. Greece has the lowest acceptance rate for asylum of any EU country so most migrants to not want to apply. In many cases there is no way they can be repatriated and so they remain locked up indefinitely even after the 18 month period.

Haji Sahib Khan is a 45-year-old from eastern Afghanistan. He was detained close to the Greek border with Turkey.He had been supervising distribution of food supplies from a US non-governmental group. Local fighters caught and beat him for his association with Americans and threatened to kill him causing him to flee. He had to bribe his way through many borders. After two years he is still in detention in a 60 square meter cell with 70 others. He has kidney stones but receives no treatment. He says he might have been better off to have stayed in Afghanistan and risk being killed by the Taliban:"I am dying every day. Maybe it would have been better to be killed by the Taliban. Even though I have a strong case, they keep telling me I have to wait another six months. I will not survive. They don't see me as a human being."

Syriza's coalition partners the Independent Greeks oppose immigration and multiculturalism and emphasize the importance of Greek history and culture. The leader Panos Kammenos stresses the role of the Greek Orthodox Church in Greece, while Alexis Tsipras, the prime minister, is an atheist. The manifesto of the Independent Greeks calls for a cap on immigration of 2.5 percent of the population whereas the present percentage is 9. Syriza may have an uphill battle reforming the detention system even within their own government.

Amnesty International welcomed changes announced by Deputy Minister for Public Order that Greek authorities would no longer detain migrants indefinitely who are held under repatriation orders. There have been many critical reports on Greece's system for detaining migrants. A detailed discussion of several reports can be found here.

The appended video gives graphic accounts of the life of migrants in Greece.

Greece may be forced to exit euro zone to achieve its reform proposals

In order to renegotiate its debt burden, the Syriza government of Prime Minister Alexis Tsipras has been forced to abandon most of its campaign promises including a write off of some of its debt, and removing most of the austerity conditions that were part of the original agreement. Indeed, the new agreement is simply an extension of the old one and will give Syriza just four months breathing space before huge payments will be required for maturing European Central Bank bonds. Germany has been insistent that there be continued onerous conditions placed upon extension of the bailout. Commentators such as the economist Paul Krugman and Joseph Stiglitz claim that the imposition of strict austerity conditions is counter-productive. The policies reduce demand producing depression and high unemployment. Increased public spending is needed to spur growth.

 While liberal economists are no doubt correct about the negative consequences not only for the populace but for economic growth that austerity produces, the aim of the austerity policies are to restore profitability and improve conditions for capital. The reforms involve cutting back on government and privatizing public facilities and services. The reforms increase unemployment resulting in a larger "reserve army of the unemployed" that will reduce labour costs and weaken union power. Expectations about what the government is able to provide in terms of social services will be reduced. All of these types of measures increase the power of capital over labour and make capital more competitive eventually improving the profit picture over the longer term. Proponents of the austerity measures point out that Greece has already reached a point where it has a surplus. The fact that it also has twenty five percent unemployment rising to fifty percent among youth is neither here nor there. Indeed it ensures that labour costs are lower. It also supplies a flow of frustrated but often skilled Greek workers into other parts of Europe helping to lower labour costs in other areas.

 The Germans have support from governments in Spain, Portugal, and Ireland who also were subjected to painful austerity policies. The Germans and their allies do not want to see their policies undermined by giving Greece less harsh terms and conditions for dealing with their debt situation. Italy and France are also attempting to impose structural reforms on their labour force. The electorate in Germany and elsewhere support harsh treatment of the Greek. Two thirds of the German populace do not want Greece to receive any concessions. Many think that Greeks are lazy, get huge pensions, and are corrupt. Of course some are, but actually the Greeks who do work are working more hours than in any other European country. If measured in hours worked, it is the Germans who are the laziest Europeans!

 The European Central Bank put pressure on the Greek banks by withdrawing their ability to use Greek sovereign debt as collateral for liquidity provisions. Depositors became worried and withdrew billions of euros each day.The Greek government was also faced with obtaining funds to pay debts and wages.Unless a deal was reached the Greek government faced an ever worsening financial crisis. T he Eurogroup, led by Germany. used these conditions as leverage to force the Syriza government to accept a deal with very few concessions. In order just to stay alive for another four months, the Greek government promises to achieve appropriate surpluses, and refrain from any unilateral actions that would impact negatively on fiscal targets.

Most of the reforms that Syriza campaigned upon will be impossible under the terms of the agreement, including raising the minimum wage and reversing privatizations, although there are signs that the government may attempt some of the reforms under the rubric of relieving the humanitarian crisis. However, they may find that their EU partners simply refuse to send money on the grounds that the government is not meeting the terms of the agreement.

 Costas Lapavitsas, an economics professor and Syriza MP, notes that not only did the Greek government pay a high price to stay alive, the situation is made even more difficult by the state of the Greek economy. The economy grew only 0.7 per cent last year and actually declined in the last quarter. It had been shrinking ever since the austerity policies had been imposed. Even during the Xmas season retail sales fell by 3.7 percent. There is evidence of a deflationary spiral with prices declining by 2.8 percent in January alone. Lapavistas claims: "This is an economy in a deflationary spiral with little or no drive left to it. Against this background, insisting on austerity and primary balances is vindictive madness." At the end of the four months, Greece will face even more demands and will need more funds to make even larger payments than during the four month reprieve. Lapavistas maintains that Greece should go ahead implementing measures that it campaigned on, including forbidding house foreclosures, writing off domestic debt, raising the minimum wage and stopping privatizations. He claims that carrying out these policies rather than fiscal calculations must be the main priority of the government in order to keep popular support.

 There is some evidence that Lapavistas viewpoint is being accepted in part, as the government forges ahead with some policies that will bring it in conflict with the EU. In Lapavistas' view the euro zone is not capable of being reformed and he claims the common currency has become an absurdity. He believes that in the next negotiations the Greek government should present radical proposals. No doubt these will not be accepted by the Eurogroup but then Lapavistas' said that the government should prepare the people for a possible exit from the zone. This position appears not to be shared by Finance Minister Varoufakis who promises he will do anything to stay in the euro zone. He has kept that promise.

 A majority of Greeks support the manner in which the Greek government carried out negotiations. A large majority also favor staying in the euro zone. Perhaps within the next few months it will become clearer to the population that if they stay in the zone then they will be subject to more austerity and a continuing debt trap. Lapavistas is not alone in suggesting an exit from the euro zone or Grexit as it is called. This article argues in a similar vein. An exit from the zone will be very difficult.

Greece short of cash to make March payments to International Monetary Fund(IMF)

 The first payment due is this Friday March 6th in the amount of 310 million euros but the total payments due this month are 1.5 billion($1.7 billion US) euros. The government may be forced into "borrowing"  state pension and social security funds or even European Union farming subsidies to meet its obligations to the IMF. While Greece will be able to meet it obligations over the short term, it faces even larger payments not long after the four month extension period of the present bailout ends in four months. In July and August 6.7 billion in European Central Bank bonds mature. 

  The Greek Finance Minister, Yanis Varoufakis, claimed he would "squeeze blood out of stone" to make the IMF payment. He also said: "It would be excellent if we could agree with out partners to smooth over this cash flow hump that we are facing over the next few months." Many experts believe that Greece will require a third bailout package after the extension period runs out in order to pay off the EU bonds maturing during the summer. Dr. Michael Arghyrou, of Cardiff Business School said that either Greece defaults on its loan payments and exits the euro zone, or it must agree to a third bailout package. While prime minister Tsipras says he does not want to leave the euro zone, he claims also that Greece will not request a third bailout. He will probably actually negotiate another bailout but call it by another name perhaps "new arrangements".  He pulled off a similar stunt after he refused to deal with the Troika (European Commission, European Central Bank, and International Monetary Fund). They are now always referred to as "the institutions" but are carrying out the same role as they did earlier of overseeing the bailout and determining whether the terms are being satisfied by Greece.

 Although Syriza promised during the election campaign that at least some Greek debt would be written off, since being election it has stressed that it would honour all its debt obligations. Jens Bastian, an analyst for Macropolis a provider of data and analysis on Greece said that it was not in the interest of Greece to default on any of its IMF obligations. If they did so, the government would face even greater difficulties borrowing money to pay off other debts. Bastian maintained:“The Greek government has identified IMF payment as an absolute political priority. You may be able to solve repayment obligations in March. The bigger problems are looming around the corner in July and August.”

 Greek's creditors are unlikely to provide Greece with any sort of financial break to help it out of its troubles. On the contrary, it will use them as leverage to force Syriza to enact reforms and follow policies that are in the interests of creditors and investors even though they bring even more hardships on the Greek populace. As Valdis Dombrovskis whose job is to monitor Greece's compliance with the conditions of the bailout program puts it: "In this case, they will need to speed up program implementation".  The Greek government can look forward to a long hot summer of negotiations with its creditors. The demands of creditors will ensure that Syriza will be able to carry out few if any of its campaign promises except to stay in the euro zone. Perhaps the party will come to realize that this is the promise they should break if they are ever going to keep their other campaign promises, even if in the near term Greeks will suffer even more.

Greek Prime Minister insists that Greece will not seek a third bailout

Alexis Tsipras, the Greek Prime Minister, announced that Greece will not seek a third bailout when the extension of the present bailout runs out in four months time.

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Tsipras, the leader of the major government party Syriza, made the announcement in an address to parliament that was on Greek TV. Tsipras has just four months to negotiate something to deal with the large payments coming due shortly after the four month period is ended. Tsipras, may simply have announced another name change as happened with the Troika. Tsipras and his finance minister, Yanis Varoufakis, refused to extend the bailout originally and would not meet with the Troika of the European Commission, European Central Bank, and International Monetary Fund to renegotiate an extension of the bailout. Varoufakis did meet with the Eurogroup of finance ministers and the "institutions" that included the Troika were also involved and eventually reached a deal under the original terms so that in the end there was a four month extension of the original bailout agreement. The plan may be to remove the term "bailout" in any new agreement. The old wine will be put in new bottles but with new labels as well. Tsipras' remarks came just a few hours after German legislators had approved the four month extension of the present bailout but with some votes against the extension.

Tsipras said: “The bailout agreements are over, both in form and in essence. Some people are betting on a third bailout in July … but we will disappoint them.”

Some leftist groups in Greece such as the Greek Communist Party oppose the Brussels agreement, so Syriza must describe their policy in a positive fashion and as being a replacement for the hated austerity conditions of the original bailout deal. Any new deal in July must also have a positive new description even though it will be very much like other bailouts and will be described as such by the Eurogroup.

Tsipras claims that Greece has been successful in separating the loan agreement from the "disastrous" austerity conditions imposed by previous governments. That is far from the truth. Indeed the terms of the extension were based upon the existing agreements. As a Eurogroup statement put it:

The Eurogroup notes, in the framework of the existing arrangement, the request from the Greek authorities for an extension of the Master Financial Assistance Facility Agreement (MFFA), which is underpinned by a set of commitments. The purpose of the extension is the successful completion of the review on the basis of the conditions in the current arrangement, making best use of the given flexibility which will be considered jointly with the Greek authorities and the institutions. This extension would also bridge the time for discussions on a possible follow-up arrangement between the Eurogroup, the institutions and Greece.The MFFA is the original bail out plan "underpinned by a set of commitments" which would include the austerity reforms. Interestingly, the Eurogroup statement already refers to a "possible follow-up arrangement" rather than a bailout. The best that Tsipras can take from this is that the "given flexibility" might be employed to change some conditions but only with the agreement of the EU group.

At a two-day meeting of the Syriza central committee, Tsipras said that Syriza had won the battle for an extension of the loan agreement even though the party sold out on most of its key commitments during the election campaign and did not actually manage to forge a new agreement outside the original agreement.Tsipras noted that many forces were against the new government: "We joined the battle in Europe with every step undermined. The most aggressive European conservative forces, in cooperation with the (ex-Premier Antonis) Samaras government, had sprung up a trap to derail us before we had even governed.They had everything set up to shipwreck us ... and the country."

Tsipras singled out Spain and Portugal as countries opposing Greece, since both countries worry that any gains by Greece could encourage anti-austerity forces in their own countries. Spain in particular faces upcoming elections with the anti-austerity party Podemos growing in strength. Tsipras claims: "We found opposing us an axis of powers ... led by the governments of Spain and Portugal which for obvious political reasons attempted to lead the entire negotiations to the brink,Their plan was and is to wear down, topple or bring our government to unconditional surrender before our work begins to bear fruit and before the Greek example affects other countries. And mainly before the elections in Spain."

Greece did come close to what was an unconditional surrender. However, when it comes to politics, rhetoric often trumps reality.

Greece's proposed reforms for bailout deal accepted by Eurogroup but with reservations

The Greek Finance Minister Yanis Varoufakis sent a letter to Eurogroup President Jeroen Dijsselbloem just before the deadline of midnight Monday that outlines proposed reforms that Greece was willing to undertake to receive bailout funds.

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The complete text of the letter can be found here or here. Many of the reforms have to do with tax collection and the tax system, an area that both Syriza and its EU partners agree is in drastic need of reform. There is also an emphasis on tackling corruption. While there are sections that deal with tackling poverty and humanitarian issues, these are always treated as being addressed in a manner that does not impact negatively on the fiscal situation.

Under the final section entitled the Humanitarian Crisis there is a section that an article in the Business Insider considers could redefine how we view the modern welfare state. The proposal is for a guaranteed minimum income(GMI). While this is often supported by leftists, it is also supported by many on the right The libertarian right sees the system as a replacement for the many separate welfare schemes that have grown in advanced capitalist societies with a single payment that could be spent by the recipient at will and without bureaucrat intervention. This contrasts with other right wing groups who want to ensure that welfare is narrow and targeted and goes only to those who are "deserving". The idea has been supported by free market ideologues such as Milton Friedman and Friedrich Hayek.

Hayek said:There is no reason why in a free society government should not assure to all, protection against severe deprivation in the form of an assured minimum income, or a floor below which nobody need descend. To enter into such an insurance against extreme misfortune may well be in the interest of all; or it may be felt to be a clear moral duty of all to assist, within the organised community, those who cannot help themselves.Hayek's formulation for the GMI is much more idealistic than that presented in the Greek reform proposals. Here is part of the context of the Greek GMI reforms as set out in the letter: • Evaluate the pilot Minimum Guaranteed Income scheme with a view to extending it nationwide.• Ensure that its fight against the humanitarian crisis has no negative fiscal effect.So any expenditure on the GMI will presumably need to be revenue neutral or paid for by saving elsewhere. Another passage makes it clear that the GMI is actually intended to discourage early retirement which would cost the state more in pensions.The reforms promise to:"..provide targeted assistance to employees between 50 and 65, including through a Guaranteed Basic Income scheme, so as to eliminate the social and political pressure for early retirement which over-burdens the pension funds."

This would allow those between 50 and 65 who may become unemployed through becoming jobless, no doubt in some cases through the measures accepted for the bailout loan, to remain in the job market until conditions improve for them without opting for early retirement which would cost the government more.

Another supporter of the GMI is Sam Bowman, deputy director of the Adam Smith Institute who writes: "The ideal welfare system is a basic income, replacing the existing anti-poverty programmes the government carries out (tax credits and most of what the Department for Work and Pensions does besides pensions and child benefit)...Like the current benefits system, this would provide a safety net. But ‘benefits traps’, where people lose as much in benefits as they earn from work, would be eliminated."

The role of the GMI as presented in the Greek reforms is to save money not solve the humanitarian crisis. This may be a means by which Greece is trying to sell the program to its partners. For those who would earn more if they could choose early retirement when laid off the GMI would represent a decline in income. The GMI is hardly the revolutionary new program the Business Insider describes:In the First Muslim Caliph, Abu Bakr introduced a guaranteed minimum standard of income, granting each man, woman, and child ten dirhams annually; this was later increased to twenty dirhams.

While the EU and Troika or "institutions" have accepted the reforms listed--not surprising since they were developed through constant consultations--they have also demanded further elaboration of them. Christine Lagarde the manager of the International Monetary Fund(IMF) and Mario Draghi, the President of the European Central Bank expressed some reservations and objections to the list. The Eurogroup finance ministers in an official statement said: “We call on the Greek authorities to further develop and broaden the list of reform measures, based on the current arrangement, in close coordination with the institutions in order to allow for a speedy and successful conclusion of the review.”Greece is being presented with more and more hoops to jump through to receive further funds. In the end the Greek government may decide enough is enough and break free through an exit from the euro zone.

Syriza government in Greece tries to sell sell out as a success

Athens - After presenting proposals for a debt deal that reneged upon most of Syriza's campaign promises that were rejected by Germany, the Syriza Greek government claims it won the battle for the debt deal.

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In actuality, with Germany taking the lead, Greece was forced to accept extension of the original bailout deal that includes all the bailout conditions of the original memorandum of agreement. It did not receive a six-month loan period as it wanted but only four months. The loan period could not expire at a worse time since large debt repayments will be due shortly after. This will provide leverage for EU officials to press even more demands on the beleaguered Greek government. The Syriza government had insisted that it did not want an extension of the existing bailout agreement nor would it deal with the Troika of the European Commission, European Central Bank or the International Monetary Fund. It has agreed to an extension of the original bailout and supervision by the Troika but under a new name. They are now called simply "institutions." There will be no debt write off, one of Syriza's key campaign promises. Greece agrees to honor all its debt obligations.

In spite of all this Alexis Tsipras, the Greek prime minister, said in a TV interview: "Yesterday we took a decisive step, leaving austerity, the bailouts and the troika behind." Tsipras is wrong on every point. Even Reuters notes the discrepancy between what Tsipras claims and the reality:Tsipras declared Greece was "leaving austerity, the bailouts and the troika behind". Nevertheless, government plans must still be approved by the re-named troika, although Tsipras won election last month on a pledge to end the humiliation of foreigners dictating Greek economic policy.

The new loan is in effect a tranch of the old bailout and he has to present reforms the Greek government intends to implement — and these must be approved by his EU partners and the IMF, in effect the old Troika under a new description: Finance Minister Yanis Varoufakis said the reform promises would be ready on Sunday and submitted to Greece's EU and IMF partners in good time. "We are very confident that the list is going to be approved by the institutions and therefore we are embarking upon a new phase of stabilization and growth,"

It will be interesting to see what these new reforms will be. I expect that some will deal with fighting corruption but there will also probably be tax reform of some sort. Greece has always had trouble with tax collection and both the government and the EU would like to see tax revenues increase. One thing is certain the type of reforms that Syriz demanded in its campaign for the recent elections will not be on the table. Only reforms acceptable to the Troika — sorry I meant "institutions" — will be on the table. These will not include rehiring laid off public workers, increasing minimum wages, or stopping key privatizations. Even Tsipras remarked: "We won a battle, not the war.The difficulties, the real difficulties...are ahead of us."

The Irish finance minister, Michael Noonan, noted that the deal simply gives the Greek government a short reprieve even after reversing their electoral position and gaining virtually nothing from the EU in return. However, it did avoid bankruptcy and having to leave the euro zone.

One promise that Tsipras and his finance minister Vourafakis did keep and that was to do whatever was necessary to achieve a deal. Even though Tsipras kept abandoning campaign promises during negotiations he at the same along with his finance minister often spouted radical rhetoric completely at odds with what he was doing. About 80 percent of Greeks supported the tactics used by their government negotiators.

The vast majority of Greeks do not want to leave the euro zone and no doubt are relieved that at least a deal has been made to keep them in the zone for now. Tsipras said:"I want to say a heartfelt thanks to the majority of Greeks who stood by the Greek government ... That was our most powerful negotiating weapon. Greece achieved an important negotiating success in Europe.".One veteran leftist, Manolis Glezos, was critical of the deal. Glezos is a Syriza member of the European parliament. On his blog he wrote: "I apologize to the Greek people because I took part in this illusion. Syriza's friends and supporters ... should decide if they accept this situation."In contrast, Finance Minister Varoufakis was confident even about the reforms he was forced to submit on Monday: "We are very confident that the list is going to be approved by the institutions and therefore we are embarking upon a new phase of stabilization and growth." An anonymous official said that the reforms included a crackdown on tax evasion and corruption. There is no mention of reforming austerity conditions since the Greek government has already agreed those will continue for at least four months. After the four months many predict that Greece will need another rescue program. As the Irish Finance Minister Noonan put it: "Once you get them into the safe space for the next four months, there'll be another set of discussions which will effectively involve the negotiation of a third program for Greece."

Costa Panagopoulos, head of the polling firm Alco, said that the initial reaction to the deal was relief that Greece would remain in the euro zone. He thought that Greeks might even accept Tsipras' claim that the Troika was no more. After all, the term does not appear in documents. The appended video demonstrates Varoufakis' skill in portraying the reality as something completely different. Perhaps, Varoufakis could be featured in a new Monty Python comedy skit.

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.

Syriza and EU lenders appear on a collison course

The new leftist government of Greece, led by Alex Tsipras, demands that part of the Greek debt be written off and austerity policies changed. There is little sign that EU lenders are willing to make significant alterations to the bailout conditions.

Many liberal economists agree with Tsipras that the EU austerity bailout conditions have failed to solve the debt problems of Greece while leading to sustained and mounting misery. Critics of the programs suggest that the austerity policies reduce demand causing a fall in output and growth and suggest Keynesian spend and grow policies as a solution as well as a write off of some debt to make the remaining debt manageable. Added to Joseph Stilglitz, and Paul Krugman both winners of the Nobel economics prize , James Galbraith recently wrote an article The Greek Hope supporting Syriza's policies.

The Troika are negotiating from a position of relative strength. Greece faces debts coming due that it cannot pay. Greek banks rely on the Emergency Liquidity Assistance(ELA) of the EU Central Bank. The Troika could threaten to cut access to the ELA.The new Quantitative Easing program ensures that if Greece exits the euro zone other countries will be somewhat insulated from the negative results. Given these weapons, the EU finance ministers in their meeting on January 26th showed little interest in renegotiating the bailout terms “The eurozone has ruled out debt forgiveness for Greece and warned its new anti-austerity coalition government must honour all past agreements…” German Finance Minister, Wolfgang Schauble, had said last December: “New elections change nothing”. Galbraith admits the past record of Greece is poor but the policies of the Troika have only made the situation worse. As the policies fail and Greece is still unable to pay its debts, the Troika follows a policy of "extend and pretend". This keeps Greece continually at the mercy of the lenders forcing Greece to accept even more drastic measures and begging for more money. This makes a write-down of the debt imperative.

 Galbraith says that Greece should not be compelled to negotiate out of fear. He admits that Greece does not have the sort of leverage in negotiations that the EU has: What leverage does Greece have? Obviously, not much; the heavy weapons are on the other side. But there is something. Prime Minister Tsipras and his team can present the case of reason without threats of any kind. Then the right and moral gesture on the other side would be to throw the three cudgels out of the room, and in particular to grant fiscal space and to guarantee Greek financial stability while talks are underway. Tsipras could claim to have the Greek populace behind him who would might very well come to support a Grexit or exit of Greece from the euro zone, if negotiations for relief from some debt and austerity conditions are not possible. However, it would seem that the EU already has accepted that may be the result. Syriza, on its part, so far has not indicated what plans it has if it should find itself forced to Grexit.

Tsipras had softened his more radical rhetoric as victory neared at the polls. He suggested that negotiations should be, as Galbraith describes them, without threats and both sides negotiating on the basis of "reason". The Greek populace, investors, and lenders, should all end up with a positive solution, as the Greek economy would begin growing at a good pace again. Yet after the election, Tsipras chose an unlikely coalition partner in the Independent Greeks (ANEL) Rather than pick the larger more centrist grouping To Potami, The River, Tsipras chose to approach a party that is quite right wing on social issues such as immigration. ANEL will be more reliable in supporting changes to the anti-austerity conditions than To Potamos: Analysts have described it as an unnatural alliance and warned it might not survive long, pointing out that ANEL - best-known for vitriolic attacks on Germany and the Troika and for the occasional unashamedly antisemitic, racist and homophobic outbursts of its populist leader, Panos Kammenos – are unpredictable and that the two parties, while they agree on the need to end austerity, hold directly opposing views on many key social issues including immigration. This choice shows that Tsipras' highest priority is to push through changes to the bailout conditions. To Potamos was rejected as a partner because it was "too soft on the bailout":"The River, a new, broadly centrist party which some expected to be the coalition partner, made clear it opposed Syriza's hard rhetoric towards Berlin."

 Tsipras has chosen a leftist economist, Yanis Varoufakis, as finance minister. Varoufakis described the EU austerity polices as "fiscal waterboarding". Varoufakis, is a dual Greek Australian citizen and left a job at the University of Texas to work on Tsipras' election team. In celebrating the election results he drew on the Welsh poet Dylan Thomas: “Greek democracy today chose to stop going gently into the night. Greek democracy resolved to rage against the dying of the light.” I have appended a lecture from some time ago with both Varoufakis and James Galbraith. In any negotiations there will always be a lot of posturing, with the parties actually giving ground when actual negotiations begin. Perhaps this is the case with respect to Syriza and the EU, but from the statements of the two sides up to now, it is difficult to see how much progress is possible.

UPDATE: Vourafakis has indicated he will not negotiate with the Troika but only through leaders and officials of EU countries.