Economist Paul Krugman applauds decision to hold referendum on bailout deal

Athens - Paul Krugman, the American liberal economist, has been consistently critical of the austerity program demanded by the Troika as a condition of releasing the final funds of the Greek bailout that expires on June 30.

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Krugman in his New York Times blog notes that until now every Greek government has given in to the demands of the Troika no matter what they had said during the election. Krugman refuses to use the term "institutions" to refer to the European Commission, European Central Bank(ECB) and the International Monetary Fund(IMF) or Troika. After the Greek government refused to meet with the Troika after being elected, they were rebranded as "institutions" presenting the radical Syriza government with at least a linguistic victory. Krugman's refusal to go along with this game is refreshing.

The continuous caving in to Troika demands has damaged the credibility of centre-left parties and no doubt is a factor in the success of Syriza, a more radical leftist umbrella group. Krugman suggests the Troika thought that the Syriza government would abandon most of its anti-austerity program or the government might fall. The Greek government did abandon most of its austerity program and almost all of its red lines. They have followed the usual pattern. However, the Troika has pressed for more and abandonment of any red lines. It is as if they needed to humiliate the party to show that a radical leftist party is helpless. They must be taught to respect their superiors.

The call for the referendum should have been a wakeup call for the Troika. It was not but an occasion for the usual moralistic blather about Tsipras being irresponsible. Krugman thinks that Tsipras did the right thing. Krugman has been arguing that the Troika has been doing the wrong things all along. In fact, he claimsthat if Grexit happens, it will be because the creditors, especially the IMF wanted it to happen. This may be correct but there are certainly risks for the eurozone and Troika if there is a Greek exit (Grexit) from the zone. If Greece defaults on debt payment the ECB and IMF will suffer huge loan losses. There is also the possibility of contagion. If over the longer term Greece recovers and grows, this would encourage resistance to austerity and the rule of the Troika in other countries. The Troika must hope that somehow they will persevere without yielding much if anything even at this late stage.

Krugman approves the referendum for two main reasons. First, a referendum will give the Greek government democratic legitimacy in any future negotiations. Most Greeks are still very much for staying in the zone it seems even if their anti-austerity demands are not meant. However, given the recent increased demands and the fact that Syriza, and no doubt other parties such as the Communists, will campaign for a rejection of the Troika proposals there is no guarantee it will pass. Even if it does pass and a deal is then negotiated it would not be a long term solution to the Greek problem but kicking the can down the road again until another bailout is needed. Meanwhile social discontent might rise to the boiling point. Krugman claims that democracy still matters in Europe. Of course it does not when it comes to the power of the Troika over individual countries. The referendum is the exception not the rule. Krugman's second reason for approving the referendum is that it will solve the dilemma that the governing party Syriza faces. Syriza faces citizens who voted for anti-austerity measures but are not willing to leave the euro zone. Syriza has achieved very little if anything in the way of relief from austerity policies and so it is now quite fitting that they should ask Greeks whether they want to bow to the Troika demands and accept their offer or to turn it down. This will provide Tsipras a mandate to cave as others have done or to develop a plan B for default and possible exit from the euro zone.

Many critics have argued that a plan B should have been planned long ago when it became obvious the Troika was giving little or nothing to satisfy demands for relief from austerity. The negotiations were filled with bluster, useless rhetoric, and false optimism that a deal was close. Having the referendum at this late date creates huge problems for Greeks that would not have been as severe were it held much earlier, say on the earlier proposals of the Troika. If held then there would not have been a huge payment coming due as that to the IMF the end of June, days before the referendum. The move to hold a referendum and the lack of a plan B show that Syriza is guilty of poor planning or perhaps no planning at all. Now Greeks face a bank holiday on Monday and capital controls. In the appended video from January of this year, Krugman was even then predicting a Greek default on its debt well before the election of Syriza.

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.

Greek Prime Minister claims that deal with creditors is close

Alexis Tsipras, the Greek Prime Minister, insists he is close to a deal with the country's creditors that would result in the remainder of the bailout loan funds to be dispersed helping to ease the country's cash shortage.

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This is not the first time Greek officials have said they are close to a deal. The same claim was made back on May 8. There are still key issues that are not resolved including pension and wage reforms, that is austerity measures. Tsipras claims that there is no possibility of retreat either on the wages issue or pensions. However, Greece has already caved on the issue of privatizations and tax reform another two issues that were previously said to be red lines. If there is to be a deal Tsipras would probably be required to yield on the pensions and wage issues as well. There will be virtually nothing left of the government's anti-austerity measures. Both the IMF and other EU creditors insist that the Greek reform proposals are still too vague. An EU official said that the Greek government needed to move beyong promising openings to final agreed upon wording and commitments.

EU leaders are holding a conference in Riga, Latvia, on May 21 and 22 to discuss eastern Europe. Tsipras will raise the bailout negotiations issue on the sidelines of that conference. The negotiations are now stretching beyond 100 days with little progress made until lately when Greece caved on key issues of taxation and privatization. Stephen Gallo, European head of currency strategy at the Bank of Montreal said in a TV interview: “Even if they have a deal before the bailout extension ends at the end of June, we don’t think they’ll get access to the full remaining 7.2 billion euros ($8.2 billion) of the current bailout extension.” He said the Greek crisis will not be over for a long time.

Meanwhile the Greek financial situation is getting worse as the government scrambles to raise 500 million euros in cash to pay for wages and pensions at the middle of the month. After raiding pension funds, and local governments the government is now asking that consulates and embassies cough up any cash reserves. The credit rating of government debt has plunged further into junk status. Greek banks have seen huge withdrawals of funds as nervous depositors worry that there may be a default and a return to the drachma. Money is flowing out of Greece as well. A leaked IMF document notes:“non-performing loans are at very high levels and – going forward – the system might suffer from important stress. The staff also noted a dramatic deterioration in the payment culture in the country”. This last refers to the near gridlock of the Greek system of inter-company payments as betwen €30 and €35bn has flowed out of the banking system – into the cash economy and abroad – since Syriza came to power.

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.

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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.

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.

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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.

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.

International Monetary Fund complains that Greece is its most uncooperative client ever

Officials from the IMF, the European Central Bank, and the European Commission, complained in a conference-call Tuesday that Greek officials are not adhering to the conditions of the bailout extension deal or cooperating with creditors.

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The officials did not want to be identified since the call was private. A letter was also sent by the European Commission objecting to legislation that would give free food and electricity to households in poverty and also to allow tax arrears to be paid in instalments. The letter said that the laws were in violation of the bailout agreement. since they were not cleared by the Troika. International Monetary Fund(IMF) officials claimed that Greece was the most unhelpful client they had dealt with in their entire history. German finance officials said trying to get the Greek authorities to present a rigorous economic reform policy was like trying to ride a dead horse.

According to a Reuters report the teleconference was supposed to allow Greece to report on its reform process but instead Greek officials insisted that discussions should be held at the upcoming European Union summit on Thursday. One anonymous euro zone official said that for many people the teleconference "could be something of a last straw."

If the Greek government does not implement the unpopular austerity provisions of the bailout extension required by creditors, Greece may end up not getting the money needed for its upcoming debt payments. Tsipras is hoping to have a meeting with Mario Draghi, head of the ECB , Angela Merkel German Chancellor, French President Francois Hollande and Jean-Claude Juncker the head of the European Commission later this week in Brussels. Tsipras wants a political deal to unlock funds from the $254 billion bailout, but the euro zone officials may be in no mood to grant Greece any leeway as the Greek government goes ahead with reform policies without getting approval from creditors. Without concrete proposals and evidence that reforms the creditors want are being implemented, there will be no political agreement to release the funds. There may however be political agreement not to release the funds.

The Dutch Finance Minister Dijsselbloem said that Greece might require capital controls as happened in 2013 in Cyprus. His remarks helped Greek bank shares to lose over 5 percent. The Athens stock exchange lost 1.8 percent and interest on Greek bonds rose to a whopping 20.5 percent. Progress of technical personnel from the Troika working in Athens has been very slow. They too complained of the Greek government passing legislation whose implications for Greek finances was not at all clear and without consultation, a clear violation of the bailout extension agreement. Greece has large payments due as early as this Friday.

German Finance Minister Schaeuble said that time was running out for the Greek government. He noted also that Greece has insisted it does not want a third bailout program. He said: "We have the impression, and everyone who is dealing with the question shares the impression, that time is running out for Greece. They obviously have certain problems."

It is not clear how Greece could possibly continue to pay its debts without further loans.

As well as talking with European officials and meeting with Angela Merkel in Berlin, the Greek Prime Minister, Tsipras, also intends to visit Putin on April 8. Some worry that Greece's debt problems may lead the country to form alliances outside the west including with Russia. The US sent Victoria Nuland , the assistant secretary of state for European and Eurasian affairs to Athens to meet with Tsipras. She was active in seeing to it that Ukraine turned toward Europe. Now she no doubt will warn Tsipras not to cosy up to Putin.

The Greek government faces the impossible task of trying to implement its election promises, to show Greeks that the government can improve conditions, and at the same time convince its creditors that it is carrying out the reforms demanded as part of the bailout deal. But reform measures by the Greek government continually violate the terms of the bailout deal. The government then call the demands of the creditors blackmail. In a further slap in the face to the Troika or "institutions" the Deputy Finance Minister Nadia Valavani said that proceeds from any privatizations will be used ,not to repay debt as desired by the creditors, but for social programs. She said:"There will be a new Sovereign Wealth fund ... and the revenue will be used to fund the government's social policies and to support the social security system."Having annoyed all those parties who hold the purse strings, it seems unlikely that Greece will be able to get any concessions at all from euro zone officials.

Syriza not even able to win symbolic victory but tops in rhetorical flourishes

Mario Draghim, president of the European Central Bank(ECB), told Greek officials in Brussels that the Greek government must allow technical representatives representing the European Commission, the ECB and the IMF to start work in Athens on Wednesday.

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These three institutions are the Troika charged with overseeing Greece's compliance with the terms of the bailout agreement. The European Commission and the International Monetary Fund(IMF) had the same message. Originally the Greek government claimed it would not negotiate with the Troika and the group did not go to Athens as is usually the case. Instead of being referred to in most documents as the "Troika," the new term is the "institutions" even though the reality is exactly the same. The Greek government was able to move the meetings discussing the proposed reforms to Brussels rather than Athens. However technical personnel from the Troika insist they need to go to Athens to examine the government books. Greece has given in and agreed to that.

Jeroen Dijsselbloem, chair of the Eurogroup of finance ministers said:“The important thing is that we’re starting the technical work between the troika institutions and the Greek government. It needs to start to bear fruit.”

Note that Dijsselbloem sneaks the term "troika" back into his description as if to remind the Greek government of the reality that they are still dependent on the Troika whatever the rhetoric from the ruling party Syriza. Dijsselbloem said the list of reforms presented by Greece last week was far from complete and not enough. He also complained that Greece was not moving quickly enough to implement what had been already agreed and wasted time arguing about where meetings should be held: "We seem to be losing time now - since the last eurogroup little has been done in terms of future talks, in terms of implementation. We have spent the last two weeks discussing who will meet who, where, and in what configuration. It’s been a complete waste of time."

The problem for Prime Minister Alexis Tsipras is that he is trying to salvage at least some of his campaign promises and get relief from some of the austerity policies imposed upon him by conditions of the Greek bailout. While there are some reforms that are at least agreed upon in principle by the two sides, such as tackling corruption, and tax evasion, even on these issues there are disagreements about some policies. However, with respect to some other issues such as privatization and humanitarian issues such as raising minimum wages, and rehiring government workers, the two sides disagree entirely.

Greece could face a cash crunch in a matter of weeks. Even to make a recent payment the government had to "borrow" from social security funds and issue more treasury bills. Greek sovereign debt is no longer eligible to be used as collateral in liquidity operations. The interest rate on treasury bills is higher than it would be if they could participate in the sovereign debt purchase operations to obtain funds.

While Greece has not even achieved a symbolic victory, since the Troika are going to Athens to examine the books, the Greek Finance Minister spins the situation to suit the demands of his constituency back home: “The troika is a cabal of technocrats that used to arrive in Athens and enter the ministries with a kind of power play that smacked of a colonial attitude. That practice is finished. We shall endeavor to do whatever it takes to provide the institutions with whatever information they need.”Who does he think the people are that he just agreed could go to Athens to look at the books?

To give Varoufakis even a symbolic victory is just too costly as far as the Dijsselbloem is concerned. Hundreds of Greek officials would need to be flown to Brussels to do the work there. The troika cabal of technocrats will return to Athens even if Varoufakis will not call them that. He agreed that the technical people could start Wednesday. German Finance Minister Wolfgang Schaeuble agreed that if the Greeks want it the troika could be renamed "the institutions":If Greece wants that, one can of course negotiate with the three institutions which we should no longer call the troika, but which is the troika,”The Troika smells just as sour by any other name. Notice that in the video appended only the term "institutions" is used not the Troika. This is a great semantic leap forward for Syriza.

The stock markets are declining in Europe and also North America. Gold has come off its lows in reaction to increased concern that Greece may default on its loans soon.

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.

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.

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.