The Greek government’s ongoing crisis isn’t looking much better at the start of the week.
The government and representatives from the European Commission, European Central Bank and International Monetary Fund were locked in negotiations over the weekend, with little progress reported.
After a positive meeting between German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras last week, it was hoped that Greece would produce a detailed reform plan to release the latest €7.2 billion ($US7.82 billion) wave of assistance.
But the talks are not going well.
According to the Financial Times, Greece is likely to make concessions on the country’s unpopular property tax. The new government had promised to scrap it, but the tax is likely to say. However, the FT suggests there are big gaps missing from the proposals:
The list failed to include reforms to labour laws and Greece’s pension system — two areas that monitors have insisted are essential to finalising the bailout programme. They remained “red lines”, said Greek officials.
“There’s no prospect of taking any recessionary measures, whether it’s cutting wages and pensions or liberalising regulation on mass dismissals,” said Mr Tsipras in an interview published in RealNews, a Sunday newspaper…
“It’s financed by ‘making the system work better’,” said one official from a creditor country who has seen the list. “This relies on huge optimism [and fiscal gains that might occur] some time in the future, but long after the costs start kicking in.”
And the situation is looking no better according to sources from inside the meetings that spoke to the Wall Street Journal:
“The proposals were piecemeal, vague and the Greek colleagues could not explain technically what some of them actually implied,” a eurozone official involved in the talks said. “So, let’s hope that they present something more competent next week.”
Now technical work will have to continue this week in Athens, officials say. Senior eurozone finance officials will hold a teleconference on Wednesday to discuss the situation, officials said. But they said it is highly unlikely eurozone ministers will meet before mid-April to release more money for Greece.
It’s quite possible that Greece can’t really wait that long — typical end-of-month payments like pensions and government salaries have to be paid, and according to European Commission estimates reported in the German press, Greece has just over a week’s worth of cash left. It may make a payment to the IMFon April 9, but after that the public finances will really be circling the drain.
Reuters have reported a slightly later date, suggesting that Greece can hang on until April 20 by shuffling public money around different government organisations. But the bottom line is the same — the money is rapidly running out and Athens will face official defaults unless there’s a deal soon.
Greece was previously running a primary surplus — collecting more tax than it spent on everything except debt interest. That’s probably a bad idea for the country’s economy, but it gives Athens some breathing space in terms of immediate challenges to the public finances. According to German news magazine Der Spiegel, that surplus is now probably totally gone and the country’s funding gap is €20 billion ($US21.73 billion) higher than previously believed.
This is a pretty desperate situation — especially since this is only meant to be the precursor to the real negotiations later this year. Remember, Greece had wanted something to tide the country over into the summer so it could arrange a bigger debt conference.