It has been one long month since the Greek deal on the Eurogroup of 20 February where Greece and the rest of the Eurozone agreed to give to the former a four-month extension of the loan agreement.
However, the Greek government does not seem to cooperate with the three institutions (ECB, IMF, EU) to actively and urgently promote structural reforms, as agreed. That is only one of the reasons the European leaders gathered in Brussels during the 19-20 March EU summit.
The mini Summit
The Greek government is facing some serious liquidity problems. This lead the Greek prime minister Alexis Tsipras to organize a meeting during this Summit, with a bit of help by the president of the European Council (EC) Donald Tusk; a “mini Summit”, as many call it, with Angela Merkel, François Hollande, Mario Draghi, Jeroen Dijsselbloem and Jean-Claude Juncker, a meeting that only came ton an end during the early hours of today. The president of the EC had stated that: “it is my obligation to help Mr Tsipras organize this meeting in order for the Greek prime minister to have an informal dialogue with the main creditors and representatives of the European institutions”.
Even if everyone’s eyes were focusing on this “mini Summit”, no new announcements were made; as was also expected prior to that. More specifically, Germany’s Chancellor had mentioned that there would be no solution to the Greek matter during that meeting but “time to talk to each other in detail and perhaps also to argue”.
After this unexpectedly long mini EU Summit, the President of the European Council, Donald tusk and the President of the European Commission, Jean-Claude Juncker made a common statement: “We fully adhere to the agreement of the Eurogroup of 20 February 2015. In the spirit of mutual trust, we are all committed to speed up the work and conclude it as fast as possible. Within the framework of the Eurogroup agreement of 20 February 2015, the Greek authorities will have the ownership of the reforms and will present a full list of specific reforms in the next days. We reconfirmed the practical agreement on the process: The policy talks take place in Brussels. The fact-finding missions take place in Athens. The Eurogroup stands ready to reconvene as soon as possible.”
Mrs Merkel added after the roundtable: “the Greek government is committed to propose reforms so that the process of an evaluation can start. A list will be sent and everything is supposed to be completed quickly. We didn’t talk about specific details. The Greek prime minister has declared his willingness to send these reforms. Trust was obviously needed”.
Mr Hollande, in agreement with the German Chancellor: “Greece will have to provide technical informations in Athens and have political discussions in Brussels”.
On the other hand, Mr Tsipras reassured on his way out of the Justus Lipsius building of the European Council: “I’m more optimistic after this deliberation. I think that all the sides confirmed their intention to try to do their best to overcome the difficulties of the Greek economy as soon as possible.”
ECB & Greek Banks
More than 300 million euros were withdrawn from the Greek banks only last Wednesday. People or companies are afraid of Greece’s bankruptcy and run to withdraw their money. The European Central Bank (ECB) has raised the limit of the emergency lending to Greek banks by 400 million but it doesn’t seem to be enough to calm people down. It only perpetuates a bad bank situation by providing only a few million euros.
This is another pressure by the European institutions to force Greece to the structural reforms path. Is this political and financial pressure by the European leaders adequate to make the Greek parliament pass harsh austerity reforms? Jeroen Dijsselbloem stated earlier this week that the Cyprus “bank run” could be witnessed in Greece this time. However, the left-leaning Governing party Syriza fought back and said it will not allow a situation like the Cyprus bank run, with capital controls in order to restrict cash withdrawals, to happen again.
The US pressure
The US President Barack Obama called Merkel before the EU summit in order to help Greece avoid a possible exit from Europe that would come either deliberately or accidentally. Barack Obama fears for an imminent Grexit or Graccident which would force Greece to seek for financial aid in other countries like the “Orthodox Brothers”, Russia.
The US President is afraid not only about the economic impact of a weaker Europe on the other side of the Atlantic but also about how countries will be strengthened by actions like the aforementioned one. Thus, a greater plan of financial aid is being drawn by the US government behind the scene in the event of a Greek dead-end.
Is Syriza afraid of a Grexit?
Mr Tsipras and his government are moving full speed ahead towards a so called Grexit or Graccident by not complying with February’s agreement to promote reforms. Was it Syriza’s plan from the beginning and their attempt to seek negotiations with the three institutions is just an pretext for the Greek citizens to go along? The Greek government’s actions, if of course they give reason to a strategic plan, would seem to support this.
The Greeks have made few reforms and voted just two days ago only for humanitarian bills. Of course these are greatly needed in Greece, a country which has been horribly hit by the crisis more than any other in the Eurozone but more reforms must be certainly implemented, in order to build the lost trust with the European leaders and gather money to pay the “rent”. Furthermore, the Greek government provided little information to the representatives of the three institutions when they went to Athens for a “technical” evaluation of the goverment’s finances and they were criticising for transferring from one hotel to another to avoid any meeting at the Ministry of Finance.
However, this is one side of the coin. One could argue that the European institutions are not helping Greece by providing enough liquidity in order to pay its debts, thus blackmailing the Greek government and its people. And that could be equally true if we think that the ECB has let Greece outside the Quantitative Easing, a programme that could have given to Greece 60 billion euros per month and could have provided enough liquidity to stand on its feet easier and faster. The ECB has repeatedly stated that it will not even think of letting Greece participate before the latter starts implementing the promised measures and the reforms.
All roads lead to Berlin
The next “business trip” for the Greek prime Minister will be next Monday to Berlin where he accepted the invitation of Angela Merkel to discuss about the on-going situation and the fate of Greece in the Eurozone. Mrs Merkel at the same time, downplays the importance of the meeting in the German capital, saying that “there will be no solution to the Greek problems” next Monday and that she will just “try” to have a conversation with Mr Tsipras; it has to be noted that the latter statement was recently made amid sarcastic laughters by fellow German politicians.
Everything is going to be judged in a political level, at least this is what Mr Tsipras believes. Greece from one side must show that is determined to create a policy with measures and structural reforms that will be implemented as soon as possible and bring results in the next three months. Only then Germany and the rest of the Eurozone from the other side should be able to trust Greece and press the start button in the Greek cash flow engine.
If Greece fails to pass the test again to submit convincing and meticulous plan for measures and cost-effective reforms in the next few days, then another round of discussions and negotiations will then begin.
In any case, the Greeks seem to adamantly believe that there is always time or that they can make time in order to get what they want; and thus they will always risk for it. The crucial question though is who on Earth has the right to gamble with the lives of 11 million people?