Although Greece is struggling to pay salaries and pensions Varoufakis is “optimistic”; the Sting reports live from EBS 2015

Yanis just could not miss the European Business Summit 2015 last week in Brussels. Yanis Varoufakis is still Greece's Minister of Finance. (EBS 2015)

Yanis is transforming into a superstar these days in Brussels. He just could not miss the European Business Summit 2015 last week in Brussels. Yanis Varoufakis is Greece’s Minister of Finance. (EBS 2015)

The Greek government found a very last-minute solution to pay its debt to the International Monetary Fund (IMF) that was only due yesterday. However, it was last Thursday when Yanis Varoufakis was appearing to be optimistic about Greece’s situation and the overall negotiations with its creditors while attending the European Business Summit (EBS) 2015 where the European Sting was official media sponsor.

Regarding the outcome of last Monday’s Eurogroup, it was evaluated that Greece has made some progress but needs to try harder in order to make the desired agreement and unlock the tranche of 7.2 billion euros; money that will save Greece from an imminent bankruptcy since almost all its reserves are over. The European Central Bank (ECB) keeps on supporting the Greek banks through the Emergency Liquidity Assistance (ELA) mechanism due to the positive climate of the negotiations. But the ECB added to ELA only the necessary funds in order for the Greek banking system to barely float.

At the other side of the Atlantic, the IMF is supporting the increase of the Greek Value Added Tax (VAT) rates as mandatory in the reform system. This measure will have a direct effect on the lower and middle class revenues and will definitely deepen the crisis in an already devastated economy.

Greece uses an emergency reserve account to repay IMF

Yannis Stournaras, the Governor of the Greek central bank, found a way to repay the IMF in a meeting he had with the Vice-President and the Chief Economics Spokesman of the Government of Greece. Mr Stournaras proposed to Mr Dragasakis and Mr Tsakalotos, respectively, to withdraw the required amount of money from an account of the Greek Central Bank that is used in emergency cases and basically holds reserves from the IMF that are denominated in Special Drawing Rights, consisting of various international currencies.

Thus, the government withdrew 650 million euros by this reserves account after approval was given by the IMF. The rest 100 million euros which are necessary for the repayment were provided by the government’s cash reserves.  However, the Greek government will have to put this money back to the account in less than a month otherwise an interest rate will be imposed.

EBS 2015: Eurogroup’s forerunner

The Greek Finance Minister attended a debate during the European Business Summit 2015 last week as member of the discussion panel together with Pierre Moscovici, European Commissioner for Economic and Financial Affairs, with the topic “Structural Reforms:  Why are structural reforms so important for digitalization too?”.

At this session Mr Varoufakis mentioned that no final decision will be made in the meeting of the Eurozone Finance Ministers, which was to happen and took place last Monday, but the moment that this will happen is not any more far away. Particularly, in an “exclusive” interview at BBC World last Thursday at EBS he stated: “Europe works in glacial ways and eventually does the right thing after trying all alternatives.  So we probably won’t have an agreement on Monday, but certainly we’re going to have an agreement in the next couple of weeks or so.”

The European Sting, as official media partner of the event, not only was reporting live from the Summit but also contributing with 7 exclusive interviews from prominent personalities to the European business agenda which this year focused on how the industry and the society are affected by digitalization; the driving force behind the forth revolution.

Progress made but which will be the next step?

The European leaders and Finance ministers came to the conclusion at EBS that the Greek government is trying to implement a reforming system which at the end of the day is not enough to satisfy the institutions in order to lend money to Greece. There are measures that the left-wing party Syriza denies to further discuss because they lie on the grounds of the “red lines” that they have promised to the Greek people.

It is obvious that Greece is barely standing on its own feet and Europe keeps on pushing, instead of providing a “crutch”. Thus, the major challenge that Mr Tsipras and his government are facing now is the reforming of the labor and social security system. Will they be able to suggest alternative equivalent measures or impose the institutions’ proposals making a U-turn to their pre-election promises?

One thing is for sure though; time has almost run out for the Greeks who in general tend to take action at the very last minute. But whichever the next step will be, a solution must be found before a Graccident occurs driving to a default the sunny Southern European country of 11 million inhabitants.

ECB is influenced by the Eurogroup

The ECB decided yesterday to further raise the ceiling of ELA to 80 billion euros. This provides Greece with some more days to continue and finish successfully the technical talks with its creditors. The 1.1 billion euros increase proves that the ECB is clearly affected by the statements of the Eurozone’s Finance Ministers.

However, this comes in conflict with the statements of Yanis Varoufakis and Jeroen Dijsselbloem who mentioned two days ago that the ECB is independent and is not forced by the European leaders. This showed that most of the times things are not the way they seem and an action is always followed by a respective reaction. Unfortunately, the ECB has proved many times that is good part of the chain of the European political system.

IMF: one step ahead, two steps back

IMF officials are seriously discussing to propose to the Greek government to raise the unified VAT rates up to 21%. This means that everything, from electricity to food, will increase to the level that the lower and middle class will not be able to pay its bills and buy the basics from the supermarket anymore. These austerity measures are not helping an economy like the Greek one to revive but on the contrary they further “pushing it off the cliff”.

Some weeks ago, the IMF proposed to the ECB and the EU to relieve Greece by cutting a part of its debt. This action however contradicts with their current suggestions about a VAT rates increase. Why does the IMF make this step backwards?

No matter what the reason is, the Greek government has better stay focused and fight for a fair and constructive final agreement till the end of May since there are no more emergency reserve accounts that could “save the day” and pay wages, pensions and external debts.

And the Greek drama is to be continued.

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