A Monday to watch the final act of a Greek tragedy; will there be catharsis or more fear?

European Council of March 2015. Informal meeting on Greece in the margin of the European Council. From left to right: Angela Merkel, German Federal Chancellor, Jean-Claude Junker, President of the European Commission, Alexis Tsipras, Greek Prime Minister, Donald Tusk, President of the European Council, Uwe Corsepius, Secretary-General of the Council, Mario Draghi, President of the European Central Bank, Francois Hollande, President of France. (European Council – Council of the European Union, Shoot location: Brussels – Belgium, Shoot date: 20/03/2015).

European Council of March 2015. Informal meeting on Greece in the margin of the European Council. From left to right: Angela Merkel, German Federal Chancellor, Jean-Claude Junker, President of the European Commission, Alexis Tsipras, Greek Prime Minister, Donald Tusk, President of the European Council, Uwe Corsepius, Secretary-General of the Council, Mario Draghi, President of the European Central Bank, Francois Hollande, President of France. (European Council – Council of the European Union, Shoot location: Brussels – Belgium, Shoot date: 20/03/2015).

Today’s Eurogroup summit of the 19 euro area heads of state and government is convened by Donald Tusk, the President of European Council in order to bluntly present Alexis Tsipras, the Greek PM with a final ultimatum; ‘comply or leave the Eurozone’. Of course this initiative was not Tusk’s, given that his mandate is rather administrative than decisive. Only the strong wording probably belongs to him, just expressing his bias against the ‘burdensome Greeks’. Not to forget that Tusk’s appointment as Council President was based on his Polish kind of conservatism plus a compromise between Germany and Britain, with both countries having a strong influence and presence in Poland.

In any case, today’s meeting of the 19 Eurozone leaders was not a decision taken by Tusk but rather by Germany. All along the past five years the laborious EU negotiations with Greece were steered mainly by Berlin, with the other euro area countries having recognized the prerogative of Germany in the endless negotiations with Athens. It was not a surprise then that the German Chancellor Angela Merkel was the first to comment on the announcement about Monday’s euro area summit. The German leader though had a lot to say despite delivering a very brief statement. Let’s elaborate on her dual message.

Merkel writes the end of the story

Only minutes after Tusk released his severe and monotonous 93 seconds video, warning and chastising the Greeks, the German leader took the floor and said that the summit will be able to decide on anything, “only if a basis for decisions is presented”. Obviously this is a direct Germanic way to tell Tsipras that it’s time to give-in to Europe’s demands, by presenting a new proposal containing more government budget cuts and increased public surpluses.

The German leader had more to add. She concluded that if a base for decision is not presented – and everybody understands that such a new platform has to contain more and extra painful Greek austerity measures – the gathering will become just a “Summit of Consultations and the wait will be prolonged”. The question is for how long can Germany wait for Greece to decide about its future? No wonder Tsipras and his government in Athens are engaged in a marathon of fervent discussions and official meetings in order to prepare a new proposal.

Fever in Athens

A number of Athens sources agree that the Greek government is actually preparing a new proposition adding extra taxation and more expenditure cuts, in order to cover the gap separating Greece from its creditors. The remaining differences are estimated to amount to around one euro billion in extra yearly fiscal surpluses. The new Greek proposal is to be presented today to the euro area ministers of finance (the Eurogroup), which is to be convened ahead of the 19 leaders’ summit. Understandably, the crucial part will played there and the leaders will just confirm what the ministers have decided.

The Tsipras government is reported to be preparing a new package of measures containing:
* three VAT categories (6.5%, 13% and 23%), with only pharmaceuticals and books in the small category, a large part of food products in the elevated one and electricity and restauration still under negotiation
* abolishment of early retirements as from 1/1/2016, while the creditors insist the measure to have immediate effect
*further liberalization of product markets and opening of the closed professions
* increased taxation of the corporate sector of the economy and more cuts in defense spending

However, it’s very important to underline that Tsipras has to face a very strong internal anti-austerity opposition in his governing left-wing SYRIZA party. A good part of the party nomenclature and a few government members reject the measures (increased taxation and spending cuts) which are reminiscent to the austerity packages the previous administrations had enforced. Even the right-wing nationalist ANEL party, the minor government alliance segment, has threatened to reject such measures in Parliament. SYRIZA has a parliamentary group of 149 deputies and the ANEL party has 14 seats in a house of 300. Nevertheless, if Tsipras gets a refreshed promise from his euro area colleagues about a debt rearrangement, he could try to introduce the whole package in the legislative and demand his deputies to vote for it.

The financial deadlock

The thorny internal political environment for the Tsipras government is further aggravated by the critical financial position of the country. Both the government and the banking sector are starved of liquidity. Two consecutive administrations have been servicing the maturing debts by using the country’s reserves for eleven months now (around €14.5 billion), leaving the state coffers completely empty. Greece’s central authorities have already touched the reserves of the pension funds and have absorbed liquidity from local government entities. Athens has postponed for the end of June three IMF loan and interest rate payments which are maturing during the month. It’s quite difficult if not impossible for Greece to honor this obligation without help from its creditors.

The situation is equally frustrating in the financial sector of the economy. The country’s banks are kept alive by weekly liquidity transfers from euro the area’s central bank, the ECB. All along the past months the Greeks keep withdrawing their deposits from the banks, with the phenomenon having assumed threatening dimensions this past week. The transfers are regularly decided in Frankfurt, where the ECB is established, on a weekly basis and are realized every Wednesday. Last Friday though the Bank of Greece, the central bank of the country, asked for extra liquidity due to increased withdrawals from the banks.

The answer of ECB to Friday’s request is of particular importance. Before going there it must be noted that, in the face of it, the ECB is a non-political institution and acts strictly according to its statutes. Its President Mario Draghi has said that the central bank will continue keeping alive the Greek financial system for as long as there is a political negotiation between the country and its creditors. Until now this meant that the ECB had to transfer enough liquidity to Greece for at least one week, that is for the time interval between the weekly Wednesday meetings of the relevant monetary committee.

Starved of liquidity

Reportedly, the ECB informed last Friday its constituent Bank of Greece that the liquidity transfers from now on will be realized not on a weekly but on a daily basis. There are rumors that the ECB informed the Greek bankers that as of now their liquidity will be constantly monitored and also that the gaps will be covered ex-post not ex-ante. This means that the ECB abolishes the so far followed practice to support a liquidity cushion of €3bn and instead there won’t be such a facility.

Putting all that together it becomes pretty clear that the end of the Greek tragedy is approaching fast. The question remains for how long more can Germany wait? In any case the fact remains that Merkel spoke of a ‘wait’, and this means Berlin has said its last word over possible concessions. Ostensibly, the German offer has reached its final form. Add to that the daily liquidity monitoring and coverage of the Greek banking system by the ECB and the situation becomes suffocating for Mr Tsipras.

In any case, the two meetings of today (Eurogroup and Summit) will offer more clues about how long the final act of the Greek drama is to last.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

CO2 emissions around the world

Brussels to tear down the trade wall with Mexico as opposed to Trump’s “walls”

3 steps to making multistakeholder partnerships a powerful force

UN-based World Summit Award (WSA) presents its master list on digital innovation with impact on society from 24 countries

Sweden has a plan to end all traffic accident deaths

Business models inspired by nature are the future

Armenia should take vigorous measures against entrenched corruption

UN mission welcomes Afghan government’s announcement of Eid holiday ceasefire

Tax crimes: special committee calls for a European financial police force

Dreaming of China

This company is breeding millions of insects in the heart of London

A Sting Exclusive: “Regulators and the shipping industry collaborating for a sustainable future”, written by the Secretary General of IMO

Austerity lovers and ‘relaxationists’ fight over the EU budget

Migration crisis will keep deteriorating as common EU political will is simply not there

In Washington D.C., Guterres signs pact with World Bank, meets US President Trump

‘All atrocity crimes are preventable’ and can never be justified – UN chief

Africa is aiming to create the world’s largest trading bloc. It won’t succeed without women

EU to relocate 40,000 migrants across the bloc: first step of a long due substantial reform?

European Commission Joint Research Centre opens world-class laboratories to researchers

Survivors of ISIL terror in Iraq want justice, not revenge, says head of UN investigation team

“Who do I call if I want to call Europe?” Finally a name and a number to answer Henry Kissinger’s question

‘Crimes against humanity,’ ‘war crimes’ and risk of new ethnic violence in DR Congo, warn UN experts

Eliminating hepatitis calls for ‘bold political leadership, with investments to match,’ UN health chief says

Why do medical students need to emigrate to become doctors in 2017?

UN anti-corruption body in Guatemala rebuts government’s reasons for expulsion order

A Sting Exclusive: “Doing ourselves a favour”, Vice President Dombrovskis underscores that this time growth has to come from within the EU

European Business Summit 2014 Launch Event: “Energising Industrial Growth”

Yes, together we can make a change! YO!Fest and EYE 2016

If airlines were a country they’d be one of the world’s top 10 greenhouse gas emitters

Companies ‘failing’ to address offline harm incited by online hate: UN expert

The London City-EU connection holds despite of Brexit and the ban of LSE-Deutsche Börse merger

Two out of every five American couples now meet online

The issues of practicing medicine in Pakistan

Eurozone: There is a remedy for regional convergence

Drone regulation is necessary to democratize the sky for humanity

Technology can help us save the planet. But more than anything, we must learn to value nature

Golden Pen of Freedom Awarded to Murdered Saudi Journalist Jamal Khashoggi during World News Media Congress 2019

From ‘dead on the inside’ to ‘truly alive’: Survivor of genocide against the Tutsi in Rwanda recounts her story as UN marks 25th anniversary

Me and China

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

GDPR and the World Cup have these 4 things in common

Unanswered questions for Europe’s youth in President Juncker’s State of Union

The US reject EU proposal for prudential financial controls

Fight against money laundering and terrorist financing: Commission assesses risks and calls for better implementation of the rules

Have Europe’s Ukrainian wounds begun to heal?

4 ways to make your wardrobe more sustainable

Chart of the day: The internet has a language diversity problem

This chart shows the fall in coal-power plants being planned around the world

Banks worth $47 trillion adopt new UN-backed climate, sustainability principles

Ebola: EU provides an additional €30 million to tackle the outbreak in the Democratic Republic of Congo

China revisited by the former Ambassador of Hungary to China

Medical students, climate change and health: an unorthodox combination

‘Pioneering’ former Chilean President Michelle Bachelet officially appointed new UN human rights chief

A young doctor from Glasgow reports: in the UK refugees are left to rot

This AI trash can is designed to stop you wasting food

Denmark plans ‘Silicon Valley’ on 9 artificial islands off Copenhagen

Burned in the Amazonian forest: Your health may be in danger

7 surprising and outrageous stats about gender inequality

AI-driven companies need to be more diverse. Here’s why

With potential to boost profits by up to 20 per cent, a woman’s place is at work, says UN labour agency

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s