The teleconference of the EuroWorking Group which took place yesterday is the forerunner of the extraordinary meeting of the Finance Ministers of the Eurozone on May 9 where Greece’s programme review is about to be discussed. The outcome was, as expected, disappointing regarding the agreement between the two sides on the package of basic and contingency measures as well as their implementation mechanism.
The difference that remains to be bridged between Greece and its creditors is the contingency measures and how they are going to be put into force. The Greek Prime Minister must decide whether to legislate the back-up measures as the IMF proposes or postpone the bailout programme review and put Greece into a greater economic suffocation.
July is the deadline for Greece when 2.3 billion euros must be repaid to the European Central Bank. Without a deal, the country risks of defaulting. The only positive news for Greece is that a possible debt relief is on the agenda of next Monday’s meeting.
Germany doesn’t worry much for Greece
The German Finance Minister shows no concern that a big crisis will happen in Greece. More precisely, Wolfgang Schaeuble stated last Tuesday: “We will have no big Greece crisis this year. The country was on its way to making visible progress.”
However, the sayings of the Finance Minister may imply also the fact that Europe has already created the mechanisms to minimize the consequences of a possible Grexit and thus an organized exit of Greece from the Union for a specific period of time is not going to affect the rest of the European economies.
Tusk urges both sides for an agreement
The president of the European Parliament (EP) presses the negotiations on the Greek bailout review to be concluded by the end of the month and provide additional help to the global economic stability. More in detail, Donald Tusk mentioned last Tuesday during the meeting with Japanese Prime Minister Shinzo Abe and European Commission president Jean-Claude Juncker: “I urge finance ministers to reach an agreement very soon and I hope that by the end of May, when we meet at the G7 summit, the implementation of Greece’s programme is positively assessed. I want to encourage all the ministers and institutions to re-double their efforts in finalising the review. We need to make sure that Europe contributes to stability rather than global instability. We should do all in our power to dispel uncertainties. There is no doubt that a successful completion of the ongoing review of Greece’s programme would strengthen confidence.”
Contingency measures: Main negotiating thorn
The main difference that still hasn’t been agreed is the implementation of the extra measures which will be taken in order to meet the budget surplus of 3.5% of Gross Domestic Product (GDP) in 2018. These measures are proposed by the IMF which is requesting that these must be legislated in advance while the Greek government is proposing the activation of an automatic mechanism for cutting state spending in case the state misses its budget targets.
It seems that either the IMF is not confident that Greece will meet the targets based only on the 5.4 billion euros basic package of measures or the IMF wants to pose more difficulties and prevent the deal to be sealed just like last summer.
On the other hand, the Greek officials deny to take more measures beforehand extending the assessment considering that they have a strong negotiating position against the creditors. But this tactic does not seem to be logical at this point taking also into consideration that it wasn’t beneficial for Alexis Tsipras during last summer’s negotiations either.
Time constraints are against debt relief agreement
There are only a few weeks left till July when Greece must have positively passed the bailout review and receive the next tranche of 5.7 billion euros from the ECB, ESM and EC in order to be able to repay the ECB.
The positive news for Greece is that the Eurozone Finance Ministers will discuss, apart from the package of reforms, the sustainability of Greece’s public debt according to the official agenda of the Eurogroup meeting.
However, this issue has long been discussed and asked to be put into the negotiating table (by the Greek government) without any progress and it is highly unlikely that a solution will be provided now in such a short period of time.
Europe cares more for Britain than Greece
The UK referendum which takes place next month is far more important for the Old Continent than a possible Grexit. The European officials are willing to conclude with the Greek programme review as soon as possible and certainly before the end of May in order to focus on how to persuade the British people to vote in favor of staying inside the EU on June 23.
All in all, the Greek government and its Prime Minister Alexis Tsipras do not seem to have learned their lesson and are about to commit similar mistakes of last summer bringing the country into economic and political deadlock and the Greek citizens into great despair.