IMF negotiators headed back to Washington after the two sides remained far apart. Proposals earlier in the week by Prime Minister Tsipras were dismissed as “not serious” by Greek creditors. The Greek government may be facing negotiations that are just as tough within the Syriza party, the main group in the government. It may have been pressure from within the party that caused the sudden decision to recently skip an IMF payment and bundle the payments together to be paid at the end of the month. If this was meant to put pressure on creditors, it did not work. Creditors are even more adamant that Greece must accept more austerity conditions such as reduced pensions and a more flexible labor market.
The EU has warned the Greek government in no uncertain terms that it must stop negotiating and decide whether or not it will decide to accept creditor’s conditions for a deal. Donald Tusk, president of the EU, said: “There is no more time for gambling. The day is coming, I’m afraid, that someone says that the game is over. It is very obvious that we need decisions, not negotiations.”
Costas Lapavitsas,an economist and member of the Greek parliament, spelled out some of the latest demands of Greek creditors, the Troika, or “institutions”: ” They have set fiscal targets slightly above those of Syriza, but to achieve these they are demanding a substantial increase in VAT, including a rise of 10% on electricity, thus hitting the poorest where it hurts. They are also demanding the abolition of subsidies and tax relief measures (including for farmers and poor pensioners), and pension cuts. Finally they demand an end to collective bargaining, no increase of the minimum wage and sustained privatisations.”
If these demands are met then all the “red lines” set out by the Greek government will have been crossed. Lapavitsas had argued in an article back in March that Syriza should have been putting forth the option of withdrawing from the Eurozone in negotiations and also thought that Syriza could not achieve significant reforms by remaining within the zone through a deal.
Given these demands, it is hardly surprising that EU officials are now having talks about what to do should Greece default on its loan payments. Syriza should have done this as well long ago. Stock markets in Greece, Europe and even North America reacted negatively on Friday to the increasing uncertainty as to whether a deal is possible with Greece: The Athens stock exchange closed nearly 6% lower. Germany’s Dax and France’s Cac 40 ended more than 1% lower.Shares also fell in the US, with the Dow Jones index dropping 0.8%.
The next meeting of Eurozone Finance Ministers is on Thursday June 18. Talks are ongoing this weekend. We should know by early next week if a deal is possible before that meeting. At the end of June the present bailouŧ loan terminates. If there is no deal by then to release the remaining funds, Greece is very likely to default on its IMF payments.
