Greece is to present a new set of proposals to its creditors on Monday. The government hopes that their new proposals will achieve the budget targets demanded by the European Commission(EC), European Central Bank(ECB) and the International Monetary Fund. These three were formerly called the Troika but now are referred to as “the institutions” so Greece can say it no longer deals with the Troika. Greece wants to work with the Eurogroup of finance ministers, the politicians, when possible. However, Greek negotiators do not seem to have had much success in convincing them that austerity provisions in the bailout agreement should be jettisoned or altered considerably
The Greek government, with Syriza being the main party, won the election on the basis of an anti-austerity campaign, but have faced creditors quite unwilling to release bailout money unless even more painful measures are agreed to and implemented. In particular, the creditors want even more reductions to pensions and tax increases that will hurt the most vulnerable. They also want labor market changes that conflict with promises Syriza made on the campaign trail. Athens officials say the new proposals may be a last ditch-effort, and if unsuccessful, could be followed by capital controls and a default. While meeting the budget target demanded by creditors, the new proposals achieve the target by eliminating tax breaks rather than through pension cuts as the lenders have proposed.
The plan is being prepared by the Deputy Prime Minister Yannis Dragasakis and other more “pragmatic” members of the government. The full cabinet could very well reject the plan. European leaders warned Greece that there will be no agreement unless the new proposals are approved by inspectors of the Troika. In spite of all the difficulties in the way of reaching an agreement Prime Minister Tsipras said in St. Petersburg where he met with Putin: “All those who are betting on crisis and terror scenarios will be proven wrong.
Creditors are becoming increasingly impatient with Greece. Earlier proposals by Greece have been rejected often with hostile comments. At times, Greek officials let loose with angry rhetoric directed at their creditors, no doubt intended for domestic audiences but irritating to the Eurogroup and Troika. In Germany, a slight majority of citizens favor Greece leaving the euro zone. The crisis is causing a huge run on Greek banks.
Outside the London-based HSBC bank in central Athens. Dorothea Lambros, 58, a government employee, stood with an envelope stuffed with cash and a $43,000 cashier’s check but she was too late to deposit it. She did not know what would happen on Monday, whether the banks would be open. Bloomberg claims no one knows, and describes a couple of grimly humorous scenes: On a street corner, a performance artist burned what he said were his last euros. Nearby, an Afghan beggar joked about how he should have gone to Sweden instead.
The Greek banks are only being kept afloat by the European Central Bank(ECB) providing them with billions of euros in emergency funding as Greeks withdraw euros at the rate of about one billion each day. The situation is described in detail by zero hedge. The ECB is going further and further in debt by keeping these banks afloat. It may very well cut off further aid and force the government to institute capital controls if there is no deal. At the end of the month when the entire four payments for the IMF will come due Greece will likely default if there is no agreement.
Even the U.S. is joining in the chorus to put pressure on Greece to present proposals that creditors can accept. U.S. Treasury Secretary Jack Lew said on CNN: “I think we’re at a moment now where the burden is on Greece to come back with a response that’s the basis for reaching an agreement as quickly as possible, It’s clear that within Greece, the consequence of a failure here would mean a terrible, terrible decline in their economic performance. It will hurt the Greek people. They will bear the first brunt of a failure here.”
Most Greeks support striking a deal, even if the anti-austerity provisions the government promised are not granted. On Monday there could very well be a deal which violates all the previous red lines the government claimed it would not allow to be crossed. However, we won’t know until some time on Monday. Many in Syriza and even some economists think that Greece would better off over the longer term if it simply defaults, leaves the euro zone and returns to the drachma as its currency.
