Connect with us

Hi, what are you looking for?

World

Greece races to win bailout extension

-

Greece's new anti-austerity government scrambled Monday to meet a midnight deadline to nail down and despatch to Brussels a list of proposed reforms to secure a four-month extension of its debt bailout lifeline.

If the measures fail to win the approval of Greece's EU creditors, the country's safety net will collapse on Saturday, leaving the government at risk of running out of cash, a run on banks and even a eurozone exit.

But hard-left Prime Minister Alexis Tsipras, whose Syriza party swept to power last month, could also face a voter backlash if he fails to deliver on promises to ease the pain of ordinary Greeks after years of recession and cuts.

In the latest in a series of dramatic showdowns over Greece's 240-billion-euro ($270-billion) bailout, flamboyant new Finance Minister Yanis Varoufakis secured the extension from his 18 fellow eurozone partners in Brussels on Friday.

Greek debt: countries most exposed
Greek debt: countries most exposed
cam/jj/jfs, AFP

The deal however came with the proviso that Greece provide by Monday a list of measures to quash concerns, not least in powerhouse Germany, that Athens might backtrack on promises to cut spending and pass root-and-branch reforms.

This in turn might prompt other eurozone countries like Spain, Portugal, France and Italy to go easy on the "tough love" austerity measures that Berlin sees as vital to preventing a return of the eurozone debt crisis.

A source in Brussels said that Athens has provided a list of reforms but that it was "not definitive".

Other sources said Brussels and Athens were in regular communication and seeking to finalise the document by a midnight (2300 GMT) deadline.

"The fundamentals -- namely assistance in exchange for reform -- must remain the same," German Foreign Minister Frank-Walter Steinmeier told the Bild daily.

Athens had to abandon plans to use some 11 billion euros in leftover European bank support funds to ...
Athens had to abandon plans to use some 11 billion euros in leftover European bank support funds to help restart the Greek economy
Angelos Tzortzinis, AFP

"Of course there will be measures that fit with the philosophy of Syriza... but they also have to take account of budgetary balance and the need to repay debts," EU Economic Affairs Commissioner Pierre Moscovici told France 2.

In Berlin, a finance ministry spokesman said the list needed to be "coherent and plausible".

- Reality bites -

Tsipras has vowed to end the "humiliation" and "vicious circle" of the spending cuts demanded by Greece's creditors in return for two massive bailouts since 2010.

He wants to use the next four months to draw up a new reform package that puts the country -- where unemployment stands at 25 percent -- on a fairer road to recovery after years of recession, spending cuts and state job losses.

Greek Prime Minister Alexis Tsipras (R) and Finance Minister Yianis Varoufakis  pictured at the Gree...
Greek Prime Minister Alexis Tsipras (R) and Finance Minister Yianis Varoufakis, pictured at the Greek parliament in Athens on February 18, 2015
Louias Gouliamaki, AFP

But the tough and united negotiating stance of Germany and other eurozone countries has obliged the former motorbike-riding communist activist and his tieless finance minister Varoufakis to give ground.

Athens pledged on Friday to refrain from one-sided measures that could compromise fiscal targets and had to abandon plans to tap some 11 billion euros in leftover European bank support funds.

UniCredit economist Erik Nielsen called it a "complete political surrender to the world of reality".

Tsipras insisted at the weekend that his coalition government had achieved an "important negotiating success" which "cancels out austerity". Athens says that it, not the country's creditors, is now calling the shots.

Government spokesman Gabriel Sakellaridis insisted on Skai television Monday that Greece still has "red lines" such as raising the minimum wage and maintaining pension levels.

The Greek government had promised to spend two billion euros this year on poverty relief for thousan...
The Greek government had promised to spend two billion euros this year on poverty relief for thousands of families hit by five years of wage cuts and tax hikes
Aris Messinis, AFP/File

But cracks were already beginning to show, with Manolis Glezos, a 92-year-old wartime resistance hero and one of Syriza's most respected members, distancing himself from Tsipras.

- Tax hit list -

There were few details about the new measures.

Minister of state Nikos Pappas told television channel Mega on Sunday they were aimed at making "the Greek civil service more effective and to combat tax evasion".

According to Bild, the measures will include a 7.3 billion-euro tax hit list targeting the fortunes of the super-rich, back taxes and a crackdown on smuggling.

The 19 eurozone finance ministers reached the agreement at tense talks pitting Greece against an ang...
The 19 eurozone finance ministers reached the agreement at tense talks pitting Greece against an angry Germany, suspicious that the new government in Athens was looking to ditch its austerity obligations
Aris Messinis, AFP

Once the European Commission, the European Central Bank and the International Monetary Fund -- the "troika" holding most of Greece's 320 billion euros in debts -- approve the list, the extension can go ahead.

Certain European parliaments also need to give the green light, however.

But if the proposals are not approved, it will be back to the drawing board and yet more drama for Greece.

"The chance of policy mistakes, political volatility and implementation risks remains quite high, and may rise," said Daniele Antonucci, economist at Morgan Stanley.

Experts at IHS said they now expect Greece to re-enter recession in the current quarter, just a year after returning to growth.

Greece’s new anti-austerity government scrambled Monday to meet a midnight deadline to nail down and despatch to Brussels a list of proposed reforms to secure a four-month extension of its debt bailout lifeline.

If the measures fail to win the approval of Greece’s EU creditors, the country’s safety net will collapse on Saturday, leaving the government at risk of running out of cash, a run on banks and even a eurozone exit.

But hard-left Prime Minister Alexis Tsipras, whose Syriza party swept to power last month, could also face a voter backlash if he fails to deliver on promises to ease the pain of ordinary Greeks after years of recession and cuts.

In the latest in a series of dramatic showdowns over Greece’s 240-billion-euro ($270-billion) bailout, flamboyant new Finance Minister Yanis Varoufakis secured the extension from his 18 fellow eurozone partners in Brussels on Friday.

Greek debt: countries most exposed

Greek debt: countries most exposed
cam/jj/jfs, AFP

The deal however came with the proviso that Greece provide by Monday a list of measures to quash concerns, not least in powerhouse Germany, that Athens might backtrack on promises to cut spending and pass root-and-branch reforms.

This in turn might prompt other eurozone countries like Spain, Portugal, France and Italy to go easy on the “tough love” austerity measures that Berlin sees as vital to preventing a return of the eurozone debt crisis.

A source in Brussels said that Athens has provided a list of reforms but that it was “not definitive”.

Other sources said Brussels and Athens were in regular communication and seeking to finalise the document by a midnight (2300 GMT) deadline.

“The fundamentals — namely assistance in exchange for reform — must remain the same,” German Foreign Minister Frank-Walter Steinmeier told the Bild daily.

Athens had to abandon plans to use some 11 billion euros in leftover European bank support funds to ...

Athens had to abandon plans to use some 11 billion euros in leftover European bank support funds to help restart the Greek economy
Angelos Tzortzinis, AFP

“Of course there will be measures that fit with the philosophy of Syriza… but they also have to take account of budgetary balance and the need to repay debts,” EU Economic Affairs Commissioner Pierre Moscovici told France 2.

In Berlin, a finance ministry spokesman said the list needed to be “coherent and plausible”.

– Reality bites –

Tsipras has vowed to end the “humiliation” and “vicious circle” of the spending cuts demanded by Greece’s creditors in return for two massive bailouts since 2010.

He wants to use the next four months to draw up a new reform package that puts the country — where unemployment stands at 25 percent — on a fairer road to recovery after years of recession, spending cuts and state job losses.

Greek Prime Minister Alexis Tsipras (R) and Finance Minister Yianis Varoufakis  pictured at the Gree...

Greek Prime Minister Alexis Tsipras (R) and Finance Minister Yianis Varoufakis, pictured at the Greek parliament in Athens on February 18, 2015
Louias Gouliamaki, AFP

But the tough and united negotiating stance of Germany and other eurozone countries has obliged the former motorbike-riding communist activist and his tieless finance minister Varoufakis to give ground.

Athens pledged on Friday to refrain from one-sided measures that could compromise fiscal targets and had to abandon plans to tap some 11 billion euros in leftover European bank support funds.

UniCredit economist Erik Nielsen called it a “complete political surrender to the world of reality”.

Tsipras insisted at the weekend that his coalition government had achieved an “important negotiating success” which “cancels out austerity”. Athens says that it, not the country’s creditors, is now calling the shots.

Government spokesman Gabriel Sakellaridis insisted on Skai television Monday that Greece still has “red lines” such as raising the minimum wage and maintaining pension levels.

The Greek government had promised to spend two billion euros this year on poverty relief for thousan...

The Greek government had promised to spend two billion euros this year on poverty relief for thousands of families hit by five years of wage cuts and tax hikes
Aris Messinis, AFP/File

But cracks were already beginning to show, with Manolis Glezos, a 92-year-old wartime resistance hero and one of Syriza’s most respected members, distancing himself from Tsipras.

– Tax hit list –

There were few details about the new measures.

Minister of state Nikos Pappas told television channel Mega on Sunday they were aimed at making “the Greek civil service more effective and to combat tax evasion”.

According to Bild, the measures will include a 7.3 billion-euro tax hit list targeting the fortunes of the super-rich, back taxes and a crackdown on smuggling.

The 19 eurozone finance ministers reached the agreement at tense talks pitting Greece against an ang...

The 19 eurozone finance ministers reached the agreement at tense talks pitting Greece against an angry Germany, suspicious that the new government in Athens was looking to ditch its austerity obligations
Aris Messinis, AFP

Once the European Commission, the European Central Bank and the International Monetary Fund — the “troika” holding most of Greece’s 320 billion euros in debts — approve the list, the extension can go ahead.

Certain European parliaments also need to give the green light, however.

But if the proposals are not approved, it will be back to the drawing board and yet more drama for Greece.

“The chance of policy mistakes, political volatility and implementation risks remains quite high, and may rise,” said Daniele Antonucci, economist at Morgan Stanley.

Experts at IHS said they now expect Greece to re-enter recession in the current quarter, just a year after returning to growth.

Written By

With 2,400 staff representing 100 different nationalities, AFP covers the world as a leading global news agency. AFP provides fast, comprehensive and verified coverage of the issues affecting our daily lives.

You may also like:

World

Philippine president-elect Ferdinand Marcos Jr said he would uphold an international ruling against Beijing over the disputed South China Sea.

Business

The numerous videos on social media of Russian helicopter gunships being shot down are very public evidence of the extent of the losses.

Business

The value of an obscure coin called Enzyme was tumbling downwards earlier this month — but then something unusual happened on May 15.

World

"This is how we live, running to our cellars. Maybe we should leave," cries retired nurse Larysa Kosynets.