Gloomy perspectives and wishful thinking

Posted by Kyra Adam 16/01/2017 0 Comment(s) Economia Blog,

The IMF and the European creditors are pushing very hard the Greek government to accept all the extra measures required in order to conclude the second evaluation of the third bailout programme.
Athens is trapped between Berlin and IMF. Both creditors stubbornly insist that extra measures for several years beyond 2018 have to be decided and legislated now, regardless if the IMF withdraws or not from the Greek bailout programme.


There are two options now on the negotiations table:


The IMF stays in the Greek programme. That means that the government has to accept the measures proposed, i.e. substantive cuts in salaries in the public sector, cut in pensions and minimisation of the tax threshold for all citizens, which will be extended beyond 2018 in order to get a European haircut of the Greek debt and a surplus 1.5% of GDP. 


It is clear that Tsipras’ government strongly resist to these measures because they pose an unbearable political problem: the implementation of the third bailout programme is already based on additional heavy austerity measures, decided by the government herself. As a result, public opinion is turning the back to SYRIZA, according to recent polls. The left party certainly does not want to commit political suicide, imposing voluntarily more austerity


That is why the Greek government wishes and pray for the IMF; s decision to withdraw voluntarily from the current programme. However, there is the option that the IMF will be forced to withdraw, because of the Greek government’s denial to accept the proposed measures by the Fund. The consequences seem to be unpredictable.


In case the IMF withdraws from the programme, Berlin and particularly Finance Minister Shoeble has already warned that ..simply the third bailout programme does not exist anymore.


Unfortunately, there is much logic in this statement. One reason is that the present programme was put on truck in 2015, only when the Greek government herself invited by letter the IMF to participate in it. The other reason is that the participation of the Fund was a precondition for a number of European creditors, especially Germany to approve by legislation the current programme.
So, if the IMF is out of picture, so is the bailout programme.


In order to “repair the damage”, Berlin proposes new negotiations for a new programme for Greece with the participation of European creditors only, through a robust mechanism of ESM, and supervision of additional measures decided in order to maintain the 3.5% surplus. This procedure will start only after the results of the forthcoming elections in Eurozone countries (Holland, France, Germany), in other words, by the end of 2017.


If that’s the case, Athens, during 2017 will probably face bankruptcy by the end of July, when 7.5 billion euro must be paid back to IMF. Furthermore, the option of ECB; s QE for Greek bonds will be dust in the wind.


The Greek government (at least the majority of the ministers) seem to flirt strongly with the idea that the Greek programme has to become a pure “European programme” with the seal of ESM only. That is why the proposal of a MEGA-cutter in pensions and public sector costs, without further legislation, remains unofficially on the negotiation table.


During the last few days, through the path of “anonymous sources”, there comes the idea of a “Referendum” on the Greek people choice to have or not the IMF on board. If the result is a big NO as predicted(?) the government estimates that this will be the way to escape elections for the time being.


But that’s only wishful thinking.

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