Greece submitted today its proposal to euro zone partners requesting a six-month extension to the existing loan agreement.
However, the phrasing is of much importance to the Greek government. Prime Minister Alexis Tsipras has spoken of an “honest compromise.” Athens will seek an extension to the Master Financial Assistance Facility Agreement, the official name for the European Financial Stability Facility’s loan contract. That contract stipulates that the dispensation of financial assistance is dependant on Greece honoring the terms of the existing so-called memorandum, which the new government has contested. Now the Greek side will ask for a “technical extension.”
In Athens there is optimism that the new proposal will lead to a solution that will satisfy both sides. The compromise would mean that Greece can avoid using the phrase “extension of the existing program” and the creditors can avoid using the term “loan agreement.” Finance Minister Yanis Varoufakis said late on Wednesday that there are more points of convergence between the two sides.
Once Eurogroup President Jeroen Dijsselbloem receives the Greek proposal on Thursday, the Euro Working Group will convene at the technical level and decide whether to approve it in principle. If it is approved, a new Eurogroup summit will be called, possibly as early as Friday by teleconference, to give the final approval.
The Greek government will insist on political actions that will stop the humanitarian crisis, such as primary residence foreclosures, insurance legislation, labor laws, 100 installments for state debts, “red” loan adjustment and so on.
Where Athens and European partners converge are on issues such as tackling tax evasion, establishing a more fair tax system, reconstructing the judicial system, eliminating state bureaucracy and so on. Also, European partners want Greece to refrain from asking for a debt writedown.
European Commission vice president for euro zone affairs, Valdis Dombrovskis, said efforts were under way to reach a compromise by finding “common ground for an extension of the current program.” Yet, the European official said that Greece has the right to substitute measures of the existing program with alternatives of equal value.
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