ATHENS – The seemingly endless saga of the rule of international lenders over Greece’s economy will take a summer hiatus but will pick up again in September when inspectors from the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) Troika will return to complete an evaluation of long-stalled reforms it demanded in return for continued rescue loans.
Greece is surviving on a first series of $152 billion in loans from the Troika, which has withheld a second bailout of $173 billion until the new government of New Democracy Conservative Prime Minister Antonis Samaras imposes more harsh austerity measures on workers, pensioners and the poor, and makes an additional $15 billion in cuts. Samaras said he would try to change those terms but now has relented.
The government on July 26 is expected to reveal the depth of the cuts it is going to make with the newspaper Kathimerini reporting that Samaras will renege on another promise, this one not to cut pensions, going back on its word. The government is also expected to recommend capping health care payments in hospitals to 1,500 euros, or little more than $1,800, which means major surgery or serious illness would bankrupt a patient in a country which allegedly has a Socialist medical care system.
Greece does not have enough money to make a 3.5 billion euro, or $4.25 billion payment on the loans due in August and is seeking yet another loan to pay that loan. The Troika said it could withhold a 31.5 billion euros ($38.28 billion) September loan installment needed to keep paying workers and pensioners if Samaras does not follow its orders.
“It is very early to make any deductions,” said European Commission spokesman Antoine Kolobani. He said the Eurozone and Greece have to find a way to pay workers and pensioners and have enough money to operate its budget in August. The IMF is asking the ECB to activate the program of buying Greek state debt, stressing it is essential to ease tensions in bond markets affecting Spain and Italy, whose economies are also stressed. Greece is in the fifth year of a recession that has been worsened by the pay cuts, tax hikes and slashed pensions the Troika insisted upon in return for the rescue loans.
An IMF report stated that the restructuring of Greece’s debt with a program of exchanging bonds continues to influence ECB policy-making, making officials more cautious. Central bank officials are leery of buying more bonds, fearful of incurring more losses similar to those Greece imposed on private investors earlier this year, imposing 74 percent reductions in payments. The Wall Street Journal said the IMF report stated also that the ECB was warned that attempts to reduce the cost of loans to Spain and Italy might be inefficient if it does not accept losses on Greek bonds it now holds.
A member of the ECB board, Ewald Novotny, said he favored the proposal for the EU’s new stability fund, the EFSF, to be licensed, despite the opposition of the ECB and Germany. “I think there are arguments for this,” the Austrian central banker told Bloomberg news agency. “There are other points of view too, but I think this is about a continuous conversation and debate,” he added. To give the EFSF a bank license to help prop up the Eurozone and provide access to unlimited liquidity by the ECB is supported by France. The bank, however, has repeatedly rejected the idea, maintaining that it would in essence be funding governments through monetary policy.
Samaras said this week he would push ahead with implementing deep spending cuts and lashed out at unnamed foreign officials for sabotaging his country’s efforts to solve its problems. He said some foreign officials were making irresponsible comments, predicting Greece would not make it. “I say it openly and publicly, they undermine our national effort. We do all we can to bring the country back on its feet and they do all they can so we can fail,” he said.
He did not say who exactly he was referring to but German Economy Minister Philipp Roesler said he did not expect Greece could fulfill its requirements and that that would mean no more money for Athens. Greece has fallen behind targets agreed as conditions of its bailout deal, mainly due to three months of political limbo as it struggled to form a government after two inconclusive elections but also because of resistance to reforms from unions and special interests.
“There are certainly delays in this year’s agreed program and we must quickly catch up,” said Samaras. “Let’s not kid ourselves, there is still big waste in the public sector and it must stop.” He blamed a recession deepened by the austerity measures he supported after he opposed them, then supported them, then opposed them, and now supports again and said the economy will shrink an astounding 7 percent this year but that he could cut unemployment nearly in half from its current 22.5 percent but without saying how. More than 1.1 million people in Greece, a country of 11 million people, have no jobs.
The coalition government, that also includes New Democracy’s rivals, the PASOK Socialists and tiny Democratic Left, has made only about $9 billion of the cuts the Troika wants and is struggling to find ways to either cut another $5 billion in spending or raise an equivalent amount, although tax revenues are falling, not increasing, despite big tax hikes as many Greeks have slowed spending almost to a standstill.
Coalition of the Radical Left (SYRIZA) leader Alexis Tsipras, whose party finished a close second in the June 17 elections, said Samaras has put Greece on the road to ruin and blasted its cooperation with a trio of Troika inspectors. “The government has no business discussing with three clerks on how to implement a failed program,” Tsipras told his parliamentarians. “New tough austerity measures are insane and will lead us to bankruptcy and away from the euro zone.”
(Sources: Kathimerini, Reuters, Bloomberg, New York Times, AP, AMNA)