Greece: Solution is Not Visible Yet

• 06.16.2015, 17:24
•  Europe,  World

During the past few weeks Greek government has been meeting the creditors numerous times but the latter have always rejected any new proposals by the Greek government.

Greece's overall debt is currently estimated to be around $350 billion, of which $270 billion is owed to its three biggest lenders - the Troika of creditors (EU, IMF, ECB).
The sides try to hammer a deal as a sign that they were moving closer to a compromise despite the protests on the other side's proposals’ unacceptability. In other words each side is trying to show they are giving less compromise.

Talks between the Athens and the Troika seemed to have been leading to nowhere by the end of this week. The main playing card of the present Greek government is that it in no terms will accept cuts on pensions and salaries. Something that is included in IMF demands. After there was a "clash" between the Athens and the IMF and the new plan of reforms by the Greeks was not accepted by the Troika. They demand tougher reforms refusing to transfer the remaining about 7bln euros of the current bailout program. The latest reform plan proposed by Greece was aiming at unlocking the desperately needed funds. This time the country asked for 6.7 bln euros to be transferred from the European Stability Mechanism. According to international media, the 3-page package also included proposals on budget indicators. It is also stressed by the international media, that this time as well Greece did not go for pension and salary cuts.  

Greece's Finance Minister Yanis Varoukfakis’ optimism comes as Athens races to agree a cash-for-reforms deal. But then the 1,5 bln debt up for the end of June is still actual. And basically this is the main concern of the country for today.  While the population supports its government more than it had ever supported any other party at power, the Athens residents are hoping for a resumption of talks in Brussels: this will finally bring an end to all the uncertainty.

On Sunday, June 14 the last round of negotiations took place between the sides. However, the Greek counter-proposal was not convincing and the meeting ended within 45 minutes. Under the Troika’s joint proposal, Greece should cut back on pensions but also save 1.8 billion euros through increases in VAT. However, Greek government insisted that their counter-proposals could reach the target they have been asked to achieve a surplus of 1% in 2015 and 2% in 2016. As the Greek side says "we made most of the distance and they ask for more". For now, no solution can be seen for the Greeks, while the unemployment rate is increasing (the highest in Europe - 50.1% in February 2015, according to Eurostat data).

According to an ICM poll, conducted in late May on who should pay the Greek debt and involving over 4,000 respondents in the United Kingdom, France, Germany and Greece, 62% of British citizens and 69% of the citizens of Germany agree that Athens must pay back its entire debt. Only 50% of French respondents shared this view. Meanwhile, 55% believe the country’s debt should be written off and only 25% of Greeks think that their country should pay off its creditors.

In the end it’s all about concessions from both sides.

It has already been four months, the negotiations proceed with no result. The Greek government says it wants to reach a deal with creditors to stay in the Eurozone, but it will not agree to deeper cuts in pensions and workers’ rights. As it comes to Alexis Tsipras, he cannot make any concessions unless he is able to persuade his own party those are necessary. The result of trying to make some more concessions was that he got rapprochement from Syriza.

So, nobody wants to give in, it would mean being defeated. Brussels will in no circumstances give in, or agree to some Greek offers as they cannot let Europeans think that any country may follow Greece’s example. On the other hand, in the present dramatic situation with euro, they cannot let Greece come out of the Eurozone either, as this may trigger an unstoppable precedent.

What is quite interesting is that the Greek PM appears in public with a wide smile and tells the journalists they will find a solution. He knows they don’t want to loose Greece and its people do not loose hope for solution…