Greece is heading toward the Woody Allen crossroads: one path leads to despair and utter hopelessness. The other, to total extinction. Well, maybe, say world press reports:
Greece Must Choose Between Catastrophes
The Guardian – Larry Elliott
Yanis Varoufakis rues the day when Greece joined the euro.
The Greek finance minister says his country would be better off if it was still using the drachma. Deep down, he says, all 18 countries using the single currency wish that the idea had been strangled at birth but understand that once you are in you don’t get out without a catastrophe.
All of that is true, and explains why Greece is involved in a game of chicken with all the other players in this drama: the International Monetary Fund, the European commission, the European Central Bank and the German government.
Varoufakis wants more financial help but not if it means sending the Greek economy into a “death spiral”. Greece’s creditors will not stump up any more cash until Athens sticks to bailout conditions that Varoufakis says would do just that.
Things will come to a head this summer because it is clear Greece cannot make all the debt repayments that are coming up. It has to find €10bn (£7.3bn) in redemptions to the IMF, the ECB and other bondholders before the end of August and the money is not there.
Greece’s creditors know that and are prepared to let the government in Athens stew. They know that Greece really has only two choices: surrender or leave the euro, and since it has said it wants to stay inside the single currency, they expect the white flag to be fluttering any time soon.
Greece’s willingness to go ahead with the privatisation of its largest port, Piraeus, will be seen as evidence by the hardliners in Brussels and Berlin that they have been right to take a tough approach in negotiations with the Syriza-led government.
But before he admits he has lost the game of chicken, Alexis Tsipras, the Greek prime minister, should think hard about Varoufakis’s analysis. Was it a mistake for Greece to join the euro? Clearly, the answer is yes.
Would Greece be better off with the drachma? Given that the economy has shrunk by 25% in the past five years and is still shrinking, again the answer is yes.
Can you leave the euro and return to the drachma without a catastrophe? Undoubtedly there would be massive costs from doing so, including credit controls to prevent currency flight, and a profound shock to business and consumer confidence. There are also the practical difficulties involved in substituting one currency for another.
IMF Leak Shows Progress, Default Risk
Channel 4 News – Paul Mason
European negotiators have just days to conclude an agreement with Greece or a critical payment to the IMF on 5 June is likely to be missed, according to a leaked document seen by Channel 4 News.
In an memo dated 14 May, the IMF’s staff state:
“There will be no possibility for the Greek authorities to repay the whole amount unless an agreement is reached with international partners.”
They point to the €1.5bn due to the IMF in June as the first vulnerable payment.
Channel 4 News understands Greek negotiators made clear last week that the €1.56bn owed to the IMF in June, beginning with a payment on 5 June, cannot be paid without a deal.
The IMF memo confirms that there has been “some recent progress” in negotiations between Greece and its lenders: on VAT reform, tax collection and regulations that would make it easier for Greek companies to go bust and be restructured.
But the tight timetable, and growing tension between the IMF and the Europeans, mean next week’s Euro summit in Riga looks like the last chance to do a deal before Greece technically defaults on a payment to the IMF in early June.
This assessment goes further than the formal words used at the conclusion of the Eurogroup last week, and confirms there is momentum towards a deal.
The IMF names the outstanding issues as: pension reform, deregulating the labour market, and the re-hiring of 4,000 former civil servants as the issues preventing a deal.
The document acknowledges progress on labour reform “in the past”, signalling that the rehiring and pensions issues are what stand between Greece and a deal this week.
Greece Remains Defiant, Seeks Creditor Deal
Bloomberg – Paul Tugwell and Rebecca Christie
Greece’s government said it won’t back down on election pledges to end austerity even while seeking to agree on a deal with creditors as soon as this week to unblock financing and avert a default.
“We’re striving for a mutually beneficial agreement by Friday,” Nikos Filis, spokesman for the parliamentary group of Prime Minister Alexis Tsipras’s Syriza party, said Sunday in comments broadcast on Mega TV.
“Our mandate from the Greek people is to reach an agreement where we stay in the euro area without harsh austerity measures,” he said, adding that “tough negotiations” will take place before a summit meeting of European Union leaders in Riga, Latvia, on May 21-22.
Tsipras’ so-called red lines include no further cuts to wages and pensions. More than 110 days of talks between Greece and its creditors have failed to produce an agreement to unlock additional aid from a 240 billion-euro ($275 billion) bailout.
The standoff has triggered a liquidity squeeze, pulling the country back into a recession and renewing doubts over Greece’s future in the euro area.
Greece’s financial situation is serious, and the country can only obtain another tranche of aid upon completing the next stage of its reform program, European Commission Vice President Valdis Dombrovskis said Saturday in an interview with Germany’s Bild newspaper. Greece still hasn’t submitted its reform list, he said …
Greece won’t accept “take-it-or-leave-it” proposals, and the issue of a national referendum on reforms “will depend on whether the creditors impose an ultimatum,” Syriza’s Filis said.
A Greek referendum might speed up the decision process on moving forward, German Vice Chancellor Sigmar Gabriel said Sunday in an interview published in Bild am Sonntag. A “third aid package for Athens is only possible if reforms are also implemented,” he said.
A Greek exit from the euro would pose a political challenge and not an economic one, but “no one would have trust anymore in Europe if, in the first big crisis,” a currency member quits, he said.
The post World Press View: Greece Heads For Risky Crossroads appeared first on The National Herald.Source: The National Herald