Greece is down to picking what’s behind door number one, two or three but behind every one is just more misery and austerity for its people, world press reports say.
Greece’s Creditors Offer Bailout Extension But Want Reforms
The Guardian – Ian Traynor and John Hooper
Greece’s creditors are aiming to strike a deal on Monday to stop Athens defaulting on its debt and possibly tumbling out of the euro, by extending its bailout by six months, supplying up to €18bn in rescue funds and pledging later debt relief for the austerity-battered country.
But EU officials, privately disclosing details of the proposed deal, stressed that a breakthrough hinged on the prime minister, Alexis Tsipras, making concessions on fiscal targets, pensions cuts and tax increases that he has resisted since he came to power five months ago.
Following a cabinet meeting in Athens, Tsipras is believed to have offered Greece’s creditors concessions on tax and pensions reform. But it was not clear whether the offer went far enough to make a final agreement possible on Monday.
Time is also running out for the Greek banking system, with Reuters reporting on Sunday that €1bn worth of withdrawal orders had been lodged with Greek banks over the weekend – on top of the €4bn that left the Greek banking system last week – and that the European Central Bank was set to discuss extending financial help to those institutions on Monday morning, amid fears that Greek banks would be unable to open on Tuesday.
A hectic round of telephone diplomacy took place on Saturday and Sunday between leaders in Athens, Berlin, Paris and Brussels while technocrats on both sides sought to hammer out the small print of the fiscal arithmetic forming the basis for a last-minute agreement days before Greece’s bailout expires. Greece must pay €1.6bn owed to the International Monetary Fund by Tuesday 30 June.
With time running out, the only way an IMF default could now be avoided is for the ECB to raise the ceiling on the short-term debt or T-bills Athens is allowed to sell, the officials said. This would need to happen by Monday next week.
The Consequences of Greece’s Impending Breakdown
The Washington Post – Lawrence Summers
When, as now appears likely, Greece financially separates from Europe, it will at one level be no one’s fault. The Greek leaders will rightly explain that having imposed more austerity on themselves than any industrial country has suffered since the Depression, they could not do more without light at the end of tunnel in the form of a clear commitment to debt relief.
European leaders will rightly explain that they adjusted their positions repeatedly to accommodate the Greeks. They will stress that their publics would not permit Greece to play by different rules than the rest of Europe. And the International Monetary Fund will rightly explain that it would have blessed any plan agreed to by Greece and Europe that added up.
The trouble is that all the parties will get much more of what they fear from a breakdown than they would from something they regard as an unacceptable compromise. Historians understand how World War I was allowed to start but still, a century later, are incredulous that it happened. So, too, financial historians may look back at the next week and wonder how Europe’s financial unraveling was permitted.
Make no mistake about the consequences of a breakdown. With an end to European support and consequent bank closures and credit problems, austerity will get far worse in Greece than it is today, and Greece will likely become a failed state, to the great detriment of all its people and their leadership.
Once Greece fails as a state, Europe will collect far less debt repayment than it would with an orderly restructuring.
A Way Past The Insanity Over Greece
The Financial Times – Willem Buiter
The obvious solution has been tried, and it has failed miserably. Drastic structural reforms, “owned” by the Greek population and government in return for a mix of debt relief and new funding, have proved beyond reach.
The two sides need a different way out — one that grants the Greeks their wish to be (or appear to be) masters of their own destiny; and that limits the exposure of the country’s creditors. Here is such a solution …
First, as regards fiscal austerity and structural reforms, the Greek government should be told it is free to do as it pleases. The awkward ritual of oversight by international institutions (formerly known as the troika) should end.
Second, the debts owed by the Greek state to the European institutions and the International Monetary Fund have to be dealt with.
The European Central Bank feels itself unable to extend these debts, arguing that doing so would amount to the monetary financing of a eurozone government, which is proscribed by treaty. Instead, they should be bought by the European Stability Mechanism, the emergency fund established by eurozone states in 2012. This could be done via a loan to Athens that involves no debt service for the next few years …
International institutions would not lend the Greek state any more money. The remaining €7.2bn committed to the existing bailout programme would not be disbursed. The Greek government would be on its own.
To prevent money from international monetary institutions finding its way into Greek government coffers by the back door, the ECB would strictly enforce its risk-management framework, no longer accepting exposure to the country’s sovereign debt. Such debt would be excluded from its programme of asset purchases, launched earlier this year to provide a monetary stimulus to the eurozone economy.
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