Category: Wolfgang Schaeuble

EU finance ministers reject Greek bailout extension

1/7/2015

IMF Headquarters

June 27, 2015: After the Greek prime minister Alexis Tsipras broke off negotiations with creditors he called for a referendum for July 5 on the latest offer from creditors for an extended bailout program. Tsipras had asked that the present program be extended until after the vote on the referendum but Eurozone finance ministers rejected the Greek request.

The Greek government has opposed the offer as humiliating to Greece. The offer involves even more austerity conditions in return for further funds. Greek lawmakers are to vote this evening (Saturday) on whether to go forward with the referendum. The referendum decision has caused a run on cash machines as Greeks worry that banks might not even open on Monday and that capital controls might be imposed. Some still think that there could be a last ditch deal and that the referendum call was a negotiating gambit.

The head of the IMF has said that Greece will not even be granted the usual 30 day grace period before a missed payment would be considered a default. If the IMF payment due on June 30 is missed, Greece will immediately be considered in default. Greece was hoping to reach a deal to release about $8 billion before that payment was due. The European Central Bank must decide if it will continue to prop up Greek banks as there are huge withdrawals. Some analysts are predicting that as early as money Greece might be forced to introduce capital controls and limit withdrawals.

Greek finance minister Yanis Varoufakis

The eurogroup is said to be already focusing on Plan B, to deal with a possible Greek default and exit from the eurozone. Jeroen Dijsselbloem president of the eurogroup expressed surprise and disappointment at the sudden Greek decision and said it closed the door on future talks. German Finance Minister Wolfgang Schaeuble also claimed the call for a referendum meant that negotiations were over. The Greek debt crisis however has been far from predictable except for the fact that the Greek government has not been able to persuade the eurogroup and other creditors to pay any attention to its demands for relief from crushing austerity conditions.

BBC News reports Greece timeline: Key dates ahead

27 June: Eurogroup refuses Greek request to extend existing bailout
30 June: Troika bailout programme ends as Greek €1.6bn payment to IMF due
1 July: No bailout programme could mean no emergency liquidity from the ECB
5 July: Proposed Greek referendum
10 July: Treasury bills worth €2bn to be repaid
20 July: Bonds worth €3.5bn to be repaid to eurozone partners
20 August: Bonds worth €3.2bn to be repaid

Additional Sources:
http://www.nytimes.com/2015/06/27/business/international/greek-debt-talks-enter-final-stages.html
http://rt.com/news/270169-eurogroup-plan-greece-default/
http://www.consilium.europa.eu/en/press/press-releases/2015/06/27-eurogroup-statement-greece/
http://www.nbcnews.com/news/world/greece-debt-crisis-lines-form-atms-pm-seeks-referendum-bailout-n383006

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EU Finance Ministers make plans for Greek default

27/4/2015

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Headquarters of IMF in Washington DC

At a meeting of the Eurogroup finance ministers in Riga Latvia on Friday, there was no breakthrough deal with Greece. The chair of the group of 19 finance ministers, Jeroen Dijsselbloem said that he hoped the meeting would create a sense of urgency that a deal had to be reached soon.

Many ministers criticized Greek finance minister Yanis Varoufakis for failing to come up with a list of reforms the group could accept. Greece has refused to budge so far on "reforms" to pensions and other demands that would go contrary to the anti-austerity program the main government party, Syriza, promised voters they would implement.

However, such measures are part of the requirements of the extended bailout loan. Creditors have made it clear that no cash will be released until they are satisfied the terms will be met. So far there is no sign that Greece is willing to do so.

Given the impasses so far, it is not too surprising that German Finance Minister Wolfgang Schaeuble hinted that the group was beginning to develop plans for a possible Greek default on its debt payments. Asked by reporters after the Friday meeting whether the finance ministers were working on a "Plan B" in case negotiations for funding Greece fail, Schaeuble said: “You shouldn't ask responsible politicians about alternatives.” He said that if he answered in the affirmative he could trigger panic. Schaeuble suggested that secrecy was necessary and drew a parallel with plans for German reunification in 1989.

French Finance Minister Michel Sapin said that there is just plan A: "There is only one plan, and that's Greece in the euro. Greece in Europe." The earliest next date for a deal is on May 11, just one day before Greece is scheduled to make a large payment to the International Monetary Fund(IMF). Pierre Moscovici, the EU top economic official warned:"We should move faster, because time is running out, financial difficulties are there as well as the commitments made. Greece must remain in the eurozone." Since May 2010 Greece has relied on a bailout loan of 240 billion euros to keep afloat. Austerity conditions imposed have ruined the economy which has shrunk by one quarter and also increased unemployment with almost half of young people unemployed and about a quarter overall.

In an article, in Al Jazeera, Mark Weisbrot, suggests that the strategy of Greek's creditors is to make things so difficult for the left-leaning Syriza government in Greece that support for it will be undermined and it will be ultimately replaced. Already the lack of a deal and possible exit from the eurozone has caused huge runs on Greek banks and depositors worry that their euros may eventually be turned into drachma with huge losses in value. The European Central Bank is cutting off liquidity to the Greek banks as well, as Varoufakis has complained. Weisbrot notes that even many IMF economists believe that the demands being made on the Greek government are too severe.

Reza Moghadan, former head of the IMF European department wrote recently in the Financial Times: “Europe is demanding implementation, in the next few weeks, of a long and comprehensive list of actions that previous governments were unable to deliver in the space of a few years.”

These impossible demands make sense if the aim is for eventual "regime change". However, it is not clear what good this would do as long as the creditors continue the present policy of demands that are politically disastrous for any Greek government to try and satisfy. However, insisting on continuing disastrous policies seems to be a hallmark of EU negotiations with Greece

Sources:
http://news.yahoo.com/greece-offers-concessions-talks-creditors-063638117--sector.html
http://www.dw.de/finance-minister-sch%C3%A4uble-hints-at-preparations-for-a-plan-b-on-greece/a-18408886
http://www.ctvnews.ca/business/there-is-only-one-plan-and-that-s-greece-in-the-euro-french-official-says-1.2344674
http://www.voanews.com/content/plans-for-potential-greek-exit-from-eurozone-played-down/2734353.html

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EU finance ministers reject Greek bailout extension

EU Finance Ministers make plans for Greek default

Ken Hanly

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