Permanently returning to pre-default as Greece once again has prolonged his agony. Debts on loans that the state will have to pay until the end of July, will be able to cover the next tranche from the European stability mechanism (ESM). 10.3 billion euros will help Greece to stay afloat until the next stage of the calculation with creditors. What you have to pay for the opportunity to extend fluttering in the shifting Sands of credit slavery?
Less than a year
From the moment when Greece rang with protests against the creditors imposed reforms, less than a year, and unrest threatened to repeat itself again. Reasons for a social explosion enough. The commitments assumed by the Greek authorities in recent years great has hit the population. Gracianette on the growth of income tax to 29% and simultaneous increase of up to 20% of the amount of payments in Fund of social protection. Pension for several years has decreased by half. All new goods are subject to excise taxes. An effort to afford the property tax, which the authorities have long promised, and to no avail to cancel.
The external and internal debts rising, and the economy of Greece did not think about the rise — on the contrary, closes more and more companies: 230 thousand during the years of crisis and more than ten thousand only for the first four months of 2016.
Moreover, the sacrifices that I had to go to the country, mercilessly cutting social programs in order to save costs, contributed to inflow of money from outside. The next tranche of 5 billion under the assistance programme, approved last summer, the Greeks couldn’t get the last few months.
Last year on a wave of popular dissatisfaction with the policies of total savings in power moved in the left government led by Alexis Tsipras. The latter had promised to stop with the blind inhuman enforcement of creditors that threatened the referendum and leaving the EU.
The referendum actually took place last summer. The majority of the participants said “no” to the conditions of the lenders, which again confirmed the results of third party surveys. Some, such as Professor of philosophy at the Technical University of Crete Dimitrios Patelis, called existing debt is blatantly illegal. The debt was “illegal, fraudulent, unfair, shameful and unsustainable”, he said, but in the Greek crisis to blame those who“recklessly lent and borrowed in the bailout program”.
A new round
However, the results of the referendum, which the creditors in words called “sad” and called for “respect”, has not fundamentally changed anything. In turn, Alexis Tsipras at the approach of the next paycheck and in the absence of new tranches ignored as the arguments of the report of Mr. Patelis, and his recent promises.
And a year later the Greek government adopts a new package of reforms in favor of the creditors. According to Tsipras, this will reduce government spending by 5.4 billion euros. But at what cost?
And in price this is to reduce pensions for future retirees, the reduction of funded pensions, the growth in deductions from pensions above two and three thousand Euro, the elimination of occupational pension funds. No taxable income will reduce from 9.1 to 8.6 thousand euros. From 23 to 24% increase VAT. Will increase excise duties and consumption taxes a number of products: tobacco, gasoline, diesel fuel, liquefied and natural gas. Appears taxes on coffee consumption and electronic cigarettes. Impose a tax on Internet and cable TV. Increase the tax on investment tools, expand nalogoblozheniya database of real estate. Reduced defense spending and state-owned enterprises. Will increase taxes for small and medium-sized companies. Tourists will have to pay extra to stay in hotels above two-star class and go to the local museums.
The authorities try to take care of the unemployed, but also a very original way. So, according to the new reform, to free them should be medicine. However, the health system of Greece is in serious financial difficulties.
“The government should find a way to financially support the hospital. After all, it comes down to money. The current shortage of medicines, materials, doctors and nurses will lead the whole health system, but especially hospitals, to collapse”, – says the head of the Greek Association of diabetics Duramale Christ.
The big question is, at whose expense will pay for medical services to the unemployed — save on medications, which do not have, or will lay this responsibility on the shoulders of the working population? At least the second option being practiced. In addition to the 700 million euros of the next tranche, which will be sent to support the unemployed in the solidarity Fund, this Fund will join workers: from 2.2 to 10% of their income, depending on income, they will have to pay extra.
Needs? Take!
The current approach, when for new loans tighten the belt tighter, it’s silly to expect health effects for the state economy, said an analyst with Kalita-Finance Alexei viazovsky:
Situation when creditors demand cuts in social expenditures in order to balance the budget leads to exactly the opposite phenomenon. Citizens begin to save even more, corporations have falling sales, shrinking the tax base. I’m afraid that this credit crisis on the prescriptions of the IMF and ECB to Athens does not come out except through a new default.
Alexey Vyazovskiy
The savings are achieved not by cost optimization, and frontal cuts of “superfluous” socially important spending. And each new tranche is not on the growth of its own production, but only covers existing debt.
“The vast majority of this amount generally passed Greece, no one saw her. This was going to debt servicing. To refinance, recapitalize banks and service debt. With this money we could buy half of the European banking system” – says Dimitrios Patelis.
For these needs, according to the former Minister of Finance of Greece Yanis Varoufakis, left 90% of the loans. However, German economists believe that even this figure is somewhat understated in the budget of the country hardly hit 5% of the amount.
Yes, it is not hidden. A year ago Greece argued the need for another loan it the need to pay previously issued. Tranche recently voiced the same objectives.
All this is reminiscent of the powerful debt spiral that is screwed deeper into the Greek economy. Every new round brings new batsman for population reform to cope with the next payment and stretch until next when everything starts over again.
No wonder Greece is constantly talking, if not about writing off debt that his restructuring. This project was proposed a year ago, came back to it a month ago, insisting that first they need to solve the issue of restructuring, and only then to implement reforms. However, simply Greek the desire result is given — creditors proved tougher and reforms demanded before you even will start to discuss the issue of debt payments.
You need to be able to forgive
However, this topic worries them no less than the Greeks themselves, and without any concrete results the discussion was conducted for a long time. On debt restructuring, the IMF insisted. Without this, according to the Fund, Greece’s debt will grow to 300% of GDP by 2060, and to service loans and interest payments will leave 67% of the gross domestic product of the country. To avoid this, the IMF proposes to freeze payments until 2040, extend loan repayment deadlines to 2080-nd, freeze interest rates at 1.5% for the next 30 years.
To reduce the debt burden of Greece called on Europe and Vice-President of the USA Joe Biden. In the EU these arguments partly agree, but your money to lose don’t want. At least make serious concessions to the Greeks should not count. So, German Chancellor Angela Merkel two months nasojejunal that the haircut on Greek debt is impossible for legal reasons. A month ago about the unwillingness to forgive the debts told the Eurogroup.
However, there are other opinions. Vice-Chancellor of Germany Sigmar Gabriel said that the partial debt write-off would be the right decision, because it’s pointless to get country for a whole year to fight over the loan, which will go to pay past.
In the end, Greece still got hope on some steps forward on the part of creditors. The preliminary agreement suggest that at the end of the next bailout of Greece, which is after 2018, can be limited to the maximum amount of debt payments, deferred interest payments, provided the new (!) loans to repay the previous. In addition, there is the option under which the EU will buy the loans granted to the IMF.
Look for benefits
The position of the EU in General and Germany in particular is clear. On the one hand, it is clear that Greece is unable to pay off the debts eventually, and the stronger it is clamped in the vise, the less those odds. On the other hand, it is impossible to forgive the debts of Germany contributes the lion’s share in financing for Athens, but it is the money of German business, which is dangerous to squander. That is why the decision on debt restructuring delayed until 2018 — the date when the election will remain behind 2017. Very much do not want the German authorities to make unpopular decisions on the eve need to be re-elected.
In addition, while we are talking about pre-arrangements. And who knows what new conditions will deliver to Greece for a positive decision on the restructuring. Fortunately, precedents. For example, Europe now offers to introduce additional measures as demands for the next: if Greece will not be able to achieve a primary surplus of 3.5% of GDP, would you be kind enough to cut back on the missing volume by the new reforms — read, again to reduce pensions and raise taxes.
Absolutely logical and the position of the IMF. The Fund also understands that Greece with this approach ever not paid off. Because the international monetary Fund for a long time did not participate in financial assistance to the state and refused to join the program without significantly reducing existing debt. And it is the decision of the Eurogroup for the restructuring will affect the future contribution of the IMF.
Because the Fund believe: better that Greece should be the EU and EU these debt is forgiven or indefinitely waiting for their return than in the same situation will be the IMF. Exactly the approach we have seen in Ukraine when the international monetary Fund for the next tranche was required first to deal with the debt to Russia by agreeing to their restructuring.
Because the main task of the Fund is not assistance to friendly countries from motives of humanity. The only goal is earn a percentage of the benefits for Western companies and sale of state property. And not without reason among the requirements for Greece is important to the process of privatization.
What is happening now in Greece, familiar to us on the example of Yugoslavia and Mexico, present-day Ukraine and Russia 90-ies.
Fortunately, we managed to avoid default through the devaluation of the ruble, what can’t go the Greeks, remaining in the EU. All these examples clearly show that, once trapped international lenders, to escape from it is extremely difficult to tighten deeper. But because it is much easier to rely on the sad experience of other countries and not get involved voluntarily in the debt spiral, the last round which doesn’t Bode well.
