Home' Trinidad and Tobago Guardian : April 19th 2015 Contents SBG14 FINANCE
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt APRIL 19 • 2015
By the day, Greece is get-
ting closer to a poten-
tially catastrophic debt
default that could force
it out of the euro bloc.
All it needs to avoid that fate is a deal with
its creditors to get more loans---yet weeks of
wrangling over the terms have produced no
sign of progress.
The situation is coming to a head, with
Greece struggling to meet debt obligations on
a weekly basis. It faces repayments worth one
billion euros (US$1.1 billion) next month that
it may be unable to afford without more rescue
Rescue creditors---fellow eurozone states
and the International Monetary Fund---want
Greece to agree to a list of economic reforms
that the country s new government came to
power promising to oppose.
Greece s finance minister, Yanis Varoufakis,
will have a chance to meet officials from the
IMF and other key creditors at a global con-
ference Washington this week.
But all sides concede that a breakthrough
is unlikely by an end-of-April deadline they
set to unlock the latest batch of bailout loans,
which have been delayed from last summer
and are worth 7.2 billion euros (US$7.7 bil-
Here s a look at why, despite the high stakes,
the two sides remain at an impasse.
What creditors want
Eurozone states and the IMF say they cannot
keep pouring billions of euros of rescue funds
into a country that refuses to modernise.
"Greece must become competitive. Other-
wise it s a bottle without a bottom. And you
can t spend hundreds of billions ... on a bottle
without a bottom," said German Finance Min-
ister Wolfgang Schaeuble this week.
Greece s problem, the creditors argue, was
initially caused by gorging on cheap loans in
the good times a decade ago. So reforms should
focus on reducing costs. Since Athens started
getting 240 billion euros in bailout loans in
2010 to avoid bankruptcy it has slashed pen-
sions, state jobs, and welfare benefits, sold
state assets and raised taxes.
For Greece to get more loans, creditors are
demanding reforms to make state adminis-
tration and business rules more efficient:
Scrapping multiple tax exemptions, removing
obstacles to mass lay-offs for struggling busi-
nesses, restarting a major privatisation pro-
gramme, and reforming a pension system.
The creditors note that five years of such
reforms have improved Greek public finances,
while the economy emerged briefly from reces-
But to be confident Greece will be able to
repay its rescue loans---which have ballooned
national debt to 317 billion euros (US$338 bil-
lion) at the end of 2014---they want assurances
that those extra reforms will be made.
Greece is the least competitive economy in
the eurozone and the 81st globally, according
to the World Economic Forum.
What Greece wants
Greek Prime Minister Alexis Tsipras and his
Syriza party came to power in January with
one main promise: end austerity measures
previous Greek governments had agreed to.
Tsipras argues the measures must be redrawn
to stimulate growth, and not just cut debt.
He blames them for causing a humanitarian
crisis: the economy has shrunk by a quarter,
leaving more than 25 per cent of people without
work, and even more without health insur-
In drawing up the new proposed reforms,
Tsipras is focusing mainly on trying to fight
tax evasion by the rich. That will only get the
government so much money, as much of its
massive tax arrears comes from ordinary
households and bankrupt businesses.
Tsipras government has opposed other proj-
ects, such as further privatisations, and any
talk of limiting job protection rights.
His bargaining position could be limited by
having a large far-left faction in his party and
nationalist-right coalition partners who
demand a tough position against creditors
The new government s combative style has
isolated Greece in the 19-member eurozone
but is hugely popular at home, despite the
financial risks involved. A weekend opinion
poll suggests the Syriza party has a near 25-
point lead over rival conservatives, more than
double the advantage it had in January.
"It has become well-nigh politically impos-
sible for any Greek government to implement
the reform policies being demanded by euro-
zone leaders," said Joan Hoey, a senior analyst
at the Economist Intelligence Unit.
If Greece is to avoid default, a compromise
is needed, and Athens is under the most pres-
sure to yield.
Economists say the eurozone is better pro-
tected against the financial instability that
could come from Greece leaving the euro. Sov-
ereign downgrades and a surge in borrowing
rates in recent week caused little market panic
But for Greece, leaving the currency would
cause huge economic turmoil, at least in the
In seeking a deal, the Greek government
has agreed to some things it had previously
ruled out, such as continued external oversight
of the country s finances. But lenders are
adamant Athens must accept more.
The key could ultimately be Tsipras pop-
ularity, says Yannis Palaiologos, a respected
Greek financial commentator and author of
the book The 13th Labour of Hercules: Inside
the Greek Crisis.
He says Tsipras could compromise and
accept some cost-savings reforms in return
for more modest budget targets.
"Tsipras could sell it to the public," said
Palaiologos. "Convincing his own party might
be more difficult."AP
Why it's proving
hard to save Greece
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