[Marxism] Telegraph(UK) report: Greece draws up drachma plans, prepares to miss IMF payment

Dayne Goodwin daynegoodwin at gmail.com
Thu Apr 2 15:52:33 MDT 2015

Greece draws up drachma plans, prepares to miss IMF payment

'We are a Left-wing government. If we have to choose between a default
to the IMF or a default to our own people, it is a no-brainer,' says
senior Greek official

by Ambrose Evans-Pritchard
The Telegraph, London
late on April 2

Greece is drawing up drastic plans to nationalise the country's
banking system and introduce a parallel currency to pay bills unless
the eurozone takes steps to defuse the simmering crisis and soften its

Sources close to the ruling Syriza party said the government is
determined to keep public services running and pay pensions as funds
run critically low. It may be forced to take the unprecedented step of
missing a payment to the International Monetary Fund next week.

Greece no longer has enough money to pay the IMF €498m on April 9 and
also to cover payments for salaries and social security on April 14,
unless the eurozone agrees to disburse the next tranche of its interim
bail-out deal in time.

“We are a Left-wing government. If we have to choose between a default
to the IMF or a default to our own people, it is a no-brainer,” said a
senior official.

“We may have to go into a silent arrears process with the IMF. This
will cause a furore in the markets and means that the clock will start
to tick much faster,” the source told The Telegraph.

Syriza’s radical-Left government would prefer to confine its dispute
to EU creditors but the first payments to come due are owed to the
IMF. While the party does not wish to trigger a formal IMF default, it
increasingly views a slide into pre-default arrears as a necessary
escalation in its showdown with Brussels and Frankfurt.

The view in Athens is that the EU creditor powers have yet to grasp
that the political landscape has changed dramatically since the
election of Syriza in January and that they will have to make real
concessions if they wish to prevent a disastrous rupture of monetary
union, an outcome they have ruled out repeatedly as unthinkable.

“They want to put us through the ritual of humiliation and force us
into sequestration. They are trying to put us in a position where we
either have to default to our own people or sign up to a deal that is
politically toxic for us. If that is their objective, they will have
to do it without us,” the source said.

Going into arrears at the IMF – even for a few days – is an extremely
risky strategy. No developed country has ever defaulted to the Bretton
Woods institutions. While there would be a grace period of six weeks
before the IMF board declared Greece to be in technical default, the
process could spin out of control at various stages.

Syriza sources say are they fully aware that a tough line with
creditors risks setting off an unstoppable chain-reaction. They insist
that they are willing to contemplate the worst rather than abandon
their electoral pledges to the Greek people. An emergency fall-back
plan is already in the works.

“We will shut down the banks and nationalise them, and then issue IOUs
if we have to, and we all know what this means. What we will not do is
become a protectorate of the EU,” said one source. It is well
understood in Athens such action is tantamount to a return to the
drachma, even though Syriza would rather reach an amicable accord
within EMU.

Eurozone creditors may be willing to release enough funds to cover
Greece’s government costs on April 14, but only if Syriza pays the IMF
first. However, trust has already collapsed to the point where key
ministers in Greece no longer believe the assurances from Brussels,
fearing they may be lured into a trap. The mood has become poisonous.

“They want us to impose capital controls and cause a credit crunch,
until the government becomes so unpopular that it falls," said one

"They want make an example of us, and demonstrate that no government
in the eurozone has a right to have mind of its own. They don’t
believe that we will walk away, or that the Greek people will back us,
and they are wrong on both counts,” he said.

Syriza is still hoping that German Chancellor Angela Merkel can defuse
the crisis, deeming her a “real ally”, but fear that she will be
confronted with a fait accompli beyond even her control.

Bank of America warned that a “critical sequence of events could
unfold” once Greece misses a payment to the IMF. It would trigger a
parallel default to the eurozone bail-out fund (EFSF) under the legal
master agreement, and might force the EFSF to cancel its loan packages
and demand immediate repayment. This in turn would trigger a default
on Greek government bonds issued under the bail-out accord.

The situation is now critical. Even if Greece manages to cobble
together enough money to cover the April deadline, it owes the IMF a
further €200m on May 1 and €763m on May 12. A Greek official told EMU
counterparts at a teleconference on Wednesday that the country has run
out of money. "There is no way we can go beyond April 9," the official
reportedly said.

The drama comes after the creditors refused to rubber stamp Athens'
latest bid to unlock funds, raising objections over Syriza plans to
boost union powers in collective bargaining and boost pensions for
lower income groups.

Creditors refused to rubber stamp Athens' latest bid to unlock funds

Brussels continues to insist on more concrete pledges, despite
receiving a 26-page list of reforms on Wednesday. Athens hopes to
raise €6.1bn in 2015 by clamping down on fuel smuggling and tax
evasion, introducing new levies on luxury goods, and reforming public
procurement. It estimated funding needs at €19bn over the coming year,
meaning that there will inevitably be fresh tensions over the summer
even if there a deal on interim funds until June.

Former European Commission head Jose Manuel Barroso warned Greece that
they have a moral obligation to other states, describing the demands
for more time and money as "completely unacceptable".

“We should remember that there are poorer countries that are lending
money to Greece, so to propose a cut to their debt would be certain to
receive a no from their partners," he said.

Greece will bolster public health care
Associated Press, Salt Lake Tribune, April 2

Athens • Prime Minister Alexis Tsipras said Thursday his government
will bolster public health care in Greece through the hiring of 4,500
specialized staff and the abolition of a compulsory $5.45 fee for
treatment at public hospitals.

Speaking at the Health Ministry, Tsipras said some reforms passed
during the last few years as part of austerity measures required for
Greece's international bailout had damaged the country's health system
and that his government was working to repeal them.

"The national health service had problems before the bailout, but it's
obvious that in the last four or five years, the bailout choices and
reforms were a nuclear bomb at the foundations of the national health
service," Tsipras said.

He announced his government was repealing the "unacceptable" $5.45
payment patients were required to make in order to be seen on an
out-patient basis at public hospitals.

"We are already working on interventions to abolish bailout measures
that have contributed to the destruction of the health service," he
said, listing reforms to the ambulance service, medications and
pharmacies, mental health and appointing doctors in rural areas.
. . .

Greece’s cash crunch: Running out of room
The Economist, London - April 1
. . .
Greece’s eurozone partners are still waiting for Athens to come up
with details, promised two weeks ago, on the country’s deteriorating
public finances. Mr Tsipras has promised Greek voters that Syriza has
banned the hated “troika” of bail-out monitors (from the European
Commission, the IMF and the European Central Bank) from Athens. To
protect that political narrative, a team of mid-level officials from
the three institutions sits ensconced in a four-star Athens hotel,
gathering information by exchanging e-mails with their finance
ministry counterparts. The ministry itself is strictly off-limits.
“This system works quite well,” claims Dimitris Mardas, the budget
minister. The visitors disagree, complaining about delays and
inaccurate replies that could be avoided if they were allowed to meet
Greek colleagues face-to-face.

Meanwhile, a three-member Greek team of senior economists in Brussels
does the actual negotiating with the troika. Not much progress has
been made...
. . .

More information about the Marxism mailing list