[Marxism] Greece accepts bailout terms

Dayne Goodwin daynegoodwin at gmail.com
Thu Jul 9 18:17:33 MDT 2015

Greece beats deadline, offers reform plan that yields to lender demands
by Carol J. Williams and Dody Tsiantar
Los Angeles Times, July 11

Sobered by reports that Eurozone partners were ready to let Greece
fall out of the common currency club, the Greek government Thursday
delivered a new package of economic reforms to its creditors that
capitulated to lenders’ demands for raising taxes and the retirement

The leftist leadership of Prime Minister Alexis Tsipras had just two
weeks ago drawn “red lines” around pensions and state workers’
salaries to shield them from deeper spending cuts demanded by the
lenders, a bold rejection that was endorsed by a healthy majority of
Greek voters in a referendum Sunday.

But faced with imminent collapse of the country's banking system and
the specter of economic catastrophe and social unrest, the populist
government was reported by Greek media to have yielded on the sticking
points that led to collapse of previous talks on a new rescue plan.
The proposals were delivered two hours before Thursday’s midnight
deadline, the iEfimerida news site reported.

“The government is doing all that it can to reach an immediate deal
and end this cycle of uncertainty,” said government spokesman Gabriel
Sakellarides. “We are optimistic that a deal will be reached.”

The Tsipras Cabinet endorsed the new plan Thursday evening, reversing
its earlier insistence that pensioners be spared any further hardship.
The new reform package would push the retirement age to 67 and cut
pensions by 15% for those who choose to retire at 62, which those with
40 years or more in government service are eligible to do.

The government also plans to withhold more tax from state salaries and
pensions and to deduct a 6% healthcare premium from retirees' checks,
Mega TV and other Greek media reported.

The program of spending cuts and tax increases is aimed at securing at
least an additional $55 billion from the creditors to keep the economy
afloat for the next two years. In exchange, the government also
pledges to boost the value-added tax on restaurant bills to 23% from
13% and end the special tax exemptions for Greek island businesses.
The reforms are predicted to generate at least $13.2 billion in
revenue over the next two years to service the country's debt from
$270 billion in two previous bailouts.

On Wednesday, the Greek government sent a letter to the European
Stability Mechanism, a fund set up since the country first sought
bailout funds in 2010, requesting immediate assistance because of the
fragility of the banking system and a clear shortage of cash. The
letter did not give specifics but said that the government would
immediately begin to implement budget reforms as early as Monday.

Greece has been in an economic free fall since Tsipras last week
called a snap referendum on the austerity measures demanded as a
condition for new talks with the creditors on a third bailout. Banks
have been closed and capital controls have been imposed for nearly two
weeks, paralyzing the economy. Greeks cannot withdraw more than $66 a
day from ATMs, and pensioners without ATM cards are allotted about
$132 a week. Banks will remain closed through Monday, the Economy
Ministry said.

Greeks rejoiced when a 61% majority in Sunday’s vote rejected more
austerity measures. However, the excitement dissipated as the reality
began to sink in: If the government fails to secure new rescue loans
by Sunday’s European Union summit, the spigot of assistance will be
turned off and banks will run out of cash.

The apparent concessions by Athens were probably aided by a growing
recognition among the creditors and Eurozone colleagues that Greece’s
debt, more than 175% of GDP, is unmanageable and needs to be reduced
or rescheduled for payment over a longer period. There is also
discussion on the lenders’ side of ensuring that interest rates remain
low to prevent the debt burden from growing further.

The Greek reform plan will have “to be matched by an equally realistic
proposal on debt sustainability from the creditors,” European Council
President Donald Tusk said Thursday. “Only then will we have a win-win
situation. Otherwise, we will continue the lethargic dance we have
been dancing for the past five months.”

Meanwhile, European Commission President Jean-Claude Junker
acknowledged that a scenario that sees Greece exiting the euro has
been prepared in detail. A Reuters poll of economists Thursday showed
that 55% of respondents expected such an exit.

After Sunday's referendum, the European Central Bank said it would not
increase liquidity assistance, weakening the already struggling Greek
banking system. Jens Weidmann, a German commissioner with the bank,
observed in a speech Thursday that it has “no mandate to safeguard the
solvency of [national] banks and governments” and that it was a wise
move by the bank to cut off emergency cash infusions to Greece so that
they are no longer being used to finance capital flight.

Fearful of a banking collapse, Greek depositors had been withdrawing
their savings at a rate that would have exhausted the nation’s euro
supply without the emergency infusions, and may still do so if an
agreement between Athens and its creditors isn’t forthcoming in the
next few days.

On Thu, Jul 9, 2015 at 3:28 PM, james pitman via Marxism
<marxism at lists.csbs.utah.edu> wrote:
> http://www.theguardian.com/business/2015/jul/09/greece-debt-crisis-athens-accepts-harsh-austerity-as-bailout-deal-nears

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