It seems everyone has reservations about the Greek proposals. However, the European Commission, the Euro group of finance ministers and the heads of state, including Merkel, seem somewhat more supportive than the ECB and IMF. National parliaments will likely grant their approval in the coming days.
After reaching an agreement to give both sides more time to negotiate, Greece will submit a new economic plan to EU legislators this week in the hopes of reaching an agreement.
Late on Friday, the EU announced reaching a tentative agreement that gave Greece a four-month extension so that the 19 Eurozone nations could find common ground on how to move forward. “We agreed on four months under conditions,” said Finance Minister Hans Joerg Schelling.
The European Union and Greece are at a stalemate over Greek debt, even as talks continued over the weekend.
An anonymous Greek official said in an email that finance ministers, who were meeting with Greek Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis, failed to come to an agreement over Greece’s burgeoning debt load. According to the email, the Greek government is refusing to extend its current debt repayment terms, with Varoufakis saying that Greece was currently facing an “ultimatum” from the EU.
With the Greek elections drawing to a rather shocking end, Greek investors are leaving the euro for gold to prevent getting caught up in the political turmoil. With the recently elected government showing no particular interest in adhering to the European council, and economic recovery efforts leading nowhere, it is understandable that the Greek people are turning to metal to preserve their wealth.
The emphatic rejection of disastrous austerity policies by the newly elected Greek government has caused consternation in Eurozone capitals. Germany has been particularly strong in dismissing Greek pleas for a renegotiation of its debt and has warned of an impending fallout should Greece persist in their demands.
Tired of dealing with the consequences of austerity, Greece appears run by a party inspired by the politics of Homer. Not the Greek Homer, mind you, I refer to the Springfieldian. Some may recall an episode of The Simpsons that saw Homer Simpson run for sanitation commissioner with the slogan “Can’t someone else do it”. Homer won, promptly implemented a garbage collection regime in which white gloved, handsomely uniformed men relieved Springfield of the need to touch their garbage cans. It took one day to bankrupt his department.
Q: What did the European Central Bank do yesterday that caused a sharp drop today in Greek stocks and bonds?
A: The European Central Bank said that because it was not confident that a new deal could be struck when the Greek assistance program ends at the end of the month, it would no longer accept Greek government bonds, or bonds it guaranteed, as collateral starting February 11. As long as Greece was getting assistance, the ECB was willing to waive its rule against accepting below investment grade collateral. It ended that waiver.
Greece needs about 10 bln euros by the end of the month. The negotiations are fierce. Although the ECB and Germany clashed over the conduct of monetary policy, they seem to agree, not to concede to Greek requests for debt forgiveness or a debt swap. At least until the end of the month, German media is unlikely to repeat the slur, referring to the ECB as the Banca d’Italia’s Frankfurt branch.
The Greek coalition party has a chance to offer an alternative to neoliberal austerity, but it needs the support of left-wing parties throughout Europe to give it room for manoeuvre.
Syriza, in choosing to enter into coalition with the Independent Greeks, is sending a clear message to the Eurozone’s leaders: it is intent on challenging Greece’s debt repayments.
So, some form of challenge to the austerity policies of the previous government is inevitable – this was its mandate. But it has options for the extent to which it might challenge international lenders – and its leaders might want to consider if this is the best option for the Greek economy.
