Negotiations between Greece and its European partners were suspended yesterday, as no agreement was reached.
The Greeks offered measures that aimed at both budgetary savings and increased revenue; Greece’s creditors were asking for a different policy mix that would not entail an extraordinary tax contribution and, therefore, more sustainable as a program. Instead, they asked for a reduction of pensions, which the Greek government denied.
No matter what the final agreement entails, both parties are aware that an agreement is unlikely to be implemented because the Greek administration does not have the resources and is not effective in overseeing expenditure.
The irony of the situation is that in January the government of Nea Demokratia under Antonis Samaras had come to an agreement, which was not finalized because of the elections. Today, that agreement looks ideal compared to what the SYRIZA government is negotiating but has yet to conclude. The bottom line is that Samaras was getting concessions, not because of his negotiating abilities and insistence, but because his party is an EPP party and EPP rules Europe and wanted to help. Today, SYRIZA belongs to a different political family, GUE, which cannot help.
Besides the specific measures to be taken – extraordinary taxation or reduction of pensions –there is still a political element that brings together Americans and Europeans and for all practical purposes is expressed by the European Commission (EC) and the International Monetary Fund (IMF). Both, the European Commission and the IMF want to punish the Greek Leftist SYRIZA government.
In effect, they both want to stop and reverse the rise of the unconventional Left growing in South Europe (Spain, Italy, France and elsewhere). They well know that if the Left takes hold of the South of Europe, the North of Europe will be contaminated. Thus in a few years, Europe may turn into an aggregate of states ruled by neo-communists under the generic flag of the new Left, with far right oppositions. For conservative Europe, this is a nightmare.
The IMF, under the control of the US Administration, would very much like the SYRIZA government derailed, because Greece has recently passed legislation that would lead to the release of a terrorist responsible for the assassinations of US diplomats. This is something the United State of America will never forget and will never forgive. Politically, that law was the end of the SYRIZA government.
And as the SYRIZA government enjoys rising popularity and cannot be overthrown by destabilization and elections, IMF –an organization potentially influenced by the US Administration- could be used for this purpose. This explains why while the Commission was positive to the proposals put forward by the Greek government, the IMF rejected them.
Yet, although Europeans and Americans want SYRIZA out, they both want Greece to remain in the Eurozone at any cost because a Grexit would put the world economy into uncharted waters.
Therefore, it is likely that by the next Eurogroup there will be an interim agreement (until September), which will allow the country to remain in the Eurozone, but will not give Greece access to liquidity that could be used to serve its own domestic needs. In this context, it is likely that this agreement will release enough liquidity for the service of Greece’s foreign obligations, probably through direct payment.
Greece’s partners (EU-USA), see the solution to the Greek problem coming from a grand coalition government of all pro-European parties (except the Leftist platform of SYRIZA). However, this is unlikely to give a final and lasting solution to the Greek quest. Indeed, the components of this grand coalition will include the same personalities who have created the Greek deadlock (huge public sector and unmanageable foreign debt) in the first instance.
http://www.neurope.eu/article/greece-and-the-eu-close-to-an-interim-agreement/