TOGETHER WE SAY THAT ANOTHER EUROPE IS POSSIBLE
The proposal of the institutions to the Greek government was to immediately enact deep recessionary measures [that would hurt the country’s already wounded social fabric] as a precondition for...
- The proposal of the institutions to the Greek government was to immediately enact deep recessionary measures [that would hurt the country’s already wounded social fabric] as a precondition for five months of financing, which was judged totally inadequate. If this proposal was accepted by the government and the Parliament, the citizens and the markets would face five months of further shrinkage, which would probably lead to more negotiations under crisis conditions. This is one of the reasons why the institutions’ proposal could not be accepted.
- As for the funding gap of the next five months, the institutions’ proposal involves 12 billion euros from the European institutions [EFSF and the ECB profits from Greek government’s SMP bonds] plus 3.5 billion euros from IMF [which is unlikely to be given, as will be explained further down], i.e. a total of 15.5 billion euros.
- More specifically, the proposal that was presented to the Greek Finance Minister in yesterday’s Eurogroup is as follows:
- Over the next few days, the ECB 2014 profits from SMP bonds [which have been withheld for Greece by its European partners], a total of 1.8 billion euros, will be returned to Greece and on June 30 will be repaid to IMF, together with another 100 million euros of the Greek state’s short supplies.
- In mid-July the country will be “given” a total of 4 billion euros by EFSF. Of this amount, 1.8 will come from the last installment of the 2nd memorandum loan plus 2.2 from Hellenic Financial Stability Fund [HFSF]’s 10.9 billion euros – which was initially intended solely for refinancing banks. 3.5 of the 4 billion euros will be remitted to ECB for the repayment of a SMP bond, which is maturing, while the remaining 500 million will be made available to NSRF [as part of national contribution].
- At the beginning of August, another 4.9 billion euros will be taken from HFSF’s 10.9 billion euros [there is very little now left in this fund for banks] in order for the other SMP bond to be repaid.
- Finally, in October, 1.5 billion euros of ECB’s 2015 profits from SMP bonds] will be repaid to the IMF.
- The above sums are judged inadequate as there is no provision for the amounts the Greek state has repaid to its lenders [particularly the IMF] without having received a single penny from them for over a year, which has resulted in an accumulation of arrears and an increase in repos.
- The proposal does not make any provision for even a minimum Greek state reserve fund or for the future repayments to the IMF, which is of the utmost importance given the fact that the IMF refuses to pay the installments laid down by the loan agreement since it considers the Greek public debt unsustainable.
- It is thus apparent that the institutions’ proposal, even if we overlooked the recessionary and socially destructive measures it suggests, creates a considerable funding gap for the planned five-month extension period while, even more disconcertingly, it would lead with mathematical precision to a new tough negotiation and a new catastrophic memorandum at the end of this year.
- The Greek government has submitted a sensible proposal for the settlement of the debt and the solution to the funding problem [e.g. through a de facto transfer of the debt to the ECB to ESM], which has been rejected by the institutions though. The government has neither the popular mandate nor the moral right to sign a new memorandum.
