Important though such structural reforms may be in improving Greece’s long-term prospects, what matters in the short term is healing a traumatised economy that has slipped back into recession and is fettered by capital controls.
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The German newspaper, Bild, released a two-page document by the Finance Ministry, which put to question issues including Greece’s debt sustainability, the worldwide Monetary Fund’s (IMF) role in the crisis and privatization in Greece.
It is true that Greece has had to undergo painful adjustments to address its deep structural weaknesses, unsustainable public finances, and lack of price competitiveness – adjustments that led to a drop in Greek output.
European creditors are readying more interim financing to help Greece make an August. 20 payment to the European Central Bank in the event of a disagreement over the full package. Traders and analysts are closely watching the development in the talks as any failure from achieving the said bailout deal would be seen as a huge negative for the Eurozone economies. “In some of these we have tried to play with time” and stagger their implementation, such as gradual increases on diesel fuel taxes for farmers, to soften the blow, he said.
Greece will implement most of the savings in 2017 instead of this year and next year.
The latest wranglings over the bailout by Germany are nothing new, with the country being the hardest taskmaster with Greece over austerity and reforms particularly as it has been the country’s largest euro zone lender. These moves are expected to unlock a three-year bailout agreement worth some €85 billion ($95 billion)-or at least a bridge loan to cover a €3.2 billion bond repayment due to the European Central Bank next week. It plans to discuss the questions at tomorrow’s meeting of finance ministers.
German government officials signaled repeatedly this week that they won’t be rushed into backing a third Greek bailout or parliamentary approval for one.
Greece’s European creditors have underlined the temporary nature of the country’s surprise return to growth by warning that they have “serious concerns” about the spiralling debts of the eurozone’s weakest member. That is a potential sticking point, because the German government and others want to ensure that Greece starts living up to its promises before offering longer maturities or reduced interest rates to ease its debt burden. Greece will only avoid the threat of “Grexit” if some of its borrowing is written off, said Robert Peston on the BBC.
Spain’s economy grew 1 percent, according to a provisional estimate published on July 30. I suspect what we are really talking about is some form of minimum unemployment insurance, with lots of restrictions and controls.
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As is her custom, Merkel has returned quietly from vacation this week and not spoken publicly on Greece or other matters since Seibert confirmed that the chancellor had talked with Tsipras on Monday and Tuesday.
