Greece leans. Europeans give to. 18 hours negotiating the lenders and the government in Athens. The Commission in Brussels was as so often particularly optimistic. The Germans and other euro countries saw a need for improvement. Meanwhile, the joint Memorandum of Understanding is (MoU). The list of reforms that Greece has to implement is long. 29 closely printed A4 pages. In return for their implementation, the country receives up to 86 billion euros in aid. 86 billion euros.
this is a dilemma for both sides. Greece’s Prime Minister Alexis Tsipras is now committed to reforms, against which he has fought as opposition leader still fierce. Reforms, which are very difficult to convey the ruling party Syriza. And the Europeans rich out more loans to the Greeks, as they had ever imagined in their worst nightmares. For terms and conditions, softer than planned. So who has won? Who has lost? So This is definitely a lose-lose situation. There is no winner.
The “world” explained the key points of the new program and the greatest risk of failure. Greece will employ the euro zone for a long time.
The savings targets
According to old plans, the Greeks should achieve even a budget surplus in the current year – at least before interest payments for the debts. That has now changed. The MoU provides for 2015 primary deficit of 0.25 percent. Next year, an increase of 0.5 per cent should apply and, in 2017 and 2018 1.75 3.5 percent are then targeted. That’s significantly less than had the Greeks in the second program, which they had unceremoniously terminated, provide.
Alexis Tsipras is the home to announce a success. Only, it is the well? The significantly lower budgetary targets mainly result from the fact that the left Syriza-led government coalition has ruined her course the country’s economy. The long standing dispute with donors, the resulting uncertainty about the whereabouts of the country in the euro zone, the referendum, the movement of capital controls as a result of capital outflows. The country’s economy, buffeted for years, is badly off. But
In order to increase social spending, while tax revenues decline. Simultaneously, the economic output collapses further. One reason for rejoicing this should not be for the Syriza supporters.
The recapitalization of banks
Up to € 25 billion represent the funder the Greeks for the stabilization of the banks in the country in view. This wobble is not because they have gambled with opaque financial products, but because they have to put their money in a government bond of their own, ailing country. And because the economy goes down the drain, on the other, fail loans and financed property would be foreclosed.
Only saving the banks is of course linked to more than just new capital injections by the Europeans. Unlike so far are homes and condos can be more easily auctioned if the owners can no longer pay their installments. Especially for owners of two or more houses should be the case. So far there are about alleged discussions yet in Greece. And of course, benefit from the non-auction of property previously very rich Greeks who refuse to pay their taxes.
However, going at first glance from the MoU does not indicate whether the banks are recapitalized directly through the euro rescue mechanism ESM . Or whether the ESM the Greek government borrows the money, the more hands it to the banks. What sounds like a trifle, has far-reaching consequences: Gives it the ESM initially to the government, then this shall also be liable for it. Their debt ratio would rise. Ginge capital directly to the banks, the government in Athens would be fine out at this point. So far there was not in the monetary union.
The pension reform
Few things were more controversial than the planned pension reforms in Greece. Given the high unemployment in the country, the pension of grandma and grandpa now often serves as a single social network. On the one hand. On the other hand a lot of fast and loose was operated in the past with the various types of pensions in the country. And still the level of pensions in Greece is partly significantly higher than in other European countries with comparable economic performance.
“The pension reforms of 2010 and 2012, they had been fully implemented, would have the long-term sustainability of the overall pension system substantially improved”, stands in the MoU. Would, would. Instead, the pension system is still fragmented and expensive and requires more significant annual transfers from the state budget. Therefore, significantly more ambitious steps are needed to resolve the structural causes. In German: Further reforms on a large scale are necessary.
This year should at the pension funds will be saved with a volume of around one-quarter per cent of Greek economic performance. 2016 should then be one percent. The reform package foresees to abolish all incentives for early retirement. The Greek Pensioners pay since the first of July a higher contribution to their health insurance. From 1 September the same applies to supplementary pensions. In addition, these supplementary pensions to be frozen until 2021 at the current level. And that’s only part of the planned measures.
There are necessary reforms. There are painful reforms. Greece should live within its economic performance. And that is after all low. Many Greeks are not understood. For the Government of Alexis Tsipras, the implementation of these measures is a real challenge.
The political dilemma
chosen to rid the country of the Troika, Alexis Tsipras brings the unloved donors now for another three years to Greece. And worse, because it took so long to negotiate the necessary Deal with them, be Greece now finds itself in a predicament, which is worse than ever.
Tsipras, the radical Left, now has to implement reforms, which even his conservative predecessor Antonis Samaras has refused. In return, he will indeed bring out some form of debt restructuring with the IMF. He will also get more money than ever Samaras was in prospect. Only he needs this money, because it Greece is so much worse.
Tsipras, head of Syriza alliance, will have to explain his party, why exactly he now implements those measures, against which he is politically ever competed. He will also have to explain why he was in the referendum against these measures and it now endorses. Simple is not for him. Syriza stands in front breakup. Without the support of the opposition Tsipras receives the new package does not by its Parliament.
Sooner or later, the Premier will therefore need to call for new elections. Syriza will have until then presumably split, in a rather left Social Democratic Party and a left-wing force. If Tsipras thus lose its power? Currently, it does not look so.
Whoever has been in Europe hoped to push the unpleasant in his view, Greek Prime Minister from office, should be used to the idea that he was still some time could be there. Partly it’s not working safely. But realistic assumptions often assist in the implementation of the necessary policies.
dispute over privatization
The federal government was in the negotiations with Greece a privatization fund important – and she got him. Greece should transfer around 50 billion euros state ownership into a sort Trust Fund. However, the agreement is only for the establishment of a “Task Force” is mentioned. Only a task force does not consider the federal government but to be sufficient.
The open IMF question
Not in the addressed agreement is a point that is particularly the deputies of the Union parliamentary group at heart: the question of whether the IMF involved in the new rescue program. Chancellor Angela Merkel and Union parliamentary leader Volker Kauder had the promised their deputies.
Many in the Union faction see more aids skeptical. For it is therefore important that the IMF, which is pursuing a rather hard line on Greece, is at a new rescue program on board. The IMF, however, will be explained only in October.
is crucial for the Fund if Greece its debt may carry permanently. Only then will it allow him his statutes, to participate in a program. Finally, the debt has risen sharply through the policies of the left Syriza government however. So reckons Berenberg Bank, that proud, the debt ratio only because of Tsipras government 35 percentage points higher than planned.
Given the high debt ratio, which could according to the IMF, to rise to up to 200 percent, in terms of economic performance, the Fund holds a haircut inevitable. The Federal Government rejects debt relief from, however, because they do not want to expect this to their voters. Without debt restructuring, however, will not participate in the new program, the IMF Greece.
Therefore, it runs well on some form of debt relief in the fall out. Is considered likely that Greece will receive additional credit privileges when it adopted its reform as promised. The question is whether the IMF such a “haircut light” enough. And in the parliamentary vote in the coming week the Union MEPs will go without an assurance that the IMF is on board.
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