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Greek government adopts a course of failing to carry out reforms

27 February 2015 / 20:02:17  GRReporter
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However, concessions in other liabilities need to be made to enable the citizens to bear this burden. For example, if a person receives half of his or her salary he or she will need to be able to shop on credit from the grocery or not to be pressed by the tax officer to immediately pay the taxes due.

Actually, all this is spread throughout the system and it is doubtful whether the measure could be successful. On the other hand, if the state has no money, it will have no option but to suspend payments.

Accounting for the fact that no reforms are being implemented yet, how long can Greece manage without a third bailout?

I think that, in terms of reforms, the government will carry out the easy ones and those that are attractive to part of its supporters. For example, it will carry out the reform in universities, because it will cost nothing. I will not consider if it will actually be a reform or anti-reform. In any case, it will do some of the things that have no financial implications for the budgets. In terms of economy, however, the government tends towards anti-reforms rather than reforms.

As for the third bailout package, to be fair it should be noted that, according to the report of a commission of technocrats from 1 October 2014, Greece would still have a fiscal problem in June 2015 even if the programme of Samaras and Venizelos were applied. In other words, this problem is not the result of the actions of the new cabinet alone. Things have been moving in this direction anyway.

The experts considered this problem last September and estimated that Greece would be short of 10-15 billion euro. Now, their estimates show that it will need 20-30 billion euro.

My personal opinion is that a third bailout, whether it is a new memorandum, credit line or anything else, is absolutely required. There is no doubt about it.

What will happen in Greece after June will be the subject of discussions in April and May. Then its requirements will amount to 7 billion euro for bonds maturing in July and August, government revenues will be in a very poor condition, a year will have passed since the banks have stopped lending and the economy has been stagnant, liquidity will be bound to term bonds, etc. The country will have no trump cards in the negotiations and it will literally be pressed to the wall. Therefore, it will abandon all theories of the Minister of Finance that the loans nourish the Greek crisis and will gladly accept the third memorandum.

At the same time, the majority of people in Greece do not seem to realize the seriousness of the situation.

Yes, people believe that something will always happen to improve the situation. And it is because something always happens. But what politicians and the media do not say is that every time when things are difficult in Greece, Europe rescues it, and it happens on the basis of an agreement.

For example, in the summer of 2012, Antonis Samaras transferred from the camp of anti-memorandum to that of its supporters first, a few days later, Mario Draghi allowed the government to issue government bonds and only then was Greece able to repay the bonds due in August, thus avoiding bankruptcy. The same thing happened last Friday when SYRIZA turned upside down in terms of its major positions. It was a huge setback.

Economic growth was expected and was ultimately attained last year, albeit low. What are the forecasts this year, what will happen to the real economy?

The forecast was for a 2.9% increase in gross domestic product. A few days ago, the European Commission decreased it to 2.5%, but the expectations are that, in this course of developments, economic growth will probably be below 1%.

As already pointed out, the current situation is not only SYRIZA’s fault, it is the fault of the previous government too, because the economy has stagnated since May 2014. This will slow down economic development and the increase in government revenue. The banking system is already paying dearly through the funding from the Emergency Liquidity Assistance, flight of deposits, loss from interests on loans, which they would normally have granted.

I think we should not expect changes in the economy until September. We will labour along until June, because the negotiations on the agreement will be in course, July and August, anyway, will be "dead" months and the only active sector remains tourism. If the agreement with the lenders is successful, we will see how things will develop from September onwards.

With all these delays and evasions Greece has found itself at least a year back in the course of its recovery. If the government of SYRIZA had requested an extension of the programme on the first day after its election, it would have won three weeks in which to discuss the conditions, there would have been no outflow of deposits from banks, foreign investors who wanted to buy sites in Greece would have considered how to proceed. At present, all these things are gone, there is no money in banks, there are no investors. If the government had made its famous "roll" then, Greece would certainly have been in a very good condition. Under current conditions, however, I do not see how it can achieve any economic growth.

Tags: PoliticsGovernmentAgreementEurogroupBanksFundingBailoutGeorge J. Prokopakis
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