Greece's creditors orchestrated plan to cause instability
by Alberto Paez and Miguel Coelho (May 2, 2016)
Messages from Brussels, Berlin and Washington DC are completely different and in mixed tones. A great deal of EU leaders raised their voice last week to stand with Greece and press for the final conclusion of the negotiations and the launch of debt talks. German Finance Minister Wolfgang Schauble is stuck on his controversial wording over the fate of Greece in Eurozone, while the IMF is sclerotic with the idea of adopting contingent measures in case Greece fails to reach 3,5% primary surplus in 2018. For those being involved in the negotiations, this seems sort of bargaining. For a third observer, this is the absolute paranoia.
It is the first time since 2010 and the first adjustment program that Greece achieves, or better overcomes, the goals that have been agreed from the beginning. The initial goal for Greece in 2015 was to control recession in -0.25%; against the odds, domestic economy performed better than expected reaching a primary surplus of 0.7%. IMF predictions were once again (i.e. for a sixth consecutive year) wrong, capital controls for export-oriented companies have been dealt with the necessary responsiveness by the relevant authorities to tackle a gap in primary balance or avoid payment delays to third parties.
At the same time. a number of necessary reforms have been put forth covering a wide range of public policy fields amid a fierce polemic by a number of systemic, highly-corrupted media and the opposition. The Greek government has developed a steady reformist pace, being committed to move on to the restructure of the public sector and the modernization of the economy, securing that social justice is and will be attributed.
The adjournment of the Eurogroup, and the re-scheduling for May 9, came after a growing pressure from leading political figures of the European Commission and the European Parliament. Still, it is uncertain whether this Eurogroup will be the last one or another one will be needed to sum up with the Greek bailout review.
The stance of certain players of the Greek puzzle abroad engenders second thoughts on the sincere intention of all parts involved towards a successful development of the Greek adjustment program and the exit of the country from a long, deep and painful crisis. The IMF wants to impose its own rules in order to step in and finance the Greek program, enacting an auxiliary austerity package along with a generous debt relief program. Germany and the European Commission have ruled out any direct haircut, pondering on alternative options that would loosen Greece's debt payments after 2020. Especially for Germany, contingent measures should be also legislated by the Greek side in advance to "over-qualify" the economy and secure that the next couple of years will run up smoothly.
Between these major postures, there is another illusive one. The fact that the German government and the IMF are delicately pushing the Syriza-led government to an impasse, forcing it to legislate another austerity package that it has never been agreed - i.e. neither by the Greek government nor by the creditors.
Both Germany and the IMF are biased against the Greek government and wished they could have another interlocutor in Athens. But at the same time, they realize that causing the fall of the government does not necessarily mean that in case of snap elections Syriza would not win. Therefore, they are pressing PM Tsipras to adopt an additional austerity package and trim his government's success domestically. Pushing for Grexit could also be the outcome of discussions in the forthcoming Eurogroup, reminding us the 18h negotiations of the last summer.
In this context, the role of the EU and its leadership is of paramount importance to unleash positive developments. This time, clearer than ever before, the stakes are outstandingly high.
Alberto Paez and Miguel Coelho are Policy Analysts at Bridging Europe
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