Brussels, 23/06/2015 (Agence Europe) - The Greek government, headed by the radical left party, Syriza, entered choppy waters on Tuesday 23 June by trying to drum up support at home for the reforms that it is preparing to accept in order to reach agreement with the country's lenders and avoid defaulting on Tuesday 30 June.
On Monday, a eurozone summit said that Greece's proposals were a good basis for talks but the IMF was more guarded (see EUROPE 11340). Even if agreement on the Greek question is reached at the special Eurogroup meeting on Wednesday evening, some lender countries, such as Germany, want particular measures in the agreement to be endorsed by the Greek parliament before it will agree to the disbursement of the next batch of aid. The Greek parliament may vote on them at the weekend.
“There is full comprehension that there are measures in the proposal that are harsh, and they are measures taken under different circumstances. If it was up to us, there was no way we would have taken them,” said Greek government spokesperson Gabriel Sakellaridis on the Antenna channel
In an interview with German newspaper Die Zeit, Greek Syriza MP Costas Lapavitsas warned: “If the reforms primarily consist of cuts that will continue to negatively affect the daily lives of the people in this country, then there will be significant political problems. How do you want to approve a programme that will not bring any growth? There's a contradiction in itself here.”
Greek prime minister Alexis Tsipras knows that he can count on the support of the main opposition parties, including To Potami, a centre left party that has promised to vote in favour of an agreement, whatever's in it. Nevertheless, since the current government still has a long term of office ahead of it, Athens' lenders know that it's in their own interest to allow Tsipras to keep his majority at the Greek parliament.
At the eurozone summit, Tsipras unsuccessfully raised the question of the Greek debt burden, which may exceed 180% of GDP in 2015. The eurozone is very clear about this - Greece must first do its party by achieving the budget targets before hoping for a gesture from its lenders. Some countries, like Slovenia and Slovakia, are difficult to win over, even though all the criteria have been met for talks to take place in this connection. If they want to send a positive signal in the statement they'll issue on Wednesday evening, the eurozone's heads of finance may reiterate their commitment to take action to shore up the viability of the Greek debt under the November 2012 eurozone statement, but this is far from certain.
Ahead of the Eurogroup meeting, the talks are concentrating on the inevitable extension by a few months of the current Greek bailout and how to finance Greece from existing instruments (the €7.2 billion from the EFSF and IMF, the HSFS bank bailout fund, and profits from Greek bonds under the ECB's SMP programme). Although there is not enough time to decide on an easing of the Greek debt, a European source explains that Tsipras is seeking a “mandate” to ensure the question is decided upon at a later stage.
Hard to say at this stage whether Tsipras will be able to counterbalance the acceptance of tough reforms with a promise by the country's lenders to examine in the future the question of the Greek debt burden.
Mobilisation of European funds. After the eurozone summit, the president of the European Commission, Jean-Claude Juncker, tried to show that in the debate between austerity and growth, the Commission was not on the side of austerity alone. Over the next few days, his teams will be fine-tuning a €35 billion package to stimulate growth in Greece that will be validated in the event of agreement between Athens and its lenders. It would involve mobilising sums from the EU budget already allocated in programming for 2014-2020 to provide €20 billion from the Structural Funds and €15 billion in agriculture funding. Annika Breidthardt, a Commission spokesperson, said the level of co-financing required from Greece would be discussed when the package was unveiled.
Greek newspapers report that on Tuesday, the ECB raised the cap on emergency ELA liquidity for Greek banks for the fourth time since Wednesday 17 June. (Elodie Lamer and Mathieu Bion)