Another day has passed and the negotiations around the debt crisis in Greece appear to have got nowhere, again. Today, saw Greece’s international creditors making a new proposal to Athens, to extend the bailout so that it can avoid defaulting on its debt. But the conditions, as always, are that Greece agrees to stringent reforms. So what are the main sticking points:
- Greece is refusing to accept cuts to pension payments or public sector wages
- The International Monetary Fund (IMF) is pushing for deeper spending cuts as well as tax rises
- The creditors want to Greece to scrap the special benefit paid to some low-income pensioners
- The creditors also want more VAT based items including extra VAT on medicines or electricity bills, hotels and restaurants
- Athens wants the creditors to provide a concrete commitment to debt relief
Greece and its creditors have been deadlocked for some time. Even with the spectre of the IMF loan repayment looming in four days. It is difficult to see what Greek PM Alexis Tsipras will do. He is being strongly advised by German Chancellor Angela Merkel to accept what she has called an “extraordinarily generous” offer. The latest offer would would release €15.5bn ($17.3bn) of funding, €1.8bn of which would be available immediately.
Mr Tsipras will return to Athens to hold emergency talks with his government. Even though he is in the driving seat, any deal must be passed by the Greek parliament. If Greece does default, it is possible it would exit the eurozone. This has the potential for serious repercussions for the rest of Europe and the world economy. The real problem is, in this unprecedented position, no one can really say what the ‘serious repercussions’ might be.
