You’re planning a crucial Eurogroup meeting. Yesterday, the government in Athens has approved, not without internal problems and citizens’ protests for today (materdì May 24), a new reform package: 7 thousand pages to increase VAT, remove the economic privileges to the islands and increase the tourist tax for tourists.
Tsipras keeps saying that Greece “has done its part” and that “now it is up Eurogroup “. Today’s meeting, in the light of the commitments made by Greece, should unlock the tranche of aid to Athens useful to address the summer paying refunds due to the ECB, the salaries and pensions. But the whole dossier on the Eurogroup table today concerns the Greek debt reached 180% of GDP and considered unsustainable by the International Monetary Fund which has repeatedly proposed restructuring .
the game today, then, it is played mainly on the issue of debt around which also runs the involvement or not of the IMF on the third bailout of Athens, a very important point for European lenders and particularly for Angela Merkel who had promised the Bundestag participation of the Fund as a guarantee of reliability and fidelity to the rescue plan.
Greece and the new reforms
in the end, the government in Athens he went to the creditors meeting by introducing into the new reform package and a kind of Italian safeguard clause, although in Greece this mechanism could be unconstitutional. The new reform package has increased VAT from 23 to 24% on various products (gasoline, cigarettes, coffee, internet, pay TV and luxury goods), introduced another tax, increased taxes on property and abolished the tax relief for the Greek islands . These innovations apply to the coffers of Athens 1.8 billion which when added to the package to 3.6 billion (with the reform of the tax system and pensions) is reaches 5.4 billion.
But Greece He has taken another step towards its creditors. A few weeks ago the negotiations had arrenato because lenders, considering unreachable for Greece the primary surplus target to 3.5% by 2018, he had asked other cuts or taxes under a safeguard clause. The Athens government had responded spades, because these mechanisms in Greece are unconstitutional.
At the end Tsipras chose to put aside differences and show greater collaboration forcing creditors to do their part. The reform package comes with an automatic adjustment mechanism that accounts for roughly 2% of GDP and which will come into force if the country fails to meet the target primary surplus of 3.5% . It is above all this mechanism, in addition to the increase in taxes, infuriate the people of Athens took to the streets to protest. According to the Greeks, with this clause, the Tsipras government has put a big mortgage on the future of the country. The prime minister, however, has tried to appease the spirits stressing that thanks to the reforms put in place, Greece will achieve the objectives without triggering the automatic mechanism. The intent of Tsipras is to convince the creditors, by relying on the IMF side, to give Athens the restructuring of the real burden of debt that weighs on the resumption of Greece.
Eurogroup and aid to Greece
the move Tsipras oblige creditors to show themselves equally available to Greece. So today is expected the green light to the aid necessary to Athens although it remains to decide the amount. On the table of negotiations of the last few weeks there were 5.7 billion euro of aid to Greece, but yesterday the news agency Bloomberg has released the contents of a Commission document that talks about 11 billion: 3.8 billion profits for Greece to pay off the arrears, 4.9 billion to cope with the cost of debt and 2.3 billion euro to be repaid to the ECB in July.
Eurogroup and debt in Athens
the real issue at the center of the Eurogroup is the debt of Greece. Arrived at 180% of GDP, the debt of Athens is now considered unsustainable, so that European creditors are also willing to discuss some intervention. The European institutions propose the restructuring of the interest due on the loans granted by Greece to Athens by European members . The hypothesis to be approved for 2018 would allow Greece to save 11% per year in spending on repaying the debt to the EU countries, a percentage that still does not solve the problems of Athens.
The proposal IMF, already anticipated in recent days, is, however, far more drastic: moratorium until 2040 and then stop at 1.5% interest. the fund has a much clearer position of the EU countries regarding Greece’s debt. According to an analysis of the sustainability of the debt of Athens, released yesterday, the fund expects the debt will be around 174% of GDP by 2020, to 167% by 2022, down to 160% by 2030, and up again, to reach the peak of 250% in 2060. based on these forecasts, the fund calls for an immediate and decisive action on the debt of Greece otherwise threatens to exit the bailout. Whether certain member states, led by Germany, can not accept the centrality of the Fund’s role as guarantor of the observance of agreements.
The government of Alexis Tsipras, despite internal and external difficulties to parliament has done its part, the IMF is ready to restructuring the Greek debt, now remains only to see the line that wish to adopt the European summits.
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