`Greece Accepts More Austerity to Avoid Chaotic Grexit - Olive Oil Times

Greece Accepts More Austerity to Avoid Chaotic Grexit

Jul. 18, 2015
Lisa Radinovsky

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Early Thursday morn­ing, with banks closed, cap­i­tal con­trols in effect, ATMs dis­pens­ing just 60 euros per account each day, and the Greek gov­ern­ment and banks run­ning out of money, the Greek par­lia­ment approved more severe aus­ter­ity mea­sures and reforms than vot­ers had rejected in the July 5 ref­er­en­dum, paving the way for nego­ti­a­tions on a third pack­age of bailout loans. Prime Minister Alexis Tsipras said Greece had no choice but to accept the mea­sures, with the econ­omy nearly at a stand­still, a 3.5 bil­lion euro loan pay­ment due to the European Central Bank (ECB) on Monday, 2 bil­lion over­due to the International Monetary Fund (IMF), and Greece on the verge of a chaotic exit from the Eurozone unless it received imme­di­ate finan­cial help.

Last week­end, the Greek Parliament passed Tsipras’s pro­posal for reform and aus­ter­ity mea­sures, which closely resem­bled an ear­lier European pro­posal that Greek vot­ers had rejected in the ref­er­en­dum. However, the new Greek pro­posal was dis­missed as too lit­tle too late dur­ing incon­clu­sive meet­ings of European finance min­is­ters last Saturday and Sunday. A sub­se­quent sev­en­teen-hour overnight meet­ing of Eurozone lead­ers ended Monday morn­ing with what European Council President Donald Tusk called an Agreekment” — a pre­lim­i­nary agree­ment on min­i­mum con­di­tions Greece must meet in order to begin nego­ti­a­tions on a third bailout pro­gram. This is the agree­ment the Greek par­lia­ment approved Thursday.

The July 13 text of the Euro Summit Statement on Greece, or Agreekment, insists that Greece request help from the IMF as well as the European Stability Mechanism (ESM) and imme­di­ately begin to leg­is­late changes includ­ing tax increases, pen­sion reforms, the inde­pen­dence of the sta­tis­tics bureau, and quasi-auto­matic spend­ing cuts” if pri­mary sur­plus tar­gets are not met. Next week, Greeks must pro­pose admin­is­tra­tive reforms and approve major changes to the civil jus­tice sys­tem.

By October, Greeks are required to leg­is­late pen­sion reforms; later, they must under­take prod­uct, energy, and labor mar­ket reforms, strengthen the finan­cial sec­tor, improve the pri­va­ti­za­tion pro­gram, and trans­fer valu­able Greek assets” to an inde­pen­dent fund” that will mon­e­tize the assets” for bank recap­i­tal­iza­tion, loan repay­ment, decreas­ing the debt to GDP ratio, and invest­ment. In a con­ces­sion to the Greek prime min­is­ter, this fund will be in Greece, man­aged by Greek author­i­ties but under the super­vi­sion of the rel­e­vant European Institutions,” with a quar­ter of the amount to be used for invest­ment in Greece.

The Euro Summit Statement also requires the Greek gov­ern­ment to con­sult and agree with the Institutions on all draft leg­is­la­tion in rel­e­vant areas,” request tech­ni­cal assis­tance with imple­men­ta­tion from the cred­i­tor Institutions and mem­ber states, and repeal or com­pen­sate for laws that back­tracked on pre­vi­ous agree­ments.


In two more con­ces­sions to Prime Minister Tsipras, the European Commission will pro­vide up to 35 bil­lion euros to fund invest­ment and eco­nomic activ­ity” to help sup­port growth and job cre­ation in Greece” over the next three to five years; in addi­tion, “[s]erious con­cerns about the sus­tain­abil­ity of the Greek debt” were acknowl­edged. “[P]ossible longer grace and repay­ment peri­ods,” but not nom­i­nal hair­cuts on the debt,” will be dis­cussed.

The Euro Summit iden­ti­fied 82 to 86 bil­lion euros in financ­ing needs – far more than the 53.5 bil­lion Greece had asked for. The IMF’s lat­est report on the unsus­tain­able size of Greece’s debt called into ques­tion hopes for a suc­cess­ful new bailout deal between Greece and its cred­i­tors, since the IMF finds Greece in need of even more debt relief now that three weeks of bank clo­sures and cap­i­tal con­trols pushed it deeper into eco­nomic depres­sion. Many European coun­tries, includ­ing Germany, have resisted IMF calls for sub­stan­tial debt relief for Greece, but IMF reg­u­la­tions pro­hibit it from loan­ing money to a coun­try with unsus­tain­able debt. With the cho­rus of voices in sup­port of debt relief grow­ing to include the ECB’s chief, Mario Draghi, as well as France and the USA, it looks increas­ingly likely that this issue could be resolved in Greece’s favor.

The German gov­ern­ment and its allies claim that the aus­ter­ity mea­sures and reforms in the Euro Summit Statement are nec­es­sary to bring Greece in line with Eurozone rules, inspire trust in its gov­ern­ment, and put it on a path to recov­ery, and most peo­ple con­cerned about Greece hope the mea­sures will help bring the coun­try sta­bil­ity. However, there has been a great deal of dis­ap­point­ment, protest, and anger from many sources: the left­ist SYRIZA’s mem­bers and sup­port­ers, their right-wing nation­al­ist ANEL coali­tion part­ners, Greek com­mu­nists, the neo-Nazi Golden Dawn party, Nobel Prize win­ning econ­o­mists, and numer­ous other com­men­ta­tors both in Greece and else­where.

For exam­ple, in The New Yorker, John Cassidy called the text from Monday morning’s Euro Summit an agree­ment that is per­haps the most intru­sive and demand­ing con­tract between an advanced nation and its cred­i­tors since the Second World War.” Many promi­nent observers argue that it is unclear whether the Greek econ­omy can recover and grow with addi­tional reces­sion­ary aus­ter­ity mea­sures such as tax increases and bud­get cuts after five years of aus­ter­ity have left Greece in worse shape than the U. S. dur­ing its Great Depression.

People like Dimitris Doukas, who runs a com­puter soft­ware busi­ness in Athens, are more opti­mistic, believ­ing Greece has to undergo all these nec­es­sary reforms to build a solid state and a com­pet­i­tive econ­omy.” He agrees with EC President Donald Tusk that this agree­ment could help avert an angry union of far left and far right groups opposed to the Eurozone.

On Wednesday, phar­ma­cists and pub­lic sec­tor work­ers went on strike, and approx­i­mately 12,500 peo­ple peace­fully protested against the new aus­ter­ity mea­sures in what the AP called the largest protests against the gov­ern­ment since January elec­tions. During later clashes in cen­tral Athens between hun­dreds of hooded pro­tes­tors throw­ing rocks and petrol bombs, and riot police with tear gas, those arrested were for­eign­ers, not Greeks.

With thirty two SYRIZA mem­bers of par­lia­ment (MPs) vot­ing against the agree­ment and six abstain­ing, the prime min­is­ter lost his coali­tion government’s major­ity in the 300-seat par­lia­ment but did not fall below the level of 120 MPs which the Greek con­sti­tu­tion requires a gov­ern­ment to have. The prime min­is­ter reshuf­fled his cab­i­net yes­ter­day, remov­ing those who voted against the agree­ment and replac­ing them with other mem­bers of his SYRIZA-ANEL coali­tion. He will need con­tin­u­ing sup­port from the pro-European cen­trist oppo­si­tion par­ties who sup­ported the agree­ment with cred­i­tors.

After the Greek par­lia­men­tary vote, European finance min­is­ters approved a 7 bil­lion-euro bridge loan to Greece, and the ECB increased emer­gency fund­ing to Greek banks by 900 mil­lion euros for the first time since banks closed on June 29, avert­ing fears that ATMs would run dry. Olive News reports that banks are expected to open on Monday, the 60 euro per day with­drawal limit could be replaced with a 300 euro per week limit, and some cap­i­tal con­trols might be relaxed for spe­cific pur­poses, although none of this has yet been con­firmed. Agrocapital indi­cates that the General Accounting Office has already had a com­mit­tee work­ing around the clock for some time now, to enable mon­e­tary trans­ac­tions involv­ing deliv­ery of food, med­i­cines, and per­ish­able prod­ucts (first pri­or­ity) as well as those pro­vid­ing raw mate­ri­als for indus­try (next pri­or­ity).

Dr. Nikos Michelakis, Scientific Advisor of SEDIK, the Association of Cretan Olive Municipalities, told the Olive Oil Times that bot­tled olive oil trans­ac­tions have been able to con­tinue as usual, since pay­ment typ­i­cally occurs after a month or two. However, bulk oil sales have nearly stopped, since bulk sell­ers want to be paid imme­di­ately, and cash is not avail­able. A lim­ited num­ber of pro­duc­ers have sent some bulk ship­ments to Italian com­pa­nies with whom they’ve had a good work­ing rela­tion­ship for many years, trust­ing them to pay later.

Michelakis reports that the gov­ern­ment gen­er­ally pays half the cost of the attractant/insecticide spray bait used to con­trol the olive fly pop­u­la­tion and pre­vent the fly from spoil­ing the fruit, with farm­ers cov­er­ing the other half, but this year farm­ers and agri­cul­tural coop­er­a­tives are pay­ing more because the gov­ern­ment has not so far con­tributed its usual share. Since farm­ers know how impor­tant the spray­ing is for the qual­ity of their oil, they are pay­ing to ensure it is done on sched­ule, hop­ing for even­tual reim­burse­ment.

Some Greek olive oil pro­duc­ers con­tinue to carry on quite suc­cess­fully. For exam­ple, Gaea recently announced the launch­ing of a new olive oil and olive pack line, and Greek olive oils won numer­ous awards at the Terraolivo Extra Virgin Olive Oil International Competition in Jerusalem last month, which tested more than 500 sam­ples from 17 coun­tries. Greek olive oils won two of the Terraolivo 2015 Special Awards for the high­est scor­ing olive oils: Best Flavored (Oleoastron Koroneiki from Sakellaropoulos Organic Farming Armonia) and International Champion (Eleon Extra Virgin Olive Oil from Mediterranean Natural Foods SA).

Such high-level recog­ni­tion should remind con­sumers that many Greeks con­tinue to excel even in the face of great dif­fi­cul­ties. The qual­ity of Greek olive oil is not being jeop­ar­dized by the present polit­i­cal and eco­nomic cri­sis, and there is now hope that the cri­sis is being resolved.

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