`Shuffling Austerity Proposals, Greece and Creditors Seek Agreement - Olive Oil Times

Shuffling Austerity Proposals, Greece and Creditors Seek Agreement

Jul. 10, 2015
Lisa Radinovsky

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During last Sunday’s ref­er­en­dum, Greek vot­ers rejected a recent pro­posal for new aus­ter­ity mea­sures in exchange for loan money, with more than 61 per­cent vot­ing against the cred­i­tors’ pro­posal. However, late last night the gov­ern­ment of Prime Minister Alexis Tsipras sub­mit­ted a new plan that many con­sider quite sim­i­lar to the pro­posal rejected last week­end. At press time, we are await­ing the out­come of today’s Greek par­lia­men­tary vote on that pro­posal, as well as the response of Greece’s cred­i­tors. Meetings planned for this week­end could deter­mine whether Greece will remain in the euro­zone.

In spite of a lack of clar­ity about the impli­ca­tions of a No vote — which some argued meant no more aus­ter­ity and oth­ers claimed meant an end to euro­zone mem­ber­ship — an unex­pect­edly large per­cent­age of vot­ers acceded to the prime minister’s request for a No to cred­i­tors last week­end, to the dis­may of many European lead­ers.

In response, the European Central Bank not only refused to increase the lim­its on the emer­gency fund­ing that has been prop­ping up Greek banks, but also, accord­ing to Bloomberg, imposed stricter terms for Greek Emergency Liquidity Assistance loans. This made it impos­si­ble for banks closed since June 29 to reopen. Capital con­trols remain in effect, with indi­vid­u­als strug­gling to get by on the €60 per account per day they can with­draw from ATMs, and busi­nesses mak­ing do with online trans­fers within Greece or seek­ing per­mis­sion for trans­fers abroad for imports nec­es­sary to con­tinue func­tion­ing. Some are man­ag­ing bet­ter than oth­ers.

Although Oxford-edu­cated Euclid Tsakalotos replaced the uncon­ven­tional, con­tro­ver­sial Yanis Varoufakis as Greece’s finance min­is­ter on Monday in a con­ces­sion to some nego­tia­tors’ pref­er­ences, Tuesday’s meet­ings of euro­zone lead­ers led to an ulti­ma­tum instead of pro­duc­tive results: Greece must pro­duce an accept­able, detailed pro­posal lead­ing to an agree­ment with lenders by Sunday, or European lead­ers will focus on how to deal with a Grexit — the Greek exit from the euro­zone that has seemed more likely this week than ever before — rather than on pro­vid­ing Greece with addi­tional loans.

Chania, Crete (Lisa Radinovsky)

On Wednesday, the Greek gov­ern­ment responded with a brief, con­cil­ia­tory let­ter and a request for a new loan. That was fol­lowed by a more detailed pro­posal to Eurogroup head Jeroen Dijsselbloem for dis­tri­b­u­tion to the European Commission, the International Monetary Fund, and the European Central Bank late last night.

Last night, Greece offered to increase var­i­ous taxes, includ­ing sales taxes (even on islands where ship­ping costs increase prices), cut spend­ing (for exam­ple on pen­sions and mil­i­tary expen­di­tures), reform the pen­sion sys­tem (rais­ing the retire­ment age to 67 by 2022), improve pub­lic admin­is­tra­tion, intro­duce labor and prod­uct mar­ket reg­u­la­tions, con­tinue with the pri­va­ti­za­tion of state-owned assets, and fight cor­rup­tion, smug­gling, and tax eva­sion. Farmers would lose sub­si­dies for the excise on diesel oil as well as pref­er­en­tial tax treat­ment (the lat­ter by 2017).


These changes are expected to pro­duce €13 bil­lion. In return for these aus­ter­ity mea­sures, Greece is ask­ing for a new loan of €53.5 bil­lion from the eurozone’s bailout fund, a recon­sid­er­a­tion of pri­mary sur­plus tar­gets, and debt relief. Donald Tusk, the pres­i­dent of the European Council, joined the International Monetary Fund’s Christine Lagarde and American Treasury Secretary Jacob Lew in call­ing for atten­tion to Greece’s debt sus­tain­abil­ity.

A num­ber of rad­i­cal mem­bers of SYRIZA are expected to oppose this pro­posal in today’s Greek par­lia­men­tary vote, but many mem­bers of the oppo­si­tion are likely to sup­port it. The country’s main cred­i­tors’ are also con­duct­ing an ini­tial assess­ment of the plan today.

Tomorrow, euro­zone finance min­is­ters will meet to dis­cuss the Greek pro­posal as well as Greece’s need for debt relief. On Sunday, an emer­gency meet­ing of all 28 European Union lead­ers will deter­mine whether Greece and its lenders can come to the agree­ment needed to keep the cur­rency union together, unless finance min­is­ters work out a plan on Saturday that makes another meet­ing unnec­es­sary.

Lisa Radinovsky for Olive Oil Times

This week, as talk of plans to deal with a poten­tial Grexit has become more wide­spread, there has also been more dis­cus­sion of Greece’s cru­cial geopo­lit­i­cal posi­tion on the edge of the Mediterranean Sea, as a bridge between the East and the West, a NATO mem­ber and a European Union mem­ber some­times pulled toward Russia and China, some­times wedged between the rest of Europe and thou­sands of migrants and refugees flee­ing trou­ble spots such as Syria. Concern about the pos­si­ble break­down of a valu­able ally has prompted coun­tries such as France and the USA to push for a solu­tion that could keep Greece in the euro­zone and the European Union.

Meanwhile, busi­nesses impacted by cap­i­tal con­trols are look­ing for ways to keep going. While cer­tain American and Canadian busi­nesses depen­dent on imports from Greece have not received some expected deliv­er­ies, lead­ing them to fear short­ages or price increases for such prod­ucts as olive oil and feta cheese, accord­ing to CNBC, oth­ers have been receiv­ing goods with­out a viable way to pay for them while Greek banks are closed. Some Greek com­pa­nies are request­ing that pay­ments be wired to accounts they have estab­lished out­side of Greece.

Reuters indi­cates that Greek olive farm­ers are request­ing cash pay­ments so they can pur­chase nec­es­sary sup­plies and feel secure about their sav­ings, but pro­duc­ers do not have the cash to pay them. Many Greeks are afraid that money in the bank is not safe, espe­cially now that Greece is tot­ter­ing closer to a pos­si­ble exit from the euro­zone, keep­ing in mind that Cypriots’ bank accounts were bailed in” two years ago, with a per­cent­age of wealthy depos­i­tors’ sav­ings con­fis­cated and con­verted into bank equity.

However, olive oil pro­duc­ers do not have enough cash to pay sup­pli­ers who pro­vide €100,000 worth of oil, as Gaea C.E.O. Aris Kefalogiannis told Reuters. Paying sup­pli­ers and trans­porters via online bank­ing and checks that can be cashed later, Gaea has enough sup­plies to last through the mid­dle of next month. On the other hand, about half of Greek olive farms are small-scale enter­prises run by fam­i­lies with lim­ited means, rather than well-pre­pared large busi­nesses with ample resources.

Both in Greece and North America, larger com­pa­nies have been stock­ing up on sup­plies, so that some importers have plenty for now, and Greek olive oil exporters such as Terra Creta can con­tinue sup­ply­ing cus­tomers in Europe and the United States with no prob­lem for the next two or three months. In fact, mar­ket­ing man­ager Emmanouil Karpadakis told Olive Oil Times that Terra Creta just received an order from a new European cus­tomer this week. Aware that some other com­pa­nies have trou­ble obtain­ing raw mate­ri­als and arrang­ing for trans­porta­tion by truck­ers who do not wish to make one-way export trips and return empty due to a lack of money for imports, Karpadakis points out that the sit­u­a­tion is very fluid now, with many changes pos­si­ble over the week­end as lead­ers meet to decide Greece’s fate.

There have been rumors of empty super­mar­ket shelves some­where in Athens, but the shelves in Chania, Crete, are full. Here, olives, grapes, and figs are grow­ing in sun that brings out the sweet­ness of the ole­an­der, and there is still such abun­dance that lemons are lit­er­ally falling off the trees. On Tuesday, The Guardian pub­lished an arti­cle titled Want to help Greece? Go there on hol­i­day.” Many tourists who are here right now agree that that’s an excel­lent idea. With good prices, a clear blue sea and sky, attrac­tions and relax­ation, vis­i­tors are hav­ing a won­der­ful time. This week­end will show what the future holds for Greeks.

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