`Third Loan Package Reluctantly Approved by Greek Parliament - Olive Oil Times

Third Loan Package Reluctantly Approved by Greek Parliament

Aug. 16, 2015
Lisa Radinovsky

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Late Friday night in Europe, Eurogroup lead­ers announced agree­ment in prin­ci­ple over Tuesday’s mem­o­ran­dum of under­stand­ing between Greece and its lenders, the European Commission (EC), the European Central Bank (ECB), the European Stability Mechanism, and the International Monetary Fund (IMF). Friday morn­ing, after an all-night debate, 222 out of 300 mem­bers of the Greek Parliament (MPs) reluc­tantly approved numer­ous addi­tional aus­ter­ity mea­sures and reforms required in return for up to €86 bil­lion in new loans. The new loan pro­gram still requires the approval of sev­eral more national par­lia­ments, includ­ing Germany’s, but that is expected by Wednesday evening, which would allow the first part of a €26-bil­lion tranche to be dis­bursed on Thursday.

There is lim­ited sat­is­fac­tion with the agree­ment, aside from EC and Eurogroup lead­ers. Many focus on its short­com­ings: every­one from the Greek prime min­is­ter and his coali­tion gov­ern­ment to the oppo­si­tion, aver­age Greeks, an inter­na­tional group of econ­o­mists who do not believe it will help solve Greece’s prob­lems, and many Germans who do not want to com­mit to new loans to Greece. Still, with no one offer­ing a more viable plan with the offi­cial sanc­tion of Greece’s cred­i­tors, its banks in dire need of recap­i­tal­iza­tion even after seven weeks of cap­i­tal con­trols, and over €3 bil­lion due to the ECB on August 20, many argue that Greece had no choice but to agree to the 57 mea­sures in the 400 pages of leg­is­la­tion passed Friday (in addi­tion to over 900 pages’ worth in recent weeks).

The agree­ment is based on the assump­tion that the Greek econ­omy will con­tinue to con­tract this year and next, but will return to 2.7 per­cent growth in 2017 — a fore­cast some econ­o­mists call unre­al­is­tic. The IMF insists that debt relief be offered to make Greece’s debt sus­tain­able, as it cur­rently is not, at 177 per­cent of GDP last year; it will not agree to par­tic­i­pate fully in the new pro­gram unless debt relief is pro­vided. Germany both insists on IMF par­tic­i­pa­tion and resists debt relief, at least before the first review of Greece’s com­pli­ance with the new pro­gram. However, Eurogroup chair Jeroen Dijsselbloem is opti­mistic that a com­pro­mise will be reached so that the IMF can begin to par­tic­i­pate fully in October.

The agree­ment between Greece and its cred­i­tors fea­tures many new aus­ter­ity mea­sures, includ­ing new and higher taxes (for exam­ple, on pri­vate schools, pur­chases on the Greek islands, ship­ping com­pa­nies, diesel fuel, and farm­ers), an increase in the retire­ment age and a decrease in pen­sions, and other lim­i­ta­tions on gov­ern­ment spend­ing. The agree­ment also requires many major reforms, includ­ing a more effec­tive fight against cor­rup­tion, speeded up pri­va­ti­za­tion of major assets and a spe­cial fund for earn­ings, dereg­u­la­tion of the energy mar­ket, an end to restric­tions on closed” pro­fes­sions, mar­ket lib­er­al­iza­tions (regard­ing bread, milk, non­pre­scrip­tion drugs, and phar­ma­cies, among oth­ers), and changes in labor laws, pub­lic admin­is­tra­tion, the judi­cial sys­tem, wel­fare, health care, bank­ing, fore­clo­sure law, and tax col­lec­tion.

Greece must attain cred­i­tors’ approval of all mea­sures that could affect any­thing in the agree­ment, includ­ing bank­ing reg­u­la­tions, and sub­mit to quar­terly progress reviews and time­lines for new actions pre­sented by cred­i­tors, who can refuse addi­tional dis­burse­ments if they are dis­sat­is­fied with Greeks’ progress. Greece is sup­posed to achieve a pri­mary sur­plus of 0.25, 0.5, 1.75 and 3.5 per­cent between 2015 and 2018.


During Friday’s vote on the agree­ment with lenders, Prime Minister Alexis Tsipras lost the sup­port of about a third of his SYRIZA party’s MPs — even more than in the last con­tentious vote. This brought his sup­port level below the con­sti­tu­tion­ally man­dated min­i­mum of 120 MPs from his gov­ern­ing coali­tion of SYRIZA and the right-wing nation­al­ist party Independent Greeks (ANEL). He is report­edly plan­ning to call for a vote of con­fi­dence in par­lia­ment after the August 20 ECB repay­ment date. Especially if he loses that vote — as he may, lack­ing the sup­port of oppo­si­tion party mem­bers who voted for Friday’s agree­ment — new national elec­tions are likely, pos­si­bly as early as next month.

The name of the major part­ner in the gov­ern­ing coali­tion, SYRIZA, is an acronym for Coalition of the Radical Left,” but those terms have recently come into ques­tion: the coali­tion has been unrav­el­ing in a debate over whether rad­i­cal left­ists can sup­port an agree­ment that includes so many aus­ter­ity mea­sures and reforms likely to neg­a­tively impact work­ing peo­ple and pen­sion­ers. In two acts of open rebel­lion by SYRIZA MPs, speaker of Parliament Zoe Konstantopoulou delayed the begin­ning of the debate and vote on the lat­est agree­ment, and for­mer Energy Minister Panayiotis Lafazanis, the head of SYRIZA’s Left Platform, signed a state­ment, along with 11 other SYRIZA mem­bers, about plans to cre­ate a new anti-bailout move­ment.

As Nikos Konstandaras empha­sizes in New Greek Bailout, Same Old Woes,” the cap­i­tal con­trols imposed after Prime Minister Tsipras announced a ref­er­en­dum at the end of June have cre­ated seri­ous dif­fi­cul­ties for busi­nesses, espe­cially those depen­dent on imported mate­ri­als, who man­aged to import only half as much in July as they did a year before. Small man­u­fac­tur­ers and busi­ness­peo­ple lost about half their income. According to Bloomberg, cap­i­tal con­trols reduced con­sump­tion by half, and they are expected to cost the Greek econ­omy 4 to 10 bil­lion euros this year. Since banks reopened July 20, busi­nesses have been required to request per­mis­sion for inter­na­tional money trans­fers, apply­ing to banks for those under €150,000, and to a spe­cial Finance Ministry com­mit­tee for higher amounts.

Now farm­ers are con­cerned that many of the mea­sures approved by par­lia­ment on Friday will make it harder for them to sur­vive finan­cially. Farmer, pro­ducer, and exporter Stratis Camatsos, founder of εvo3 in Lesbos, told Olive Oil Times, I believe the mea­sures being dis­cussed will be harm­ful for the olive oil indus­try, espe­cially farm­ers and pro­duc­ers,” since taxes on farm­ers will increase from 13 per­cent to 26 per­cent, while the VAT for agri­cul­tural sup­plies will increase to 23 per­cent from 13 per­cent, and a fuel tax ben­e­fit will be lost.” Camatsos points out that this is espe­cially hard on small-scale Greek olive farm­ers. He con­tin­ues, This will also have a trickle-down effect on exporters as costs will increase, exporters will have to make a deci­sion to either knock-on the costs to the con­sumer or bear the costs themselves…reducing razor thin profit mar­gins even more. I believe that most exporters will bear the costs them­selves as they can­not afford to not be com­pet­i­tive in the mar­ket — but we will see more com­pa­nies and brands slowly exit­ing the mar­ket as they will not be able to sur­vive.”

Camatsos does not com­pletely dis­agree with those who argue that the new agree­ment has a num­ber of poten­tial ben­e­fits. He admits, accept­ing the bailout agree­ment as a whole will help sta­bi­lize the indus­try and Greece’s econ­omy and re-estab­lish the trust fac­tor between the olive oil indus­try and cus­tomers which is so del­i­cate yet so impor­tant.” Argyris Bouras, an exporter and owner of Eleones Hellenic Olive Products, told Olive Oil Times he is opti­mistic that in the long run the cur­rent devel­op­ments will help the olive oil indus­try” since he thinks many unem­ployed Greeks will con­sider olive oil an obvi­ous way to turn, because every­body in this coun­try knows some­one or has a rel­a­tive that pro­duces olives or olive oil.” He expects some of those peo­ple to bring sub­stan­tial expe­ri­ence in mar­ket­ing or other trades” to the busi­ness, as well as a will­ing­ness to take risks, so that those who suc­ceed could bring some­thing new to the Greek olive oil world. In addi­tion, Bouras believes that the new taxes on farm­ers will reduce fraud­u­lent claims of eli­gi­bil­ity for farm­ers’ ben­e­fits, fraud­u­lent use of diesel fuel intended for rural use, and under-the-table tax-evad­ing trans­ac­tions, leav­ing a fairer play­ing field for those who play by the book and pay all their taxes. He believes that with wise deci­sions and good man­age­ment, farm­ers will be able to sur­vive.

Bouras reminds for­eign­ers that Greece is a par­adise for high qual­ity unique prod­ucts,” includ­ing some hid­den trea­sures that require dis­cov­ery. Camatsos urges any­one con­sid­er­ing buy­ing Greek olive oil, Buy and sup­port it. You can be sure that if you are buy­ing Greek olive oil, you are truly sup­port­ing the Greek econ­omy.”

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