6 Sep 2016

Another Greek Standoff: Europe Refuses Athens' Bailout Payment Until Reforms Are Implemented

By Tyler Durden: One of the longest running, recurring jokes in European high finance is that insolvent Greece pretends to reform (it has been mostly delaying and extending the mandated budget cuts, many of which involve unpopular mass terminations of government workers), while Europe pretends to send it money (most of the cash goes to various creditors, most notably the ECB and the IMF). To be sure, one of the reasons why last year's Greek bailout was rushed - and passed - is that much as Varoufakis had anticipated, Europe had no choice but to "bail" Greece out at any cost, since that meant avoiding an impairment on ECB debt, which may have led to domino-effect fallout. It also explained why the funds were promptly wired over to Athens, just so Athens could then quickly turn around and wire it all right back.

This particular farce, however, is now once again in jeopardy, because with no imminent maturities or coupons owed to the Troika of institutions who can not be defaulted upon, Europe has decided to play hardball, and as Reuters reports overnight, citing Handelsblatt, Greece is once again facing a bailout standoff with its creditors as eurozone countries have refused to release additional funds to Athens this month.
After approving a first tranche of €10.3bn this spring, of which €7.5bn has so far been released, the 19 finance ministers are due to disburse the rest this month but are said withhold payment for the rest of the year. A further finance ministers’ meeting is planned for 21 September.
Athens has again managed to infuriate its Euro peers because it has so far passed just two of the 15 reforms that were a condition of last year’s rescue package; additionally Greece has delayed privatizing state assets, adding to the frustrations of eurozone finance ministers who will discuss progress on Friday.
Further funds are due to be disbursed under the European Stability Mechanism (ESM), which will give Greece up to €86bn (£72bn) of financial assistance by 2018 in return for reforms. The debt relief is due to be granted in tranches, including short-term measures to extend Greece's debt, with a further reduction due after 2018 including interest deferrals and interest rate caps.
The diplomats said the Eurogroup will only discuss a progress report on Greece at the upcoming FinMin meeting.
The gridlock report came after the head of the ESM said at the weekend that Greece should be able to secure at least short-term debt relief measures but only if it began implementing the remaining reforms. “We have been working on these measures and they could be implemented very soon,” Klaus Regling told Greek newspaper Ta Nea.
Klaus Regling, head of the European Stability Mechanism.
Cited by The Guardian, Regling said that “We hope the government implements remaining prior actions very soon." EU officials are demanding that Athens pushes on with plans to set up a new privatisation fund, sell specific state assets, and reform its civil service.
With or without new cash, however, the endless Greek depression continues: eight years into the country’s financial crisis, life has become harder for most Greeks. Unemployment is the highest in Europe and one survey in June found that extreme poverty had risen from 2.2% of the population in 2009 to 15% – a total of 1.6 million people – last year.
Just as bad, longer-term relief to help the country reduce its crippling debt of 176% of GDP will not follow until after the end of the bailout, Regling said. However, the International Monetary Fund – which is not participating in Greece’s third rescue programme – has insisted that long-term relief including debt forgiveness must happen sooner.
So while the last thing Europe needs right now is another Greek crisis, one may be brewing: Greek media said Athens faced a monumental task to push through the highly unpopular reforms and secure the last “desperately needed” €2.8bn of funding, followed by the start of long-promised debt restructuring talks by the end of the year.  The government is counting on the talks as a consolation prize to offset a hugely unpopular austerity package including spending cuts, tax hikes and pension reductions required by the bailout, the newspaper Kathimerini said.
It added that the noises emanating from Brussels “speak volumes about eurozone countries’ confidence levels” in the Greek government, while hampering the ability of the prime minister, Alexis Tsipras, to announce even modest measures to help people worst affected by Greece’s prolonged economic crisis.
But maybe the worst problem is that Greek society itself is rapidly devolving into a state of chaos. As Kathimerini reports, a series of almost daily attacks launched by self-styled anarchists against law enforcement units stationed outside the National Technical University of Athens and in the Exarchia district have placed the Greek police on full alert, bracing for the possibility of an incident-filled fall – starting with demonstrations being planned in Thessaloniki on the occasion of the International Trade Fair of Thessaloniki.
“Every two days around 15-200 kids in hoods launch attacks around the NTUA, hurling firebombs at riot police units and setting fire to dumpsters,” a police source told Kathimerini.
A recent front-page headline in a nationwide anarchist newspaper is telling of the intentions of anti-establishment groups in coming months. In the story, titled “Everyone hates the police,” readers are urged to clench their fist and smile as “we are entering a period of troubles.”
“The orders we get from the operations center is to do nothing and back down when the youngsters initiate their attacks,” the police source said, adding that the only time police are told to detain people and make arrests is after the situation gets out of hand, for example, when a bus is set on fire or a road is blocked by riots.
Some could say that Greece has almost caught up with the US when it comes to cop-citizen relations, while critics would add that this has resulted in yet more audacious attacks by young groups of hooded anarchists.
It would be sad if by the time Europe finally figures out that keeping Athens in its clutches is literally crushing Greek society, there is no longer a society to speak of.
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