Greece: Sisyphean task

In the February issue of the magazine the Economist published an article dedicated to Greece. In General, it would seem that the standard for the magazine, but on the sidelines of the London establishment, he suddenly became one of the most talked about. This is due, apparently, to the fact that the erosion process in the European space is becoming more and more obvious and devastating.

British experts, the authors of the material with the first paragraph set the tone hopeless. They remember the hero of Greek mythology of Sisyphus, who was doomed forever to raise the stone up the hill, which immediately rolled down, and sarcastically noted that even the endless rolling a stone uphill seems more sensible than continued efforts to keep Greece in the Eurozone and prevent its default. It has been almost seven years since the country carried out the first package of anti-crisis measures and the second bailout package. As Greece continues to teeter on the verge of economic collapse.

Greece fell another source of trouble, and this time extremely serious. Suddenly there was an open quarrel between two of the main international lenders due to the strong disagreements of the assessment of the state debt of Greece. Against this background, aboutporsche conflict European stability mechanism (the Fund’s emergency financing) may withdraw from the scheduled repayment of the Greek bonds worth 6.3 billion euros (6.7 billion U.S. dollars) with maturity in July 2017. If these funds are not provided, then Greece will default. British analysts believe that sooner or later “Gracita” can not be avoided.

Yet not so long ago, before the February summit of Finance Ministers of the Eurozone countries cherished the hope that the parties still fail to agree, since it is in the common interests of all members of this Greek Saga. It seemed that the scenario will unfold, as has been repeated many times in the history of the Greek crisis, when certain decisions were made at the last minute, when it seemed that everything is over and there is no escape. However, apparently in the Euro area, indeed there is a serious tectonic shifts not yet obvious to the layman. So, this time, sadly, the disputes of creditors and policy prevented an agreement. Creditor relations have stalled.

At the same time, British experts remind that the Greek economy seemingly began slowly to recover — at least, so say the official statistics. On the surface at least the fact that, indeed, investors again started to Deposit money in banks, and it even allowed the European Central Bank (ECB) to reduce the volume of emergency lending. And after many years, the Greek GDP fell continuously, the figure began to show some periods of growth. And with all that unemployment remains very high, however, and the dynamics of this important indicator has inspired some hope. In recent years, the unemployment rate declined from a record 28% to 23%. In addition, Greece has easily achieved the objective of a primary budget surplus, which in 2016 exceeded 0.5% of GDP (excluding debt service).

British experts focus on the fact that Greece’s economy is still too weak and can not resist a new phase of fiscal austerity. According to analysts, almost half of Bank loans in the country are invalid, the investment in the country at a very low level of lending to small businesses, to really make it work, just not serious. British experts objectively say that the rules for doing business and the tax legislation does not just change constantly, but also is adverse, to be able to talk about some kind of stability, predictability, effective development of economy and overcoming the crisis. And it lasts for many years. British experts note that the primary budget surplus was achieved as a result of inefficient and unfair policy. The Greeks, as noted by the Economist, continue to demonstrate their literally filigree skill in evasion from payment of taxes: marginal tax rate has increased, and at the same time, a growing number of cases of tax exemption. In spite of the buzz around tax compliance, more than half of employed workers are still exempted from paying income tax. Despite the reduction in base budget expenditure, pensions remain too high. Retiring citizen of Greece gets the monthly payments in the amount of 81% of the average wage, and at the same time, the pension is resident successful and prosperous Germany is 43% of the average wage. Here’s the Greek arithmetic.

The Economist writes that against this background it is natural that a conflict is brewing between the two creditors. The participation of the IMF in financial assistance to Greece. Germany and the Netherlands do not trust the European Commission in the management of financial assistance to Greece: both countries have put forward as a condition of its assistance, the IMF participation in this process. The IMF to sponsor Greece now refuses. The IMF believe that the goal is to achieve a primary budget surplus at 3.5% of GDP can push the Greek economy into recession. In their view, it is desirable to suspend the measures of brutal austerity and insist on the introduction of a more reasonable tax measures that are not as harmful to the economy. However, the European countries believe that the IMF estimates the prospects for Greece too dark.

Experts note that there are other stumbling blocks. According to the internal rules of the IMF, the organization is unable to provide financial assistance to the state, having no confidence that such assistance will create a “viable” debt, which will steadily decline and easily funded. In order for the plan to rescue the Greek economy was approved by the Eurozone partners agreed to restructure its debt. In this the British see a serious threat, because a public promise to alleviate the debt burden of the Greeks dangerous from the political point of view in a number of European States: it will lead to the growing popularity of anti-European parties ahead of the elections in the Netherlands, France and Germany. The head of the “European stability mechanism” Klaus Regling (Klaus Regling) is sure to maintain the Greek economy to the Eurozone countries enough to show visible solidarity with her (“European stability mechanism” owns two-thirds of Greek debt, most of which are denominated in bonds with long maturities and low interest rates). This arguable appeal most analysts looks skeptical, objectively believing that Greece is unlikely to help.

And here the British Economist experts say, it is a farce. And explain their harsh assessments. Most of the Greek bonds, the repayment period which begins in July, are in the possession of the European stability mechanism. Thus, essentially, the creditors argue among themselves about whether to transfer funds from one Institute to another in the Eurozone. In this situation, to wrestle with compromise is not necessary. Greece will have to adopt a law on the reduction of state pensions and reductions from income tax after 2018. European lenders will need to assume a commitment to Finance Greek debt at today’s low interest rates. But the IMF will have to agree to the adoption of higher than desirable, target of a budget surplus for this country.

The experts believe that even under these conditions, the situation could develop negatively. Prime Minister Alexis Tsipras can expect that the IMF, under US pressure, led by President Donald trump refuses leading role in the process of emergency funding for Greece. The resulting uncertainty ultimately undermine a shaky economy. And everything else, you need to keep in mind the obvious fact of growing political instability in Germany and France, which does not contribute to the consensus in the European family. The British believe that the protraction of the conflict runs the risk of completely derail the Greek economy. And correctly point out that the fall of Greece no one will win.