On Wednesday, Greek yields surged when it emerged that diplomatic relations between Greece and the Eurogroup had broken down once again, after European finance ministers suspended negotiations over granting short-term debt relief to Greece as a result of pledges by embattled Greek PM Tsipras unexpectedly said he would grant low-income pensioners a pre-Christmas payoff by spending €600 million to the nation’s 1 million low-income pensioners, to replace a Christmas bonus scrapped by the Greek bailout supervisors.
Assuming that the threat of not granting Greece some theoretical debt concession (which would reduce Greek debt by 20% some time in 2060) would be sufficient, the bureaucrats gave the Greek government a few hours to come to their senses and to eliminate the promise to pensioners.
That did not happen and instead on Thursday, Greek lawmakers backed the decision to allocate €617 million – a surplus from savings – in a bonus to pensioners as Greece snubbed its international lenders and legislated plans to give pensioners a one-off Christmas bonus despite the clear warning from creditors in what has become the latest standoff over the country’s third bailout.
“(Greek) people have to see that sacrifices of now six, seven years are at last starting to pay off,” said Greek Finance Minister Euclid Tsakalotos in a visit to Brussels.
But jaded by those sacrifices and almost a dozen pension cuts which has pushed almost half of the country’s elderly into poverty, about 5,000 pensioners marched peacefully through the streets of Athens on Thursday night. “We came here to send a message. No more!,” protesting pensioner Efstratios Bozos told Reuters.
“Our pensions have become restaurant tips.” Well, yes, and your economy remains in a depression. But at least you have your Euro, and following the summer of 2015 when Greece was this close to obtaining its independence from the clutches of Brussels, yet choked in the last minute, the international community no longer cares about the Greek plight any more.
Here’s the even worse news: as long as Greece remains part of the Eurozone, it will only keep getting worse. By now we would think that the Greeks would have gotten it; they haven’t, which is why the pain must go on.
Still, there was some good news.
As Reuters reports, the move by Tsipras “infuriated” officials in Germany and several other member states, but French President Francois Hollande and his finance minister came to Tsipras’s defense on Thursday in a sign of European divisions over how to handle Greece.Arriving at an EU summit in Brussels,
Hollande said it was wrong to prevent Greece from taking “sovereign decisions” and suggested that euro zone ministers had not granted Athens sufficient debt relief. Other socialists chimed in: Finance minister Michel Sapin, speaking in Paris, expressed understanding for Tsipras’s decision to spend 617 million euros on pensioners because Greece had exceeded its 2016 primary surplus target.
How generous of the French president with the lowest approval rating in history: allowing Europe’s vassal state of Greece make its own “sovereign decisions.”
On the other hand, one can see why Europe’s unelected bureaucrats would be angry with Greece, which is now their property: Greece unveiled the pensioner payout and a separate decision to keep lower value-added tax on some islands without consulting euro zone governments, which now own most of Greece’s public debt, although the bailout agreement says it must. The consultation would have given lenders time to assess the fiscal and economic consequences of the two Greek decisions for the bailout reform program and targets. Germany has asked the institutions to check if the Greek decisions are in line with bailout obligations.
In short, the slave dared to think on its own, and now it must be punished.
The differences came amid a deep rift between Athens, its European partners and the International Monetary Fund (IMF) over the reforms needed to get the Greek economy, in recession since 2009, back on track. The IMF sees the euro zone’s economic targets for Greece as overly ambitious and the assumptions about reform implementation too optimistic. The IMF is also at odds with Germany and some other northern European countries over granting Greece more significant debt relief. Berlin wants to retain leverage over Athens and is reluctant to grant it favors that could anger conservative allies of Chancellor Angela Merkel before a federal election in the autumn.
The IMF, which participated in the first two bailouts for Greece, has so far refused to inject funds this time amid the standoff over economic assumptions and debt relief. Of course, as was made all too clear last summer, Germany will never agree to such a concession, which is why the third Greek bailout may sadly be its last.
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