Eurozone finance ministers meet today to discuss the progress made towards the second review of the Greek program and the sustainability of the Greek Debt. The government in Athens hopes for a comprehensive solution that will include measures for debt relief. Berlin vehemently rejects any relevant discussion before the current program concludes in August 2018.
Merkel’s coalition partner, Foreign Minister Sigmar Gabriel (SPD) has demanded a firm commitment to debt relief. The move could cause friction in Berlin in election year. In Monday’s edition of German daily Süddeutsche Zeitung, Gabriel spoke out against Germany’s existing policy towards dealing with Greece’s debt.
“Greece has always been promised debt relief when its reforms are implemented,” said Gabriel, a member of the Social Democrats (SPD), the junior government coalition partners. “Now we must stand by that promise.”
Sigmar Gabriel claimed the IMF and a majority within the Eurogroup support further debt relief. This should not “fail because of German resistance,” he said.
The official agenda of today’s Eurogroup is the briefing about the preliminary agreement reached on 2 May between Greece and the institutions (the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund) on a new set of policy reforms in the context of Greece’s economic adjustment programme, financed by the European Stability Mechanism. The Eurogroup will also discuss Greece’s medium-term (from 2018 onwards) fiscal targets and the issues related to the sustainability of the country’s public debt.
The agreement is one of the steps towards completing the ongoing second review of the programme and paving the way for the next disbursement of financial assistance to Greece by the European Stability Mechanism, a Eurogroup statement reads.
Last Thursday, the Greek Parliament adopted a new package of austerity measures demanding 4.9 billion euros on new sacrifices. The additional austerity measures 2018-2021 were pushed by the International Monetary Fund.
Right after the voting, prime minister Alexis Tsipras said that the ball was now in creditors’ court who should proceed with debt relief measures and stick to their commitments.
Greece has said that it will not implement these measures should the IMF stays out of the Greek program. Germany insists on IMF participation, although it does not nothing to meet the Fund’s debt sustainability demands at least halfway.
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Many people know it, many don’t know it and far too many don’t want to know it – in 1953 under the ‘London Agreement’ German debt was cut by 50 percent and they were not required to begin repaying the balance until their economy was in a sustained period of growth and surplus. Any conversation or article on the subject of Greeces debt (relief) should include this fact especially but not exclusively in the context of Germany’s stubborn refusal to yield. If no such compromise can be reached then if Greece is ever to grow out of its predicament then someone must take a brave decision, one that is underpinned by dramatic and radical action which must include immediate cuts in taxation to levels equal to or less than those in Bulgaria that have seen tens of thousands of Greek business being relocated there, an accompanying instant online business set up procedure available to all immediately removing the months of mindless bureaucracy, and a complete overhaul and super-simplification of the tax system which only serves to stifle growth. Additionally there must be an immediate end to all restrictive self protectionist practices which are blocking competition. Large cooperations which could collectively train and employ hundreds of thousands will not relocate to Greece when they can enjoy corporation tax rates of 2 percent elsewhere. If it means providing some of them with zero percent taxation to secure their investment, then so be it. People who oppose such an argument are walking with blinkered vision as they do not see the bigger picture. Imagine 250000 new jobs positions all contributing income tax into the system….imagine the VAT revenue on many billions of euros their products and services would generate….Greece has the potential to become one of the most sought after locations for business in the world and be a glowing example of growth and what real change can achieve. But before anything can happen, the attitudes of many must first change lest we remain in the economic modern day equivalent of the dark ages.