BY Richard Summerfield
It would appear that after much debate – and many billions of euros – the Greek debt crisis may finally be entering the end game.
On Tuesday 30 June, the International Monetary Fund (IMF) confirmed that Greece had failed to make its latest €1.5bn debt repayment, officially placing the country ‘in arrears’. Greece’s missed payment is the largest in the IMF's history and the country becomes the first ever ‘advanced economy’ to be placed in arrears. The ‘default’ by Greece also brings about the end of the country’s second bailout programme.
In a last gasp attempt to prevent default, the Greek government proposed a new two year bailout programme which would be supplied under the European Stability Mechanism, which provides Europe’s bailout fund. The proposal was made shortly before the IMF’s payment deadline.
In a letter sent to the European Commission, IMF and European Central Bank, incumbent Greek prime minister Alex Tspiras asked for a new loan of €29.1bn to cover debt maturing in 2017.
In order to secure the fund, Mr Tspiras claimed that he would accept all of the conditions put forward by the country’s creditors provided there were a few minor amendments. The Greek government is seeking, in terms of the country's value-added tax system, a special 30 percent discount for Greek islands, many of which are in remote and difficult-to-supply regions, be maintained. With regard to pension reforms, Mr Tsipras asked that changes to move the retirement age to 67 by 2022 begin in October, rather than immediately. He has also requested a special ‘solidarity grant’ be awarded to the country’s poorer pensioners. This grant, Mr Tspiras notes, would be phased out by December 2019. “Our amendments are concrete and they fully respect the robustness and the credibility of the design of the overall programme,” said Mr Tsipras.
At the time of writing the approval of this third bailout seems highly unlikely. Many senior European figures, particularly those in Germany, appear unwilling to deal with Mr Tspiras and his finance minister Yanis Varoufakis. Mr Tspiras’ decision to call a referendum for Sunday 5 July, in which the country will decide whether it wants to accept creditors' bailout conditions, has proven to be a contentious one. German chancellor Angela Merkel noted that “the door to talks with the Greek government has always been, and remains, open", adding, however, that talks could not take place before Sunday’s poll.
With fierce criticism of the referendum ringing around Europe, a no vote appearing most likely, and a €3.5bn payment to the ECB due on 20 July, Greece’s time in the euro may be drawing to a close.