Eurozone Raises Pressure on Greece, Urges Reforms

Ministers urge Greece to make haste with reforms to qualify for continued financial support.

Greek finance minister Yanis Varoufakis arrives for a meeting in Brussels, February 20, 2015
Greek finance minister Yanis Varoufakis arrives for a meeting in Brussels, February 20, 2015 (The Council of the European Union)

Eurozone finance ministers warned Greece on Friday it risked default if the country’s leftist-led government would fail to produce credible plans for economic reform.

Greece’s Yanis Varoufakis faced a hostile meeting of finance chiefs in Latvia’s capital, Riga, where at least one of his counterparts raised the possibility of a Greek exit from the eurozone.

The Netherlands’ Jeroen Dijsselbloem, who chaired the summit, told Dutch media afterward the Greeks lacked a sense of urgency. “It is a matter of weeks rather than months before the money runs out,” he warned.

Without an agreement to release the remaining €7.2 billion in its bailout program, Greece could enter default as early as next month.

Dijsselbloem said a “comprehensive deal” was needed before other the eurozone countries could release the aid.

Pierre Moscovici, the European economy commissioner, urged Greece to make haste. “There is no other choice if we want to reach the goal that everyone shares, which is a stable, prosperous Greece anchored in the eurozone,” he said.

Varoufakis had made some concessions before the talks, saying he would be willing to consider new privatizations as well as establishing a commission to supervise tax collection in a nation that is notorious for avoiding paying tax.

But Greece previously turned down offers from other European countries to help it set up an independent tax commission and Varoufakis rejected deeper pension or salary cuts.

Greek prime minister Alexis Tsipras promised his creditors last month he would soon unveil new reforms in order to qualify for continued financial support. The proposed measures have underwhelmed the European Union and the International Monetary Fund which jointly administer Greece’s bailout.

Among the reforms were €6 billion in new taxes to pay for food stamps, rent subsidies and electricity for households that are unable to pay their bills.

Lacking were changes to the Greek pension system and labor market liberalization.

If anything, the government’s recent proposals would reverse improvements made in both areas. They would free up €600 million to pay a thirteenth month of pensions and gradually raise the minimum wage “after consultations with the social partners.”

Tsipras won the election in January on promises to raise the minimum wage and restore collective bargaining.

Immediately after taking office, he canceled the privatization of Greece’s largest seaport and its public power utility.

Other European governments criticized the rolling back of policy changes Greece has made since 2010 in exchange for €240 billion in financial support.

Tsipras has not made himself more popular by demanding war reparations from Germany and accusing Portugal and Spain of taking a hard line in negotiations in order to bring down his government. Members of his cabinet have threatened to flood Europe with immigrants, including militants who might have been fighting for the Islamic State in Iraq and Syria, if Greece doesn’t get its way — or to seek help from Russia instead.

The anxiety has pushed Greece’s economy back into recession after it finally posted some growth last year.

Leave a reply