Greece proposed economic reforms late on Thursday to qualify for €53 billion more in financial support from other European Union countries. But the reforms were largely similar to those Greeks overwhelmingly rejected in a referendum on Sunday, raising doubts about the country’s sincerity.
With only days left until European leaders meet again in Brussels to discuss the crisis and Greece has to pay back €3.5 billion to the European Central Bank, the coalition of Prime Minister Alexis Tsipras seemed to have folded.
Among the concessions it made in a last-ditch effort to avoid bankruptcy and a Greek ejection from the euro were an overhaul of the complicated sales tax system, the phasing out of a “solidarity grant” for poor pensioners, defense spending cuts and privatizations, including selling off the Port of Piraeus — one of the largest in the Mediterranean — and a number of regional airports.
When he came to power in January, Tsipras halted a privatization program that was originally envisaged to raise €50 billion.
The Open Europe thinktank pointed out there were still discrepancies in terms of labor reform. Greece’s creditors are critical of plans to raise the minimum wage and restore collective bargaining which they see a step back from the liberalizations that have been made. Many Greeks, by contrast, blame austerity for leaving almost one in four workers without a job.
But debt forgiveness, otherwise a key demand of Tsipras’ government, wasn’t even mentioned in Thursday’s proposal, hinting at a willingness to compromise.
Even though European officials and the International Monetary Fund recognize that Greece’s debt — which equals around 180 percent of yearly economic output — is unsustainable, relief would be politically infeasible right now in hawkish creditor states like Finland, Germany and the Netherlands.
The same countries are skeptical of Tsipras’ intentions.
After more than 60 percent of Greeks followed his advice to vote “no” in a referendum this weekend that was seen in the rest of Europe as a test of their commitment to the single currency, and given his previous dismissal as “absurd” and “humiliating” the very proposals his government made on Thursday, it is difficult for the Northern Europeans to believe the far-left leader is serious this time.
His party is also split. “The proposals are not compatible with the Syriza program,” said Panagiotis Lafazanis, Tsipras’ energy minister and a hardliner. Some in his faction would welcome a Greek exit from the eurozone, seeing as the only way to unshackle the Balkan nation from German-imposed “neoliberalism” and cuts.
The prime minister said he would ask for parliament’s support Friday night. He might need the help of opposition lawmakers to get a majority for his proposal if the hard left of Syriza defects.
Time is running out. The Financial Times reports that without a deal this weekend, Greek banks will run out of money on Monday and the European Central Bank will pull the plug.
After Greece’s €240 billion bailout program expired last month and it failed to repay €1.5 billion to the IMF, capital controls were imposed to stave off a financial panic, limiting cash withdrawals to €60 or €120 per day.