Guest post. Translated from the French by Tim Gupwell
It is not just Italy and Spain causing problems, after the decisions taken during the last summit suffered a setback, in view of the spectacle of great confusion and nervousness we have witnessed with regard to the joint press release – which wasn’t one – from Spain, Italy and France demanding immediate implementation. Simultaneously, Greece is providing an example of the strategic retreat of the European authorities and of the IMF.
It is now the ECB and the Eurosystem which hold the vast majority of the Greek debt, a fact which has allowed the commercial banks to consider the countdown which has already begun with a far greater degree of equanimity. The same cannot be said for the European authorities.
On the 20th August, the Greek Government will have to reimburse up to 3.2 billion Euros to the ECB, due to bonds reaching maturity – and it does not have the means to do so. A decision is going to have to be taken as to whether to continue, or to halt, the second rescue plan; the corresponding decision on whether or not to unplug the life support that maintains the country in the Eurozone will depend on the outcome of that one. The ensuing consequences for Spain and Italy are impossible to control.
With the implementation of the agreement having totally fallen off the rails, nothing having been done over the last four months due to political crisis and the elections, a decision has to be taken on whether or not to fill in the profound new hole in the finances which has opened up; at the same time the decision will be taken on whether or not to continue the payments foreseen in the plan, by committing a further 31.5 billion Euros. The Government has to put all other matters aside in order to present to the Troïka details of how they will find 11.5 billion Euros worth of spending cuts for 2013 and 2014, on the subject of which it claims to have come to a broad agreement, signifying that it does not know how to implement them in practice. In the context of crisis that is sweeping the country, new austerity measures cannot be adopted at a time when the previous ones have been suspended, as this would mean increasing taxes once more and drastically reducing the amounts of pensions. At the same time, the privatization fund, which has the objective of finding19 billion in extra receipts by 2015 has ground to a halt, with the departure of its President and General director.
If the IMF decides, as seems possible, to withdraw from the plan and to no longer participate, there will be no other option than to proceed to another restructuring of Greek debt, this time to the detriment of its public creditors; or to an easing of the loan conditions in terms of rates and payment schedules, which would have a knock-on effect on Ireland and Portugal. This is a decision on which discussions have not even been held yet, given the European political context.
“The situation we are experiencing is a situation that we must and shall overcome”, declared Pierre Moscovici, the French Finance Minister, calling for the “rapid and efficient” implementation of the decisions taken during the latest summit, taking up once again the terms of the joint press release which never existed. A slight wavering that we could not have expressed better ourselves….