[9]
Big surprise in Brussels late last week as the International Monetary Fund pulled its negotiation team [10] from the discussions with the European Union and Greece where all parties were trying to find a sustainable long-term solution for the Greek drama.
Pulling the team out of the negotiations probably was the right thing to do as the Greek delegation suddenly realized playtime was over and that everybody was losing its patience with the stubborn strategy they were using. Suddenly the Greeks were scrambling to convince the European Union and Eurozone partners – which didn’t walk away – that it had the best intentions to come to an agreement. Less than 24 hours after the IMF walked away, Greece already submitted a new plan.
According to our information, the main stumble block were the pensions and salaries of the government officials and on this subject Greece just doesn’t want to cave at all. The IMF wanted Greece to spend 1% of its GDP less on pensions, but that was a no go for the Greeks as they thought that would make them lose their faces in Athens. And they are correct. Whilst other measures are a bit easier to swallow and to implement, lower pensions and benefits would have a direct impact on the weaker classes of the society, and it would be unheard of to see a left-wing Greek party reduce the pensions. That’s why Alexis Tsipras called the demand absolutely unrealistic, especially now the Greek unemployment rate is ticking up again.
[9]
Source: Bloomberg
That perception will have to change though, and seems to be changing. After Juncker called the proposal to have another meeting with Tsipras ‘a waste of time’ [11], Greece seems to be realizing things are getting very serious now and on Saturday Tsipras announced he’s willing to make sacrifices to come to a solution. He will have to as not only is the unemployment rate in Greece on the rise, the cash outflow from its banking system is still ongoing (see next image).
[9]
Source: Ibidem
He will have to do so, and he will have to do it overnight as the next meeting of the Euro-Group is on Thursday. If Greece wants to make sure it receives the next package of the bailout-funds before the end of this month, they will HAVE to get an agreement by Thursday, as the ministers of the Euro-countries will need some additional time to get ratification of the new deal in their respective parliaments.
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