While the world awaits with bated breath until the moment that Greece can no longer afford to pretend it is solvent and has to apply for its third bailout from Europe, or else threaten to take down Deutsche Bank and its tens of trillions in gross derivatives, the world has to listen to the constant jawboning from the Troika which for the past nearly 4 years continues to express its displeasure with Greece, and yet still provides every Euro of funding the imploding country requests. In the latest iteration of this charade, the Troika has apparently flexed its muscles and made it clear that if Greece wants to receive the next round of cash, it will have to shutter the state-owned Hellenic Defense Systems (EAS) and the Hellenic Vehicle Industry (ELVO). In short: shut down the domestic defense and auto industries, and we'll talk. Oh, and if as a result you have to import your guns and cars from Germany (whose generous funding has kept you afloat so far), and have to take out Deutsche Bank loans to pay for them, so be it.
The heads of the troika mission in Greece are due to return to Athens at the beginning of November, it was revealed on Tuesday as sources in Brussels insisted that the country’s lenders would not back down over their demands for further fiscal measures and the closure of Hellenic Defense Systems (EAS) and the Hellenic Vehicle Industry (ELVO).
The Greek government has balked at suggestions it may have to find as much as 2 billion euros more than it has planned in savings next year. However, EU sources told Kathimerini that the troika does not consider the draft 2014 budget reliable. Greece’s creditors believe the plan overestimates tax revenues and underestimates social spending.
As a result, the troika wants to thrash out more measures with the Greek government, ensuring that the deficit target for 2014 will be met. The European Commission, European Central Bank and International Monetary Fund agree with Athens’s positions that any extra savings should not come from “horizontal” cuts to wages and pensions.
The precise amount needed to cover Greece’s fiscal gap next year will not be assessed fully until the current troika review is completed. This requires Greece to meet the milestones agreed with its lenders, such as rounding off the first phase of a public sector mobility scheme. EU sources noted that Greece could survive without receiving its next loan tranche until spring, thereby underlining that the troika is not in a rush to complete the review.
With regard to EAS and ELVO, Greece’s lenders do not believe it is possible to save the two state firms as they are a drain on public finances, in contrast to other European countries, where companies in the defense industry are profitable.
Athens has been in contact with the European Commission over the past few days to respond to queries about its plans to keep the firms afloat. The government believes that it could turn EAS into a profitable company with two years. EU sources said Brussels had heard similar pledges from Greek governments over the past 20 years.
The last snarky sentence was from Kathimerini, not us.
And of course, all of the above would be dramatic if it wasn't quite clear apriori that this is merely the latest iteration of the kick-the-can closed loop, best summarized by the schematic below.