Greece extricates from one crisis, falls into another

The world media spread the news about the Greek parliament making vote of confidence to the coalition government led by Antonis Samaras. 179 deputies of the "New Democracy", PASOK and DIMAR voted for the approval of the Cabinet, while 121 MP from the opposition (left SYRIZA and other parties) have opposed. This event was to begin to address the long-running political crisis in Athens. Another question is whether the new government will be able to hold the country for four years.

On Monday the first resignation took place when Deputy Minister of Labor Nikos Nikolopolus refused further participation in the coalition. The reason for his departure was named in a special message addressed to the Greek prime minister. The document noted that the government was not ready for tough negotiations with creditors. Some colleagues of Nikolopolus interpreted this move as a sign of weakness and inability to work in difficult conditions.

However, the coalition has no unity in the strategy to overcome the financial crisis in Greece. There is disagreement on some issues of socio-economic policy. The private sector has been losing from the adoption of measures aimed at improving the budget. This situation still does not satisfy the "left".

However,  Prime Minister Antonis Samaras has been criticized for a departure from the original campaign promises. Originally it was a broad review of agreements with Greece, the European Union, the ECB and IMF. Now the Prime Minister and Finance Minister Janis Sturnaras say that the old agreement may be amended only if the country and its partners are ready for these changes. But such a formulation can be interpreted in different ways.

The new Cabinet has just started its work, and the opposition is already criticizing Samaras and his colleagues, accusing them of demagoguery and populism. The Government does not intend to fulfill their obligations and to seek renegotiation of the EU aid, considered supporters of the Left Opposition. MP from SYRIZA Zoe Konstantopoulu said on independent television NTD that the opposition had no hope that this government will be able to re-negotiate anything. He added that Mr. Sturnaras, Minister of Finance, has already stated this, dispelling any doubts about their intentions to renegotiate.

In the current difficult situation, the new leadership of Greece is trying to maintain the confidence of creditors, while calming the opposition and the population of the country, assuring there will be no more significant reductions. It is still not completely clear what the coalition government intends to do. Whoever is in charge in Greece at the moment will have to follow Europe-wide rules.

More recently, local media reported on a possible mitigation of the conditions for granting financial assistance. On July 9, Sturnaras said that he was not going to negotiate with creditors to ease the conditions of EU assistance. The coalition government first needs to accelerate the reform and only then ask for a review of the conditions attached to the multi-billion loan. "The program is not being implemented, and we cannot ask anything from the creditors until we come back into the framework of the program. There is light at the end of the tunnel, but the tunnel is very long," Information Portal Greecetoday quoted the head of the Ministry of Finance.

Recently Prime Minister Samaras announced a program of reforms vital for the recovery of the Greek economy. Improving the efficiency of tax collection system, accelerating privatization, creating conditions for attracting foreign investors are the priority measures identified in the coming months.

European lenders generally favorably received the news of reaching a consensus on the composition of the coalition government that the Greek Parliament gave the green light to. However, the forthcoming decision on the granting of the next tranche to the country in distress will not be easy. Many analysts note that the 500 billion euros obtained by Athens were wasted. The Greek economy continues to decline. This year the decline in GDP could reach 6.9 percent.

Harsh statements of the IMF's Christian Lagarde do not leave the Greeks hope for relief from the creditors. All austerity measures voiced earlier must be observed. There will be no consultations on mitigating the terms of the agreements with Greece, assured Christian Lagarde on July 4th. The experts from the ECB and IMF are expected to complete their mission in Athens in late July, when we can talk about a decision on the Greek debt crisis.

Yet, ordinary citizens do not believe that the financial situation in Europe is stabilizing. Only before the election Greeks withdrew from the bank accounts over a billion euros. There is good news for ordinary citizens: the government will not implement mass layoffs of state employees and will consider the issue of raising funds for paying unemployment benefits in order to avoid unrest.

Yuri Sosinsky-Semikhat


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Author`s name Dmitry Sudakov