Greek Finance Minister, Yanis Varoufakis, earlier told Bloomberg TV “I prefer to cut my arm off” than sign up to a proposal that didn’t include restructuring his country’s debt. As luck would have it the International Monetary Fund (IMF) looks like it sympathises with that stance.
Although the European Central Bank (ECB) and European Union are yet to follow suit, having one of the three major creditors concede the point earlier this evening may give some impetus to negotiations after Sunday.
The Telegraph reports IMF debt sustainability analysis published today shows Greece needing at least another €50bn to keep it afloat for the next three years, in conjunction with a substantial alleviation of its debt burden – the key demand Greece has been making all along. Business Insider reports the major issue with bailout proposals so far “has been that they effectively turn Greece into a zombie country, stumbling along the poverty line and existing solely to pay off its heavy debts.”
The IMF has admitted political uncertainty and a fall back into recession “render the debt dynamics unsustainable”. It concluded that restructuring is the only way the beleaguered country will be able to access money markets again, the only alternative being yet further reliance on periodic bailouts.
Meanwhile on the streets of Greece the situation is still deteriorating. Bloomberg reports that liquidity reserves of Greek banks “will probably only last until Monday” even with capital controls and bars on withdrawing more than €60 a day from ATMs. If the situation worsens and withdrawals accelerate, which it might do if polls edge towards the rejection of the bailout package called for by the Syriza governing party, authorities may need to consider further restrictions on daily cash withdrawals.
Coincidentally Monday is the day after the referendum and the day ECB policy makers plan to consider the level of Emergency Liquidity Assistance (ELA) to the banks. If the country defies its government’s current position and votes for the bailout package then ELA will likely be extended. The Washington Post reports ECB Governing Council member Josef Bonnici, the head of Malta’s central bank, offered an ominous warning in an interview in Milan today:
“In the end, the collateral that Greek banks have depends on what the Greek population decides. If that collateral collapses then there is no longer possibility of having ELA. The Greek nation is passing through a difficult time and no nation can survive without a banking system.”
Those who believe in democracy will find another development rather chilling. Members of the Syriza government such as Varoufakis have said that as matters stand today they will resign on Sunday should the country vote for the creditors’ bailout. Martin Schulz, the President of the European Parliament, used an interview with German newspaper Handelsblat to call for Prime Minister Alexis Tsipras also to resign and be replaced by technocrats if Sunday’s vote is a ‘Yes’. He added:
“New elections would be necessary if the Greek people vote for the reform programme and thus for remaining in the eurozone and Mr Tsipras, as a logical consequence, resigns. If this transitional government reaches a reasonable agreement with the creditors, then Syriza’s time would be over. Then Greece has another chance.”
Schulz described Tsipras as “unpredictable”, alleging he “manipulates the people of Greece, in a way which has almost demagogical traits.” He concluded:
“My faith in the willingness of the Greek government to negotiate has now reached rock bottom”.