“We want Greece to remain in the euro.” It is the phrase with which the president of the European Commission, José Manuel Durao Barroso, tried to calm in the last hours the tense situation that lives Europe with the Hellenes . And, probably, the phrase that mentally repeats the leaders of the eurozone while the troika hurries the negotiations with Prime Minister Lucas Papademos and his coalition Government.
The European Central Bank, the IMF and the European Union maintain the blockade on the next loan of 130,000 million euros to Greece if it does not implement a series of adjustments, among others, reduce wages, lower the minimum wage and cut pensions and public spending . On the other hand, the Hellenic country negotiates the forgiveness of up to 70% of its debt with private creditors, ie banks.
From the economic point of view “they have no choice but to accept what the troika is asking for,” Xavier Freixas, professor of Financial Economics and Accounting at Pompeu Fabra University, explains to 20minutos.es . But they are trying to stretch the deadlines – in theory, the deal had to be closed on Monday – to “negotiate interesting decisions”; If not, the population will use the “democratic process” to elect other leaders.
“This is related to the general strike today,” he adds. According to a spokesperson for the country’s main union, GSEE, “80% of private sector workers and 90% of civil servants” have supported the strike on Tuesday. The situation is critical and the threat, “serious” : if there are no cuts, no loan or debt, on March 20 Greece could go bankrupt.
He does not have money in the box
The Greek Executive has to pay in March 14,400 million euros of the more than 360,000 million that it owes. And he will not have money in the box. That is why it is again mentioned, as it was a few months ago, that Greece could end up leaving the eurozone . An EU commissioner has already dropped it. It is not a remote idea, “the ravages are such that if there were a referendum today people would vote in favor,” according to Freixas.
Entering the euro has “benefits”, advantages, adds the professor, “Greece had them and now they see that they have to pay for that growth “. In fact, and here he points out that the Spaniards “have things in common” with Greece, the government of Hellenic will have to realize that “that growth was artificial, a mirage, which was based on fragile foundations,” he explains.
If Greece goes bankrupt, the consequences for the financial stability of the entire euro area will be “enormous”, he explains. Behind could fall the weakest, as Italy, Portugal, Ireland and Spain ; they would be “the first affected”. But Germany and France, which have been pushing Greece for a few days to accept the troika agreements, would also suffer indirectly.
Especially the French banks, which are in a situation of significant weakness , as they are creditors of Greece. And also the Germans, remember 20minutos.es Federico Steinberg, principal investigator of Economy and International Trade of the Elcano Royal Institute. Germany and France want to protect their “bondholders”, but also save the eurozone from an “unprecedented” situation, he says.
“All this is new”
Neither Sarkozy nor Merkel knows what is going to happen, “all this is new,” says Steinberg. Although if Greece does not pay what it owes, the Hellenes would have a door opened: they would no longer have debts. And what about that money? ” There are bondholders who have bought default insurance and will charge the same, ” says Steinberg, so there are those who “prefer” that Greece does not pay; others will not have the same luck.
According to the New Democracy conservatives, who are part of the Greek government, the demands of the troika will leave the country in ruins. “They just want to get to power, the wages have to be lowered,” Steinberg says, “they are responsible for the hole.” For the professor, the moment to negotiate is the current one, since Papademos has good relations with the European institutions. Even so, whether or not there is a ransom , the bad situation of citizens “will go further”.
For the time being, there are partial agreements : the Greek government will reduce 15,000 civil servant positions until the end of 2012 and, in addition, the European Commission will extend until 30 June the special regime of assistance to financial institutions of Greece approved on the occasion of the crisis. This Tuesday, everyone works on a final document, which will be discussed at the last minute of the day and which Greece should take to the Eurogroup meeting on Wednesday.