Can Greece cope with demands for additional austerity beyond the end of the current programme?

euobserver.com

The participation of the International Monetary Fund in the Greek bailout programme is “non-negotiable”, the head of euro zone finance ministers said on Thursday according to a Reuters report.

Speaking at the end of a monthly meeting of euro zone finance ministers in Brussels, Jeroen Dijsselbloem said future bailout programmes for Greece may be carried out without the IMF, but for the current one, the participation of the IMF was “non-negotiable” because of the expertise of the fund and its financial contribution.

A number of member states are adamant on the IMF’s involvement,” he said.

The IMF has not yet decided whether it would participate in the current 86-billion-euro financial aid programme for Greece, the third one since 2010, but has in its latest report continues to hold the view that the Greek debt is ‘highly unsustainable’ and it will not be considered sustainable even if Greece adopts the fiscal path proposed by  Wolfgang Schaeuble, namely 3.5% of GDP primary surpluses for a 10-year period after the end of the current programme which ends in 2018.

To get the IMF on board Eurogroup appears to have demanded Greece takes additional austerity measures for the period 2018 -2021. Reports on the Greek media claim that Greece’s finance minister’s Tsakalotos proposals for an extended automatic adjustment mechanism if the country’s primary budget surplus fell below agreed targets were  rejected at Thursday’s Eurogroup.

European finance ministers insisted on passing binding legislation now setting up specific measures for 2019 and 2020 as the existing agreed measures are not enough to create the surpluses demanded by Europe.

Speaking after the meeting, Mr Tsakalotos said it was “not correct to ask a country to legislate two to three years beforehand what it would do in 2019”. He added: “It is a commitment that goes well beyond the framework of democracy and the ethical values that inspired Europe.” 

The Syriza government has been  doing what the lenders demanded for almost two years now, adding to the misery suffered by the Greek people for the last six years, in the expectation that Greece will be allowed in the QE programme in its final stages and that the country will be granted some form of loan restructuring.

Europe has however been continually demanding more measures and keeps kicking the can down the road,  pushing back the second evaluation that should have closed over a year ago, with an eye to the forthcoming elections in Holland, Italy, France and Germany where populist eurosceptic movements are gaining ground.

The German finance minister makes no secret of his dislike of the the left and particularly of the left in government in Greece; nor does he make a secret of the fact that he would prefer Greece out of the Eurozone.

So perhaps the time has come for Greece to say ‘no’ to Europe and take another plunge into the unknown. We may not know what will happen if Greece defaults, but we know that  Greece cannot continue in this path of increasing austerity for much longer.  At least, outside the euro – the threat the lenders hold over the country’s head –  there may be some hope for a better future after a few more years of possible hardship, while that the future for the country in its present path  is really bleak for as far ahead as we dare imagine.

Greece has almost reached rock bottom with the tax paying ability of the people exhausted, unemployment at unacceptably high levels and no sight of capital controls  being lifted. The prospect of a government collapse on the event of having to legislate now for additional measures in the future is very real. So there is not much for the government to lose. But can europe afford another crisis?