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|Posted on June 22, 2015 at 7:48 AM|
It seems they will reach a crunch point on the Euro vis a vis Greek debt problems by 23rd July.
The Greece Central Bank Governor has counted out a Greek exit from the Euro system, so it only remains for the Syriza government to strike a deal with their creditors and keep the economy moving forward, debt laden as it is.
Greece has been fortunate to receive the huge bailout over 270 billion Euros, plus another nearly 100 billion in recent months in emergency lending arrangements. They realise that by leaving the system, they would count themselves out from this line of credit, this lifeline to the Greek economy. Which now seems to be at a healthy stage where growth will create more growth, and positively deliver some improving numbers in the coming months and years. At this stage, they just need continued support, hopefully easy financing, and freedom to grow their economy the best the know how, without any conditions from the IMF-ECB creditors which would be like putting a straightjacket on a heart patient who is recovering.
Goodwill and trust in a spirit of generosity from the IMF-ECB consortium is what the Greeks would welcome most. They can't put the lean pensions any further, 700 Euros a month is just about okay. Nor can they put up the VAT - that would reduce spending because the budgets are already stretched.
If Greece receives the 7 billion tranche due minus the 1.3 billion due to the consortium, or net 5.7 billion, that would give them cashflow for the meantime to roll on for the near future. And that is about one way out of the cul de sac that seems a default. The Greeks, even more than their creditors, are anxious to avoid that eventuality, for they know it would mess up the whole system, and their available to credit internationally would take a hit. Also, of course, the Greeks have been complaining that they have not received the previous tranche of 10.9 billion. What's going on? they may as well scream.
In a spirit of goodness and generosity, they have to be helped over this last hurdle. Perhaps the one thing the Greek government can deliver on pretty much immediately is to formulate and offer legislation that will enable the people open shops and factories without too much red tape. The obvious huge potential for growth of the economy lies first and foremost at home, in Greece itself, after that they can also build up their exports, including huge infrastructure projects to generate solar power and export it to other nations.
After the huge amount of co-operation and support they have already extended, the final tranche seems small change, but it will 'make it or break it' and this refers to the Euro system. They must keep it flowing.
The stability it provides to the whole economic system will be inestimable, as well as a great virtuous deed towards Greece. I pray that the powers that be will soon agree on a deal.
Durudarshan H. Dadlani
Categories: A crunch point for Greece and the Euro Area.