Early Thursday morning, with banks closed, capital controls in effect, ATMs dispensing just 60 euros per account each day, and the Greek government and banks running out of money, the Greek parliament approved more severe austerity measures and reforms than voters had rejected in the July 5 referendum, paving the way for negotiations on a third package of bailout loans. Prime Minister Alexis Tsipras said Greece had no choice but to accept the measures, with the economy nearly at a standstill, a 3.5 billion euro loan payment due to the European Central Bank (ECB) on Monday, 2 billion overdue to the International Monetary Fund (IMF), and Greece on the verge of a chaotic exit from the Eurozone unless it received immediate financial help.
Last weekend, the Greek Parliament passed Tsipras’s proposal for reform and austerity measures, which closely resembled an earlier European proposal that Greek voters had rejected in the referendum. However, the new Greek proposal was dismissed as too little too late during inconclusive meetings of European finance ministers last Saturday and Sunday. A subsequent seventeen-hour overnight meeting of Eurozone leaders ended Monday morning with what European Council President Donald Tusk called an “Agreekment” — a preliminary agreement on minimum conditions Greece must meet in order to begin negotiations on a third bailout program. This is the agreement the Greek parliament approved Thursday.
The July 13 text of the Euro Summit Statement on Greece, or Agreekment, insists that Greece request help from the IMF as well as the European Stability Mechanism (ESM) and immediately begin to legislate changes including tax increases, pension reforms, the independence of the statistics bureau, and “quasi-automatic spending cuts” if primary surplus targets are not met. Next week, Greeks must propose administrative reforms and approve major changes to the civil justice system.
By October, Greeks are required to legislate pension reforms; later, they must undertake product, energy, and labor market reforms, strengthen the financial sector, improve the privatization program, and transfer “valuable Greek assets” to “an independent fund” that “will monetize the assets” for bank recapitalization, loan repayment, decreasing the debt to GDP ratio, and investment. In a concession to the Greek prime minister, this fund will be in Greece, managed by Greek authorities but “under the supervision of the relevant European Institutions,” with a quarter of the amount to be used for investment in Greece.
The Euro Summit Statement also requires the Greek government to “consult and agree with the Institutions on all draft legislation in relevant areas,” request technical assistance with implementation from the creditor Institutions and member states, and repeal or compensate for laws that backtracked on previous agreements.
In two more concessions to Prime Minister Tsipras, the European Commission will provide up to 35 billion euros “to fund investment and economic activity” to “help support growth and job creation in Greece” over the next three to five years; in addition, “[s]erious concerns about the sustainability of the Greek debt” were acknowledged. “[P]ossible longer grace and repayment periods,” but not “nominal haircuts on the debt,” will be discussed.
The Euro Summit identified 82 to 86 billion euros in financing needs – far more than the 53.5 billion Greece had asked for. The IMF’s latest report on the unsustainable size of Greece’s debt called into question hopes for a successful new bailout deal between Greece and its creditors, since the IMF finds Greece in need of even more debt relief now that three weeks of bank closures and capital controls pushed it deeper into economic depression. Many European countries, including Germany, have resisted IMF calls for substantial debt relief for Greece, but IMF regulations prohibit it from loaning money to a country with unsustainable debt. With the chorus of voices in support of debt relief growing to include the ECB’s chief, Mario Draghi, as well as France and the USA, it looks increasingly likely that this issue could be resolved in Greece’s favor.
The German government and its allies claim that the austerity measures and reforms in the Euro Summit Statement are necessary to bring Greece in line with Eurozone rules, inspire trust in its government, and put it on a path to recovery, and most people concerned about Greece hope the measures will help bring the country stability. However, there has been a great deal of disappointment, protest, and anger from many sources: the leftist SYRIZA’s members and supporters, their right-wing nationalist ANEL coalition partners, Greek communists, the neo-Nazi Golden Dawn party, Nobel Prize winning economists, and numerous other commentators both in Greece and elsewhere.
For example, in The New Yorker, John Cassidy called the text from Monday morning’s Euro Summit “an agreement that is perhaps the most intrusive and demanding contract between an advanced nation and its creditors since the Second World War.” Many prominent observers argue that it is unclear whether the Greek economy can recover and grow with additional recessionary austerity measures such as tax increases and budget cuts after five years of austerity have left Greece in worse shape than the U. S. during its Great Depression.
People like Dimitris Doukas, who runs a computer software business in Athens, are more optimistic, believing “Greece has to undergo all these necessary reforms to build a solid state and a competitive economy.” He agrees with EC President Donald Tusk that this agreement could help avert an angry union of far left and far right groups opposed to the Eurozone.
On Wednesday, pharmacists and public sector workers went on strike, and approximately 12,500 people peacefully protested against the new austerity measures in what the AP called the largest protests against the government since January elections. During later clashes in central Athens between hundreds of hooded protestors throwing rocks and petrol bombs, and riot police with tear gas, those arrested were foreigners, not Greeks.
With thirty two SYRIZA members of parliament (MPs) voting against the agreement and six abstaining, the prime minister lost his coalition government’s majority in the 300-seat parliament but did not fall below the level of 120 MPs which the Greek constitution requires a government to have. The prime minister reshuffled his cabinet yesterday, removing those who voted against the agreement and replacing them with other members of his SYRIZA-ANEL coalition. He will need continuing support from the pro-European centrist opposition parties who supported the agreement with creditors.
After the Greek parliamentary vote, European finance ministers approved a 7 billion-euro bridge loan to Greece, and the ECB increased emergency funding to Greek banks by 900 million euros for the first time since banks closed on June 29, averting fears that ATMs would run dry. Olive News reports that banks are expected to open on Monday, the 60 euro per day withdrawal limit could be replaced with a 300 euro per week limit, and some capital controls might be relaxed for specific purposes, although none of this has yet been confirmed. Agrocapital indicates that the General Accounting Office has already had a committee working around the clock for some time now, to enable monetary transactions involving delivery of food, medicines, and perishable products (first priority) as well as those providing raw materials for industry (next priority).
Dr. Nikos Michelakis, Scientific Advisor of SEDIK, the Association of Cretan Olive Municipalities, told the Olive Oil Times that bottled olive oil transactions have been able to continue as usual, since payment typically occurs after a month or two. However, bulk oil sales have nearly stopped, since bulk sellers want to be paid immediately, and cash is not available. A limited number of producers have sent some bulk shipments to Italian companies with whom they’ve had a good working relationship for many years, trusting them to pay later.
Michelakis reports that the government generally pays half the cost of the attractant/insecticide spray bait used to control the olive fly population and prevent the fly from spoiling the fruit, with farmers covering the other half, but this year farmers and agricultural cooperatives are paying more because the government has not so far contributed its usual share. Since farmers know how important the spraying is for the quality of their oil, they are paying to ensure it is done on schedule, hoping for eventual reimbursement.
Some Greek olive oil producers continue to carry on quite successfully. For example, Gaea recently announced the launching of a new olive oil and olive pack line, and Greek olive oils won numerous awards at the Terraolivo Extra Virgin Olive Oil International Competition in Jerusalem last month, which tested more than 500 samples from 17 countries. Greek olive oils won two of the Terraolivo 2015 Special Awards for the highest scoring olive oils: Best Flavored (Oleoastron Koroneiki from Sakellaropoulos Organic Farming Armonia) and International Champion (Eleon Extra Virgin Olive Oil from Mediterranean Natural Foods SA).
Such high-level recognition should remind consumers that many Greeks continue to excel even in the face of great difficulties. The quality of Greek olive oil is not being jeopardized by the present political and economic crisis, and there is now hope that the crisis is being resolved.
- A Humiliating Deal for Greece
- Text of the Euro Summit Statement on Greece
- Fund’s leaked debt sustainability report shows that Greece’s public debt is likely to peak at 200% of national income within the next two years
- Greece’s Banks Are Next in Line for a European Bailout
- Gaea introduces newly designed extra-virgin olive oil bottles, adding new varietals to the collection
- The ESEE propose a relaxation of “CAPITAL CONTROLS” (Η ΕΣΕΕ προτείνει τη χαλάρωση των «CAPITAL CONTROLS», in Greek)
- Greece licks wounds after bailout vote, ECB move expected
- Greece, Its Back to the Wall, Adopts Austerity Steps
- Greece seeks relief from lenders after first bailout test
- Terraolivo Extra Virgen Olive Oil International Competition
- Extortion ended, loans come (Εκβιασμός έληξε, δανεικά έρχονται, in Greek)