GreekWatch (Day 7 of 13) – will you soften your approach to Greece? “that is not the case” says ECB

The IMF and EU teams on the ground in Athens are expected to conclude their work by tomorrow, according to the Greek finance minister. “We are concluding the negotiations and I hope they will be finished … by Wednesday,” Finance Minister George Papaconstantinou told Antenna TV. It is still expected that it will be next Monday 6th June, 2011 that the troika give their verdict.

Nationally, protests continued inAthensand some cities on Monday, though on a smaller scale than Sunday’s. The protests take the form of gatherings often co-ordinated over social networking websites and there seems to be a jumble of issues publicized by protesters. Once the precise austerity measures and privatization proposals are placed before parliament in early June, you can expect protests to intensify.

On the EU national political front, central European minnow Slovakia put its oar in when its prime minister Iveta Radicova yesterday called for Greece’s €327bn of debt to be restructured, and Belgium’s finance minister promptly shot the proposal down. An axis of hard-love is developing involving Germany-Finland-Holland, with national ministers all calling on Greece to get on with implementing the plan or risk not getting the next tranche – “if it does not, Holland, Germany and Finland will follow the IMF should it decide not to give more money to Greece” said the Dutch finance minister on Saturday last.

The ECB continues to ensure that no board or governing council member, past or present, remains silent on Greece– the current post-holders are all listed here and it is difficult to pick one out that has kept his or her own counsel in recent weeks. Outgoing ECB executive board member, the Austrian economist Gertrude Tumpel-Gugerell re-iterated what is emerging as the strong ECB view that there can be no deviation from the EU/IMF bailout and there can certainly be no restructuring or reprofiling. When asked whether or not the ECB might soften its approach towardsAthens, the firm reply from Ms Tumpel-Gugerell was “that is not the case”

You might be interested in Harvard professor of economics, Martin Feldstein’s contribution on the Greece crisis and suggests a “temporary leave of absence” for Greece from the euro, and interestingly he suggests the Maastricht Treaty allows such a move. He points out that Greece has the largest trade deficit in the EuroZone and that Greece suffers from chronic competitiveness problems. For those contemplating a permanent exit byGreece from the euro, it’s a novel proposal.

Some details today of the new austerity measures being considered by Greece. Schoolbooks will have to be returned by schoolchildren at the end of each year so that they can be used by the following year’s intake and this will save a portion of the €80m per annum that the Greek government spends in providing schoolbooks. Greece like Ireland has different VAT rates and there are proposals to move certain products from the low (13%) rate to the higher (23%) rate. This includes heating oil and natural gas. There’s to be a 1% solidarity levy applied to all public sector salaries and a similar levy in the private sector to be borne by employer and employee. There is now a proposal that any budget overspend by any government department would require that department to come back to parliament which would permit an over-spend only if the money could be found through savings in another government department; the proposal is aimed at the notoriously uncontrolled government departments to impose better financial control on overall government spending. The Opposition led by conservative, Antonis Samaras is not only opposed to tax rises, he wants corporation tax reduced from 24% to 15%. And he citedIreland as evidence of the benefits of low taxation. I wonder what our French friends might make of that proposal…

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