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February 13, 2015

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A couple of days before a “70-30” agreement between Greece & EU

It seems that the Greek government and its European partners have come to an understanding. Press reports in Athens on Friday are claiming that an official agreement will be reached at next Monday's Eurogroup meeting.

In such a framework, the president of the Council of Economic Advisers (SOE) George Houliarakis, and a team of consultants, will remain in Brussels to work with EuroWorking Group president Thomas Wieser ahead of the meeting on Monday and prepare the final details of the agreement.

In Athens, reports say that the new agreement is going to be “70-30” plan proposed by Minister of Finance Yanis Varoufakis. The agreement is expected to contain 70% of the measures that were already outlined in the existing bailout agreements, while the remaining 30% could contain structural changes proposed by the Greek side.

The same reports claim that during the Euro Summit on Thursday EU members pressured Greece to accept a “technical extension” of the loan and current agreement in order to overcome legal concerns. It is still unclear if Greece will accept this or not.

Other reports noted an agreement between Greek Prime Minister Alexis Tsipras and Eurogroup head Mr.Dijsselbloem to continue talks on a technical level, so that the ground is set for Monday’s Eurogroup where the negotiations will conclude.

This fact alone clearly indicates that a compromise was reached.

The government has clearly realized that its campaign proclamations are unrealistic and has decided to compromise with its EU partners and this can only be applauded. Obviously there was going to be mutual concessions, as the discussions so far have shown that the 70-30 ratio of commitments that Greece assumed with the bailout agreements are the basis.

The government has to now decide which commitments (reforms) it will implement and which obligations it will replace.

If indeed an agreement is reached on Monday it will also end the uncertainty that shook Greece's economy over the last few weeks. It will also allow the SYRIZA-ANEL government to implement its policies and demonstrate in practice that it can reconstruct the economy (as it claims).

Basically, the Greek government has requested a “transition deal” from the current program – which it has rejected – into a new, mid-term program for 2015-2018.

The program apparently has four main points:

  1. Transitional funding, which Greece may need until the end of August
  2. Balanced budget with some concessions as to the extent of surpluses
  3. National reform plan
  4. Addressing the humanitarian crisis

According to the Greek press, Greece is not asking for a new loan, nor the final 7.5-billion-euro tranche of the existing program, but rather for a 1.9 billion euros of profit from Greek bonds which are held by the ECB and other European banks. It has also asked to raise the issuance ceiling of bonds by 10 billion euros and to use the 11.4 billion euros available in the financial stability find for “red loans”.

Regarding the primary surplus, the SYRIZA-led government wants to reduce it from 3% this year and 4.5% in 2016, to a more realistic 1.5% GDP.

Everyone hopes for the best on Monday so that things can return to some sort of normality and this is because the economy has literally frozen, public revenues have dropped and there is a significant reduction of 2014’s primary surplus. Basically, that the government needs to activate things at home, or the State mechanism and restore its operation to a satisfactory rate, or risk losing everything on the European level.

If the new government becomes irresponsible, then it will quickly lose the trust and advantage it earned from the people of Greece and the citizens of this country are not tolerant anymore. At the same time it will lose the respect and benefit of the doubt that they now are also earning from the Europeans.


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