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Greeks Bearing Debts
Temperatures Rise Ahead of Euro Summit

Neither the Greek government nor the European Union is backing down ahead of an summit at which the Greek PM Alexis Tsipras is expected to ask for additional help from the EU. Tsipras is looking for at least part of the €7.2 billion earmarked as bailout funds to be immediately released to help alleviate his country’s severe cash crunch.

The latest furore is over a ‘humanitarian bill’ that Tsipras’ Syriza managed to pass on Wednesday without consulting first with its European creditors. The bill has an estimated net price tag of €200 million. The Europeans are livid:

“We completely support the objective of helping those who are most vulnerable in Greek society, those who have been struck by the crisis,” said Pierre Moscovici, economic chief at the European Commission, one of Greece’s bailout monitors. “But there must be consultations on new measures. We have to be able to evaluate the budgetary impact of the measures being proposed.”

The German tabloid Bild put it more bluntly, calling the law — which offers food stamps and free electricity to the poor — a “declaration of war”.

Apart from looking for manna from Brussels, the Greeks are turning to domestic sources to try to muddle through. OpenEurope reports:

[T]he Greek government has asked major public corporations, including utilities, to invest their excess cash reserves in state debt to help alleviate the serious funding crunch facing the government. The proposals have so far been rejected by those involved, including the trade unions. Kathimerini reports that the uncertainty has once again increased the rate of deposit withdrawals from banks, with officials suggesting up to €400m was withdrawn yesterday – the highest level since the extension was agreed in February.

The Greeks themselves are still undercutting their government’s positions. Public companies, and even trade unions, don’t think Greek government debt is a safe bet, so they won’t lend the government money to pay its bills. Savers are also shifting their money out of a dangerously exposed and unstable financial system. Yet Syriza is still popular: latest polls indicate that 59.8% support them, which is down from a high of 83.1% in February, but still quite high.

This dynamic is clearly unsustainable. As a famous philosopher once quipped, “If something cannot go on forever, it will stop.” The question is only when. And how.

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  • R. Howell

    “Public companies, and even trade unions, don’t think Greek government debt is a safe bet, so they won’t lend the government money to pay its bills.”

    The Greek 10 year bond yield is currently only 4.2%. I’m having trouble reconciling that with the implication that people aren’t willing to lend to the government. Someone must be doing it.

    • Curious Mayhem

      Those are highly artificial trades — on thin volume — subsidized by the ECB. What you’re seeing in Greece is what people really think of Greek government debt.

  • Andrew Allison

    Of course Syriza is popular; it’s promising to bring back the punchbowl. What its supporters don’t realize is that the punchbowl is empty.

    • Curious Mayhem

      Not just empty — gone.

      • Kevin

        If only it were gone – then they could realize that and make anew plan. The problem sems to be they still have the punch bowl and some fool has refilled it with antifreeze and proposed they all keep drinking. These sorts of things don’t end well.

        • Curious Mayhem

          Or full of Kool Aid, the special kind.

    • gabrielsyme

      Right now they are promising to bring back the punchbowl. However, if it plays its cards right, Syriza can pilot Greece through a tumultuous crisis and retain its popularity by emphasising national determination and perseverance in despite of faceless and unfeeling international institutions. It would appear that they are adequately laying the groundwork for just such a change of course.

      • Government Drone

        The trouble is, this sort of course frequently turns into a game of “EVUL FURRINERS!!!1!”, which often includes blaming said aliens for all domestic faults. The result is that Greece still does not change course, while eliminating any outside help that comes without strings.

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