And if they still refuse, he has called their bluff.
The Greek bailout request, worth €53.3 billion, is a white flag on austerity – everything the Greeks voted against in the referendum in terms of tax raises, spending cuts, etc. . However, it consists of 3 major changes that were always talked about by the creditors, but never officially offered as part of the agreement that Greek voters rejected. Here they are:
- Debt restructuring: There was always vague talk about this future option, and in recent days, the topic reached the agenda, with even Merkel and Schaeuble beginning to talk about it. Everybody now knows that Greece’s debt is unsustainable and some change is needed in order to make a bailout program work. Greece now wants it as part of the deal. The June 25th proposal that the Greeks rejected did not include any talk about debt.
- Front loaded 35 billion investment plan: Jean-Claude Juncker mentioned this in past. Beforehand, back in 2012, there was talk about a “Marshall Plan” for Greece. Nothing ever materialized. Now Greece put a number to it, €35 billion, and wants it now: front loaded. Investment in Greece at this magnitude can spur growth and partially counter austerity. This wasn’t in the original proposal.
- Medium term: the 3 year proposal, that we already learned of, means a longer period of stability. Doesn’t everyone have Greek fatigue? Doesn’t everyone want to solve it once and for all. Well, original proposal was for only 5 months, keeping the pressure on Greece.
The media is focusing on Greece folding to creditors on austerity and undoubtedly, it’s harsh. Harsh exactly as they wanted it. Tsipras is blasted for a shameful betrayal of his people, surrendering and what not. He will surely have trouble running them through parliament, especially within his own party. At least they admit that this time Greece submitted the proposal on time.
But, the other proposals listed here make a difference. A really big difference. And these are proposals that the creditors talked about.
If they reject their own proposals, the creditors will show that they were never negotiating with good will. They either wanted regime change, aka to see Tsipras kicked out, or to make Greece suffer in order for other countries to stay put.
EUR/USD is higher on the proposals, gradually rising from under 1.10 to a high of 1.1082, well within the range. These are late hours in Europe. We will see the full reaction in the European session.
You can see the austerity measures here:
Greek crisis – all the updates
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