Greece Will Use Primary Surplus For Debt Relief Bid

After previously stating Greece didn’t need nor would seek debt relief, the government now is reportedly planning to use a primary surplus that is expected to be larger than first estimated to force losses on international lenders as a previous government did with private investors and bondholders. Greece is surviving on $325 billion in two bailouts from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that run out this year but most analysts say they can’t be repaid because the rescue packages haven’t cut the country’s debt. There was a trigger clause in the memorandum that allows the government to ask for debt relief – essentially stiffing the Troika on a portion of what it owes, although it’s not been reported how much that would be. In 2011, a previous government in which current PASOK Socialist leader Evangelos Venizelos was finance minister, arbitrary imposed what were effectively cuts of 74 percent on investors, including those in the Diaspora bonds that became almost worthless. He is now the Deputy Prime Minister/Foreign Minister in the coalition headed by Prime Minister Antonis Samaras, the New Democracy Conservative leader who has said a recovery will begin this year from a crushing economic crisis in which austerity measures demanded by the Troika created record unemployment and deep poverty. The government is locked in stalled negotiations with the Troika over unresolved reforms and how to close a 2.4 billion euro. ($3.27 billion) hole in the 2014 budget. No date has been set for the lenders envoys to return to Athens for talks but when they do Finance Minister Yannis Stournaras reportedly will put debt relief on the table. The government will argue that achieving a primary surplus was the key although it doesn’t include interest on the debt Greece wants to cut, nor the cost of state and municipal enterprises, social security and some military expenditures. The government also has to find 500 million euros ($681.78 million) to pay the salaries retroactively of members of the military and emergency services that were cut with the country’s highest court reportedly set to rule that was unconstitutional. With the date that troika officials are to return to Athens still unclear, the government is believed to be focusing on exploiting the leverage afforded by a larger-than-expected primary surplus to push its goal of launching negotiations on debt relief. The government had hoped the talks would be before a Feb. 17 meeting of Eurozone finance ministers. The newspaper Kathimerini, citing unidentified sources, said the government wants the okay on debt relief talks from Germany, the biggest contributor to the bailouts but with Chancellor Angela Merkel insisting on big pay cuts, tax hikes and slashed pensions. She had ruled out any negotiations on a debt cut which would force taxpayers in the other 17 Eurozone countries to pick up the tab for generations of wild overspending by alternating New Democracy and PASOK administrations that hired hundreds of thousands of needless workers in return for votes. There’s  political edge in play too, as municipal and European Parliament elections are set for May and poll show New Democracy slipping further behind the major opposition Coalition of the Radical Left (SYRIZA) and even in danger of fighting it out for second with the neo-Nazi Golden Dawn party whose leaders have been jailed or arrested on charges of running a criminal gang.  PASOK is irrelevant in the polls and has aligned itself with the new Initiative of the 58 in a bid to avoid become extinct. If debt talks do begin in April, this could give Samaras an edge over leftist SYRIZA leader Alexis Tsipras, whose party rejects the terms of the country’s foreign loan agreements. Tsipras said if he comes to power he will renege on at least 60 percent of the debt although that could force Greece out of the Eurozone and also unable to return to the markets, leaving it bankrupt. Stournaras said he’s readying a February surprise that is expected to show the primary surplus will be more than the eWhile Samaras and Finance Minister Yannis Stournaras push for talks on debt relief privately, their public statements have focused more on Greece’s primary surplus, which is expected to exceed 1.1 billion euros ($1.5 billion). Samaras, hoping to quell public anger and stem political unrest, said he would return 70 percent of the surplus to those who’ve most been affected by the austerity measures, a tactic Greek governments frequently use before elections to win, or keep, disaffected voters. The rich and politicians have largely been untouched by austerity, and many of them have prospered. The Troika wants to see progress on unsettled reforms, such as lagging privatization, ending professional monopolies and further cuts to the civil service, which successive governments have been promising for years but failed to deliver. Meanwhile, Stournaras told the Frankfurter Allgemeine Zeitung that Greece’s funding gap for 2014 is around 5 billion euros or 11 billion euros for the next two years. He had previously denied there was one and added that Greece did not need a third rescue package. He said the gap would be filled by unexplained budget reforms and going after tax cheats, both of which the government has failed to do for decades. While the government doesn’t want to repay its loans in full, it has set aside a bill providing for debt relief for indebted households that can’t pay mortgages, loans and credit cards because pay cuts, tax hikes and slashed pensions. New Democracy and PASOK have also said they can’t repay 250 million euros ($340.9 million) they owe to banks even though they are granted free money from the public coffers they put up as collateral.

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