Greece’s provisional agreement with creditors to avert a default started to crack as European officials said the country’s latest proposals fell far short of what was put forward two weeks ago and Greek ministers floated the prospect of a referendum if their reforms are rejected.
The list of measures Greece’s government sent to euro region finance ministers last Friday, including the idea of hiring non-professional tax collectors such as tourists, is “far” from complete and the country probably won’t receive an aid disbursement this month, Eurogroup chairman Jeroen Dijsselbloem said on Sunday.
Greece’s anti-austerity government, elected in January on a promise to renegotiate the terms of a 240-billion euro ($260 billion) bailout, has to present detailed proposals to European creditors or risk running out of cash as soon as this month. The renewed tensions threaten to temper a rally in Greek bonds sparked by optimism over the provisional accord.
“It seems their money box is almost empty,” Dijsselbloem told reporters at an event on Sunday organized by Dutch newspaper de Volkskrant in Amsterdam.
Greece is seeking the disbursement of an outstanding aid tranche totaling about 7 billion euros. Without access to capital markets, its only sources of financing are emergency loans from the euro area’s crisis fund and the International Monetary Fund. Its banks are being kept afloat by an Emergency Liquidity Assistance lifeline, subject to approval by the European Central Bank.
“I can only say that we have money to pay salaries and pensions of public employees,” Greek Finance Minister Yanis Varoufakis told Italy’s Il Corriere della Sera in an interview Sunday. “For the rest we will see.”
Varoufakis said on the weekend that if the country’s creditors raise requests which aren’t acceptable to the government, then the people of Greece may have to decide on how to break the deadlock. Prime Minister Alexis Tsipras also signaled the referendum option is being considered.
“If we were to hold a referendum tomorrow with the question, ‘do you want your dignity or a continuation of this unworthy policy,’ then everyone would choose dignity regardless of difficulties that would accompany that decision,” Tsipras told Der Spiegel Magazine, in an interview published Saturday.
Tsipras is walking a tightrope between sticking to his election pledges, which found resonance in a country with a 26 percent unemployment rate, and avoiding default and a possible exit from the euro region. Some of his post-election glow is starting to fade, one opinion poll showed.
A survey conducted by Marc for the Efimerida Ton Syntakton newspaper on Saturday showed 64 percent of Greeks had a positive opinion of the government, down from 83.6 percent in February.
“Maintaining the unity of the anti-bailout coalition, while striking a deal which would ease the immense pressure on the economy, is proving to be almost a ‘Mission Impossible,’” said George Pagoulatos, a professor of European politics and economy at the Athens University of Economics and Business.
Tsipras’s administration sent a set of commitments Friday to Dijsselbloem, in the hope that the policy proposals would pave the way for the disbursement of aid.
Two officials representing creditor institutions said the proposals, which include tackling tax avoidance through non-professional inspectors and equipping citizens with chipped smart cards, aren’t enough to unlock bailout funds. The plans are amateurish and don’t signal substantial progress to meeting the commitments it made on Feb. 20, they said, asking not to be identified as negotiations are private.
In its letter requesting an extension to the bailout last month, Greece’s government had committed to streamline sales tax rates, with a view to limiting exemptions, implement a comprehensive review of government spending in every sector, and auction digital frequencies used by TV channels.
‘Time Running Short’
The letter, which was sent to euro area finance ministers on Feb. 23, and got their approval the day after, also included a commitment to pension reform, the elimination of loopholes and incentives that give rise to an excessive rate of early retirements, and the removal of barriers to competition in its goods and services markets.
With about 2 billion euros of debt-servicing payments, including T-bill redemptions and IMF obligations coming due on March 13, Greece’s government has little room to maneuver.
If talks between euro-area finance ministers in Brussels fail, the government may have to decide its next step fast.
“Time is running short for Greece,” ECB Executive Board member Benoit Coeure said in interview with Cypriot newspaper Politis published Sunday.