ECONOMY

Will the price of milk and pasta really decide Greece’s fate?

How much should be the sales tax for a beer and kebab in an Athens taverna? How much for a carton of milk at the local shop? Or bought on an island instead of the mainland?

The integrity of the euro depends on Greece and its creditors agreeing on the answers to these mundane questions. After five months, including talks every day in Brussels this week, consensus has proved elusive.

“When it comes to negotiations, very often a very small and insignificant thing comes to signify a much bigger difference,” said Stathis Kalyvas, a professor of political science at Yale University. “It may sound absurd right now to be arguing over the price of milk, but in the end, these things can become political hot buttons.”

The acrimony of past meetings turned into confusion bordering on farce in recent days as competing draft proposals were dispatched, dissected and ditched. The Maltese finance minister said on Thursday he didn’t even know where the disagreements lay anymore, or what had been added and deleted.

For all the back and forth, the biggest stumbling block may remain mistrust. The Greeks believe that unsustainable debt is the root of their woes and Europe won’t forgive any of it. Creditors believe that Greek leaders remain unwilling to overhaul a dysfunctional economy after more than five years of prodding and at least 200 billion euros ($224 billion) of bailout loans.

Ideological Clash

The clash is reflected in the pettiest of disputes.

While Prime Minister Alexis Tsipras and his Coalition of the Radical Left, or Syriza, rose to power promising the restoration of national pride, Europe’s top economic officials are embroiled in matters like the price of pasta.

Sticking points until yesterday included a disagreement over tax rates for processed and unprocessed food.

It’s not the first time minutiae have turned into arguments. A year ago, then-premier Antonis Samaras faced a series of defections from his party over a bailout review stalled over extending the shelf life of pasteurized milk. The demand by creditors was met with fierce resistance from lawmakers and local lobbies, who said that it would hurt Greek farmers because supermarkets could import milk from abroad.

Defining Farmers

During the five years since Greece became a ward of European taxpayers, officials from the International Monetary Fund, the European Commission, and the European Central Bank have struggled to undo the patchwork of regulations that have deformed the economy.

The bailout deals that began in 2010 prescribed changes on everything from how taxes should be collected to opening railroads to methods of collective bargaining. And in 2015, the leaders of some of the richest countries in the world are still haggling over how much tax to collect on a movie ticket.

An international official directly involved in the bailout review said earlier this month one of the main bones of contention often not mentioned in media is the “definition of farmer.” Negotiators sparred over incremental changes to company levies — 28 percent? 29 percent? How much should remote Greek islands — and the tourists who flock to them — pay in tax when they use so few of the country’s amenities.

Pasta Battles

All of these little things add up to whether Greece will be allowed to unlock at as much as 7 billion euros or so in aid in time to meet a June 30 deadline on a 1.5 billion-euro repayment to the IMF.

Among the big-ticket issues, the most contentious is pensions: When to start eliminating early retirement for hundreds of different professions, and how quickly to phase out a supplementary amount that the poorest retirees get.

When the talks started, what separated Greece from its creditors was the request for some 4 billion euros in additional annual savings from pension cuts and sales tax hikes. The gap, now smaller, remains unbridged.

Even to those on the front line, five meetings of 19 finance ministers and heads of state in less than a week to discuss whether pasta will cost 5 or 6 euro cents more, verges on the absurd.

After all, as Tsipras’s parliamentary spokesman Nikos Filis said in an interview with Greek radio, “how much pasta can one eat?”

[Bloomberg]