Greece’s Parliament Approves New Austerity Bill Despite Dissent

Anti-Austerity protestors spent much of the afternoon today in clashes with police around Parliament, as Greece voted on the latest bailout package. The nearly $100 billion EUR received by the country today marks the end of debt payments required for the next three years. However, as this vote was coming to the floor, dissent mounted among both the opposition parties and within Prime Minister Tsipras’ own ranks. Many see the bailout package as a raw deal for Greece, without a write down of some of their debt (slated to increase to nearly 200% of their GDP after this package). Many outsiders believe that Tsipras bet that the Eurozone would compromise before losing it as a member, and as it turns out, Germany was ready to move them off the Euro currency without any willingness to budge on their full debt repayment requirements.

All of this effort was for naught, as a very similar package to what was originally planned wound up passing overwhelmingly with a 229-64. This vote will allow Athens to keep a financial lifeline in tact, but at a very significant cost. They will need to raise taxes, cut tax evasion, decrease pensions, decrease significant social spending and sell nearly all State assets. Many political strategists did not see such hard terms being accepted at all just a few short weeks ago.

The measure was ultimately approved, even after a minimum of 10 protests occurred near Parliament throughout the afternoon, and large strikes crippled the city’s services. At least 15,000 demonstrators assembled in Syntagma Square this afternoon. Many of them did not ultimately clash with police, but a sizable minority caused serious disruption outside of Parliament.

Calling Tsipras’ Bluff?

With the previous referendum and ‘Oxi’ vote last week, it was clear that PM Tsipras wanted better terms, ones that included a renegotiation of the terms of their debt. These were soundly rejected, namely by Germany, who seemed to be unwilling to accept any renegotiation of the terms of the loans, or write downs of any fractional portion of the debt. Ultimately, the bill was passed much as it was originally written, just with more funds becoming available.

Tsipras spent much of the day and the day prior convincing the public that this bailout agreement was the best choice. However, defections even among his own party were significant prior to the vote being cast. Tspiras told parliament that they had to either accept the agreement, which he largely did not agree with, or have a default. There seemed to have been no wiggle room in the negotiations in the end. The Greek people accepting the bailout remains to be seen, as even with the most healthy projections for economic growth, Greece’s debt to GDP ratio will still be over 100% by 2030. This means this could be a very difficult decade for Greece as these loans result in severely reduced spending.

The IMF broke ranks with the European leaders by calling for debt relief on Tuesday, similar to Greece’s request. However, European leaders, spearheaded by Germany, ruled this out completely. The IMF does not believe Greece has the capacity to pay off its debt burden under any scenario as it stands. The European Commission continues to rule out debt relief as a possibility, until (or unless) Greece runs out of money again. Then this process will start all over again.


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Greece Submits Formal Bailout Proposal to EU Summit Leaders

In a shocking turn of events, Greek Prime Minister, Alexis Tsipras, submitted a bailout package to the European leaders on the evening of July 9th. This package included a deal for 53.5 billion Euros in additional bailout funds enough to shore up the loan payments of the beleaguered Mediterranean country for another 3 years. This is likely in the hopes that the Greek economy would improve by then and allow them to begin paying off the low interest rates that the European Central Bank and IMF have given Greece until this point.

Greece did not ask for this bailout as it turns out without offering something in return. Tsipras offered a package of reforms to go along with it. Much of these as it turns out were the very same type of reforms originally demanded by their EU counterparts with the proposal from two weeks ago, that was soundly rejected by the Greek people. Among these reforms include pension savings, tax increases and significant spending cuts. This proposal is now set to be discussed this coming Sunday at the summit with all of the European leaders in Brussels.

In exchange for these reforms, Greece is asking for their debt to be refinanced to a level that they can actually pay. This would be significantly lower than the rates they have presently.  It still remains to be seen if this is a proposal that the rest of the Eurozone can accept, however. Creditors may want even more austerity measures to be put in place, but perhaps they have learned from their mistakes over the last few weeks. You cannot draw water from a stone, and it’s better to be repaid slowly at a lower rate than you expected than not repaid at all. If the creditors see the situation in this light remains to be seen.

Could This Crisis Be Coming to an End?

It’s still unclear what the creditors for Greece will be accept with this deal. A haircut of the debt appears to be out of the question, with Merkel in Germany saying as much earlier today. This debt will allow Greece breathing room until 2018 and will be sufficient to pay off the IMF loans and other creditors. They will then only owe funds to EU institutions. In addition, they agree to cut public pensions and increase sales tax (VAT) nationwide. Two key things austerity proponents have wanted for some time.  Issues of trust still linger, with the EU Commission unsure that Greece will ultimately be able to guarantee passage and national acceptance of any terms reached, unless they include significant debt right down (something Germany adamantly opposes).

Greece is not offering this as just another short term bailout. They also want restructuring of their debt, and 35 billion EUR in funds for growth related programs domestically. Debt relief is still the end goal for Greece, and the US. Pressure has been mounting on Chancellor Merkel to offer such terms, as debt relief is seen as a key factor in ensuring Greece’s growth is sustainable. Unfortunately, this is a very unpopular policy domestically in Germany.

At first glance this may seem like a bad deal for Greece, but they in fact get to stay in the Euro, and will have a fighting chance at recovering from this over the course of the next 3 years. Yet, even though this is heavily in the middle of where the EU parliament wanted them to be, it’s unclear if Germany will ultimately accept it. Some form of debt relief is required, something Germany continues to strictly oppose.

Ultimately, there’s another factor at play here. Even if Tsipras gets his deal, as written, he still has to fight the battle back home of accepting these terms. Most of these reforms are what the Greek people already rejected.

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Shocking ‘No’ Heard from Greeks – Eurozone Skeptics Roil

After a heated debate leading up to the shocking referendum in Greece today, the vote clearly came to the side of the ‘Oxi’ (No) voters this evening. With a full 61% of the voters voting against the bailout terms, Greece is now on the brink of leaving the 19-member EU. Whether forced out by debt they can not possibly pay, with an inevitable default, or forced out by their own will against attempts to keep them in the Eurozone by the Trioka, Greece is now playing with fire and setting the stage for something few thought was possible only a few short weeks ago.

‘Europe is dying from the inside’ was heard from opposition on the far left and right across all of Europe today, as anti-EU leaders such as Nigel Farage and Geert Wilders took to social media and interviews describing the future Europe. These parties, such as the UK independent party, have been massively on the rise in recent years across all of Europe as countries battle with unsustainable immigration, poor economic growth, strained social programs and several crises.

What’s Next for the European Union

Anti-EU parties around Europe celebrated the announcement of the Greek referendum results, hoping it will hasten in similar votes in other countries. Prime Minister David Cameron has promised to hold a similar referendum in the UK before the start of 2017. Opposition leaders such as Nigel Farage of the UK Independent party see this has the perfect opportunity for the UK to follow suit, allowing them to finally control their own immigration and monetary policies.

Opposition parties around Europe lauded the decision of the Greeks to control their own destiny, hoping that countries with their own strong economies, like the UK, Netherlands and Finland will soon follow suit.  These plans will take time, they say, but should be easier for the countries not presently using the Euro like the UK.

Farewell to the Euro?

While the headlines tomorrow will focus namely on the Greek default, opposition parties are calling today the first day in the end of the Euro as a unified currency across the continent. These parties have gained significant support in recent elections all across Europe, garnering 25% of the European Parliament seats in the latest elections.  The far right leader in France, Marie Le Pen, called this a victory over the EU oligarchs, which have been blamed for years for their pillaging of 500 million citizens across Europe. They blame them for allowing immigration to tear at the foundations of Europe, undermining their culture and destroying the benefits of taxpayers.

Ultimately, if Greece does drop out of the $11 trillion + annual Eurozone, as many British banks now bet will occur, this will be the perfect setting for the UK’s referendum next year in which voters will be put to the same question of EU membership. Although polls today still show a small majority in support of continued membership, years of erosion of social programs and the tax base in the UK via immigration is creating increased incentives to defect. If Greece does leave, this will set a legal precedent for the action that did not exist before.

One thing that’s for sure, if Greece leaves, this will not be the end of the conflict. Unless the EU pushes to control and curb or even stop immigration, a source of great strife between the healthier and weaker economies, Greece likely will not be the last.

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EU Denies Calls to Send Peacekeeping Forces to Eastern Ukraine

EU leaders have told Ukraine officials today that although they are concerned about continue breaches of the ceasefire on the Eastern Ukrainian border, they will not send peacekeeping troops into the region. European Council President Donald Tusk indicated that only civilian representatives would enter the region, and no troops would be deployed. In recent days, pro-Russian rebels have continually bombarded the key port city of Mariupol, to the East of the rebel controlled region.

Ukrainian President Poroshenko said during the meeting that they needed peacekeepers to monitor the frontlines and the rebel controlled border with Russia. Musk did emphasize that EU sanctions against Russia would remain in place, until the ceasefire conditions were fully realized and remained in place for an extended period. Given Russia’s stalwart resolve that they are not supplying the rebels and Russian troops there are “volunteers” this seems unlikely to occur in the near term.

Continued Fighting Impacts Ukraine’s EU ambitions

On Sunday, OSCE observers noted what they called the most intense shelling of the town of Shyrokyne since the fighting began there back in mid-February of this year. Heavy weapons including tanks were spotted in rebel-held areas near there, they said. As the EU leaders met with Poroshenko in Kiev, they could hear the shelling occurring just a few short miles away. Tanks were visible when looking out over the frontline near the region, and shells for armored batteries were noted.

The economic toll of this war weighs heavily upon the greater ambitions of Ukraine and the EU. There’s simply no way for the two to become closer in trade while this continual fighting continues. The EU visit marks a period where the leaders of the Union want to show solidarity with the Ukrainian people, to help resolve what the West has seen as undue aggression from the East for the last year. The rebels will probably just view this as another collaboration with who they view as “Western” enemies.

Calls for Further Reform

This is the first summit that occurred since since the EU-Ukraine agreement was signed last June.  The EU is still anxious to see the Ukraine take steps to reign in debt, inflation and corruption which was rampant prior to the next government’s takeover. Although it will be difficult to control spending in a time of protracted war.  The EU agreed to delay the implementation of this association agreement until next year, after Russia complained and called the agreement ‘suspicious’. Russia believed this would merely allow cheap goods to flood the Russian market from the EU.

Mr. Juncker, the President of the EU Commission, noted that the living conditions faced by Ukrainians were ‘very difficult’ and pledged during the summit to do more to help. He pledged increased financial support to help them along with these painful reforms, which are required by the association agreement. He noted that it was clear Ukrainians wanted ‘to live in a corruption-free country’.  One of the major areas in desperate need of change is the heavily subsidized and extremely expensive energy sector. Huge energy inefficiencies, lack of trade with Russia after the conflict, and poor infrastructure have been a major drain on national resources.

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