Editor's Note: Greece is a country in crisis. Facing financial, political and social uncertainty, Greece's ruling Syriza party has been trying to cut a deal with the European Union to keep the Greek economy afloat. But European institutions and prominent member countries such as Germany are reaching the limits of their patience when it comes to tolerating Greek debt. Something has to give, and Athens is in an extremely vulnerable position. Stratfor is logging the latest developments in this crisis update.
April 29
Greek officials met with members of the Euro Working Group in Brussels on April 29 to discuss Athens' proposals for economic reform and will meet with representatives from the EU Commission, the European Central Bank and the International Monetary Fund on April 30. Athens hopes it can convince Greece's lenders to disburse at least part of the last tranche of bailout funds (some 7.2 billion euros, around $8 billion) sooner rather than later.
According to Greek media, the April 29-30 negotiations focus on measures already promised by Athens, including policies to improve tax collection and fight tax evasion, rather than on new proposals. Greece has also allegedly offered to delay the introduction of controversial measures, such as raising the minimum wage. But eurozone ministers insist that Athens introduce further reform, including of pension rules and labor legislation, and that it continue privatizing state-owned companies. Greek Prime Minister Alexis Tsipras' task will be to meet the demands of both Greece's lenders and the more radical members of his government, who oppose pension cuts, privatization of strategic companies and layoffs in the public sector.
Greece is hoping to reach a deal with its lenders before May 12, when it has to repay 750 million euros to the IMF. Athens also needs funds to pay pensions and salaries. In the meantime, Athens has tried to finance itself through controversial measures such as a decree obliging municipalities to transfer funds to the central bank.
April 25
Greece's governors and other local officials agreed April 25 to lend cash to the central government after Prime Minister Alexis Tsipras assured them the measure would be temporary. The decision comes after Greek lawmakers approved the decree April 24 to force state entities to lend cash to the central government in spite of protests by municipalities and labor unions. It also comes as Athens negotiates with EU and IMF creditors over its proposal for a deal to obtain cash in exchange for making reforms.
April 21
The Greek government has managed to gain a few extra weeks in its push to pay pensions and public sector salaries while avoiding a default on debt owed to the International Monetary Fund. On April 20, Athens issued a decree ordering state entities to transfer their cash reserves to Greece's central bank — a measure that is expected to collect around 2 billion euros ($2.15 billion). This should help Athens pay around 1.6 billion euros in pensions and salaries by the end of April and almost 1 billion euros to the International Monetary Fund in early May.
This measure, however, is controversial. On April 21, the Central Union of Municipalities of Greece threatened to hold demonstrations against the measure and take the issue to the supreme court. But Athens' decree is effective immediately, meaning any measures to block it will not take effect before the Greek government accesses the money. On top of this, Greece's parliament has 90 days to ratify the decree, during which time Athens can legally use the funds. While the Hellenic Parliament will debate the decree on April 22, the Syriza-led government has acquired the space in which to negotiate with its lenders and meet its immediate domestic financial obligations.
These are only delay tactics. The Greek government had been expecting to reach a deal with its lenders during the meeting of eurozone finance ministers April 24-25. However, Athens and its lenders still disagree on issues such as Greece's fiscal targets and privatization. As a result, several EU officials have suggested an agreement will not be reached until mid-May.
Athens' decree has bought Greece just enough time to prevent a default and continue negotiations with its lenders. But the Greek government is running out of time and money. If no agreement is reached in May, Athens will probably not be able to buy more time to prevent a default.
April 18
Athens aims for a deal with its creditors over a reforms package but would not rule out a referendum or early polls if talks reach an impasse, Greece's deputy prime minister said. Athens is stuck in negotiations with its eurozone partners and the International Monetary Fund over economic reforms required by the lenders to unlock remaining bailout aid. Talks are not expected to produce a deal for the approval of eurozone finance ministers at their next meeting in Riga on April 24, as progress is painfully slow.
Understanding the Origins of the Greek Financial Crisis
As Greece attempts to deal with multiple pressing concerns, from its worsening financial situation to political and social unrest, Stratfor Europe analyst Adriano Bosoni examines the various issues at stake in a question-and-answer format in Explaining Greece's Financial Disarray, first published March 22.
