Cash-Strapped Greece Given New Deadline

Euro coin & Greek flag with Athens in the background

Photo by Lisa Whitten

Cash-Strapped Greece Given New Deadline
| published July 8, 2015 |

By Thursday Review staff

For economically-troubled Greece, the clock is ticking…again.

Members of the European community called the Euro Zone have told Greek officials the cash-strapped country has until this weekend to present a viable solution, or the money runs out. Other euro participant nations say that if Greece can craft a package resolution—meaning reforms which meet the criteria of Europe and its bankers—by Sunday at midnight, the EU and the IMF will proceed with a bailout, Greece’s third in five years.

On Wednesday, Greek officials rushed out a hastily-drafted plan, which includes a three-year loan. Greek officials also included vague language regarding economic reforms, tax changes, and pension reforms—three issues often at the core of heated disagreements between Greek and European negotiators.

Greek banks are running out of money, and the Greek government has been unable to implement a solution to the growing crisis. Greece has borrowed hundreds of billions from Europe and international banks, including the International Monetary Fund, but it missed a critical deadline two weeks ago on a scheduled repayment on that debt.

Negotiations between Europe, the IMF and Greek officials have lasted for more than a year, and a newly-elected leftist government—which had campaigned on a promise to resolve the crisis—was unable to craft a solution for a country with extremely high unemployment and a heavy dependency on social services and pension payments. The looming deadline brought the country to the brink of financial collapse, as citizens lined up to withdraw cash from ATMs, and attempted to use credit cards to purchase essentials.

Starting ten days ago, Greece began limiting credit card usage, and restricting ATM withdrawals to about $70 per person. Banks began operating with limited hours, or closing completely, and the government halted all transactions between Greek account holders and foreign banks—an effort to keep cash in the country.

Talks between Greek officials and European negotiators have sometimes been tense and rancorous. Greek Prime Minister Alexis Tsipras has said publicly that Europe is strangling Greece with impositions and controls. He has also called IMF and Euro Zone demands "extortion" and "blackmail." Many Greeks say that the imposition of austerity measures has worsened the effects of the Great Recession.

But members of the Euro Zone and its lenders say that Greece must learn to live within its means, and point to Greece’s continued heavy spending and domestic subsidies as the problem. European leaders complain that Greece has been given previous loans of billions, but has been consistently unable to restrain spending or craft a balanced budget.

The crisis has escalated to the point that it has adversely affected tourism to a land once teeming with travelers from around the globe.

Officially, Tsipras has until the weekend to present a new plan. But German Chancellor Angela Merkel has said it is her preference that Greece draft a broad-stroke solution as soon as possible, as early as Thursday, so that officials and lawmakers in Europe can assess the implications. The draft plan floated on Wednesday may be a step in the direction which Merkel prefers, and may yet prove to provide a meeting point between the two sides. Euro Zone officials have indicated to reporters that they will still want details by Thursday or Friday.

Last weekend, Greek voters made their positions clear in a nationwide referendum. That vote, which was expected to be close, turned out to be a resounding victory for those Greeks who want out of the euro. Tsipras had called for the vote when talks between Greece and its creditors broke down two weeks ago.

Related Thursday Review articles:

Will Greece Avert Financial Derailment?; Keith Roberts; Thursday Review; July 6, 2015.

Greek Default Could Have Wide Impact; Thursday Review staff; Thursday Review; June 30, 2015.