Analyse fra BNP Paribase
Greece: The government trying to meet deadlines in a bid to facilitate a deal As we go to print, the Greek government has yet to submit its detailed reform proposals to its creditors by the end-Thursday deadline. However, there has already been press speculation on what the proposals could look like. According to the Kathimerini newspaper, the government is preparing a package worth EUR 10-12bn (6-7% of GDP) for 2015-16, EUR 2-4bn higher than it presented before the referendum.
The increase in the overall amount reflects a potential downward revision to the government‘s GDP growth estimate, from 0.5% for 2015 previously to as low as −3%, according to press reports. Allegedly, the package is still tilted towards tax hikes (including an increase in corporate tax and a rise in VAT on luxury goods, restaurants and hotels) rather than expenditure cuts, a fiscal mix that would most likely be detrimental to the Greek economy. Last time, the creditors asked for a more balanced approach; we believe their stance is unlikely to change this time around, highlighting the challenges in the way of any potential deal.
What’s more, not all in the Syriza government are likely to agree on a deal. The Energy Minister Panayiotis Lafazanis, who heads the far-left section of Syriza, told at a conference on Thursday: “Greece is striving to reach an agreement with international creditors but does not want a third memorandum that will bring harsh austerity, suffering and deprivation to the Greek people”. Taken alone, such comments could raise doubts as to whether the Greek premier could get adequate support for any deal back home. However, the referendum has strengthened Prime Minister Alexis Tsipras’s position; the involvement of the opposition parties in this week’s negotiations suggests that if a deal is struck, Mr Tsipras could pass it with the support of main opposition parties.
The question, however, is whether Greece could even reach that point. A workable plan for both Greece and its creditors might be more difficult than many assume. Latam experience suggests consequences of Grexit would be severe Greece’s rejection of austerity in Sunday’s referendum has increased the likelihood that the country will have to leave the eurozone. Latin American experience suggests that Greece’s departure from the currency bloc would be difficult to engineer and could have severe consequences for the economy. The introduction of a new currency would result in a large devaluation and could lead to a banking crisis and debt defaults. A currency board or ‘euroisation’ would be difficult, as Greece has insufficient FX reserves. And operating a parallel currency could have significant adverse consequences, too. For additional details, s
