Neverending Crisis

Greek Reforms Fail to Impress

Greece Corbis
Greece; torn between the drachma and the euro.
  • Why it matters

    Why it matters

    Greece will probably run out of money by mid April, yet its lenders are insisting they will not release bailout funds until the country makes firm commitments to reforms.

  • Facts


    • Greek officials held talks with lenders from the E.U., ECB, and IMF over the weekend.
    • The eurogroup will not meet ahead of Easter to discuss the reforms.
    • Greece has to pay the IMF €450 million on April 9.
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Things may be close to the wire, but for now Greece’s creditors are playing hardball.

Despite rapidly running out of money, Greece cannot hope for any speedy relief to its increasingly precarious financial situation after handing over its latest reform proposals.

The finance ministers of the euro zone, known as the eurogroup, are not expected to meet before Easter to release bailout funds to Athens, according to information obtained by Handelsblatt.

As such it is not yet certain if the remaining €7.2 billion in the bailout funds earmarked for Greece will be unlocked by the second week in April.

With the Greek coffers all but bare, that risks the worst-case scenario, insolvency and an exit from the euro zone.

The unwillingness to release the funds is due to the slow pace of Greek reforms and frustration with the lack of cooperation from the leftist-led government in Athens, which in February secured a four-month extension of Greece’s bailout program.

Increasingly, it seems Athens is betting on getting the loans without signing up to the reforms demanded by its partners, particularly Germany.

That is a risky gamble.

“If the Greek government does not make the necessary U-turn, they’ll run out of money.”

Erik Nielsen, Chief Economist, UniCredit Bank

“The Greek government’s strategy of isolating Germany and getting a majority of other euro zone members to support another package against vague promises and no coherent reform plan has failed spectacularly,” Erik Nielsen, global chief economist at UniCredit Bank, said in a client note on Sunday.

“If the Greek government does not make the necessary U-turn, they’ll run out of money.”

Greek officials traveled to Brussels on Friday afternoon and held talks this weekend with the representatives of the lenders — the European Commission, the European Central Bank and the International Monetary Fund – known as the Brussels Group.

The proposed list of 18 measures were reported to be only be accessible in the Greek language on a tablet device, according to the DPA news agency, with the Greek government officials presenting them verbally.

The official reform list was due to be handed in on Monday. However, E.U. officials say that it may now take more time to flesh out the proposals before they can be presented to the eurogroup.

Worryingly, the three days of talks made it clear that there has been little progress on the part of the Greeks, according to participants in the talks. The Greek side’s commitments are still vague announcements of steps against tax evasion and corruption, sources told Handelsblatt.

Tsipras Monday reuters
Things getting serious in Athens. Mr. Tsipras is torn between Brussels and his party. Source: Reuters


There is little sign of concrete reforms related to the labor market or pensions. And the Greek negotiators have also not said anything specific about privatization. According to the lenders, measures in these areas are all mandatory before any funds can be released.

For its party, the Greek government has said that its 18-point reform program does not include any “recessionary measures” and would bring in €3 billion of additional revenue this year and enable the economy to grow 1.4 percent in 2015.

Greece has red lines and won’t agree to any “recessionary measures” such as cutting wages or pensions or allowing mass layoffs, Greek prime minister, Alexis Tsipras, told Greek paper Real News this weekend.

He said he hoped that he hoped the talks with international creditors would yield a “happy ending” to the standoff between Athens and its European partners over the debt crisis.

His party, Syriza, came to power in January after pledging to overturn the austerity regime that had been imposed on the by previous governments, which were the conditions for two bailouts amounting to €240 billion.

Germany in particular has insisted that Greece has to fulfill commitments to reform its economy before any more of the bailout fund, to which it is the biggest contributor, can be handed over.

Relations between the two countries have soured, fuelled by the personal animosity between the countries’ finance ministers and Greek calls for war reparations. A visit by Prime Minister Tsipras to Chancellor Merkel in Berlin last week sought to ease tensions, but the fundamental disagreement over what kind of reforms need to be implemented remain.

Tax Revenue in Greece-01


That has lead to increased uncertainty about a deal being reached.

On Friday, ratings agency Fitch cut Greece’s credit rating to “CCC” — meaning debt default was a “real possibility” — but said nevertheless it expected the country to survive the current crisis.

“Greece is now teetering on the edge of chaos with the population withholding tax payments and withdrawing money from the banks –- and the possibility of Greece leaving the euro zone, which… would be an utter economic disaster for Greece,” Mr. Nielsen warned.

“Greece is forcing the other euro zone countries to make a decision: either accept bail-out loans without real conditions or release Greece from the monetary union.”

Jörg Krämer, Chief Economist at Commerzbank

Despite that sense of urgency, there seems to be little appetite to rush into handing more cash to Greece.

A high-ranking European official told Greece’s Katherimini newspaper that the euro working group (EWG) would assess the measures this week but that euro-zone finance ministers would not be called upon until all the details have been ironed out.

Officials at the various finance ministries are expected to hold a teleconference on Wednesday.

Greece cannot really afford these delays. The money in the public coffers is expected to run out by April 9, when a €450 million payment to the IMF is due.

Yet Greece’s European partners have become increasingly frustrated with the lack of cooperation from Athens.

Visiting technical teams, for example, have not been able to obtain all the information they need from ministries.

The Austrian finance minister, Hans Jörg Schelling, says he doesn’t believe in a swift agreement on Greece. “We have a crisis of confidence with Greece,” he said. The country has failed to produce the necessary papers. “It is difficult to reach decisions on this basis,” he said.

Greece still seems to be playing a game of chicken with its partners, gambling on the fact that its partners will do anything to avoid allowing the country to exit the euro zone, argues Jörg Krämer, Chief Economist at Commerzbank.

“Greece is forcing the other euro zone countries to make a decision: either accept bail-out loans without real conditions or release Greece from the monetary union,” he wrote in a note on Monday.

It is clear that Mr. Tsipiras is under pressure at home, with leftist elements of his Syriza party preferring confrontation rather than compromising on election promises to end austerity.

His energy minister, Panagiotis Lafazanis called for a clash with a “Germanized Europe and the E.U. establishment,” in an interview at the weekend.

Meanwhile, Euclid Tsakalotos, international economic affairs minister, said Greece won’t abandon its anti-austerity philosophy in return for bailouts. The country wants an agreement but will go its own way “in the event of a bad scenario,” he told the Guardian newspaper.

“This government is faced with a massive dilemma,” Spyros Economides, professor of international relations at the London School of Economics, told Handelsblatt Global Edition. “It wants to reach certain agreements with whichever European forum it is dealing with and makes promises which it cannot deliver domestically.”

Meanwhile, one potential source of funds could be untaxed income that rich Greeks have squirreled away in Swiss bank accounts. Experts estimate that there are untaxed Greek assets worth the high tens of billions hidden in the country.


Greece's Debt Burden-01


The Swiss authorities want Greece to implement an amnesty deal which would allow tax evaders to avoid penalties in return for self-disclosure.

A year after talks broke down on remaining tax issues, the Swiss junior minister for International Finance and Tax Matters, Jacques de Watteville, and Nikos Pappas, the Greek minister of state, have taken up the issue again in order to work together in battling tax evasion.

Switzerland no longer wants to complete a formal tax agreement with Greece, as it did with Austria and Britain two years ago, Handelsblatt has learned from sources close to the negotiations.

A planned agreement with Germany, in which the Swiss banks, adhering to banking confidentiality, would have anonymously transferred withheld taxes, was never implemented.

Since then the United States has enforced, through the Foreign Account Tax Compliance Act (FATCA), that Switzerland automatically deliver account information for U.S. citizens to the United States.

If Switzerland were now to conclude a bilateral tax agreement with Greece, it would have to be ratified by the Swiss parliament, and with a mandatory referendum that can take a long time.

Things would go faster if Greece, like Germany, were to give its tax dodgers a path to tax compliance through self-disclosure. Then the Swiss banks could require their Greek customers to submit a tax declaration and cancel the clandestine accounts by a deadline without violating Swiss law.

The government is considering an amnesty for tax evaders if they declare the income they have hidden from the authorities so far.

The Greek Deputy Finance Minister, Nadia Valavani, announced that a draft law will be presented by the government in April. Details, such as the tax rate, are currently being worked out in the Greek finance ministry.

In the past, there have been attempts to repatriate illicit funds put by Greeks into accounts abroad, but with modest results. In 2004, Finance Minister Giorgos Alogoskoufis initiated a six-month-long amnesty, allowing those with money abroad to bring it back to the country with a special tax rate of 3 percent and to remain penalty free. Mr. Alogoskoufis hoped to be able to repatriate €4-5 billion.

Even though the timeframe was extended by three months, only €625 million was returned to Greece.


Ruth Berschens is Handelsblatt’s bureau chief in Brussels, Siobhán Dowling is an editor with Handelsblatt Global Edition in Berlin and covers European politics. Holger Alich in Zürich, Gerd Höhler in Athens and Donata Riedel in Berlin contributed to this article. To contact the authors:,



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