July 29, 2015

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Could Syriza still block a deal?

Syriza’s central committee will hold an emergency meeting Thursday after the political secretariat failed to achieve an unanimous decision yesterday on how to deal with the growing rift inside the party. Panagiotis Lafazanis is pushing hard for a congress to be held now, before a third bailout has been agreed, not in September, like Tsipras is suggesting. Lafazanis also wants a regular congress not an emergency convention, because it would mean delegates are being elected rather than voted as representatives at the 2013 congress, thus increasing the chances of Tsipras getting in like-minded people. The central committee members will now have to decide whether they want a regular or an emergency congress or whether there should be a ballot of Syriza members to decide what should be done. Macropolis highlights the fact that of the 200 members of the central committee half voted against the July 13 agreement, thus the chances of the party blocking Tsipras on the third bailout programme are not slim. The three Left Platform members on the political secretariat called on Tuesday night for Tsipras to abandon efforts to agree a third bailout and essentially draft a plan for leaving the euro.

The technical teams of the four institutions started their work yesterday visiting the state accounting office, the finance ministry and the central bank. The main task is to reassess the macroeconomic conditions in Greece and how recent developments, especially capital controls, have affected their forecasts. It is expected that they will conclude their work by Friday, at which point the mission chiefs can take over. Kathimerini understands that the lenders believe the economy will shrink between 2% and 3% this year, compared to the previous forecast of 0.5% growth. Greece is also on course towards a 1% primary deficit this year.

One of the main issues in the negotiations is to assess the funding needs. The latest assessment we have is a 12 page report on Greece’s request for a 3 year ESM loan from the European Commission. They estimated that Greece needs €82bn, which includes €35.9bn debt redemption, €17.8bn interest payments, a €25bn capital injection to banks, €7bn in state arrears and €4.5bn to rebuild state deposits, according to Macropolis. The total of €90.2bn in financing needs is expected to be diminished by €8.5bn from privatisation proceeds (€2.5bn over three years) and primary surpluses so that the total comes up to 81.7bn. As we have argued before, this is all based on optimistic assumptions about the primary surplus, that is to reach 3.5% of GDP by 2018.

The saga of Varoufakis' Plan B revelations, meanwhile, goes on. The mayor of the city of Stylida and a Greek lawyer both filed lawsuits against Varoufakis, accusing him of “actions that led to economic measures” and “high treason”, according to KT Greece. There are two others, one against hacking of taxpayers registration numbers and another against his “parallel banking system” plan. As MP Varoufakis enjoys parliamentary immunity, so the Supreme Court forwarded the lawsuits to the Parliament. It will be up to its Committee to investigate the case. One of the issues is that Varoufakis acted on behalf of Tsipras. If their findings hold against Varoufakis, 299 MPs would have to vote to lift his immunity.

Our other stories

Today we also have a look at the latest developments for Greek banks, imports, and capital controls; the new German position on EU reform; and the state of the EU banking union.

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