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Economy

Greece can only survive within the eurozone, analyst says

media Charalambos Tsardanidis, director of the Institute of International Economic Relations Jan van der Made

The massive support for a 'No' to European debt-restructuring programmes and calls for a "Grexit" and a return to the drachma are unrealistic and will lead to only more misery for the common man, an analyst tells RFI. Athens will have to think carefully if it continues on the path that is sustained by the extreme left of Greece’s ruling Syriza party, says Charalambos Tsardanidis, director of the Institute of International Economic Relations.

Outgoing finance minister Yanis Varoufakis “was the one who formulated the negotiating strategy so far, including the referendum," Tsardanidis said Monday. "But in the inner circle of Syriza, there were disputes between different factions. There was one group that wanted to leave the euro altogether, while Varoufakis wanted to have a diplomatic tactic to go for a referendum.

“This also changed the whole picture of the negotiation, and created strong reactions from the member states.”

Tsardanidis says that Varoufakis’ strategy has created a lot of enemies, not only outside of Greece but also inside, and especially among many Syriza members.

“It was not just about his methods," he explained. "He made proposals, for instance that Greece should adopt an 'IOU' mechanism. He had the habit of talking to the press and issuing his own statements before consulting with prime minister Alexis Tsipras, which is rather bizarre.”

In the end, Tsardanis says, the departure of Varoufakis is a “positive move” regarded well by Greece’s eurozone partners.

“It may create some chances of opening the window for a new round of negotiations,” he said.

Meanwhile, a 20 July instalment is looming for Greece to pay 3.49 billion euros. This sum comes on top of a 1.5-billion-euro instalment that Athens failed to pay back to the International Monetary Fund on 30 June.

Dossier: Eurozone in crisis

The country now owes the IMF 21.2 billion euros in addition to a total of 130 billion euros to the European Financial Stability Facility.

The average maturity of these loans is 32 years.

Apart from that, there is 52.9 billion euros to be paid back to individual eurozone member states and the rolling over of short-term T-bills amounting to 15 billion euros, of which 2 billion euros have to be rolled over on 10 July. On top of that, there is some 27 billion euros owed to the European Central Bank.

A long list of deadlines set for repayments of these debts and their interest stretches all the way to 2053.

But according to Tsardanidis, the most urgent problem now is to get cash. A “short-term programme” may be worked out until the end of the summer in order to supply Greece with all the money it needs to pay its debts to the IMF and to the ECB.

Long queues at ATM machines can be seen all over Athens, "much longer than in the weekend,” says Tsardanidis. The government is pondering extreme measures. A vice minister of finance proposed a prohibition to take away cash that people had stored in personal safe deposit boxes in their banks.

“It is an amount of some 10 billion euros that is unaccounted for,” he says. And the right-wing daily Katherimini reported that people with Swiss bank accounts may evade a fine if they bring back their money, provided they pay a 21 per cent tax over the total amount.

“Nobody will do it,” says Tsardanidis, who points out that Greeks have put some 2 billion euros away in Swiss banks without declaring it to the fiscal authorities.

Meanwhile, if there is going to be a new programme for debt restructuring and it includes more austerity, Syriza voters won’t be happy, says Tsardanidis: “Even Syriza’s current proposals contain austerity measures, if the EU will consider rescheduling of the debt.”

But it is far from clear if the EU will accept new proposals. And the reaction of the grassroots and the Left Platform, the left wing of Syriza, are not to be underestimated.

In a worst-case scenario   Greece leaving the eurozone   there won’t be much hope left, says Tsardanidis. “That will mean the destruction of the Greek economy. Most of our products are imported; 80 per cent of our food stuff is imported, so we don’t have a good foundation to be independent for many years to come in which we would need to create an alternative production model,“ he says.

Tsardanidis cites estimates that a "Grexit" would mean a “50 per cent loss of revenue for the Greek people.”

“We have to choose between an austerity program that would create much more pain than we have lived so far, and isolation from Europe which may mean that people will suffer even more because Greece’s economy has no way to survive without having a relationship with the eurozone and the EU,” he concludes.

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