A series of events that have taken place has set Greece on a potentially dangerous collision course with its European creditors that could bring the country, once again to the brink of financial collapse.
How it all played out:
On December 5, 2016, Eurogroup ministers meeting in Brussels agreed to give Greece short term debt relief in the form of easing of loan repayments and the waiving of an interest rate hike that was due to take effect in 2017.
According to Klaus Regling, the head of the European Stability Mechanism, the body that releases the bailout funds to Greece, the package of measures would reduce Greece’s debt burden by 20 percentage points by 2060.
Germany pushed back, arguing the Greece needed more reforms, but the Eurozone ultimately passed these measures.
A few days later, in a nationally televised address, Greek prime minister Alexis Tsipras announced a series of benefits that his government would enact, that targeted the country’s most vulnerable people.
He announced one-time Christmas bonuses for senior citizens living on pensions lower than €800 a month and suspended the sales tax (VAT or value added tax) on Greece’s border islands which have felt the biggest burden of the refugee crisis.
The European creditors were furious, telling the media that were not consulted about Tsipras’ plans and announcing that they would cancel the originally-promised debt relief.
Tsipras, on his end, doubled down and responded that the money for these benefits would come from budget surpluses that his government had achieved and not from European bailout funds.
Furthermore, he announced more plans to continue a free school meal program for 30,000 underprivileged pupils.
Greece’s government spokesman Dimitris Tzanakopoulos fired back during a television interview that Greece was not a colony of Europe and that the government had a responsibility to tend to its most vulnerable citizens and those impacted the most by the austerity packages imposed by the country’s lenders.
Defending the spending increases, Tsipras said that the country’s creditors “should respect the Greek people”, who he added had made “huge sacrifices in the name of Europe”.
“We have carried the weight of the refugee crisis. In the name of Europe we have, in recent years, implemented an extremely harsh policy of austerity.
“Everything that we are doing is absolutely within the framework of the accord which we are keeping and which our partners should keep too.”
A spokesman for Eurogroup president Jeroen Dijsselbloem said: “The institutions have concluded that the actions of the Greek government appear to not be in line with our agreements. There is no unanimity now for implementing short-term debt measures.”
But the Europgroup’s retribution on Tsipras might have cracks.
French President Francois Hollande warned on that Greece should be treated with “dignity”.
“I want Greece to be treated with dignity and to stay in the eurozone,” Hollande said as he arrived in Brussels for a meeting.
“There cannot be any question of asking extra efforts from Greece or of stopping it from taking a certain number of sovereign decisions.”
French Finance Minister Michel Sapin said earlier that Paris opposes the decision to suspend the debt relief measures.
Sapin suggested the decision had not been taken unanimously by the 19-member eurozone, with austerity champion Germany known to have pushed for suspending further aid to the debt-wracked country.
“Individual statements are not the collective statements of the eurogroup,” Sapin told reporters, putting France at odds with the decision announced on Wednesday morning.