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Greece Crisis: PM Tsipras confident, assures debt-deal within 48-hours

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Athens: Greek Prime Minister Alexis Tsipras appears confident that the reforms-for-cash debt deal Greece has been seeking for five months with creditors will be reached within 48 hours after Sunday’s referendum regardless of the result.

In an interview with local private television channel ANT1 on Thursday evening, the Leftist leader assured that Grexit was not an option for his government and that the hardships Greek people were suffering these days would soon be over.

Tsipras dismissed criticism that his initiative to call last Saturday, the referendum on the debt deal proposal submitted by creditors on June 25, was the catalyst to the banks’ closure and the introduction of capital controls since this Monday, Xinhua news agency reported.

He put the blame on the hardliners within the Eurogroup who rejected Athens’s request for a new extension of the bailout that expired on Tuesday midnight, when the country failed to repay a loan installment to the International Monetary Fund (IMF) and was declared in arrears status.

The referendum should have been held five years ago when Greece resorted to the EU/IMF bailouts, the Greek premier argued, so that citizens could decide on the course the country takes.

“Today people should not worry, because we will have a deal within 48 hours after the referendum,” Tsipras said on Thursday when asked whether banks would reopen next Tuesday, as his government has announced, and whether deposits face the spectre of a “haircut”.

“Banks will reopen with a deal soon, regardless of Sunday’s outcome,” he said, noting that on Monday he was ready to travel to Brussels to negotiate and sign an agreement.

“Grexit is not our option,” the Greek leader underlined. He stressed that his government still sought a “viable solution” for the Greek debt crisis within the European framework.

He insisted that a debt restructuring was the only way to ensure the sustainability of the Greek debt burden and subsequently of any deal with creditors, pointing to the IMF report released earlier on Thursday.

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According to the IMF, the Greek debt load is unsustainable and Greece needs a debt relief in exchange of reforms and a new 50-billion euro ($5.5 billion) financing package until 2018 to stay afloat.

Tsipras avoided to state clearly on Thursday whether if “Yes” prevails against his government’s line he intended to step down, call general elections and leave another premier resume dialogue with lenders.

On the way to Sunday’s referendum, the risk of a rift within the two-party coalition government and political turmoil next week increased.

Five MPs of the junior Greek coalition partner Independent Greeks (ANEL) party publicly rejected the referendum as divisive for Greek society on Thursday.

One of them who added that he intended to vote “Yes” on Sunday was expelled from ANEL’s parliamentary group.

He eventually resigned from his seat in parliament as asked and immediately replaced so the coalition still controls 161 seats in the 300-member assembly.

Health Minister Panagiotis Kouroumblis has implied that he would quit the government should further cutbacks on expenditure in the health sector were implemented, while government sources rejected media reports that the leader of ANEL and Defence Minister Panos Kammenos has also threatened with resignation if defence cuts materialized.

As Tsipras was speaking on TV on Thursday night, the same government sources were also dismissing reports that one of his closest aides, the government’s General Secretary Spyros Sagias, had already submitted a letter of his resignation due to his objection to the “highly risky” referendum idea.

(IANS)

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Know How Venezuela Can Restore Back Its Economy

A U.S.-aligned government in Caracas would likely seek to restructure its debts to creditors like China and Russia, two countries that continue to support the Maduro government. China has loaned Venezuela $20 billion in exchange for future oil shipments.

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Venezuela
A man holds a sign that reads in Spanish "They attack for oil" during a march of in support of the state-run oil company PDVSA, in Caracas, Venezuela, Jan. 31, 2019. VOA

Oil-rich Venezuela’s near economic collapse may make it easier for U.S.-backed opposition leaders to reverse socialist policies instituted by late President Hugo Chavez, if they are able to oust his successor, Nicolas Maduro, according to analysts.

“I do think at the very beginning, because the Venezuelan people have suffered so much there, they’re going to be willing to give a lot of political capital to the new leadership to do all of these changes,” said Dany Bahar, an Israeli and Venezuelan economist with the Brookings Institution in Washington.

People line up to receive bags with food subsidized by the Nicolas Maduro's government near the international bridge of Tienditas on the outskirts of Urena, Venezuela, Feb. 11, 2019.
People line up to receive bags with food subsidized by the Nicolas Maduro’s government near the international bridge of Tienditas on the outskirts of Urena, Venezuela, Feb. 11, 2019. VOA

Economic collapse

In the last five years, Venezuela’s economy has shrunk by nearly half. Nationalization of much of the private sector, including the oil industry, has driven away foreign investment. Hyperinflation, aggravated by the increasing fiscal deficit, is now close to 180 percent, with prices of goods tripling every month. More than 3 million people have fled the country to escape increasing poverty.

The government-subsidized assistance programs for the poor have been plagued by chronic food and medicine shortages, due in part to corruption and declining oil revenues that account for more than 95 percent of Venezuela’s export earnings.

Maduro has claimed the humanitarian crisis in his country is a “fabrication,” and blamed U.S. sanctions and capitalist sabotage for the economic shortfall.

The United States, as well as most of Latin America and Europe, has recognized Juan Guaido, president of Venezuela’s National Assembly, as the country’s interim leader, and support opposition claims that Maduro’s reelection last year was illegitimate after he banned most opposition parties from running.

FILE - Opposition National Assembly President Juan Guaido talks with reporters upon his arrival to the Venezuelan Central University for a conference on economic plans for reviving the country in Caracas, Venezuela, Jan. 31, 2019.
Opposition National Assembly President Juan Guaido talks with reporters upon his arrival to the Venezuelan Central University for a conference on economic plans for reviving the country in Caracas, Venezuela, Jan. 31, 2019. VOA

Market reforms

With the “Chavista” socialist model discredited, new Venezuelan leadership aligned with the United States would be expected to embrace strong market reforms that would entail an infusion of international aid and credit, privatizing state-controlled industries and cutting government subsidies.

“Market mechanisms have been completely destroyed. The government centralizes everything, decides who gets what, rations all sorts of goods, food, medication, everything. So, you have to get rid of that and just allow the market to reappear, which doesn’t really take very long if the situation on the ground is stable,” said Monica de Bolle, a senior fellow at the Peterson Institute for International Economics in Washington.

Fighting inflation will likely be the top priority for any new government. Recommended fiscal controls would include introducing a new currency tied to international exchange rates, as was done by Brazil and Argentina in the past. Venezuela’s bolivar has lost most of its value, as the Maduro government reacted to inflation by printing more money while its oil revenues plummeted and its deficit grew.

“The moment you move from very high inflation to low inflation, the first thing that you see is a dramatic reduction in poverty rates. This is what happened in Argentina. This is what happened in Brazil, you know, at the time when they were fighting their own inflationary problems,” said de Bolle.

Privatizing oil industry

The International Monetary Fund would likely require Venezuela to lift price controls and privatize state-owned companies, including the oil and gas company Petróleos de Venezuela, S.A. (PDVSA), in exchange for billions of dollars in aid and loans. The reforms and influx of capital would help ease food and medicine shortages.

Venezuela has the world’s largest oil reserves, but production has fallen from three 3 million barrels per day (bpd) in 1997 to just over 1 million bpd in 2019. Maduro contributed to the decline by putting generals in charge of the company rather than industry professionals, and replacing qualified staff with thousands of political supporters.

“If we’re generous with the interpretation, they have also been doing social programs and things like that. If we’re not generous, it has become a vehicle of corruption for the regime. So, there’s going to need to be a deep restructuring of the oil company,” said Bahar.

A U.S.-aligned government in Caracas would likely seek to restructure its debts to creditors like China and Russia, two countries that continue to support the Maduro government. China has loaned Venezuela $20 billion in exchange for future oil shipments.

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Ending Venezuela’s free oil shipments of an estimated 50,000 barrels per day to Cuba, another key Maduro ally, could redirect billions of dollars to support limited social programs at home.

If Maduro is removed from office, Washington is expected to ease oil sanctions imposed this year that are estimated to cut Venezuela’s oil exports by two-thirds. Oil sales to the U.S. had provided nearly 90 percent of Venezuela’s hard currency before the sanctions were enacted. (VOA)