Greece falling short of final debt deal

For a government struggling to make a repayment to the International Monetary Fund this week, Greece's Syriza administration has a remarkably lax attitude to negotiating with its creditors. Last week, Athens sent the latest, painfully slow, iteration of a reform programme to eurozone governments, the IMF and the European Central Bank, asking for its bailout to continue.

The letter was at least fuller and more rational than previous attempts. But it still fell short of a comprehensive agreement that will allow Greece to set out long-term plans and be granted debt relief without the perpetual threat of bankruptcy hanging over it.

The proposal was the usual combination of the useful, the quixotic and the counterproductive. The useful included an assurance that privatisation processes currently under way would be allowed to continue. The quixotic was the notion that a clampdown on offshore tax avoidance - a perfectly sound idea in itself - could raise between €725m and €875m this year. The counterproductive was the announcement that the government would backtrack on some of its labour market reforms, for example reversing the move towards collective bargaining at company rather than industry level.

The problem with the programme as currently conceived - and this is the creditors' fault as well as Greece's - is that some conditions, well-meaning though they are, will have the short-term effect of depressing demand at a time when the Greek economy is struggling to generate growth.

Clamping down on VAT fraud, for example, is a laudable aim, given widespread tax evasion. But unless it is offset with spending or tax cuts elsewhere, reducing the cash flow of small businesses and the self-employed is exactly what the Greek economy does not need just at the moment.

The emphasis should be on setting conditions for long-term growth, not short-term wheezes to raise money. Athens should, for example, be freeing up labour markets and reducing widespread early retirement, which damages the solvency of public pension and social security programmes. The problem is that the Syriza administration has generated such suspicion among eurozone governments that there is little faith that such actions will not be undone once debt relief is delivered.

Such lack of trust will not have been helped by the latest posturing of Alexis Tsipras, Greece's prime minister. Mr Tsipras signalled last week that he regarded Russia as a counterweight to the EU. This week he travels to Moscow. Athens has historical links to Russia, but Mr Tsipras's talk of Greece as a bridge between Moscow and the EU, and his criticism of sanctions against Russia, is fruitless provocation. The implied threat of Greece escaping its EU obligations through assistance from Russia is an empty one. Moscow certainly has enough foreign exchange reserves to cause mischief if it wants to, but the idea that it will take on the burden of bankrolling a crisis-prone economy is a non-starter.

While negotiations stumble on, deadlines for Greece to make a payment to the IMF (April 9) and to repay a Treasury bill (April 14) come ever closer, with the risk that Athens will run out of money and resort to capital controls or a parallel currency.

The ultimate deadline will be set by the Greek banking system haemorrhaging cash such that the economy grinds to a halt. That only becomes more likely with each week that passes without a resolution. Syriza still protests it is desperate to stay in the single currency. Its actions suggest otherwise. It should dial down the posturing and concentrate on the substance.

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