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Greece, which is literally hanging with one leg over the abyss called "sovereign default" while strikes and political bickering are undermining the ground under the opposite leg, is entering a crucial phase. A general strike against the cancellation of the 13th and 14th salaries in the private sector and against the cuts in the public sector is declared in Attica today, at a time when the treasury is in a state in which it may not be able to pay even the first salary for the year.
    The negotiations with private creditors in the face of the Executive Director of the Institute of International Finance Charles Dallara for the 50% haircut on Greek debt should resume in Athens tomorrow. As Mega TV correspondent Michalis Ignatiou reported on Twitter, that is not certain as Charles Dallara is urging the International Monetary Fund and the European Commission to clarify their positions on the Greek debt cuts. The main reason for the suspension of negotiations last Friday was the interest rate on new bonds. Creditors insist on an interest rate of 5 to 5.5%, Germany does not accept more than 3% and some media state that according to the International Monetary Fund, Greece will not be able to service its debt if the interest rate is higher than 2%.
     Investors throughout the world clearly expect Greece’s default in the coming days. Bill Gross, CEO of the largest investment fund in the world PIMCO announced this yesterday on Twitter and Maurice Kramer from Standard & Poor's forecasted the same later. "If the Greek government does not immediately do something significant and efficient rather than just impressive such as to close the most unprofitable public enterprise – the railways, the investment climate will not be in our favour," said a Greek representative of the big business. "It is dangerous when your creditors start saying one by one that they expect you to go bankrupt. This expectation infects all and bankruptcy becomes inevitable then," said a Greek financier with a long career in international markets.
    "The government of Lucas Papademos will cope with the objectives of the mandate - to complete the negotiations with private creditors on the cut of the debt, to conduct the necessary reforms and to conclude the agreement for the new bailout of 130 billion euro,", this is certain, stated Interior Minister Tassos Yanitsis, who spoke yesterday before the annual meeting of the Greek Alumni Club of Harvard Business School. "The problems in Greece will begin after the government of Lucas Papademos" he fears. Indeed, many observers wonder how the same political parties that have led Greece to its present condition will be able to take it out of it. How those politicians who indiscriminately employed civil servants will now boldly lay them off.
    "Greece has two options ahead. Either to drastically suppress the purchasing power of the Greeks by reducing incomes and prices or to obtain its own currency, to devalue it dramatically and become competitive in world markets again," said Daniel Gros, director of the Centre for European Policy Studies. He said the economic boom in Greece in the early 21st century was due mainly to the increased consumption financed by cheap and easy lending. Therefore, it is necessary to suppress consumption drastically now as Latvia did.  Public consensus is needed to suppress consumption brutally. This is a political test for Greece. And this is what Europe expects from it. It does not matter for it how this will be achieved and whether it is fair or not. Equitable reduction in consumption is a Greek problem, not a European one," said Daniel Gros.
    According to Jean Pisani-Ferry, the director of Bruegel, the Brussels-based think tank, the only way to make a country proceed with fiscal consolidation is to leave it to feel the pressure of markets. "There is no doubt that painful reforms will be resisted. There is no doubt that the recession throughout the eurozone has a negative impact on the situation in Greece, but its economy is extremely closed and uncompetitive. This must change," said the professor. He defines as a mistake the strategy of Greek rulers to achieve fiscal consolidation based solely and exclusively on tax increasing. The most serious problem in the negotiations with private creditors according to him is the fact that Greek banks hold large amounts of Greek government securities and will suffer a lot from the debt haircut. So much that the state will have to save them and here is the vicious circle.
    Lord Mark Malloch Brown, an economic adviser to former British Prime Minister Gordon Brown, defined the euro as a discredited currency. "The eurozone is an experiment of social democracy, which assumed that countries with such different economies, growth, politics and attitudes could have a single currency. This is the cause of the crisis and it is incurable, and the lack of political leadership is indicative of it," said the British expert. He believes that Greece has always been a step outside the euro, holding it like a drowning man clutching a straw.
    The former president of the Hellenic Federation of Enterprises  Dimitris Dimitrakopoulos spoke about two perils in Greece. The first one is the group of politicians and union leaders, who are willing to ruin their country but to keep their power. And the second peril is the utopian faith of Greeks, that "It is not in Europe's interest to let us fail, or to throw us out of the eurozone." "The success of PSI is in no way guaranteed. Even if negotiations are successful, even if our country receives the second bailout package, it will still have to reform. Our partners from the European Union are clear – they will only help for our old debts, we will have to finance the new ones by ourselves," said Dimitris Dimitrakopoulos.