Thursday, September 13, 2018

Greek Economic Recovery Has Nothing to Do With Odysseus

by Alexis Papazoglou

New Republic

September 13, 2018

In 2010, at a picturesque port on the island of Kastelorizo, then Prime Minister George Papandreou announced the start of “a new Odyssey for Greeks”: entry into an austerity-focused International Monetary Fund-European Union bailout agreement to help finance the country’s debt. “We know the route to Ithaca,” Papandreou said, “and we’ve got a map.” Eight years and $360 billion later, last month Prime Minister Alexis Tsipras announced the end of the third such bailout program. Speaking from a peaceful cove on the island of Ithaca itself—Odysseus’s home and final destination—Tsipras took full advantage of the symbolism to declare the long voyage over.

The analogy was designed to appeal to the country’s love of associating with the grandeur of Ancient Greece, and to flatter its citizens, comparing their troubles with the story of one of literature’s archetypal heroes, whom they study in school. In Homer’s epic poem, it took Odysseus ten years to return to his home island after the end of the Trojan war, making eight years of contemporary austerity a slight improvement. Greek citizens had to face pension cuts and tax hikes, and infrastructure privatization. Odysseus had to fight a Cyclops, survive storms at sea conjured up by the god Poseidon himself, navigate his ship between Scylla and Charybdis, resist the enchanting song of the Sirens, and even pay a visit to the underworld.

But beneath the superficial lure of a mythic analogy, the comparison suggests a worrying degree of confusion in Greek political discourse about what the past eight years have meant, and the lessons the country should draw from them.

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Greece has the means to help refugees on Lesbos – but does it have the will?

by Sebastian Leape

Guardian

September 13, 2018

A 10-year-old child tried to commit suicide in a Greek refugee camp. Perhaps the most shocking thing about this story is that it is not new.

Routine police beatings and squalor in Moria, the largest camp on the island of Lesbos and home to about 8,000 people, have pushed the situation to breaking point.

Moria fails to meet just about every standard set by the UN High Commissioner for Refugees (UNHCR). New arrivals are crammed into inadequate sports tents, or on to farmland where lighting has not been installed, and up to 190 refugees share one filthy toilet.

Last year, the mayor of Lesbos, Spyros Galinos, warned that the facility was starting to resemble “concentration camps, where all human dignity is denied”.

Yet Moria resides in plain sight, on a tourist island in the EU. It is full of people with the most extraordinary of life stories.

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Tuesday, September 11, 2018

Tsipras seeks to stave off cuts as election looms

by Kerin Hope

Financial Times

September 11, 2018

Alexis Tsipras, Greece’s leftwing prime minister, is seeking to stop or delay cost-cutting measures agreed as part of the exit from the country’s €86bn bailout — even though he insists Athens will retain broad budget discipline.

Mr Tsipras told the European Parliament on Tuesday that the country was “continuing on the path of fiscal stability” and “determined to avoid the mistakes and the behaviours of the past that led to the crisis”.

But he is determined to prevent a new round of pension cuts from taking effect in January — even though the measures were approved by the Greek parliament as a condition for winding up the final bailout.

Mr Tsipras argues that the cuts, which the IMF championed, will drag down the economy and are not necessary to achieve next year’s target of a primary surplus of 3.5 per cent of gross domestic product.

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Friday, September 7, 2018

Crash Time

by Kenneth Rogoff

Project Syndicate

September 7, 2018

A decade after the collapse of Lehman Brothers and the start of the global financial crisis, it is clear that many lessons have been learned, while many economic misconceptions remain embedded in the public consciousness. If economic history teaches us anything, it is to be mindful of our own limitations in a world of infinite uncertainties.

Ten years after the collapse of Lehman Brothers, Crashed, by the noted Columbia University historian Adam Tooze, offers a sweeping history of the global financial crisis up to the era of Donald Trump. Above all, it is a scathing critique of the global fiscal-policy response to the crash. To guess the punchline, all one really needs to know is that the word “austerity” appears 102 times without ever being clearly defined. Does austerity mean actually reducing government spending and debt, or simply slowing the rate at which spending and/or borrowing rise? Tooze uses the same term to describe a confusingly wide range of policies and episodes.

Such freewheeling use of a freighted term muddles the discussion at key junctures. More broadly, it is emblematic of an economic analysis that seems to be rooted in a selective reading of left-leaning commentaries rather than primary economic or historical sources, much less a balanced survey of the scholarly literature.

For example, we are told that during the eurozone crisis, Greece was subjected to “the most draconian austerity program ever proposed to a modern democracy.” This would seem to suggest that the “Troika” –the International Monetary Fund, the European Central Bank, and the European Commission – was demanding that Greece immediately pare the overall size of its debts. In fact, the opposite was true. In the years following the crisis, when Greece lost access to fresh money from private markets, the Troika gave the country enough to meet all its payment obligations, plus a significant amount of additional fresh money, thereby reducing the magnitude of austerity it inevitably faced when its borrowing binge ended.

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Wednesday, September 5, 2018

Syriza choice for justice minister sparks Greek rule of law fears

by Kerin Hope

Financial Times

August 5, 2018

The appointment of a Syriza radical to oversee Greece’s legal system has deepened opposition fears over rule of law and government meddling as Athens seeks to restore investor confidence after eight years of international bailouts.

Michalis Kalogerou, the new minister of justice, was a controversial figure even before he was appointed in a government reshuffle last week.

A lawyer and adviser to the leftwing Syriza government, and cabinet secretary since 2015, he made his name representing a member of a local anarchist group that made headlines across Europe after mailing parcel bombs to foreign politicians and diplomats.

He has also previously clashed with the judiciary he now oversees, attacking judges over the treatment of his anarchist client and over a controversial law he drafted on issuing television licences, which was seen as ill-conceived and was eventually overturned.

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Tuesday, September 4, 2018

A Political History of Modern Greece, 1821-2018

by Aristides N. Hatzis

September 2018

Modern Greece has a history of almost two centuries. During these centuries, the country managed to move from the backwaters of Europe to a prosperous liberal democracy before economic crisis hit the country hard in 2010. Greece was founded after a War of Independence from the Ottoman Empire that was based on liberal and democratic principles. This left a political legacy which led to universal male suffrage as early as 1844 and one of the longest parliamentary histories in Europe, despite the tumultuous political life and brief periods of authoritarian regimes. The 19th century was a period of a slow modernization of the country (in infrastructure and institutions) but is was also suffocated by “Megali Idea”, the irredentist dream of the enlargement of the Greek state to include all lands, under Ottoman rule, inhabited by large Greek-speaking populations. A great part of Megali Idea was realized in early 20th century but the triumphs ended with a devastating catastrophe in 1922. Greek political elites were often incompetent and corrupt, but several reformist statesmen managed gradually to achieve convergence with other western European countries. Most importantly, they were very effective in steering Greece on the right (i.e. winning) side of history during every major European or Global conflict (Balkan Wars, World Wars, Cold War). Greece, after World War II and a ferocious Civil War, enjoyed one of the strongest, almost uninterrupted growth on a global level. This led to the accession to the European Communities in 1981 and later the Eurozone. Today, after ten years of economic crisis and painful austerity, Greece must meet one of the most difficult challenges: to achieve growth by adopting inclusive institutions.

Download the Paper (PDF)

Tuesday, August 28, 2018

Children 'attempting suicide' at Greek refugee camp

by Catrin Nye

BBC News

August 28, 2018

At Moria camp on the Greek island of Lesbos, there is deadly violence, overcrowding, appalling sanitary conditions and now a charity says children as young as 10 are attempting suicide. The Victoria Derbyshire programme has been given rare access inside.

"We are always ready to escape, 24 hours a day we have our children ready," says Sara Khan, originally from Afghanistan.

"The violence means our little ones don't get to sleep."

Sara explains that her family spend all day queuing for food at the camp and all night ready to run - in fear of the fights that break out constantly.

Conditions are so appalling that charities have actually left in protest.

The place smells of raw sewage, and there are around 70 people per toilet, according to medical charity Medecins Sans Frontieres (MSF).

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Wednesday, August 22, 2018

Greece is in ‘Hotel California’: Checked out but it can never leave

by Theodore Pelagidis

Brookings Institution

August 22, 2018

After eight years of painful bailout programs, this week Greece is leaving behind, at least technically, the era of bailout programs dictated by creditors. However, despite optimistic views expressed both by the Greek government—Prime Minister Alex Tsipras included—and some Eurozone officials, many believe that the country has, to paraphrase the Eagles’ “Hotel California” song, checked out but it can never leave.

From CNBC to Reuters to Politico EU to CNN Money, recent international news coverage on Greece cites the usual culprits and causes for pessimism, emphasizing weaknesses in the economy that were not tackled as part of three consecutive bail-out programs. These include: inefficient public administration, the black market economy, corruption and tax evasion, slow and inefficient justice, and numerous administrative obstacles to exports and investments. Other shortcomings of the three bailout programs include a heavy propensity toward implementing austerity measures. These are all, at least to an extent, valid flaws.

Yet rarely does the international press cite my top pick—overtaxation—a phenomenon with disastrous repercussions for Greece’s future. Let me explain why by presenting a few graphs.


Figure 1 depicts higher taxes plus higher social security contributions (SSCs). Both are higher than the OECD average and become highly progressive as wages become higher. But even low-income employees pay the high and non-rewarding SSCs. In sum, such a social welfare tax makes it extremely costly for a company or an employer to hire and so they avoid doing so. When an employer does hire, the “disposable wage” should be low to compensate for sky-high taxation and SSCs. As a consequence, domestic demand will be weak, which in turn dampens growth and employment prospects.

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Tuesday, August 21, 2018

EU celebrates an end to Greek aid as an Italian storm looms

by Desmond Lachman

The Hill

August 21, 2018

Monday marked the day that Greece finally emerged from eight years of tutelage under an International Monetary Fund (IMF)-European Union economic adjustment program.

This is giving rise to celebrations in some official quarters in Europe that finally the euro crisis is over. As an example, Klaus Regling, the managing director of the European Stability Mechanism, says that he will be drinking a glass of ouzo to celebrate this important Greek milestone.

Evidently, Regling is not paying attention to two factors. The first is the extraordinarily sorry state in which Greece has emerged from its IMF-EU program as well as the country’s still very gloomy economic prospects.

The second is a brewing Italian financial and economic crisis that could have very much more serious consequences for the euro than did the earlier Greek economic crisis.

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Tsipras warns of fresh battles after bailout ends Greek premier says country has endured an ‘odyssey’ of austerity

by Kerin Hope

Financial Times

August 21, 2018

Alexis Tsipras, prime minister of Greece, has warned of “fresh battles ahead” as the country prepares its first budget measures following the end of its international bailout.

In his first public remarks since Athens’ exit from its eight-year rescue programme, Mr Tsipras said Greece was now free to “reshape its future . . . as a normal European country”.

The premier spoke on Tuesday on the island of Ithaca — consciously comparing Greece’s travails with those of the mythological hero Odysseus, who endured an arduous 10-year journey before reaching the island, according to Homer’s epic.

“Greece has lived through its own odyssey, including €65bn of austerity measures . . . We’re starting a new era today, with a sense of responsibility that Greece won’t return to the years of deficits and bankruptcy,” he said on state television, against a backdrop of the island’s picturesque port.

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Monday, August 20, 2018

Many Greeks Struggle to Keep Their Heads Above Water as Bailout Ends

by Nektaria Stamouli

Wall Street Journal

August 20, 2018

Giorgos Fasois may never hold a full-time job again. He has come to terms with that, he said. He will just do whatever it takes to feed his three children.

Charis Karakosta Papachristou now works as a doctor in Sweden. She doesn’t intend to return.

Evelyn Karyofylli kept her swimsuit-making business going, but isn’t sure it was worth it.

“I had to let go of the whole personnel gradually: 25 people in total,” she said. “I’m now alone; I’m sewing the swimsuits in the winter, selling them in the summer.”

These three Greeks, and millions of their compatriots, won’t be celebrating when Greece’s international financial bailout ends on Aug. 20. The moment will mark the symbolic end of the eurozone’s long debt crisis, which put the survival of the single currency in doubt.

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Greece’s Bailouts End, but Its Prospects Still Look Grim

by Yannis Palaiologos

Wall Street Journal

August 19, 2018

It took three bailouts, around €290 billion in loans from its European partners and the International Monetary Fund, countless nights of knife-edge negotiations, an avalanche of austerity, a collapse in output worse than America’s in the Great Depression, and three close brushes with an exit from the euro. On Monday Greece’s third bailout will conclude, and the country will no longer have to rely on its official creditors to finance itself.

The eight-year crisis leveled Greece’s old political landscape. Four general elections between 2012 and 2015 reduced the once-mighty Pasok party, which had led the country most of the preceding 30 years, to a single-digit also-ran. Syriza, a fringe group on the hard left that barely sneaked into Parliament before the debt crisis, has swept into power. Golden Dawn, a fascist party that polled below 0.5% before 2010, won 18 seats in the last election and is now entrenched in Parliament. Despite the criminal indictment of its entire leadership, it likely will finish third in the next election, which must be held by October 2019.

At the end of it all, the government and its European Union cheerleaders now argue that Greece is once more a normal country, on course for sustainable, inclusive growth. If only that were true.

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Greece’s Bailout Is Ending. The Pain Is Far From Over.

by Liz Alderman

New York Times

August 19, 2018

When Dimitris Zafiriou landed a coveted full-time job two months ago, the salary was only half what he earned before Greece’s debt crisis. Yet after years of struggling, it was a step up.

“Now, our family has zero money left over at the end of the month,” Mr. Zafiriou, 47, a specialist in metal building infrastructure, said with a grim laugh. “But zero is better than what we had before, when we couldn’t pay the bills at all.”

Greece is reaching a milestone in one of the most ruinous financial crises to hit Europe. On Monday, the country will officially end its reliance on over 320 billion euros, or about $360 billion, of bailouts, opening a path to a new era of financial independence. The economy is slowly returning to growth, and European leaders are declaring an end to a debt crisis that nearly broke up the euro.

But the price of Greece’s apparent turnaround has been steep. A wrenching downturn, combined with nearly a decade of sharp spending cuts and tax increases to repair the nation’s finances, has left over a third of the population of 10 million near poverty, according to the Organization for Economic Cooperation and Development.

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Sunday, August 19, 2018

What Greece needs now that its bailout is ending

by Jim Brunsden & Kerin Hope

Financial Times

August 19, 2018

Greece’s exit from eight years of international bailout programmes on August 20 will be a defining moment in its emergence from the depths of austerity. But government and business acknowledge that this is just a milestone.

One government official said: “We’re not at the end of the road yet. There are still near and medium-term challenges ahead.”

Aristos Doxiadis, the manager of a fund for technology start-ups, summed up the challenges: “We’re coming from a place where domestic demand is dead. The greatest challenge now is to create an environment where investment can take place.”

EU officials speak of two main potential scenarios for the next 15 years. In one, a solvent but “stagnating” Greece is still burdened by stubbornly high debt and unemployment. The other, brighter picture, is of a reinvigorated economy as Greece shakes off legacy problems.

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Greece's bailout is finally at an end – but has been a failure

by Larry Elliott

Guardian

August 19, 2018

After eight years, Greece will on Monday be deemed strong enough to stand on its own feet. The international bailout programme that has provided Athens with emergency financial support will come to an end. Aside from the tough budget rules in place for the next decade or more, Greeks can wave goodbye to the troika – the officials from the International Monetary Fund, the European Central Bank and the European Union – that has in effect been running the country since 2010.

Beware the hype that trumpets this as a great success story, a tribute to solidarity and a commonsense approach that has restored economic stability and prevented Greece from being the first country to leave the euro. Nothing could be further from the truth.

Greece has been a colossal failure. It is a tale of incompetence, of dogma, of needless delay and of the interests of banks being put before the needs of people. And there will be long-term consequences. When Greece first received help in 2010, the plan was for it to have access to the financial markets within two years. It has taken two further rescue packages and six years for that to happen.

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End of Greek bailouts offers little hope to young

by David Molloy

BBC News

August 19, 2018

On Monday, Greece ends its third and final financial bailout programme, having received more than €300bn (£269bn; $342bn) over eight years.

The government and its European lenders are keen to paint the end of the last bailout as a good thing, having avoided a "Grexit" in which the country would have crashed out of the eurozone into unknown territory.

But for many Greeks - especially the young - the damage has already been done.

A recent poll indicates that three-quarters of the population think the country is headed down the wrong path. The same number think the bailout deals, rather than saving Greece, actually harmed the country.

Taxes remain high and more than 90% of Greeks believe the lenders will keep a close watch on the country's spending for years.

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Friday, August 17, 2018

Greece’s eight-year odyssey shows the flaws of the EU

Economist
August 18, 2018

Kastellorizo is “the end of Europe—or perhaps its beginning”. So says Yannis Doulgaroglou, co-owner of the Hotel Kastellorizo, a sunny inn on Greece’s easternmost inhabited island. A tiny rocky outpost just off the Anatolian coast, on maps of Greece Kastellorizo is often relegated to an inset. Yet it was from the island’s picturesque harbour, on April 23rd 2010, that George Papandreou, the prime minister, stared blankly into a camera and acknowledged that his troubled country had lost access to capital markets and needed a financial rescue package from its euro-zone peers. The day is etched in the memory of most Greeks. Chuckling, Mr Doulgaroglou recalls the journalists who scarpered from his hotel once they realised the prime minister was saying something momentous, leaving behind their unpaid bills.

Eight years and three bail-outs later, as Greece prepares to leave its final programme on August 20th, Mr Papandreou’s remarks seem laden with pathos. He directed his ire at the “speculators” who had sent Greek bond yields soaring, more than at the successive governments that had overspent, under-reformed and fiddled the national accounts. Yet, he vowed, with a “common effort” Greece would “reach the port safely, more confident, more righteous and more proud.” He called this the “new Odyssey”.

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Tuesday, August 14, 2018

Greece Is Back on the Grid, But Recovery Remains Elusive

by Giorgos Christides & Tobias Rapp

Spiegel

August 14, 2018

On August 20, the third aid package for Greece will end, marking the end -- for now -- of the country's debt crisis. But the country's slow economic growth and grim demographic outlook mean that even without the onerous rules attached to its repayments, it faces an uphill battle.


The school on the small Greek village of Kerasochori looks like the set of a disaster movie. Everything is still there: the black board, the math books, tables and chairs, the sports equipment, the map of Greece on the wall. Even the class registers are still in the corner. A layer of dust covers everything. About 20 boys and girls once went to school here, but 12 years ago it was closed down. That's where it began. There were no longer enough families in Kerasochori to keep it running.

Konstantina Kalli, 34, has unlocked the door and stands helplessly in the ruins of the past. "Anyone who leaves doesn't come back," she says. "The village is shrinking."

Kalli is Kerasochori's hope. She has a three-year-old daughter and is six months pregnant, with a girl. The birth will likely be difficult. There is no medical clinic nearby, and she has had to drive to Athens for every checkup, a journey of five hours by car along many winding mountain roads. Kerasochori doesn't have any child care. The nearest school is in the neighboring village, as long as there are enough children for it to remain in operation.

Kalli works for the local government, the biggest employer in Kerasochori. Together with two colleagues, a mayor, a priest and a police officer, she runs the district. About 100 people still live here in the village, most of them retirees. The average income is about 300 euros per month. There is almost no work -- the main sources of income are beekeeping and a bit of forestry. There's no tourism, even though, according to UNESCO, the air here is cleaner than almost anywhere else in Europe.

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Thursday, August 9, 2018

What the crisis changed in Greece — and what it did not

by Kerin Hope & Jim Brunsden

Financial Times

August 9, 2018

Greece has lived through eight lost years. Since 2010, its economy has shrunk by one-quarter, the disposable income of its citizens by-one third. More than 300,000 of those people have emigrated; among those left, unemployment is at 20 per cent.

As the country prepares to draw a line under this grim period, with the international tutelage imposed after its bailout set formally to end on August 20, the question is whether the years of trauma will have acted as a purge — cleansing Greece of some of the problems that contributed to the crisis.

The reforms that Athens signed up to in exchange for bailout funds were intended to address glaring shortcomings: a ruinously spendthrift pension system, an overstaffed bureaucracy and deep-rooted problems of tax evasion.

Other measures such as liberalising labour law and new business licensing rules were aimed at promoting growth and investment in a corporate sector fenced in by outdated regulations and restrictive union practices.

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Friday, August 3, 2018

Only four economies have shrunk more than Greece’s in the last 10 years. Two of them have been hit by civil wars.

by Matt O'Brien

Washington Post

August 3, 2018

After eight years of bailouts, brinkmanship and even more bailouts, Greece’s economy is finally ready to stand on its own again. Well, what’s left of it.

The good news is that Greece really is about to wrap up its latest bailout program and won’t need any more financial assistance for now. But the bad news, as the International Monetary Fund points out, is that even with the lower interest rates and longer repayment periods that Greece has been given, it still has too much debt, too little growth and too fragile a private sector to be able to say that it won’t need more help for long.

Which brings us to the worst news of all: Europe might be celebrating this as a success story now, but Greece has been one of the biggest economic failures you’ll ever see short of a war or revolution.

Indeed, excluding microstates such as San Marino, there are only four countries that have grown less — or, more accurately, shrunk more — than Greece has in the last 10 years: Libya, Yemen, Venezuela and Equatorial Guinea. (The IMF doesn’t have numbers for Syria since the start of its conflict, otherwise it would probably be on this list as well).

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Thursday, August 2, 2018

Greece exits its bail-out programme, but its marathon has further to go

Economist
August 2, 2018

“No one buys furniture in a crisis,” laments Konstantinos Vourvoulakis. He and his father used to sell handmade furniture, but as customers became strapped for cash, they shut up shop in 2014. A chatty man with a sunny disposition, he started driving a taxi instead, ferrying tourists around Athens and offering travel tips. But he doubts he will be able to afford a holiday himself any time soon.

Greece’s public-debt woes triggered an economic collapse that lasted longer than the Great Depression in America. In 2009 the new prime minister admitted that budget-deficit figures had been understated for years, and were perhaps double those originally reported. Ratings agencies downgraded its debt. Interest rates surged. In 2010 the government turned to the euro zone and the IMF for help. Their loans had strings attached: that Greece implement deep spending cuts and structural reforms.

On August 20th Greece exits the last of three bail-out packages. Both its creditors and its government think its public finances have improved enough for it to borrow from the markets again. Debt relief agreed on in June helps cushion its return. The maturity of some loans has been extended, and interest-rate relief offered on others. A cash buffer of €24bn, enough to cover nearly two years of Greece’s funding needs, should also reassure investors.

But the public finances and economy have miles to go before they reach normality. Public spending is still severely restrained. The Greek government has signed up to exceedingly ambitious targets: primary surpluses (that is, excluding interest payments) of 3.5% of GDP until 2022—which only a few non-oil-producing countries have achieved in the past 30 years—and an average of 2.2% until 2060. In the early years, creditors will monitor progress every quarter.

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