Monday, April 27, 2015

Greece Just Clipped Varoufakis’s Wings

by Nikos Chrysoloras & Marcus Bensasson

Bloomberg

April 27, 2015

Greece reshuffled its bailout-negotiating team, reining in Finance Minister Yanis Varoufakis, after three months of talks with creditors failed to unlock aid and a meeting with his euro-area counterparts ended in acrimony.

The coordination of the day-to-day efforts to strike a deal with creditors was handed to Deputy Foreign Minister Euclid Tsakalotos, a Greek government official said in an e-mail to reporters Monday. Varoufakis will supervise the political negotiations with euro-area member states and the International Monetary Fund. No change was announced to Greece’s representation in euro-area finance ministers’ meetings, which Varoufakis attends.

A Eurogroup meeting in Riga, Latvia on Friday descended into name-calling as the currency bloc’s finance ministers hurled abuse at their Greek colleague, accusing him of being a time-waster, a gambler and an amateur. Still, the 54-year-old academic-turned-politician in the government of Prime Minister Alexis Tsipras remains popular at home, with 55 percent of respondents in an Alco survey published in Proto Thema newspaper Sunday expressing a positive view about him.

“This move squares the circle, because it doesn’t look like Tsipras is surrendering by firing Varoufakis, but it to some extent has the same result,” said Michael Michaelides, a strategist at Royal Bank of Scotland Group Plc in London. “It doesn’t change the issues, but given the interpersonal nature of the Eurogroup, and since the finance ministers still remain in charge, this is significant.”

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Friday, April 24, 2015

Euro or Drachma, Greece Must Finally Choose

Bloomberg
Editorial
April 21, 2015


Greek Prime Minister Alexis Tsipras seems to be about as good at managing down as he is at managing up. Which is to say: not very.

Tsipras and his neo-Marxist political party, Syriza, long ago alienated their European creditors with their demands to disregard the terms of the country's bailout, boost public spending and nevertheless stay in the euro. Now Greece is borrowing from local governments to make ends meet, prompting cries of protest from Athens to Zakynthos.

To ask whether Tsipras is entirely or only partly to blame for this mess is by now beside the point. Europe has dug in and is apparently preparing to let the so-called Grexit happen. The question for Tsipras is therefore what he should do if Europe insists that Greece abide by the failed bailout program. If he intends to abandon it and default on Greece's debt -- with the risk that this would force Greece out of the euro system -- he should say so, and ask Greek voters to support that position in a referendum.

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Greek Contagion Is Not a Something, Not a Nothing

by Mark Gilberg

Bloomberg

April 24, 2015

Austrian-British philosopher Ludwig Wittgenstein argued that trying to discuss private sensations such as pain is impossible because "it is not a something, but not a nothing either." That enigmatic statement is a useful way to reflect on whether a bad outcome for Greece will have a contagious effect on other members of the euro zone.

Contagion refers to the risk that Greece would infect its neighbors if it either defaulted on its debts or exited the euro. Investors, for example, might decide that Portugal is next in the firing line if Greece left the euro. They would demand a higher financial reward for taking on the greater risk of default, and thus drive up Portugal's borrowing costs. So far, apart from an almost imperceptible blip higher in borrowing costs in the past week for Portugal, Spain and Italy versus Germany (the euro zone's AAA rated benchmark borrower), Greece's inability to reach a deal on getting fresh money from its creditors hasn't rattled markets:


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Greece's Varoufakis Takes Hammering From Riled EU Ministers

Bloomberg
April 24, 2015

Euro-area finance ministers hurled abuse at Greek Finance Minister Yanis Varoufakis behind closed doors as they shut down his bid to find a shortcut to releasing financial aid.

Jeroen Dijsselbloem, the Dutch chairman of the euro-zone finance chiefs’ group, categorically ruled out making a partial aid payment in exchange for a narrower program of reforms after a stormy meeting in Riga, Latvia, in which Varoufakis was heavily criticized by his euro-area colleagues over his failure to deliver economic reforms.

Euro-area finance chiefs said Varoufakis’s handling of the talks was irresponsible and accused him of being a time-waster, a gambler and an amateur, a person familiar with the conversations said, asking not to be named because the discussions were private.

“It was a very critical discussion and it showed a great sense of urgency around the room,” Dijsselbloem said at a press conference after the meeting. Asked if there was any chance of a partial disbursement, he said, “The answer can be very short: No.”

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Fairfax optimistic about prospects of a Greek debt deal

Reuters
April 23, 2015

Fairfax Financial Holdings , which bet on the success of a Greek turnaround last year, said on Thursday it is confident that Greece will reach a deal with its counterparts in the euro zone and remain a part of the currency bloc.

Fairfax last year became a key player in the bailout of one of the country's largest lenders Eurobank, after it bought a 13.6 percent stake in the bank. The Toronto-based firm recently boosted its position in the bank further, even as Greek banks suffered deposit outflows in the face of fears over the Greek government's extended standoff with euro zone partners over reforms.

"We believe a compromise will be reached," said Fairfax CEO Prem Watsa, who is a well known contrarian investor. "We meet with government officials routinely. We believe Greeks want to stay in the Euro group and that within that construct they are trying to do the best deal possible for the people of Greece."

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Thursday, April 23, 2015

Greek finance minister tells magazine: Grexit no bluff if more austerity imposed

Reuters
April 23, 2015

The risk that Greece would have to leave the euro if it has to accept more austerity is no bluff, Greek Finance Minister Yanis Varoufakis told a French magazine, saying that no one could predict what the consequences of such an exit would be.

In a conversation with philosopher Jon Elster conducted at the end of March and published in France's Philosophie Magazine, Varoufakis, a specialist in game theory, said this was not the time to bluff over Greece's debt talks.

"We cannot bluff anymore. When I say that we'll end up leaving the euro, if we have to accept more unsustainable austerity, this is no bluff," Varoufakis is quoted as saying.

Greek Prime Minister Alexis Tsipras called for a speeding up of work to conclude a reform-for-cash deal with euro zone creditors to keep his country afloat after talks with German Chancellor Angela Merkel on Thursday.

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US alarmed by Greek energy alliance with Russia

by Ambrose Evans-Pritchard

Daily Telegraph

April 23, 2015

The US is scrambling to head off a Greek pipeline deal with Russia, fearing a disastrous change in the strategic balance of the Eastern Mediterranean as Greece’s radical-Left government drifts into the Kremlin’s orbit.

Ernest Moniz, the US Energy Secretary, said his country is pushing for an alternative gas pipeline from Azerbaijan that would help break the stranglehold that Russian state-controlled firm Gazprom has on European markets.

“Diversified supplies are important and we strongly support the ‘Southern Corridor’ to bring Caspian gas to Europe,” he told a group of reporters on the margins of CERAWeek oil and gas forum in Houston.

He insisted that it was vital to uphold “collective energy security” in Europe.

Greece’s foreign minister, Nikos Kotzias, said Gazprom made a “very good offer”, with guaranteed gas supplies for 10 years at good prices. He asked how his Syriza government could justify turning down such an opportunity unless the Western powers could come up with something better.

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At this point, only a miracle can save Greece from disaster

by Nicolas Economides

Forbes

April 23, 2015

The debt-troubled nation must grasp the only lifeline left and negotiate with creditors now to save itself.

The new leftist Greek government is running out of cash fast. Elected on the promise to disburse large amounts to those hurt by austerity, it cannot even pay the regular obligations of the State. Within two to four weeks, Greece will not be able to pay salaries, pensions and loan obligations to the International Monetary Fund and other lenders. The clock is ticking and time is running out. Greece must grasp the only lifeline left and negotiate with creditors now to save itself.

By the middle of May, Greece will need to refinance $3 billion of its Treasury bills. Typically, Greek banks buy most T-bills, but the European Central Bank has placed restrictions on these purchases. As a result, Greece is faced with the burden of covering $756 million worth of new T-bills, as well as repay $836 million to the International Monetary Fund (IMF) on May 11. That’s a total of about $1.6 billion, which doesn’t include paying salaries, pensions and other government expenses.

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Wednesday, April 22, 2015

Greece’s Long and Painful Odyssey

by Yannis Palaiologos

Wall Street Journal

April 22, 2015

On April 23, 2010, George Papandreou stood in front of a camera on Kastelorizo, the tiny eastern-Aegean island farthest removed from the Greek mainland. With its idyllic harbor as an incongruous backdrop, he announced that Greece had requested a bailout from the European Union and the International Monetary Fund. It was the beginning of a long and painful odyssey. Five years later, a safe return to the Ithaca of growth, market access and unquestionable eurozone membership is less certain than ever.

A policy disaster of this magnitude was entirely avoidable. In the fateful days leading up to that first bailout, investment bankers from Lazard had prepared a plan for rescheduling Greek debt. But the Papandreou government abandoned that idea under pressure from the European Central Bank, Germany and France, which were afraid of the effects a restructuring would have on the banking system. They insisted instead that Greece commit to repaying its debts in full. The IMF, whose staff saw that a program of harsh fiscal austerity, with no devaluation and no restructuring, was bound to fail, acquiesced.

For a time, the plan appeared to be working. In the initial months after the deal, the Papandreou government was hailed by creditors as a team of committed reformers. Finance Minister George Papaconstantinou received a standing ovation at the fall meetings of the IMF in 2010. But markets panicked after the tone-deaf Deauville agreement, as it raised the specter of the default of advanced economies for the first time in decades. As Ireland requested its own bailout, reforms in Athens stalled.

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Europe's Collision Course With Greece

by Clive Crook

Bloomberg

April 22, 2015

The brinkmanship over Greece and its debts continues. A meeting of finance ministers in Riga on Friday is likely to pass, like many previous make-or-break moments, without resolution. The European Union isn't deviating, and neither is Athens. Before much longer, though, something really will have to give -- and it seems ever more probable that, when it does, the news will be bad.

Confidence has firmed across Europe that a Greek default won't much harm any other country -- indeed, that the rest of the EU might actually be stronger if the Greeks are taught a lesson. This theory is wrong. If it's pressed into action, Europe will come to repent its biggest miscalculation since the creation of the euro.

EU governments are hardening their insistence on an overt Greek surrender. The terms of the existing bailout program, they say, must be honored in full before talks on a new one can start -- and meanwhile, there'll be no more money. In plain terms, the Syriza government led by Prime Minister Alexis Tsipras must not only break its promise to voters but be seen by all to have broken it.

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European Central Bank Squeezes Greek Banks, Tightening Access to Loans

by Landon Thomas Jr.

New York Times

April 21, 2015

As Greece scrambles to secure a financing deal with Europe before running out of cash, the European Central Bank is tightening the vise on the country’s ailing banks by curtailing access to desperately needed emergency loans.

The European Central Bank is now demanding that the value of the collateral that Greek banks post at their own central bank to secure these loans be reduced by as much as 50 percent, according to people who have been briefed on these discussions but who were not authorized to discuss them publicly.

And, these people say, if the Greek government and Europe remain at an impasse on an agreement about austerity measures, these so-called haircuts could increase further.

The move highlights the hard-line approach taken by the E.C.B. toward Greece as it presses the new government to reach an agreement with its creditors.

With the value of the collateral being reduced so significantly, banks will be hard pressed to obtain the money they need to survive.

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Tuesday, April 21, 2015

Varoufakis Sees Differences Narrowing in Creditor Talks

by Marcus Bensasson

Bloomberg

April 21, 2015

Greece and its creditors are narrowing their differences as officials on both sides recognize that the best chance for success is an accord that leaves them all somewhat unsatisfied, Finance Minister Yanis Varoufakis said.

“The convergence is absolutely clear,” Varoufakis told reporters in Athens late on Tuesday. Both sides “have invested a huge amount in achieving an agreement, and neither they nor we will let the opportunity slip to arrive at an agreement that’s clearly to the benefit of everyone.”

Greece has been struggling to make progress toward releasing financial aid since striking a deal to extend its bailout program in February. The anti-austerity coalition government has repeatedly expressed confidence that a deal to free bailout disbursements was imminent, only to be refuted by euro area officials seeking concrete steps.

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Mythology that blocks progress in Greece

by Martin Wolf

Financial Times

April 21, 2015

The Greek epic continues. It will not end well if the people involved do not recognise they are clinging on to myths. Here are six, each of which poses intellectual and emotional obstacles to reaching a solution.

A Greek exit would help the eurozone. “Will no one rid me of this turbulent priest?” This is the question Henry II is supposed to have asked about Archbishop Thomas Becket. Wolfgang Schäuble, Germany’s finance minister, must think much the same of his Greek partners. For the English king, however, the gratification of his wish was a disaster. A similar thing is likely to be true if Greece leaves. Yes, if Greece suffered a calamitous aftermath, populist campaigns elsewhere would be less effective. But euro membership would cease to be irrevocable. Each crisis could trigger destabilising speculation.

A Greek exit would help Greece. Many believe a weak new drachma offers a painless path to prosperity. But this is only likely to be true if the economy can easily expand its production of internationally competitive goods and services. Greece cannot. And the immediate consequences are likely to include exchange controls, defaults, a halt to foreign credit, and more political turbulence. Stable money counts for something, particularly in a mismanaged country. Ditching it carries a cost.

It is Greece’s fault. Nobody was forced to lend to Greece. Initially, private lenders were happy to lend to the Greek government on much the same terms as to the German government. Yet the nature of Greek politics, tellingly described in The 13th Labour of Hercules by Yannis Palaiologos , was no secret.

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The IMF's big Greek mistake

by Ashoka Mody

Bruegel

April 21, 2015

The Greek government's mounting financial woes are leading it to contemplate the previously unthinkable: defaulting on a loan from the International Monetary Fund. Instead of demanding repayment and further austerity, the IMF should recognize its responsibility for the country's predicament and forgive much of the debt.

Greece's onerous obligations to the IMF, the European Central Bank and European governments can be traced back to April 2010, when they made a fateful mistake. Instead of allowing Greece to default on its insurmountable debts to private creditors, they chose to lend it the money to pay in full.

At the time, many called for immediately “restructuring” of privately-held debt, thus imposing losses on the banks and investors who had lent money to Greece. Among them were several members of the IMF’s Board and Karl Otto Pohl, a former president of the Bundesbank and a key architect of the euro. The IMF and European authorities responded that restructuring would cause global financial mayhem. As Pohl candidly noted, that was merely a cover for bailing out German and French banks, which had been among the largest enablers of Greek profligacy.

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The IMF's Big Greek Mistake

by Ashoka Mody

Bloomberg

April 21, 2015

The Greek government's mounting financial woes are leading it to contemplate the unthinkable: defaulting on a loan from the International Monetary Fund. Instead of demanding repayment and further austerity, the IMF should recognize its responsibility for the country's predicament and forgive much of the debt.

Greece's onerous obligations to the IMF, the European Central Bank and European governments can be traced back to April 2010, when they made a fateful mistake. Instead of allowing Greece to default on its insurmountable debts to private creditors, they chose to lend it the money to pay in full.

At the time, many called for immediately restructuring privately held debt, thus imposing losses on the banks and investors who had lent money to Greece. Among them were several members of the IMF’s board and Karl Otto Pohl, a former president of the Bundesbank and a key architect of the euro. The IMF and European authorities responded that restructuring would cause global financial mayhem. As Pohl candidly noted, that was merely a cover for bailing out German and French banks, which had been among the largest enablers of Greek profligacy.

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ECB Is Studying Curbs on Greek Bank Support

Bloomberg
April 21, 2015

The European Central Bank is studying measures to rein in emergency funding for Greek banks as resistance to further aiding the country’s stricken lenders grows among policy makers, people with knowledge of the discussions said.

ECB staff have proposed increasing the discounts imposed on the securities banks post as collateral when borrowing from the Bank of Greece, the people said, asking not to be named as the matter is private. While adjusting these so-called haircuts hasn’t been formally discussed by the Governing Council, it may be considered if Greece’s leaders fail to quickly convince euro-area finance ministers they can reform their economy and secure bailout funds, one of the people said. Greek bank stocks slid.

Greek lenders are mostly locked out of regular ECB cash tenders while the government, which holds talks with euro-area partners in Riga this week, tussles with its creditors over the much-needed aid payments. Instead, the banks currently have access to about 74 billion euros ($79 billion) of Emergency Liquidity Assistance from their own central bank -- an amount that has been rising and which will be reviewed this week.

There’s “no doubt” that the ECB is losing patience with Greece, said Frederik Ducrozet, an economist at Credit Agricole CIB in Paris. “Greek banks will need more funding before long, so in a way larger haircuts or a lower ELA cap are equivalent.”

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Monday, April 20, 2015

Constancio Says Greek Default Doesn’t Mean Automatic Euro Exit

Bloomberg
April 20, 2015

European Central Bank Vice President Vitor Constancio said Greece might not have to leave the euro even if it defaults on its debt.

“We are convinced in the ECB that there will be no Greek exit,” Constancio said at the European parliament in Brussels on Monday. “The Treaty does not foresee that a country can be formally, legally expelled from the euro. So, if anything, some choice of that nature would have to be taken by the Greek government, not by us.”

The ECB is supporting Greek lenders, and by extension the economy, with emergency liquidity as concern over the government’s negotiating tactics for international aid payments spark deposit outflows. In a sign of the severity of the crisis, the government has issued a decree that forces local governments to transfer cash balances to the central bank.

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New Greek Law Could Release Prominent Left-Wing Terrorist

by Stelios Bouras

Wall Street Journal

April 20, 2015

Greek lawmakers approved on Monday a controversial prison ovrehaul that could lead to the early release of a left-wing terrorist convicted of killing U.S. and British officials and which has drawn criticism from the American embassy in Athens.

The law, designed to ease overcrowding in the country’s congested prison system, would abolish Greece’s high-security prisons and allows for the compassionate release of elderly and severely disabled inmates.

Among them is 53 year-old convicted terrorist Savvas Xiros.

Mr. Xiros is serving multiple life sentences for his involvement in Greece’s notorious November 17 terror group. The group, before it was largely disbanded in 2002, is charged with carrying out a string of almost two dozen assassinations in its 23-year history, including the murder of five U.S. embassy officials.

In an unusual step last week, as the legislation was being debated in Greece’s parliament, the U.S. embassy tweeted a tribute to one of the slain officials Mr. Xiros was convicted of killing. It reminded followers of the terrorist’s violent history that included the murder of one other American, a rocket attack on the U.S. embassy, as well as a series of other murders, attempted murders, bombings and robberies.

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Let Greece Stumble Out of the Euro

by Mark Gilbert

Bloomberg

April 20, 2015

As the weeks since the Greek election have rolled into months, the government elected in January seems no closer to resolving the dichotomy between its anti-austerity inclinations and the reforms its creditors demand as the cost of handing over more money. Today's news that the government has seized the cash of the nation's local governments, citing "extremely urgent and unforeseen needs," suggests the money really is running out. And none of the likely scenarios for what happens next seems compatible with Greece staying in the euro.

The hard-to-admit truth is that Greece seems both unwilling and unable to pay the dues that accompany euro membership. By ceding control of its currency, the country has ruled out devaluation as an option to pull its economy out of its tailspin; some clever people are starting to say Greece might be better off on its own.

It's worth recalling how Greece got behind the velvet rope of the euro club in the first place -- by cheating. The country couldn't clear the 3 percent deficit-to-gross-domestic-product ratio to qualify for membership; so it hired Goldman Sachs to do some fancy financial engineering in the derivatives market to manufacture the right number by 1999.

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Greece on the Brink

by Paul Krugman

New York Times

April 20, 2015

“Don’t you think they want us to fail?” That’s the question I kept hearing during a brief but intense visit to Athens. My answer was that there is no “they” — that Greece does not, in fact, face a solid bloc of implacable creditors who would rather see default and exit from the euro than let a leftist government succeed, that there’s more good will on the other side of the table than many Greeks suppose.

But you can understand why Greeks see things that way. And I came away from the visit fearing that Greece and Europe may suffer a terrible accident, an unnecessary rupture that will cast long shadows over the future.

The story so far: At the end of 2009 Greece faced a crisis driven by two factors: High debt, and inflated costs and prices that left the country uncompetitive.

Europe responded with loans that kept the cash flowing, but only on condition that Greece pursue extremely painful policies. These included spending cuts and tax hikes that, if imposed on the United States, would amount to $3 trillion a year. There were also wage cuts on a scale that’s hard to fathom, with average wages down 25 percent from their peak.

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Trial Starts for Members of Neo-Fascist Golden Dawn Party in Greece

by Niki Kitsantonis

New York Times

April 20, 2015

In Greece’s most high-profile political trial in decades, members of the neo-fascist party Golden Dawn appeared in a Greek court on Monday on charges including membership in a criminal organization and murder.

The trial will determine the fate of Golden Dawn, the third-largest party in Greece’s Parliament. The overtly racist group was catapulted from obscurity into the front lines of Greek politics at the peak of the country’s debt crisis in 2012, railing against austerity and a growing influx of immigrants.

Facing trial are the party’s leader, Nikos Michaloliakos, a 57-year-old dishonored former Greek Army commando, and 68 other people, including the party’s remaining 16 lawmakers as well as supporters and police officers. Most are charged with membership in a criminal organization, with others accused of murder, racist violence and weapons possession. They face long prison terms if convicted. Golden Dawn rejects the charges, saying they are politically motivated.

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11 Acts Toward a Greek Tragedy

by Mohamed A. El-Erian

Bloomberg

April 20, 2015

With negotiations faltering, the rhetoric intensifying and a daunting payment schedule ahead, there is mounting concern that the latest disagreements over Greece may be more than just another stage in the prolonged repeated game involving that country's debt drama.

The worry is that, this time, a ghastly set of circumstances is coming together to form an inevitable reality – that of Greece being ejected from the euro zone (a forced “Grexit”), which wouldn't be caused by a conscious decision, but would be the result of a huge accident (“Graccident").

Here are the 11 things you need to know:
  1. What is making this scenario seem more plausible is the simple fact that Greece is rapidly running out of money, a situation so dire that the unthinkable is on the table: a default on obligations to the International Monetary Fund, one of the world’s few preferred creditors.
  2. With such an outcome becoming more than just thinkable, the walk away from Greek financial assets has turned into a jog that could be on the verge of turning into a run. Even some of the structural holders of Greek debt, such as foreign subsidiaries of Greek banks, have been exiting their holdings. Meanwhile, withdrawals of bank deposits are probably accelerating, this after large amounts have already fled the Greek banking system.
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Charting Greece's Frightening Future

by Mark Whitehouse

Bloomberg

April 20, 2015

Greece and its creditors would do well to step back and survey the wreckage as they enter yet another week of brinkmanship: Data on capital flows suggest they've undone years of confidence-building in a matter of months.

Haggling over the terms of loans from Germany and other official creditors is bringing Greece ever closer to a worst-case outcome: a default on its debts and possibly its exit from the European Monetary Union. The protracted uncertainty itself is taking a toll. Worried depositors and investors are moving their euros out of Greece to safer places such as Germany, depriving the Greek economy of the private investment it desperately needs to grow.

Data from the Greek central bank, which records each euro that leaves the country as a liability, suggest the capital flight has reached unprecedented proportions. Over the six months through March, about 62 billion euros ($67 billion) were taken out of Greece. That's the equivalent of a quarter of the country's gross domestic product. Here's a chart:


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Greece Flashes Warning Signals About Its Debt

by Landon Thomas Jr.

New York Times

April 19, 2015

By the standards of his frenzied schedule here last week, the meeting on Friday between Yanis Varoufakis, the Greek finance minister, and Lee C. Buchheit, the dean of international debt lawyers, was a quiet one.

There was none of the media scrum that had followed Mr. Varoufakis around town during the semiannual meetings of the International Monetary Fund and World Bank, as he paid calls on the I.M.F. chief, Christine Lagarde; the head of the European Central Bank, Mario Draghi; the United States Treasury secretary, Jacob J. Lew, and even President Obama.

But the get-together with Mr. Buchheit carried critical meaning, according to experts here. After all, it was Mr. Buchheit who helped broker Greece’s most recent debt refinancing, in 2012.

As Greece now gropes for a resolution to its current financial problems, the meeting suggests Athens might still be holding out hope for a restructuring of its debt burden of 303 billion euros, or $327 billion.

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Sunday, April 19, 2015

Europe Braces for Messy Greek Endgame

by Simon Nixon

Wall Street Journal

April 19, 2015

It’s still possible that Greece can remain in the eurozone—though that is no longer the base case for many policy makers. At the very least, most fear the situation is going to get much, worse before it gets any better. No one now expects a deal to unlock Greek bailout funding at this week’s meeting of eurozone finance ministers in Riga—originally set as the final deadline for a deal. The new final, final deadline is now said to be a summit on May 11.

But among European politicians and officials gathered in Washington DC last week for the International Monetary Fund’s Spring Meetings, there was little optimism that a deal will be agreed by then.

The two sides are no closer to an agreement than when the Greek government took office almost three months ago. “Nothing, literally nothing has been achieved,” says an official. In fact, it is worse than that: so far, the bulk of Athens’s reform plans would actually cost money or reduce government revenues, according to eurozone officials.

They say that when you add up all the government’s proposals, the budget surplus required under the current program turns into a 10-15% deficit while debt soars far above the 120% of GDP targeted for 2022. There is no way that the eurozone—let alone the IMF—could disburse funds on the basis of such fantastical numbers.

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IMF chief encourages Greece to bring reforms to ‘fruition’

Financial Times
April 19, 2015

Greece’s populist government must set aside politics and bring promised reforms to “fruition” to save its economy and avoid default, the head of the International Monetary Fund has warned ahead of a crucial few weeks of negotiations.

In an interview with the Financial Times, Christine Lagarde said she told Yanis Varoufakis, the Greek finance minister, during a meeting of the IMF/World Bank spring meetings in Washington last week that he needed to accelerate reforms. She warned that patience was running out with the new Syriza government in Athens and that any honeymoon it may have had with its creditors was rapidly coming to a close.

“There has been a huge commitment by the international community, the European partners but also the IMF and the European Central Bank to actually support the Greek economy,” she said.

“What needs to happen now is that the political views need to actually deliver the measures, the tools, the reforms that could actually reach the objectives that have been set between the international community and Greece: restore stability, improve the economy [and] make sure that one of these days Greece re-accesses the financial markets on its own and without support.”

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Greek default necessary but Grexit is not

by Wolfgang Münchau

Financial Times

April 19, 2015

Until last week, discussions with Greece did not go well. That changed when the circus of international financial diplomacy moved to Washington for the spring meetings of the International Monetary Fund and the World Bank. Then it became worse.

My hunch is that this show will go on for quite a while. The Greeks want to merge the talks on the extension of the current, second, loan programme with the talks on the new third one. For that to work they will require temporary bridging finance to get through the summer. This sounds like somebody has a plan. But this is not my impression. I have never seen European finance officials so much at a loss.

The big question — whether Greece will leave the eurozone or not — remains unanswerable. But I am now fairly certain it will default.

My understanding is that some eurozone officials are at least contemplating the possibility of a Greek default but without Grexit. The complexity is severe, and they may not have had the time to work it out. But it may be the only way to avert utter disaster.

On whom could, or should, Greece default? It could default on its citizens by not paying public-sector wages or pensions. That would be morally repugnant and politically suicidal for the Syriza-led government. In theory, it could default on the two loans it received from its EU partners, though it is not due to start repaying the first of those until 2020, and the second in 2023. It could also default on the remaining private-sector bondholders but that would not be a good idea. Greece might need private sector investors later.

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How to deal with a problem child like Greece

by Chris Giles

Financial Times

April 19, 2015

Never in the history of the eurozone has the eurogroup been so united. Never have the institutions formerly known as the troika — the European Commission, the International Monetary Fund and the European Central Bank — had such a common purpose. Whether by design or by accident, the Syriza government led by Alexis Tsipras has achieved more European harmony than a collection of continental choirs singing Ode to Joy. Everyone is deeply frustrated by the antics of Greece.

The issue dominated the spring meetings of the IMF and World Bank in Washington. European officials spoke of their incomprehension that Yanis Varoufakis, Greece’s finance minister, has not engaged with technical talks to change the terms of the country’s lending conditions.

Success would unlock €7.2bn of additional finance necessary to keep Greece from running out of money. The IMF and European officials issued a common message that the detailed talks must speed up or the chances of a default were high. Without agreement, the loans would remain under lock and key.

No one understands Greece’s behaviour in shunning the talks since an outline deal was agreed in February. They call it childish. Many say privately that the Greek authorities are behaving like a toddler having a tantrum. It’s unacceptable, they say. But just as parents often differ on the best way to quieten their screaming offspring, European harmony does not extend to agreement on the best strategy for dealing with the Greek government.

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Saturday, April 18, 2015

ECB’s Draghi Rejects Talk of Greek Euro Exit

Wall Street Journal
April 18, 2015

European Central Bank President Mario Draghi on Saturday rejected speculation that Greece may be forced to abandon the euro, reiterating that Europe’s single currency is irrevocable.

At a news conference during meetings here of the world’s top finance officials, Mr. Draghi said he stood by a comment he made in 2012 that the euro “cannot be reversed.”

The risk of a Greek exit appears to be rising, as a stalemate between Greece and its creditors over emergency financing drags on with some big bills due for Athens in the coming weeks.

Despite the urgent circumstances, the International Monetary Fund’s Managing Director Christine Lagarde on Saturday said she had learned little new in talks with Greek Finance Minister Yanis Varoufakis last week, and urged him promptly to submit a detailed proposal for a fresh bailout.

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Draghi warns of ‘uncharted waters’ if Greece crisis deteriorates

Financial Times
April 18, 2015

Mario Draghi said the euro area was better equipped than it had been in the past to deal with a new Greek crisis but warned of “uncharted waters” if the situation were to deteriorate badly.

The European Central Bank president called for the resumption of detailed discussions aimed at resolving the country’s debt woes and urged the Greek authorities to bring forward proposals that ensured fairness, growth, fiscal stability, financial stability.

Asked about the risks of contagion from a new flare-up in Greece, he said: “we have enough instruments at this point in time . . . which although they have been designed for other purposes would certainly be used at a crisis time if needed.”

The two tools he referred to were the ECB’s so-called outright monetary transactions, which have never been used, and Quantitative Easing, which the ECB launched in January. He added: “we are better equipped than we were in 2012, 2011 and 2010.”

However Mr Draghi added: “Having said that, we are certainly entering into uncharted waters if the crisis were to precipitate, and it is very premature to make any speculation about it.”

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IMF Official Sees Greek Bailout Needing Several More Weeks of Talks

Wall Street Journal
April 17, 2015

Negotiations over fresh emergency financing for Greece are likely to take several more weeks, even though the cash-needy government in Athens requires a deal to help it meet a big increase in debt payments due in June, a senior International Monetary Fund official said Friday.

The IMF official’s comments come as the U.S., worried that Greece’s worsening financial crisis could spell trouble for a fragile global economy, urged Greek officials in private meetings to reach a deal that would satisfy Athens’ creditors.

“There’s no time to waste,” U.S. Treasury Secretary Jacob Lew said after a meeting with Greek Finance Minister Yanis Varoufakis. “If there is a crisis, it will first hit Greece, and it will hit the Greek people very hard. But it is something that the European and global economy doesn’t need, to have another crisis.”

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Friday, April 17, 2015

ECB’s Nowotny: ELA Can’t Be Long-Term Financing Substitute for Greek Banks

Wall Street Journal
April 17, 2015

European Central Bank governing council member Ewald Nowotny said Friday the central bank’s emergency-lending program can’t become a long-term financing mechanism for Greek banks.

“Due to the legal structure, the ECB isn’t in the situation to substitute long-term financing, that’s a political decision,” Mr. Nowotny said at the International Monetary Fund’s Spring Meetings.

“If a decision [on a program for Greece] doesn’t come about, the ECB can’t replace it, we’re not a replacement for a politically-decided program,” Mr. Nowotny said. The ECB can only offer emergency-liquidity assistance, or ELA, to solvent banks, and the Greek banks currently receiving it can’t increase their exposure to Greek government debt.

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Greece's big nowhere

by Theodore Pelagidis

Brookings Institution

April 17, 2015

Syriza will eliminate the primary budget surplus and cease or reverse the privatization efforts of the Samaras government, the cost of which for 2015 alone would be around 8 billion euros. Meanwhile, bond maturities in 2015 will reach almost 25 billion euros. Since most of the maturities are held by state entities, one should not discount the possibility of either a violent ‘Grexit’ from the euro or, conversely, a long transition to some kind of normality that will unfortunately kill any hope of an imminent ‘Grecovery.’

- My January 5 blog post, Greece in 2015: Assessing the 'Syriza' Political Risk

Syriza’s behavior is unpredictable….What comes next might be something far worse than a nightmare.

- My January 28 blog post, Greece’s New Government: Empty Pockets and Empty Promises

The nightmare is here

What is the current situation of the Greek economy? GDP is about to contract again after an increase of 0.6 percent in 2014 fuelled by tourism and an increase of private consumption of around 1.5 percent. Employment, after an increase of 0.6 percent in 2014, seems to be falling again, and the primary budget surplus has evaporated in a three month period.

There is no doubt that the political risk has killed the (albeit anemic) 2014 recovery. It has also destroyed the troika program. However, polls show that people seem to be still relatively happy with a government that is said to play hard ball with the Europeans and the IMF—but the honeymoon is very close to being over. People are beginning to understand that the postponement of the drama—i.e, painful short-term reforms—will only make the end even worse. This is not even mentioning the possibility of an economic disaster such as a “Grexit,” meaning that the poor will first and foremost pay a heavy price. In any case, sooner or later, the Greeks will have to face the reality and, after calculating real costs and benefits, will possibly show in the polls a more cool-headed view about the future of the country. In the meantime, the pretending-to-be-cool government is serving IMF liabilities and Treasury bill redemptions by using cash from pension funds, counties, and public organizations, ironically making a future possible default much more painful and disastrous. As time passes by, it becomes evident that behind the government’s frozen smiles, the country is going nowhere. And the creditors have finally got it.

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ECB examines possibility of Greek IOU currency in case of default

Reuters
April 17, 2015

The European Central Bank has analyzed a scenario in which Greece runs out of money and starts paying civil servants with IOUs, creating a virtual second currency within the euro bloc, people with knowledge of the exercise told Reuters.

Greece is close to having to repay the International Monetary Fund about 1 billion euros in May and officials at the ECB are growing concerned.

Although the Greek government has repeatedly said that it wants to honor its debts, officials at the ECB are considering the possibility that it may not, in work undertaken by the so-called adverse scenarios group.

Any default by Greece would force the ECB to act and possibly restrict Greek banks' crucial access to emergency liquidity funding.

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Greece: Decision time

by Tony Barber & Kerin Hope

Financial Times

April 17, 2015

Below the walls of the Greek parliament, on the spacious, sloping square of Syntagma in central Athens, the most unusual public protest of the Syriza era took place on Thursday.

When it is not lecturing European countries on their mishandling of the euro crisis — a crisis that, as every day passes, is bringing Greece closer to a debt default — the nation’s ruling radical leftist party likes to portray itself as the champion of the proletariat and the defender of the oppressed on home soil.

But Thursday’s protest told a different story. Waving flags and dressed in hard hats and luminous yellow jackets, a couple of thousand demonstrators from northern Greece — gold mine workers, accompanied by families and friends — spread out across Syntagma.

After a 14-hour bus journey they had arrived in Athens to demonstrate against the government’s suspension of one of the Canadian-owned mine’s operating licences. The miners suspect that the measure, ostensibly adopted on environmental grounds, is politically motivated and will cost them their jobs. “We think it’s unfair and illegal,” says Dimitris Ballas, a geologist at the mine.

The rally was the first sizeable anti-government protest since Syriza swept to electoral victory on January 25. It indicated that Greeks, if they feel mistreated or misgoverned, will turn against the political upstarts of Syriza just as they turned against the traditional parties of left and right whose misrule pushed Greece to the abyss.

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Big improvement in the Greek primary budget

by Silvia Merler

Bruegel

April 17, 2015

Ahead of what promises to be a very tense negotiation period, the Greek Ministry of Finance released the preliminary budget execution data for the first three months of 2015. The State primary budget is reported to considerably exceed expectations, due to both expenditures below target and revenues picking up.

The coming month promises to be very tense for Greece, as negotiations seem to proceed slowly and payment deadlines are approaching fast. The Eurogroup is due to meet next week, on April 24th, to discuss the Greek reform list that will be the basis for the final programme review and that must be agreed by the end of April, according to the terms of the 20th February agreement. Agreeing on a reform list is paramount for Greece to be able to unlock some of the frozen funding of the programme and relief the cash issues.

However, EU policymakers sound increasingly skeptical about the possibility that a deal can be reached on the 24th. Germany’s Finance Minister Schauble reportedly said “nobody expects there will be a solution” next week, while EC Vice President Dombrovskis also ruled out an agreement and said the meeting is most likely going to be just an assessment of the progress in talks with Greece. If no agreement is reached on 24th April, then the discussion would shift to the Eurogroup on May 11th, just ahead of a 750 million repayment due to the IMF the 12th May (see here for the detailed repayment schedule).

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Greek Officials Ponder Life Without the Euro

Bloomberg
April 17, 2015

With Greek officials hinting they could be forced from the euro and the country’s creditors growing frustrated with the government’s foot-dragging, analysts are asking what might happen if talks break down.

German officials are “taking just about everything into consideration,” Finance Minister Wolfgang Schaeuble said in an interview this week as he urged Greek leader Alexis Tsipras to stop offering his people false hopes. Economists such as UniCredit Bank AG’s Erik Nielsen say it may be just a matter of time before Tsipras’s cash supplies run out and he’s forced to print a new currency.

Adopting the euro was always supposed to be a one-way ticket, so there is no legal precedent or political roadmap for an exit. If you’re waiting for a formal announcement of a clear resolution, you may be waiting a long time.

Next steps for Greece range from retaining the euro to catastrophic divorce; half-measures like having multiple currencies circulate, with aid recycled to repay foreign-currency debts, are also in the cards.

Equally unclear is who would tell the world -- and how -- that Greece has entered an economic afterlife. Possible messengers include Tsipras, the European Central Bank, European Union President Donald Tusk and European Commission President Jean-Claude Juncker, among others.

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Greece Creditors Grim on Prospects of Deal

by Marcus Walker

Wall Street Journal

April 16, 2015

Greece’s international creditors signaled they are losing hope that Athens will do what is needed to unlock bailout funds before it runs out of money, and Greek government bond prices plunged as concerns rose about default and an exit from the eurozone.

The European Union’s executive arm, which helps oversee Greece’s bailout, said it is “not satisfied” with the slow progress in talks, while Christine Lagarde, the managing director of the International Monetary Fund, another key lender,said Greece needs to “get on with the work” of fixing its economy. Ms. Lagarde said Thursday she has warned Greece against postponing loan payments, a prospect people familiar with the matter said Athens informally explored.

Policy makers across the euro currency zone are bracing themselves for brinkmanship in coming weeks that could lead to a resolution—of one kind or another—but only in the face of further political and financial turmoil. “Greece is moving ever closer to the abyss,” Slovakia’s Finance Minister Peter Kazimir said this week.

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Don’t Blame Germany for Greece’s Profligacy

by Jeremy Bulow & Kenneth Rogoff

Wall Street Journal

April 16, 2015

In the court of world opinion, a large majority seems to believe that even if the Greeks may have been a tad fiscally irresponsible, it is the Germans who have driven Greece into depression through cruel insistence on austerity and debt repayments.

This populist narrative misses the essence of the problem: The Greeks are experiencing an emerging-market debt crisis, albeit one on steroids. Those convening in Washington, D.C., this week for the spring meeting of the International Monetary Fund might want to keep in mind that Greece’s problem is not simply the straitjacket of the single currency. The euro has fallen by 13% over the past year against an effective index of eurozone trading partners, yet Greece is hardly booming.

The deeper issue is that European integration by design has reduced the independence of European Union member states legally, fiscally and politically. Interdependence helped Greece run up debts far in excess of a normal advanced emerging-market country, but it is now making these debts devilishly difficult to unwind.

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Christine Lagarde dashes Greek hopes on loan respite

Financial Times
April 16, 2015

Christine Lagarde, head of the International Monetary Fund, dashed Greece’s hopes of grace periods for loans it is due to repay next month, saying precedents were “not followed by very productive results”.

Greek bond yields soared on Thursday after the Financial Times revealed the news of the IMF’s stance. Returns on the July 2017 bond rose 202 basis points to 26.2 per cent, the highest since the country’s restructuring. Its 10-year bond yields climbed 70 basis points to 12.4 per cent.

The revelation that Greece had explored the possibility of a grace period highlighted the parlous state of its public finances and international uncertainty about whether it will default on a €747m payment to the fund, due on May 12.

Speaking at the IMF’s spring meetings in Washington, Ms Lagarde confirmed that she explained the fund’s policy of refusing requests for a delay to Yanis Varoufakis, the Greek finance minister, after Athens made an informal approach this month for more time to pay. Mr Varoufakis has denied that he made such a request.

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Thursday, April 16, 2015

Europe Braces for Brinkmanship Over Greece as Country Moves ‘Ever Closer to the Abyss’

by Marcus Walker

Wall Street Journal

April 16, 2015

Europe is losing hope that Greece will adopt the economic policies needed to unlock bailout funds before it runs out of money.

Policy makers across the euro currency zone are bracing themselves for brinkmanship in coming weeks that could lead to a resolution—of one kind or another—but only in the face of further political and financial turmoil in Greece.

“Greece is moving ever closer to the abyss,” Slovakia’s Finance Minister Peter Kazimir said this week. Financial markets seem to agree: Yields on Greece’s three-year bonds shot up to nearly 28% on Thursday as investors priced in a high chance of default.

The eurozone usually avoids the abyss at the last minute through what it does best: political fudges.

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Greek Government Bonds Plunge

Wall Street Journal
April 16, 2015

Greek government bonds plunged Thursday, shaken by swelling fears that the beleaguered country will be forced into a default.

Yields on the country’s two-year bonds soared by more than 4½ percentage points on the day to above 27%—their highest since being issued and a massive jump even for notoriously volatile Greek debt. Yields rise when prices fall.

On the country’s 10-year debt, meanwhile, yields advanced more than one percentage point to a shade over 13%—their highest in more than two years.

An inverted yield curve, where shorter-term debt yields more than longer-dated bonds, is a classic signal that investors see a very high risk of default.

“Overall the probability of a Greek exit [from the euro] remains higher now than it ever was,” economists at Barclays wrote in a note. Others warned that a default or an exit from the euro could spark a wave of volatility across other Southern European countries, such as Spain, Italy and Portugal, that were hit hardest during the height of the eurozone crisis.

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Greece's debt crunch: Sorry, no extensions

Economist
April 16, 2015

That Greece is becoming increasingly desperate in its search for funds to pay its creditors is well known, but Thursday’s news from Washington was striking nonetheless. Sources at the International Monetary Fund, the Financial Times reported, confirmed that Greek officials had asked whether it would be possible to postpone the country’s repayments to the group, which amount to €2.5 billion ($2.7 billion) in May and June. The IMF turned Greece down unconditionally. But the request showed that the Greek government itself is no longer confident it will be able to agree with creditors on reforms in time to unlock the bail-out funds it needs to avoid default. With Greece’s mercurial finance minister, Yanis Varoufakis, arriving in Washington today for the spring meeting of the IMF, the country seems to be edging ever closer to disaster.

The inquiry about delaying payments to the IMF was typical of the unpredictable behaviour of Greece’s new government, led by the leftist Syriza party. Within the Eurogroup of euro-zone finance ministers, the Greeks’ shifting demands and failure to respect confidentiality have destroyed their credibility. Other members have largely given up trying to understand Greek aims, and are instead setting conditions. On Wednesday Germany’s hard-line finance minister, Wolfgang Schäuble, demanded that Greece stop deluding its people and implement tough reforms quickly, saying the solution to the impasse was “entirely down to Greece”. The president of the European Central Bank, Mario Draghi, struck a similar note in a press conference the same day. Asked how long the ECB could continue to provide the emergency liquidity assistance (ELA) that is keeping Greece’s banks afloat (see chart), he said that was “entirely in the hands of the Greek government”, which needed to resolve its negotiations with the EU.

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Greek PM Tsipras confident of EU deal despite friction over reforms

Reuters
April 16, 2015

Greek Prime Minister Alexis Tsipras told Reuters on Thursday he was "firmly optimistic" his government would reach an agreement with its creditors by the end of April despite friction over issues such as pension and labour reform.

In a statement, Tsipras said several points of agreement had been found since talks first started, especially on areas such as tax collection, corruption and distributing the tax burden towards those who most able to pay.

But he acknowledged that the two sides disagreed on four major issues: labour rules, pension reform, a hike in value-added taxes and privatisations, which he referred to as "development of state property" rather than asset sales.

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IMF knocks Greek debt rescheduling hopes

Financial Times
April 16, 2015

Greek officials have made an informal approach to the International Monetary Fund to delay repayments of loans to the international lender, highlighting the parlous state of Greek finances, but were told that no rescheduling was possible.

According to officials briefed on the talks by both sides, Athens was persuaded not to make a specific request for a delay to the Fund, which is owed almost a €1bn in two separate payments due in May.

Although Athens was rebuffed, the discussions, which occurred in private earlier this month, are a sign that the Greek government is finding it increasingly difficult to scrape together enough money to continue to pay wages and pensions while meeting its debt payments to external lenders.

Yields on Greek bonds soared on Thursday following the news, with yields on three-year paper rising 134 basis points to 25.10 per cent, the highest since the country’s restructuring. Its 10-year yields climbed 45 basis points to 12.18 per cent.

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Wednesday, April 15, 2015

Wolfgang Schäuble dashes hope of Greek bailout deal

Financial Times
April 15, 2015

Germany’s finance minister virtually ruled out a deal next week that would release bailout funds to Athens, increasing the possibility that Greece could go bust as soon as May.

Wolfgang Schäuble’s comments were the first in public by a senior eurozone policy maker to dash hopes of an agreement at a meeting of finance ministers in Riga on April 24. But they echo sentiments made in private for several days by senior officials involved in the negotiations.

“Nobody expects that there will be a solution,” Mr Schäuble said of next week’s meeting.

Officials said technical talks between Greek authorities and the country’s bailout monitors on the ground in Athens, while more constructive than last month, have barely moved forward in the past week and raised questions as to whether a deal is likely even at next month’s eurogroup meeting.

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Greece Is Running Out of Money, and Time

by Mark Gilbert

Bloomberg

April 15, 2015

Greece, as everyone knows, is running out of money. That means it might not be able to pay its debts, including what it owes the International Monetary Fund, which should be a cause for serious anxiety in Europe. But there's a dangerous myth starting to gain traction that the nation could default on its obligations but still remain a member of the euro.

On Monday, the Financial Times said Greece is poised to default on 2.5 billion euros of payments owed to the IMF in May and June if it doesn't get additional bailout cash. The newspaper cited "people briefed on the radical leftist government's thinking." Germany is making contingency plans that would let Greece stay in the euro even if it defaults on its debts, the Die Zeit newspaper reported today, without citing its sources.

Figures released today show Greece's budget surplus was just 0.4 percent of gross domestic product last year, well short of the 1.5 percent it had promised as part of its bailout terms. The Greek government has said it needs funds by April 24, when euro-region finance ministers are scheduled to next meet; but Friederike von Tiesenhausen, a spokeswoman for the German finance ministry, told reporters today that "no one in the euro group expects that this could be completed by April 24." No wonder Peter Kazimir, the Slovakian finance minister, said today that Greece is moving "closer to the abyss. Nothing can be excluded."

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Germany Sees Greek Payment Withheld in April as Progress Elusive

Bloomberg
April 15, 2015

The German Finance Ministry said an aid payment to Greece won’t happen this month and that negotiations between the Greek government and creditors have still failed to progress.

Speaking to reporters in Berlin Wednesday at a regular government press conference, Finance Ministry spokeswoman Friederike von Tiesenhausen said that she could “only shake my head” at a report in Die Zeit newspaper that Germany was making preparations for a possible Greek default that would allow it to stay in the euro area. “What the government is working on is that the euro region is kept together and strengthened,” she said.

While negotiations with Greece are ongoing, von Tiesenhausen said that even if Prime Minister Alexis Tsipras’s government produces a reform list, there then has to be a so-called staff level agreement to formally change the terms and conditions of the aid program.

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Wolfgang Schäuble on German Priorities and Eurozone Myths

by Wolfgang Schäuble

New York Times

April 15, 2015

The annual spring meetings of the International Monetary Fund and the World Bank begin on Friday in Washington. I’m looking forward to them, even if the discussion in recent years has seemed, to some commentators, a bit too well-rehearsed to provoke much discussion or thought outside of the usual comfort zones.

The fact that the immediate sting of the global financial crisis has faded in much of the world has probably contributed to this complacency. Unfortunately, however, the world economy is not yet out of the woods. It still faces very concrete challenges. We are as badly as ever in need of a common understanding of what needs to be done.

The financial crisis broke out seven years ago and led many countries into an economic and debt crisis. A pervasive set of myths — that the European response to the crisis has been ineffective at best, or even counterproductive — is simply not accurate. There is strong evidence that Europe is indeed on the right track in addressing the impact, and, most importantly, the causes of the crisis. Let me run through some of these myths.

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Gdefault needs not Grexit

by John Cochrane

The Grumpy Economist

April 15, 2015

The little grumpy cartoon usually represents me pounding my coffee down in agreement as the WSJ exposes some idiocy. Last week, alas, I spilled my grumpy coffee in disagreement with a little part of its otherwise excellent "The case for letting Greece go."
Thursday marks another deadline in Greece’s struggle to avoid default, as a €450 million payment to the International Monetary Fund comes due. Athens says it will meet this obligation, but sooner or later Prime Minister Alexis Tsipras and his government will miss a payment to someone if it doesn’t agree with creditors on a new bailout. An exit from the euro would then be a real possibility.
Please can we stop passing along this canard -- that Greece defaulting on some of its bonds means that Greece must must change currencies. Greece no more needs to leave the euro zone than it needs to leave the meter zone and recalibrate all its rulers, or than it needs to leave the UTC+2 zone and reset all its clocks to Athens time. When large companies default, they do not need to leave the dollar zone. When cities and even US states default they do not need to leave the dollar zone. A common currency means that sovereigns default just like large financial companies. (Yes, a bit of humor in the last one.)

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Sun is shining, restaurants are full and Athens is far from panic

by Tony Barber

Financial Times

April 15, 2015

Immersed in thoughts about whether Greece will strike a last-minute deal with its foreign creditors to avoid a debt default, I found myself on Tuesday evening outside an Athens souvenir shop selling a T-shirt with this slogan:

To be is to do – Plato
To do is to be – Aristotle
Do be do be do – Sinatra

Shop owners at Pompeii must have sold items like this in the summer of AD79, just before the eruption of Vesuvius.

What is striking about the mood in Athens is its extraordinary calm. The sun is out, and everyone has returned from a refreshing Easter break. One acquaintance tells me the restaurants are so full – with Greeks, not just foreign tourists – that he couldn’t make a reservation anywhere the other night.

All in all, this does not seem like a society that knows, or fears, that it is two steps from the precipice.

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What a Difference a Year Makes for Greece Left Stranded by Funds

Bloomberg
April 15, 2015

As Greece once again flirts with default, the country’s bonds are trapped in no-man’s land, too risky for most mutual funds and not cheap enough for other investors.

A year ago, money managers championed Greece’s return to international markets from a four-year exile by lapping up an offer of five-year debt. Signs of economic recovery under a government supporting budget cuts drew investors like Invesco Asset Management Ltd. and BlackRock Inc. toward the bonds.

Many of them are now long gone, as a standoff between Greece’s new anti-austerity leadership and its creditors triggers fears over Greece leaving the euro, or “Grexit.” The vacuum has yet to be filled by hedge funds and those buying illiquid assets because returns aren’t near enough to distressed levels even as yields have tripled from a year ago.

“It was a trade that didn’t work and it was time to exit,” said Hartwig Kos, a fund manager at Baring Asset Management in London who bought the bonds last year. “I fear the Greek authorities are at risk of sleepwalking into a Grexit accident. Once they have resolved their differences, I will definitely re-enter the market.”

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Tuesday, April 14, 2015

Greek Finance Minister to Meet With Obama

by Nektaria Stamouli

Wall Street Journal

April 14, 2015

Greece’s finance minister Yanis Varoufakis is due to meet President Barack Obama in Washington Thursday, according to a senior finance minister.

“Mr. Varoufakis is going to attend celebrations for the Greek Independence Day at the White House, where he will have a private meeting with the U.S. president,” the official said Tuesday.

The meeting comes as Greece’s Syriza-led government has been locked in negotiations with its international creditors since coming to power in late January, with progress so far being very slow.

Greece needs a deal to secure billions of euros in bailout aid to avoid defaulting on its debts by this summer and potentially tumbling out of the euro.

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Greece confident of reaching agreement in make-or-break 24 April deadline

by Helena Smith

Guardian

April 14, 2015

Greece has vigorously rebutted speculation that it will declare a debt default and plunge out of the eurozone if it fails to strike a deal with lenders to keep its bankrupt economy afloat.

Acknowledging that the Syriza-led anti-austerity government had faced the “teething problems” of any administration new to power, the minister tasked with overseeing the country’s international economic relations expressed confidence that a deal with creditors would be reached even if negotiations went to the wire.

“I can assure you we are working flat out for the good scenario,” said deputy foreign minister Euclid Tsakalotos. “I am absolutely confident an agreement will be reached on 24 April. Deals are always done five or three or one minute before midnight, it’s not unusual that they should go right to the brink.”

In what is widely seen as a make-or-break date for the debt-stricken nation, eurozone finance ministers have said they will pass judgment on the reform package Athens has been told to submit next week when they gather in the Latvian capital, Riga, on 24 April.

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EU expert group for Greece set for overhaul after Athens' protest

Reuters
April 14, 2015

A group of European Union experts helping Greece to improve administration and draw more European funding is set to be all but dismantled after the new leftist government refused to cooperate with them, officials have told Reuters.

Such a concession to Prime Minister Alexis Tsipras' government by the European Commission could dismay countries which have grown frustrated with Athens' push to abandon reforms as it rejects what many in Greece see as European interference.

The 'troika' of inspectors representing Greece's international backers has already been renamed following Athens' objections. The 'troika' is deeply unpopular in Greece due to the tough austerity measures it has overseen during the crisis.

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Don’t bank on Tsipras dumping Syriza’s leftwing diehards

by Tony Barber

Financial Times

April 14, 2015

Seen from the capital cities of Greece’s eurozone partners, there is one obvious way for Alexis Tsipras, the leftwing prime minister, to prevent the disaster of a debt default and exit from Europe’s 19-nation monetary union.

It boils down to the happy thought that, with Greece running out of cash to pay salaries and pensions, he should bow to realities and govern as a rightwinger or, at least, as much less of a leftist.

He should negotiate in good faith with Greece’s creditors, waste no more time on bombastic anti-capitalist gestures, make credible promises of economic reform and budgetary discipline and, last but not least, implement these promises.

If necessary, so this argument continues, Mr Tsipras should break with ultra-leftists in his ruling Syriza party who are opposed to such concessions, and who account for a good 20 per cent of the party’s parliamentary representation. Instead, he should govern in a sort of pro-EU national unity front with the moderate parties he defeated in January’s election.

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Payback time

Economist
April 14, 2015

Not much has gone right for Greece since the Syriza-led government of Alexis Tsipras took power earlier this year. Mr Tsipras's promise to press Greece's European creditors for better bail-out terms rattled markets; both bank deposits in Greece and sovereign bond yields, which had been stable under the previous government, have moved in an ominous direction in recent months. Discussions with creditors continue, but each payment date looks a dangerous potential stumbling block. Greece's government is warning that if it cannot agree a new bail-out deal by the end of April it will miss payments amounting to €2.5 billion due to the International Monetary Fund in May and June.

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