Wednesday, October 17, 2018

Kyriakos Mitsotakis Has Big Investment Plans for Greece

by Eleni Chrepa & Sotiris Nikas

Bloomberg

October 17, 2018

Kyriakos Mitsotakis says he’s a man with a mission.

The leader of New Democracy, currently Greece’s main opposition party -- who will become prime minister if his party wins general elections next year -- says what the country needs more than anything else is investment. With that in mind, he says he will issue permits for the mining project in Skouries, northern Greece, in his very first month in office and push for the development of the site of the former Athens Airport of Hellinikon.

The top priority would be to “unblock important and symbolic investment projects” the 50-year-old said in an interview in his spacious, bright office on a busy Athens street. “One way or another, Hellinikon must get off the ground in 2019. This project must not be delayed, not even for a minute longer. Hellinikon is the most emblematic of the big investments in the country. It’s all about the new Athens.”

The projects are together valued at about 11 billion euros ($12.7 billion) and have been stalled for years in legal and bureaucratic red tape in Greece, where luring investments has become critical to reviving an economy that lost about 25 percent of its gross domestic product during its almost decade-long crisis.

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Greek foreign minister resigns over Macedonia disagreement

by Kerin Hope

Financial Times

October 17, 2018

Greece’s foreign minister resigned on Wednesday following a clash with Panos Kammenos, the defence minister, over the country’s recently signed naming agreement with Macedonia.

Nikos Kotzias had earlier accused Mr Kammenos of undermining the leftwing Syriza-led government’s foreign policy at a cabinet meeting on Tuesday, according to Greek media reports.

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Greece Is Trapped

by Ferdinando Giugliano

Bloomberg

October 17, 2018

If you thought Greece’s ordeal was over, think again.

Months after exiting its international rescue program, the country faces renewed trouble in its banking system. There is no easy fix: money is short and investor patience thin. But it looks increasingly like the gradual approach pursued by Athens and the euro zone authorities is running out of steam.

Lenders still bear the scars of a decade of economic crisis. Borrowers are failing to meet payments on almost half of all loans, the highest ratio in the euro zone. A large proportion of banks’ capital is made of so-called “deferred tax assets” – future tax deductions accrued because of past losses – about which investors are skeptical.

True, there are differences in the health of the four largest lenders: Piraeus Bank SA is in the worst shape, while National Bank of Greece SA and Eurobank Ergasias SA are faring much better. But investors have little time for such subtleties: the country’s banking stocks have trailed their European equivalents by 32 percent this year. Even Eurobank trades at an unhealthy 77 percent discount to the book value of its assets.

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Friday, October 5, 2018

What's Wrong With Greek Banks and How It Can Be Fixed

by Nikos Chrysoloras & Sotiris Nikas

Bloomberg

October 4, 2018

Burdened by the highest ratio of bad loans in Europe, Greek banks have no shortage of challenges. And that was before Greece -- the continent’s most indebted state -- decided to end its bailout program in August without requesting a follow-up lifeline backed by European creditors. If doubts about the state of their balance sheets aren’t addressed, concerns about the fate of Greek banks could spiral out of control. That became clear this week when banking shares plunged, though news that the government is weighing plans to help lenders speed up bad-loan disposals arrested the declines.

1. Didn’t the world already fix Greece?

It’s tried. This summer Greece graduated from its third international rescue program and reached a landmark deal with Europe’s other governments that gives it a decade or more to start repaying most of its loans (with the understanding it won’t go back to the spending that brought its economy to the brink of collapse in 2009). The nation’s largest banks have been recapitalized three times since the start of the debt crisis -- most recently in 2015. The state, which has chipped in almost 50 billion euros to shore up capital over the past decade, says its banks are now well-capitalized and poised to gain from a nascent economic rebound. It also says that the banks have now new tools at their disposal to resolve the bad loans issue, including easier out-of-court settlement procedures and e-auctions.

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Wednesday, October 3, 2018

Sell Off Prompts Greek Banks to Spring Clean Balance Sheets

by Christos Ziotis & Sotiris Nikas

Bloomberg

October 4, 2018

Greek bank stocks reeled amid growing concerns about their need for more capital, even as the biggest lenders were said to set ambitious new targets for reducing their piles of bad debt.

The benchmark FTSE Athex banks index dropped almost 9 percent on Wednesday, after earlier in the day slipping as much as 18 percent. Piraeus Bank SA closed 21 percent lower, having slumped 30 percent to the lowest ever after Chief Executive Officer Christos Megalou told Reuters that the bank is looking for an opportunity to issue debt to boost capital. Bloomberg reported on Friday that the ECB told the lender to increase capital this year.

Piraeus must raise about 500 million euros ($577 million) by selling tier 2 bonds under a plan agreed with the ECB’s Single Supervisory Mechanism, two people with knowledge of the matter told Bloomberg. Traders say the recent deterioration in the European bond market amid political tensions between Italy and the European Union adds to worries about Piraeus’s recapitalization efforts.

The lender is monitoring debt capital markets to identify the right timing for the issuance of the bonds, according to an Athens bourse filing it issued Wednesday in response to press reports. The issuance “remains subject to market conditions,” Piraeus said.

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Greek bank shares slide on bad debt worries

by Martin Arnold & Kerin Hope

Financial Times

October 3, 2018

Some of Greece’s biggest banks suffered steep share price falls on Wednesday as investors worried they may not have enough capital to meet fresh targets on reducing their large portfolios of bad debts.

Shares in Piraeus Bank, the country’s largest lender by assets, dropped more than 20 per cent, cutting its market capitalisation to less than €600m. The bank responded by trying to reassure investors that its plan to boost capital by issuing €500m of subordinated bonds was still on track.

Piraeus was the worst performer in the European Central Bank’s stress tests of Greek lenders in April. After its capital ratio fell lower than rivals in the stressed scenario, it agreed a plan with regulators to raise €1bn of capital by issuing bonds and selling operations in central and eastern Europe.

Fears exist that Piraeus could find it hard to complete its planned bond issue because of general market jitters stemming from concern over the Italian government’s budget deficit plans and the fragility of emerging markets.

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Sunday, September 30, 2018

Tsipras Tests Greek Budget Credibility With Pitch to Voters

by Marcus Bensasson

Bloomberg

September 30, 2018

Greek politicians are gambling their post-bailout credibility with lenders and investors on voter-pleasing promises as they look to elections that may be just months away.

Prime Minister Alexis Tsipras has pitched rescinding unpopular pension cuts slated for January, while both he and opposition leader Kyriakos Mitsotakis are promising lower taxes. The government will unveil draft numbers on Monday, and the plan is the first big test of how much fiscal sovereignty Greece has regained since exiting its aid program in August.

Tsipras says he can hit fiscal targets set down by the euro area and International Monetary Fund without the planned pension cuts. They were agreed after months of back and forth negotiations, and some creditors consider them a vital structural reform. That means the government risks creating the impression of backsliding now that Greece is out of the bailout.

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Thursday, September 27, 2018

Greece’s Left-Wing Leader Builds Alliance With U.S., Europe in the Balkans

by Nektaria Stamouli & Marcus Walker

Wall Street Journal

September 27, 2018

Greece’s Prime Minister Alexis Tsipras vowed to ratify a landmark pact with neighboring Macedonia regardless of domestic political risks, as part of a strategy to stabilize the Balkan region in cooperation with the U.S. and European Union.

Macedonians are expected to back the agreement with Mr. Tsipras’s government to rename itself “North Macedonia” in a referendum on Sunday.

In return, Greece, which has long objected to its neighbor using “Macedonia”—a name that dates back to the ancient Greek kingdom of Alexander the Great—has promised to lift its veto on the small country joining the North Atlantic Treaty Organization and, eventually, the EU.

Greek nationalists, including a small party in Mr. Tsipras’s left-led coalition, object to the pact. A vote to ratify the deal in Greece’s parliament could therefore split the government, leading to speculation that Mr. Tsipras might postpone the emotionally charged decision until after Greek elections next year, which he is not expected to win. He dismissed that speculation.

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Tuesday, September 25, 2018

EU watchdog probes possible misuse of refugee funds in Greece

by Lili Bayer

Politico

September 25, 2018

The EU’s anti-fraud watchdog is investigating the potential misuse of EU funds meant to provide food for refugees in Greece, a spokesperson for the agency said Tuesday.

The news follows the detention on Saturday of three journalists from Greek newspaper Fileleftheros following a libel suit filed by the country’s defense minister about an article alleging mishandling of EU funds meant for reception centers for migrants.

A spokesperson for the European Anti-Fraud Agency (OLAF) declined to go into detail about the investigation or say whether it was related to the newspaper allegations.

The investigation into “alleged irregularities concerning the provision of EU-funded food for refugees in Greece” was launched following information submitted by the European Commission’s directorate-general for migration and home affairs in 2017, the spokesperson said.

“As the investigation is on-going, OLAF cannot issue any further comment at this stage,” the spokesperson said in an email, adding that “the fact that OLAF is examining the matter does not mean that any persons/entities involved have committed an irregularity/fraud.”

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Monday, September 24, 2018

Refugee integration starts with homes

by Kerin Hope

Financial Times

September 24, 2018

Most evenings at about 11pm, Hanan and Ismail Abbas take their four young children to play in a park near their apartment in central Athens. “Local families are out enjoying the cooler temperatures so we feel safe being out so late,” says Ismail, a 33-year-old footwear designer who fled to Greece last year from the Syrian city of Aleppo.

“We eat ice-cream and practise speaking Greek to our neighbours.”

Mr Abbas was granted refugee status after crossing from Turkey in a smuggler’s boat and spending two months in a camp on the island of Kos.

He was later able to bring his family to Athens and now has a job with a small Greek business exporting handmade shoes. He says: “I was lucky to find work in Athens, not only a house.”

The family lives in a middle-class neighbourhood in a flat rented by SolidarityNow, a Greek non-governmental organisation founded by George Soros, which is participating in a European Union-funded programme that aims to house up to 27,000 vulnerable refugees.

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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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