Tuesday, February 9, 2016

Closing the Balkan Route: Will Greece Become a Refugee Bottleneck?

February 9, 2015

At five o'clock in the morning last Tuesday: Macedonia has once again closed its border, and just a few hours later, chaos reigns. Eighty buses with 4,000 refugees have been stopped by the Greek police 20 kilometers from the frontier and they are now waiting in a gas-station parking lot. Bus drivers argue, refugees jostle on the overfilled lot and overwhelmed police officers yell orders. "Macedonia, Macedonia," the people waiting scream, "open the border!"

But today, the border remains closed to most people. And if it were up to Brussels and the Germans, it would remain that way -- that is, to anyone not from Syria, Iraq or Afghanistan. Since mid-November, Macedonia has tightened its border controls and whoever isn't from one these three countries is turned away. Now, many people's dreams of Europe come to an end here, in Idomene.

For it has recently become clear that Turkey is both unable and unwilling to stop the flow of refugees. As a result, the EU is placing its bets on Macedonia, with a plan that has the support of European Commission President Jean-Claude Juncker.


Cheap Cigarettes Are Burning Greece's Finances

by Nikos Chrysoloras


February 8, 2016

On an unremarkable morning on Stournari street in downtown Athens, just a few blocks away from the epicenter of every riot the city has seen during its recent crisis years, two men of Asian origin politely and openly hawk cigarettes to passersby.

The illegal packs of R.G.D.-branded smokes cost 1.50 euros ($1.70) each, less than half the price of 20 Marlboros or Prince at one of Greece’s ubiquitous street kiosks.

As Prime Minister Alexis Tsipras walks another tightrope between creditor demands for additional belt tightening and a social backlash, the scene exposes an unhealthy truth: Greeks could smoke, drink and gamble their way out of their next financial hole, if only they were taxed on all of it.

“Illicit cigarette and bulk tobacco trade strips the Greek state from significant revenue each year that could be used for paying pensions, salaries, and social benefits,” said Iakovos Kargarotos, vice-president of Philip Morris International’s affiliate in Greece, Papastratos AVES. “It creates a big public revenue hole that taxpayers have to fill.”


Monday, February 8, 2016

Greece’s Prime Minister on the Ropes

by Yannis Palaiologos

Wall Street Journal

February 8, 20156

January was a bad month for Greece’s Prime Minister Alexis Tsipras. The election of Kyriakos Mitsotakis on Jan. 10 to the leadership of the official opposition and the rise of mass protests against the government’s plans for pension reform have decisively altered Greek politics in ways that undermine Mr. Tsipras’s plans for a more stable second term.

To start, Greece’s economic pain is back in the news. Technocrats representing the country’s creditors arrived in Athens last week for the first review of Greece’s progress in fulfilling the terms of its August bailout. There’s already been an uproar, especially among farmers and the self-employed, in reaction to Mr. Tsipras’s proposal to increase contributions, limit early retirement and cut pay-outs on pensions. But creditors, especially the International Monetary Fund, are likely to continue insisting that current retirees swallow further cuts in order to achieve a reduction in pension spending equal to 1% of gross domestic product this year.

Athens and its creditors also will have to agree on the fiscal measures for the entire 2016-18 period, by the end of which Greece is required to have achieved a primary surplus of 3.5% of GDP. With this government, that’s likely to mean more tax hikes. The finance ministry has already proposed an increase of the top tax rate to 50% for individuals making more than €60,000, or about $67,000.


Thursday, February 4, 2016

State Transformation and the European Integration Project: Lessons from the financial crisis and the Greek paradigm

by Evangelos Venizelos

Centre for European Policy Studies

CEPS Special Report #130
February 4, 2016

The financial crisis that erupted in the eurozone not only affected the EU’s financial governance mechanisms, but also the very nature of state sovereignty and balances in the relations of member states; thus, the actual inequalities between the member states hidden behind their institutional equality have deteriorated. This transformation is recorded in the case law of the Court of Justice of the European Union and the member states’ constitutional courts, particularly in those at the heart of the crisis, with Greece as the most prominent example.

It is the issue of public debt (sovereign debt) of the EU member states that particularly reflects the influence of the crisis on state sovereignty as well as the intensely transnational (intergovernmental) character of European integration, which under these circumstances takes the form of a continuous, tough negotiation. The historical connection between public debt (sovereign debt) and state sovereignty has re-emerged because of the financial crisis. This development has affected not only the European institutions, but also, at the member state level, the actual institutional content of the rule of law (especially judicial review) and the welfare state in its essence, as the great social and political acquis of 20th century Europe. From this perspective, the way that the Greek courts have dealt with the gradual waves of fiscal austerity measures and structural reforms from 2010 to 2015 is characteristic. The effect of the financial crisis on the sovereignty of the member states and on the pace of European integration also has an impact on European foreign and security policy, and the correlations between the political forces at both the national and European level, thus producing even more intense pressures on European social democracy. In light of the experience of the financial crisis, the final question is whether the nation state (given the large real inequalities among the EU member states) currently functions as a brake or as an engine for future European integration.

Evangelos Venizelos is former Deputy Prime Minister of Greece (2011–12, 2013–15), Minister of Foreign Affairs (2013–15), Minister of Finance (2011–12), Minister of Defence (2009–11) and former Leader of PASOK (2012–15). He currently serves as a member of the Greek parliament and is Professor of Constitutional Law at the Aristotle University of Thessaloniki.

Read the Report (PDF)

Monday, February 1, 2016

The Grexit that Could Actually Happen

by Jacob Funk Kirkegaard

Peterson Institute for International Economics

February 1, 2016

For years the euro area has labored to successfully prevent a financial exit by Greece from the common currency, a fear commonly known as “Grexit.” Following the September 2015 elections, Greece now has a parliament that is overwhelmingly pro-euro and in compliance with the program imposed by the European Commission, the European Central Bank, and the International Monetary Fund (IMF), known as the Troika. Barring major external economic and political shocks, the country can return to growth in 2016 and get further debt relief from the euro area. The migration crisis in Europe threatens this hopeful forecast and could even force a de facto “physical Grexit” from the rest of Europe.

Last week the European Commission started a bureaucratic doomsday clock threatening Greece with expulsion from the Schengen Area of open borders if it does not manage its border with Turkey more effectively. The legal basis for such an expulsion would be the conclusion of the so-called Schengen Evaluation Report of Greece, based on unannounced inspections to verify compliance with its rules for identification and registration of migrants at the Turkish-Greek border in late 2015.

The draft report has not been made public, but EU Migration and Home Affairs Commissioner Dimitris Avramopoulos has described “serious deficiencies in the management of the external border in Greece.” Unless Greece implements in the next three months whatever remedial measures the Commission and Schengen Evaluation Committee propose,1 a qualified majority of Schengen members (e.g. , able to outvote Greece) may reintroduce physical internal border control to protect the common interest of the Schengen Area and hence leave Greece out for up to two years.


Friday, January 29, 2016

Threat of Schengen expulsion a new EU humiliation for Greeks

by Kerin Hope

Financial Times

January 29, 2016

Six months after Greece narrowly avoided a disorderly exit from the euro, a new threat looms that many in Athens see as equally damaging: being summarily ejected from Europe’s passport-free Schengen zone.

Brussels this week gave the faltering administration of Prime Minister Alexis Tsipras three months to take control of Greece’s maritime border with Turkey, set up reliable identity checks for refugees and other migrants and provide medium-term shelter for up to 50,000 arrivals.

If the Syriza-led government is unable to meet the deadline, Greeks will lose access to a coveted privilege of EU membership: seamless travel across most European borders with the wave of a national identity card.

It is a worrying prospect for a nation grown accustomed to frequent travelling within Europe, with tens of thousands of young Greeks studying in Europe’s core capitals and increasing numbers migrating to find jobs as the crisis shrinks opportunities for working at home.

Leaving Schengen would be “disastrous”, said Kostis Michalos, who travels frequently to Brussels and other European cities in his role as deputy chairman of the Association of European Chambers of Commerce and Industry.

“It would mark the beginning of the end of our eurozone identity,” said Mr Michalos.

“It’s the political connotation even more than the possible inconvenience: you’re losing freedom of movement and that’s a big loss.”


Greece’s far-left Syriza government is tottering

January 29, 2016

On January 24th Alexis Tsipras, Greece’s prime minister, gave a rousing speech to his supporters in a stadium in Athens, marking the first year in power of his far-left, anti-austerity Syriza party. He vowed to come down hard on his party’s enemies, and blamed the Greek people’s continuing misery on the opposition. Meanwhile Greece’s public broadcaster, ERT, aired a six-minute retrospective on Syriza’s first year, featuring gauzy shots of Mr Tsipras and a voice-over proclaiming that his government had battled elites, delivered social justice, fixed the economy and made Greece an international symbol of dignity. Even leftists rolled their eyes at the heavy-handed propaganda. But if Mr Tsipras’s speech and video were intended to boost morale, they backfired.

Many Greeks were infuriated that the prime minister’s speech failed to mention the refugee crisis, reinforcing a growing feeling that Mr Tsipras is out of touch. His party has been weakened by corruption scandals. George Stathakis, the economy minister, is being probed by a parliamentary committee for failing to include 38 properties and €1.8m ($1.9m) in his 2011 declaration of assets. Earlier this month, the Greek press alleged that Syriza MPs and officials had appointed family and friends to senior public-sector jobs. The government is moving to privatise ports, airports and other public assets: measures that, while economically sensible, are deeply unpopular. Taxes are rising, and unemployment remains at 25% (and near 50% for those aged 18-24). Capital controls, including a measure limiting bank withdrawals to €420 a week, are still in place.


Wednesday, January 27, 2016

Alexis Tsipras and Kyriakos Mitsotakis clash over Greek pensions

by Kerin Hope

Financial Times

January 26, 2016

Alexis Tsipras has fended off attacks from Kyriakos Mitsotakis, Greece’s newly elected opposition leader, by insisting that his Syriza government can rescue the country’s underfunded pension system without cutting benefits to retirees.

The prime minister and his rival went head-to-head on Tuesday night in a heated parliamentary debate, their first confrontation since Mr Mitsotakis, a pro-European reformer, was voted in to lead the centre-right New Democracy party this month.

“There will be no reductions in main pensions,” a defiant Mr Tsipras said. “One pension is a whole household’s income in the present [recessionary] circumstances.”

Syriza has resisted pressure from creditors — the EU and IMF — to impose hefty pension cuts by March. The move, postponed from last year, has become an urgent priority with bailout monitors due to return to Athens next week to assessing progress on the reforms agreed in return for a €86bn third international bailout.

Taking aim at Mr Mitsotakis, the son of a former conservative premier, Mr Tsipras asserted that state pension funds were poised to collapse because of “sustained looting” over decades by previous governments.


Tuesday, January 26, 2016

EU Slows Down on Greece Support as Compliance Trumps Urgency

January 16, 2016

Greece’s next bite of bailout money may turn into a movable feast if Prime Minister Alexis Tsipras can’t convince euro-area authorities he’s making good on his promises.

“Everyone got used to the fact the reviews take longer,” Lithuanian Finance Minister Rimantas Sadzius said in an interview on Friday. “Everyone’s prepared to demand that agreements are implemented at 100 percent.”

European governments won’t rush additional aid until Tsipras delivers on pledges to fix Greece’s pension system, update its labor markets and close fiscal gaps. A slow approach has already pushed borrowing costs to levels not seen since August and risks renewing last year’s conflict that nearly ended Greece’s membership in the euro area. Greek political party leaders will debate pension reform proposals in parliament on Tuesday, ahead of planned strikes by seamen, journalists, and lawyers against government policies.

Greece may get 4 billion euros ($4.3 billion) or more once the nation’s creditors complete a review of the most recent bailout, according to a euro-area official who asked not to be named because talks are ongoing. If Greece fails to unlock more funding it may face a cash crunch by the middle of the year.


Monday, January 25, 2016

Syriza one year on: what happened to the radical left dream in Greece?

by Vassilis Petsinis

Open Democracy

January 25, 2016

On 25 January 2015, Syriza and Alexis Tsipras won the Greek parliamentary elections. Syriza’s proponents as well as critics, at home and abroad, regarded this as a landmark for Greek politics: It was the first time in Greece’s history that a political party with ‘genuinely’ leftist origins had entered the halls of power. The first weeks after Syriza’s victory were marked by a renewed wave of optimism that a more positive turn for Greece could still be feasible despite the critical phase that the country has been going through.

Nevertheless, a few months later, this optimism was gradually replaced with disillusionment. For a start, the government coalition with the right-wing Independent Greeks/ANEL did not resonate well with the ‘older’ segment of Syriza’s electorate.

Furthermore, it soon became evident that, during his electoral campaign, Alexis Tsipras had made various promises to different target-groups which were often incompatible with each other (e.g. the ‘Thessaloniki Declaration’ in September 2014).

For instance, pledges to maintain the wage-grid intact and suspend additional layoffs in the public sector combined with promises to relax taxation for small and medium-size entrepreneurs.


Friday, January 15, 2016

The Greek who out-reforms Alexis Tsipras

by Yannis Palaiologos


January 15, 2015

In Greek politics, appearances can be deceptive.

At first glance, Kyriakos Mitsotakis, who won a January 10 contest to lead the center-right New Democracy party, and Prime Minister Alexis Tsipras have little in common. To many, Tsipras embodies change. The 41-year-old is a self-made politician who rose to the top without the help of family connections, and who leads a party that has never before been in power.

Mitsotakis, 47, on the other hand, is the son of a former prime minister, the brother of a former foreign minister and the uncle of one of Greece’s most promising regional governors. He became the leader of the party that formed the first government of the post-junta republic in 1974, and which alternated in power with the center-left PASOK until Tsipras’ Syriza took office in January 2015.

By traditional standards, Tsipras represents the new, Mitsotakis the old.


Thursday, January 14, 2016

Next Up for Greece: How to Shrink the Debt

by Viktoria Dendrinou

Wall Street Journal

January 14, 2015

Greece’s creditors are expected to start talking soon over an issue that has been looming over the eurozone since 2010: cutting the country’s mountainous debt burden.

Greece already sliced its debts to private lenders through a bond swap in 2012. But that wasn’t enough. Now, most of its debt is owed to other eurozone governments, which have conceded Athens needs more relief.

The debt talks won’t begin until after still-difficult negotiations over steps Greece must take, including pension changes and budget cuts, to complete the first review of its latest bailout package for up to €86 billion ($93.4 billion) agreed to last year.

Jeroen Dijsselbloem, the Dutchman who presides over meetings of eurozone finance ministers, said Thursday that once there is agreement on that, “then we will start political debates on debt sustainability.”

But while the creditors—the eurozone and the International Monetary Fund—broadly agree on how they could go about cutting Athens’ debt, they will likely lock horns over how much relief the country will need.


Greek Pensions Crisis: The Last Act of the Greek Tragedy?

by Michael Iakovidis, Daniel Mahoney & Tim Knox

Centre for Policy Studies

Economic Bulletin 70
January 14, 2016

The Greek pensions system, after decades of political exploitation, state interference and crony capitalism, is close to collapse. The system has been plagued by an unsustainable worker to pensioner ratio, endemic corruption along with major financial losses on investments in Greek banks and Government bonds. To sustain the unaffordable pension system, the Greek Government has plugged the gap with €216 billion of subsidies since 2000.

In the summer 2015, the “Troika” (comprising the European Commission, the European Central Bank and the International Monetary Fund) requested further reforms to Greek pensions in return for continuing its financial assistance via the bailout programme. The Greek Government has tabled a package of pension reforms, which is currently being scrutinised by European Ministers. It is probable that reforms to pensions will pass the Greek Parliament later this month, but the underlying deep-rooted problems will not be addressed. The reforms, although politically extremely painful, will do nothing to alleviate the Greek crisis.

Download the Report (PDF)

Tuesday, January 12, 2016

Greece’s biggest foreign investor threatens to halt mines project

by Kerin Hope

Financial Times

January 12, 2016

A Canadian mining company that has invested $700m in gold extraction projects in northern Greece has threatened to suspend its operations because of delays in issuing licences and permits, its chief executive has announced.

The leftwing Syriza government responded by accusing Eldorado Gold, the largest foreign investor in Greece, of attempting to blackmail the Greek state.

“Our investment is being treated as a political toy,” Paul Wright, chief executive of the Vancouver-based miner, said in Athens on Tuesday. “We’re just spinning tyres, spending money and not making progress.”

Mr Wright said that activities at two gold mines under development will be shut down at the end of March, with the loss of about 600 jobs, if the environment ministry fails to approve applications to install processing facilities that had been agreed by previous administrations.


Monday, January 11, 2016

Greek conservatives bank on unlikely lad to revive flagging party

by Kerin Hope

Financial Times

January 11, 2016

For almost a decade Kyriakos Mitsotakis languished on the backbenches of the Greek parliament, sidelined by his own conservative New Democracy party even when it held power.

His background as the reformist son of a former prime minister, equipped with degrees from Harvard and Stanford universities and experience as a consultant with McKinsey, counted for little with the old-fashioned grandees running the party.

Yet his moment has arrived. To the surprise of many conservatives, including some of his 300 campaign volunteers, the 47-year-old pulled off an unlikely victory in Sunday’s run-off election for leadership of the floundering opposition to prime minister Alexis Tsipras and his leftwing Syriza party.

Evangelos Meimarakis, the folksy former speaker of parliament who led by an 11-point margin after the first round of voting by grass roots New Democracy, supporters was so taken aback by the results that he failed to concede defeat for several hours after the election outcome had become clear.

To Greeks disillusioned with Syriza’s broken promises to expel the hated bailout monitors, reduce persistently high unemployment and boost social spending after years of recessionary cuts, Mr Mitsotakis’s pledge to put common sense above populism offered a ray of hope.


Sunday, January 3, 2016

How the SYRIZA-led government privatized Greek banks

by Miranda Xafa

Centre for International Governance Innovation

January 3, 2015

After lengthy negotiations that lasted through the summer, Greece’s radical left SYRIZA government and its creditors reached an agreement last August to secure €86 billion in bailout funds. Within this total, €50 billion were set aside to recapitalize the Greek banks, which had suffered massive deposit withdrawals prior to the imposition of capital controls in late June, funding pressures, and a sharp rise in non-performing loans (NPLs) as the payment culture deteriorated in response to Grexit fears. Greece and the troika of program monitors —the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF) — went out of their way to speed up the bank recapitalization part of the agreement in order to avoid triggering new "burden sharing" rules on Greek depositors that went into effect on January 1, 2016.

The rush to avoid hitting the new Bank Resolution and Recovery Directive reflects the Single Supervisory Mechanism’s (SSM) reluctance to impose a haircut on uninsured deposits in excess of €100,000 that belong to Greek corporations and would negatively affect economic activity. This aggressive timeline to recapitalize Greek banks risked imposing losses on taxpayers in order to protect Greece's depositors. The Greek taxpayers' existing stake in the four systemic banks, valued at €25.5 billion in May 2013, faced certain dilution, as did €8.3 billion in fresh capital injected by private investors in the spring of 2014, ahead of the ECB’s Comprehensive Assessment of all Euro area bank balance sheets. Asking all four systemic banks to raise funds at the same time in in a risk-off market environment ahead of the Fed’s tightening cycle, and before the Greek government had shown a clear commitment to the program by concluding the first review, including bank-related reforms, appeared to be a hard sell.

This was the third Greek bank recapitalization in as many years, each agreed as part of rescue packages funded by official creditors. The first one, finalized in May 2013, followed the debt exchange of 2012, which recognized the losses incurred by Greek banks in the government bond portfolio. The Greek state, through the Hellenic Financial Stability Fund (HFSF), acquired majority stakes in each systemic bank through direct capital injections of €25.5 billion, funded by the ESM. A second bank recapitalization took place in April 2014, ahead of the SSM’s Comprehensive Assessment of all Euro area banks. It was entirely funded by private investors, who acquired a 27 percent stake in Greek banks by injecting an €8.3 billion of equity.


Tuesday, December 22, 2015

Hope and fear in the endless Greek crisis

by Martin Wolf

Financial Times

December 22, 2015

The Greek economic crisis has blighted the country and the eurozone for six years. The election last January, which brought Alexis Tsipras and his leftwing Syriza party to power, added further friction between Greece and the rest of the eurozone. Mr Tsipras vowed to undo austerity — a promise he could not deliver on his own.

In the event, after winning a referendum in July against the terms offered by the eurozone, he agreed to a new €86bn three-year eurozone programme on terms not so different from those he had persuaded the Greek people to reject. After a split in his party, Mr Tsipras then won another election in September. Yet the capital controls imposed in June remain in force and the economy has fallen back into recession.

Is there a good chance that economic recovery will take hold in 2016? This was in my mind as I visited Athens last week. My conclusion was that a chance does exist. But it is not, alas, that good.

The starting point has to be with the differences of view among the main players: the Greek government and wider political community; the International Monetary Fund; and eurozone creditors, particularly Germany.

As Mr Tsipras made clear last week, one of his aims is to avoid another programme with the IMF. He finds its demands hard to bear. More broadly, he thinks that “the sooner we get away from the [bailout] programme the better for our country”. He notes: “If Greece completes the first [progress] review in January, we’ll be covering more than 70 per cent of fiscal and financial measures in the agreement.” He hopes Greece will soon regain its sovereignty or, with the IMF out of the picture, at least will only have other Europeans to deal with.


Sunday, December 20, 2015

Alexis Tsipras pushes for IMF to stay out of next Greek bailout

by Kerin Hope & Martin Wolf

Financial Times

December 20, 2015

Greek prime minister Alexis Tsipras is pushing for the International Monetary Fund to stay out of the country’s €86bn third bailout, leaving the eurozone to take full responsibility for overseeing economic reforms.

Mr Tsipras said in an interview with the Financial Times he was “puzzled by the unconstructive attitude of the fund on fiscal and financial issues”. He indicated that the IMF should leave his country’s third bailout to the eurozone when it decides whether to stay involved early next year.

“We think that after six years of managing in extraordinary crisis, Europe now has the institutional capacity to deal successfully with intra-European issues.”

Mr Tsipras’s assertion is likely to anger the German government, which has always insisted the IMF stay on board. Berlin values the fund’s technical expertise as much as it doubts the European Commission’s resolve.

Mr Tsipras also risks alienating the IMF, which is a strong advocate of debt relief for Athens while Germany and other eurozone members are strongly against debt writedowns, although he praised the fund’s support on this issue.