Wednesday, May 4, 2016

The threat of Grexit never really went away

Economist
May 4, 2016

The tagline of the film “My Big Fat Greek Wedding 2”, which was released in March, is “People change. Greeks don’t.” Whether any euro-zone finance ministers have seen the film, let alone detected any resemblance to their ongoing talks with the Greek government over its third bail-out, is unknown. But the renewed bickering about whether Greece is keeping to its end of the bargain, complete with threats of a snap election if its creditors don’t give more ground, has the air of a duff sequel.

Greece badly needs the next dollop of the €86 billion ($99 billion) bail-out creditors promised it last summer, in exchange for promises of austerity and reform. But it will not get the money until the creditors complete a review of its progress, which has been dragging on since November. The government has scraped together enough cash (by raiding independent public agencies) to pay salaries and pensions in May, perhaps even in June. But by July 20th, when a bond worth more than €2 billion matures, the country once again faces default and perhaps a forced exit from the euro zone. The threat of Grexit is not exactly back; it never really went away.

With a referendum on Britain’s EU membership in June and a possible flare-up of the refugee crisis as summer approaches, the last thing Europe needs is another Greek drama. The European Commission is thus in a mood for compromise. It emphasises that negotiations are “99%’’ complete. But the other creditor, the IMF, is less forgiving. With tax arrears in Greece rising and reforms constantly delayed, the fund has little faith that the programme’s target of a 3.5% primary budget surplus by 2018 can be achieved. It wants Greece to make a contingency plan to raise more money or cut spending further before it approves the next instalment of the bail-out.

More

Friday, April 29, 2016

Greece, Germany, IMF: Someone Has To Blink (The Short Answer)

by Marcus Walker

Wall Street Journal

April 29, 2016

The Greek bailout saga has entered another one of those tense periods when the whole deal could fall apart. A compromise is needed. But it isn’t clear how to keep key creditors on board without testing Greece’s brittle politics to breaking point.

Exactly six years have passed since the first Greek bailout. Europe has kept deferring the hardest questions: Is Greece solvent? Is austerity alone a realistic fix, economically or politically? Do Germany & co. need to relieve Greece’s debts? Those issues have come back to haunt Europe, just as it’s suffering headaches over migration and Brexit. A breakthrough in May has become vital for avoiding another big Greek panic this summer.


Q: It's déjà vu all over again! What's the latest fight about?

A: The International Monetary Fund has lost patience with the strained math of the Greek bailout plan. It is refusing to lend Greece any more money, unless either the country enacts extra austerity to guarantee a high budget surplus, or eurozone countries led by Germany write down a lot of what Greece owes them.

Germany’s irascible finance minister, Wolfgang Schäuble, is taking a hard line against any debt relief. So the IMF, with German encouragement, is taking a hard line on Greek budget cuts.

More

Friday, April 22, 2016

Greece and Its Creditors Make Progress on Differences

by Gabriele Steinhauser & Viktoria Dendrinou

Wall Street Journal

April 22, 2016

Greece and its creditors took a step Friday toward resolving disagreements that have hobbled the country’s international bailout program, including how to ease its staggering debt burden.

The creditors—eurozone governments and the International Monetary Fund—have been at odds for months about Greece’s economic outlook and the scope of the overhauls it needs, with the IMF pushing for further austerity for Athens to meet its budget targets.

That has stalled talks about what Greece needs to do to secure a new IMF loan program, thereby unlocking rescue funding from Europe as well.

To resolve the standoff, eurozone finance ministers at a meeting in the Dutch capital said Athens would have to come up with and put into law extra austerity measures worth 2% of gross domestic product—or about €3.6 billion ($4 billion).

The additional savings would be triggered only if the government missed its promised budget targets.

More

Thursday, April 21, 2016

Greek talks with lenders fraught as fears grow of default

by Helena Smith

Guardian
April 21, 2016

The Hilton hotel in Athens makes the perfect backdrop for high-intensity talks. Its ambience is subdued, its corridors hushed, its meeting rooms an oasis of tranquility.

When Greece, in one of its many stand-offs with the international creditors keeping it afloat, finally won the right to conduct negotiations outside the confines of government offices, it seemed only natural that they should be held at the hotel.

However, in recent weeks the talks have assumed an increasingly nervous edge. An economic review that should have been completed months ago has been beset by wrangling as Alexis Tsipras’s leftist-led government has argued with lenders over the terms of a bailout agreed last summer.

The €86bn (£67.8bn) rescue programme agreed in July 2015 – the debt-stricken country’s third in six years – followed months of high-octane drama that saw Athens being pushed to the brink of bankruptcy and euro exit. Now, less than a year later – and with a crucial meeting of eurozone finance ministers lined up for Friday – a sense of crisis has returned to Greece.

More

Wednesday, April 20, 2016

The crazy reason we might be facing a huge crisis in Greece again

by Matt O'Brien

Washington Post

April 20, 2016

Sometimes it's hard to tell whether history is repeating itself as tragedy or as farce.

Greece, after all, has had plenty of both over the past eight years. Its economy has shrunk as much as the United States' did during the Great Depression, its government has collapsed over and over and over again as a result, and its bailout is in its third iteration — without which it would have been forced out of the euro zone. How bad are things? Greek Prime Minister Alexis Tsipras just touted the fact that his country's unemployment rate has fallen from 26.5 percent to 24.9 percent, and that there was a month last year in which Greece's industrial production grew faster than anyone else's in Europe.

When life doesn't even give you lemons, you have to pick cherries instead.

Greece might not even be able to do that, though, if it starts fighting over its bailout terms again. That would bring back the fear that it wasn't going to stay in the euro zone, and, consequently, the incentive for people to pull all of their euros out of the country's banks before they could get turned into drachmas that wouldn't be worth anywhere near as much. Its underwhelming recovery would become none at all.

More

Monday, April 18, 2016

Greece Creditors Push for More Austerity

by Marcus Walker & Nektaria Stamouli

Wall Street Journal

April 18, 2016

Greece’s creditors have agreed to press the country for additional austerity measures if it falls short of budget targets, a move that papers over disagreements between the lenders but could test the stability of Greece’s fragile government.

European Union institutions and the International Monetary Fund are set to resume talks in Athens on Tuesday and Wednesday after reaching a deal among themselves in Washington at the weekend. The IMF and the EU’s executive arm, the European Commission, agreed to reconcile their differing views on Greece’s budget outlook by demanding an extra austerity package of about 2% of Greece’s gross domestic product, or €3.6 billion ($4.1 billion).

The package would be triggered only if Greece falls short of targets over the next three years. But the proposals, which come on top of a list of austerity measures already being negotiated, would have to be passed into law now—posing a stiff test for the governing coalition of Prime Minister Alexis Tsipras, which has a majority of only three seats in parliament.

Greek officials are resigned to having to sign up to the full set of budget cuts, totaling around €8 billion. They are hoping that in return, creditors will give Greece a concrete promise of major debt relief, a political prize that could help Mr. Tsipras sell unpopular belt-tightening.

More

Saturday, April 16, 2016

Greece’s Creditors Weigh Extra Austerity Measures to Break Deadlock

by Marcus Walker & Viktoria Dendrinou

Wall Street Journal

April 16, 2016

Greece’s creditors are considering seeking extra austerity measures that would be triggered if Athens misses its fiscal targets, in a bid to bridge differences between Europe and the International Monetary Fund and break a deadlock threatening to unravel the Greek bailout.

Under the proposal, say officials involved in the discussions, Greece would have to sign up to so-called contingency measures of up to about €3 billion, on top of the package of about €5 billion in tax increases and spending cuts Greece and its lenders are already negotiating.

The country would only have to implement the extra measures if falls short of targeted budget surpluses for coming years that were set out in last year’s bailout agreement, the officials say.

The idea, which has support from the eurozone’s dominant power Germany, hasn’t yet been agreed upon, and officials on the creditors’ side say it would be politically hard for Greece’s embattled government to swallow.

More

Thursday, April 14, 2016

Eurogroup head sees no Greek debt breakthrough this week

Reuters
April 14, 2016

There will be no breakthrough on unlocking new loans for Greece in Washington this week, but euro zone ministers will seek a deal next week in Amsterdam that could pave the way for debt relief talks, a top euro zone official said on Thursday.

"In Amsterdam we will have more time, everyone around the table and try to really get somewhere," the chairman of euro zone finance ministers, Jeroen Dijsselbloem, told reporters on the sidelines of International Monetary Fund and World Bank meetings in Washington.

He said euro zone lenders were adamant that the key to a deal was sticking to the assumption that Greece's government had to reach a 3.5 percent of GDP primary surplus in 2018.

"I don't see any flexibility on the 3.5 percent in 2018 because it was one of the anchors of the agreement of last summer. So that's going to take a huge effort on the part of Greece but I think it can be done," Dijsselbloem said.

More

Monday, April 11, 2016

Why Greeks' swap of cash for cards could end a culture of tax evasion

by Sara Miller Llana

Christian Science Monitor

April 11, 2016

Mary Plakaki likes to carry cash on her at all times. So when Greece limited the amount of withdrawals last summer to avoid financial catastrophe, she got her first debit card. Now she uses the card for whatever purchase she can, so that her stockpile of on-hand cash is always full.

Math student Tassos Tassoulas uses his debit card for the opposite reason. Ever since he was pickpocketed, he prefers his wallet as thin as possible. He now carries 30 euros max.

And for retired politician Ioannis Varvitsiotis, the new use of his debit card has less to do with cash flow and more to do with convenience, he says – and the fact that it’s simply the correct thing to do. Today he refuses to eat at a restaurant if it doesn’t accept electronic payment.

For all of the hardship that capital controls have placed on Greek society, there’s been one upside: across generations and class and for differing motivations, more Greeks are turning to plastic, in a nation where cash has always reigned. It’s what Aristides Hatzis, an associate professor of law and economics at the University of Athens, calls an eight-month “natural experiment in cards.”

More

Thursday, April 7, 2016

Merkel Coalition Readies for Greek Deal as EU Crises Multiply

by Birgit Jennen

Bloomberg

April 7, 2016

German lawmakers say they expect Greece and its creditors to reach an accord to unlock further bailout funds, avoid a debt cut and meet Chancellor Angela Merkel’s demand that the International Monetary Fund take part in the aid program.

In a turnaround from last year, when mainstream German politicians lined up to advocate booting Greece out of the euro, lawmakers and officials in Berlin now say they’re counting on a deal. While the slow pace of talks has raised speculation of another Greek budget crunch in July, Germany policy makers see the Greek dilemma as eminently solvable compared with strife over migration and the threat of the U.K. leaving the European Union.

“The EU has so many issues it can’t agree on these days, including the refugee crisis,” said Ingrid Arndt-Brauer, a Social Democrat who chairs the German lower house’s finance committee. “At least on Greece one can hope for an agreement. We’ve always managed to reach one in the past.”

Underpinning that view is Merkel’s open door to limited debt relief and her determination to avoid destabilizing Greece as it struggles at the frontline of Europe’s refugee crisis. After Merkel and IMF Managing Director Christine Lagarde discussed Greece in Berlin on Tuesday, the chancellor said negotiations are “on a very sensible path” though more work was needed for an agreement.

“As in the past, there will ultimately be a deal with the IMF on debt relief, without calling it debt relief,” Carsten Linnemann, a member of Merkel’s Christian Democratic Union who voted against the latest Greek aid package in July, said in an interview.

More

Tuesday, April 5, 2016

Germany's Merkel says Greece can't have debt haircut in euro zone

Reuters
April 5, 2016

Chancellor Angela Merkel said on Tuesday that a debt haircut for Greece was not possible so long it remains in the euro zone, adding that Germany wanted a quick conclusion of a bailout review.

Merkel spoke after meeting IMF chief Christine Lagarde. The IMF has fought shy of participating in the bailout without a firm promise of debt relief for Greece from the EU.

Germany, while keen for the IMF to take part, has said relief cannot be discussed until Athens has demonstrated compliance with the terms of the bailout.

"It is not a demand of the federal government to have no debt haircut but rather in our opinion this is legally not possible in the euro zone," Merkel told reporters in Berlin after meeting International Monetary Fund head Christine Lagarde and other global economic leaders.

"The German position is that the IMF takes part in an agreement ... We want a quick conclusion of these talks," Merkel added.

More

Monday, April 4, 2016

Greece needs to keep the IMF at the table. Tsipras is putting short-term political gain ahead of national interest

Financial Times
Editorial
April 4, 2016


Since Alexis Tsipras persuaded Greek voters to endorse a third bailout programme, after flirting last summer with sovereign default, eurozone creditors have been keen to view him as a responsible partner. The row over a leaked conversation between International Monetary Fund officials suggests they are wrong.

The Greek prime minister has seized on the transcript of a teleconference about bailout negotiations to claim the IMF is trying to push the country towards bankruptcy, so as to impose ever-tougher austerity policies. Christine Lagarde, in a furious response, has all but openly accused him of wiretapping officials and leaking the recording.

If it is true that the Greek government has engineered the crisis in an attempt to eject the IMF from bailout talks, then its tactics are irresponsible. Whatever the source of the leak, it is clear that Mr Tsipras wants the IMF to leave. Once again, he is displaying an instinct for short-term political gain and a disregard for his country’s long-term interests.

The ever-unpopular IMF is an easy target for a prime minister facing criticism for his handling of the economy and the refugee crisis, and under pressure from the resurgent opposition headed by Kyriakos Mitsotakis. It is also true that the fund would be a tougher judge of Greece’s fiscal and economic performance.

More

Saturday, April 2, 2016

IMF Discussed Pressuring Germany on Greek Debt, WikiLeaks Says

by Nikos Chrysoloras & Eleni Chrepa

Bloomberg

April 2, 2016

International Monetary Fund officials discussed the possibility of putting pressure on German Chancellor Angela Merkel to give Greece debt relief, or the IMF would withdraw from the country’s bailout program, according to a transcript of a purported conversation published by WikiLeaks.

Three officials said the refugee crisis, the U.K. “Brexit” referendum and Greece’s July deadline to repay about 2.3 billion euros ($2.6 billion) in principal on Greek bonds held by the European Central Bank were key events that could bring the issue to a head, according to the transcript on the WikiLeaks website. When asked about the account, an IMF spokesperson in an e-mail said the fund never discusses leaks or supposed reports of internal discussions.

The purported conversation underscores tensions that still divide Greece’s creditors after six years and three financial bailouts. IMF has been at loggerheads with auditors from the European Commission over the fiscal measures that the continent’s most indebted state must implement in order to meet its agreed budget targets, while Germany and other euro area countries have been insisting that the Fund will eventually have to get on board for the bailout to proceed.

More

Monday, March 21, 2016

EU-Turkey deal fails to stem refugee flight to Greece

by Karolina Tagaris

Reuters

March 21, 2016

They waved, cheered and smiled, elated to have made it to Europe at dawn on Sunday in a packed blue rubber motor boat.

The 50 or so refugees and migrants were among the first to arrive on the Greek island of Lesbos on day one of an EU deal with Turkey designed to close the route by which a million people crossed the Aegean Sea to Greece in 2015.

Exhausted but relieved, the new arrivals wrapped their wet feet in thermal blankets as volunteers handed out dry clothes and supplies.

Reuters witnesses saw three boats arrive within an hour in darkness in the early hours of Sunday. Two men were pulled out unconscious from one of the boats amid the screams of fellow passengers and were later pronounced dead.

More

Thursday, March 10, 2016

On the front line: Greece’s biggest banks may appear to be out of danger, but they are not

Economist
March 12, 2016

On the face of things, Greece’s four big banks are in their best shape in years. In November they received their third bail-out in as many years. The extra €14.4 billion ($15.9 billion) they got then (some of it from private investors) raised their capital ratios to 18%, well above the European average of 13%. Recent legal changes make it easier for them to repossess collateral and to sell loans to third parties. Better yet, recent data suggest the economy shrank by only 0.2% last year, much less than initially feared. The Bank of Greece predicts that growth could return as early as this summer. After eight years of crisis and recession, normality at last seems within reach.

But beneath the cushion of fresh capital, cracks remain. Greek banks are still losing money. Piraeus Bank, the country’s second-largest lender, this week reported a net loss of €1.9 billion in 2015. Deposits have barely begun to grow again after last year’s run; the capital controls it prompted remain in place. Fully 40% of loans and 55% of mortgages are not being paid down, compared with a European average of 5%. Big losses on non-performing loans (NPLs) and debt securities could erode the banks’ capital once again. Greece is rowing with the other members of the euro zone about the conditions of its bail-out, raising the spectre of another crisis. A fourth recapitalisation is not out of the question, says Josu Fabo of Fitch, a rating agency. The markets remain nervous: bank shares are down by 36% since the start of the year.

The banks are largely innocent bystanders in the endless back and forth between the Greek government and its creditors, but they are guilty of procrastination when it comes to their NPLs. Instead of restructuring the loans worth saving, calling the bluff of defaulters that could probably pay, and reclaiming and selling the collateral of the hopeless cases, they are counting on a return to growth to rescue delinquent borrowers. That, in turn, is impeding the flow of capital to ventures that might help revive the economy. Yannis Stournaras, the head of the central bank, recently demanded “bold and innovative initiatives” to clean up bad loans. “This cannot be ensured by the current ‘business as usual’ approach,” he added.

More