Friday, March 27, 2015

Greece to pay pensions . . . for this month

by Kerin Hope

Financial Times

March 27, 2015

Some of the money has come through strong-arm collection tactics, and some through enticements.

Whatever the case, Greece’s leftwing government will be able to cover pension and civil servants’ salaries due at the end of the month, according to the deputy finance minister for expenditure, who has been frantically scraping together the funds in recent days.

“Whatever needs to be paid will be paid on time — that means wages, pensions and the subsidy to IKA (Greece’s biggest health and social security fund),” Dimitris Mardas told the Financial Times.

He dismissed speculation that the cash-strapped government would have to issue €500m of IOUs to cover part of the €1.7bn bill as “quite unfounded.”

However, Mr Mardas could not give any assurances about a separate €450m payment to the International Monetary Fund due on April 9, which is overseen by a separate department within the ministry.

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Neither Grexit, nor Grexident. Euro and 'drachma' in parallel?

Reuters
March 27, 2015

Greece is unlikely to exit the euro, either intentionally or accidentally. But it might be forced to introduce an alternative means of payment, in parallel to the euro, to pay some domestic bills if a reform-for-cash deal with its creditors is not secured soon, several euro zone officials said.

Athens has lost access to bond markets and international creditors are not willing to lend it more money until it starts implementing reforms. An official familiar with the matter told Reuters this week that without fresh funds, the government will run out of money by April 20.

"At some point, when the government has no more euros to pay salaries or bills, it might start issuing IOUs -- a paper saying that its holder would receive an x number of euros at a point in time in the future," one senior euro zone official said.

"Such IOUs would then quickly start trading in secondary circulation at a deep discount to the real euros and they would become a 'currency', whatever its name would be, that would exist in parallel to the euro," the official said.

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Greece’s German Allies Aghast as Tsipras Fails to Assure

Bloomberg
March 27, 2015

Even Greek Prime Minister Alexis Tsipras’s friends in Germany are getting exasperated with his government after a visit to Berlin fueled skepticism that he can do what’s needed to end the impasse over his country’s finances.

While the atmosphere was good in talks between Tsipras and Chancellor Angela Merkel this week, an improvement in tone may not help resolve a standoff over the reforms required to unlock aid, according to a German government official familiar with the chancellor’s strategy on Greece who asked not to be named because the meeting was private. Members of Merkel’s Social Democratic coalition partners, who have sought to strike a more moderate tone on Greece than her party, were left unconvinced that he can resolve the crisis.

“What’s coming out of Greece is moving completely in the wrong direction,” Joachim Poss, a Social Democratic lawmaker who is the party’s deputy parliamentary spokesman on finance policy, said in an interview. “The situation is really worrying -- we’re stunned watching the developments.”

Tsipras’s difficulty in persuading even more measured German policy makers he’s on the right track risks entrenching a conflict with Greece’s European creditors as his government runs out of money. More than a month after winning an extension of the country’s bailout deal, Greek officials will finally submit plans on how they’ll meet the conditions for releasing aid on Friday, an official from Tsipras’s administration said.

The delay led Thomas Oppermann, the Social Democrat Bundestag floor leader, to join Finance Minister Wolfgang Schaeuble in speculating about a possible Greek exit.

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Wednesday, March 25, 2015

Euro Area Said to Give Greece Five Days to Deliver Plan

Bloomberg
March 25, 2015

Greece has until Monday to show how it will follow through on reform commitments after the euro area ruled out speedy access to aid funds, three officials said following a conference call of finance ministry deputies.

The euro zone’s other 18 members were adamant on Wednesday’s call that Greece needs to deliver specific plans to see any more bailout cash, the officials said. Prime Minister Alexis Tsipras needs to show that Greece can rebuild trust in its promises, they said.

Finance deputies left the door open to 1.2 billion euros ($1.3 billion) that has been allocated to aid the banking system, as the deputies concluded that Greece can’t tap those funds on a technicality. As a result, Greece will have to show it will move ahead with the changes its creditors are seeking to get the bank-aid money or other bailout funds.

Greece won some financial breathing room Wednesday when the European Central Bank raised the ceiling for Emergency Liquidity Assistance to Greek banks by more than 1 billion euros to more than 71 billion euros, according to two people with knowledge of the decision who asked not to be named.

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Tuesday, March 24, 2015

Athens raids public health coffers in hunt for cash

Financial Times
March 24, 2015

Greece’s government has raided the coffers of its public health service and the Athens metro as it widens a hunt for funds to keep itself afloat and service debts.

Athens faces a €1.7bn bill for wages and pensions at the end of the month and then a €450m loan payment to the International Monetary Fund on April 9. Greek government and eurozone officials believe Athens does not have funds to cover both.

In another constraint on Greece’s ability to raise cash, the European Central Bank decided to impose stricter curbs on the issuance of short-term government debt.

EU officials expressed hope that a marathon Monday night meeting between Alexis Tsipras, the Greek prime minister, and his German counterpart, chancellor Angela Merkel, would spark long-stalled talks over economic reforms Greece must implement to unlock €7.2bn in frozen bailout aid.

Athens has promised to deliver a list of reforms to eurozone authorities by Monday. But officials cautioned that the list would still have to be agreed with bailout inspectors before eurozone authorities could make progress on any deal to free up new funding.

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Greece’s Unhappy Marriage

by James Angelos

New York Times

March 24, 2015

On Wednesday, Greece will mark its independence day as it does every year. Schoolgirls in embroidered traditional dresses will march alongside boys wearing fezzes and kilt-like fustanellas — outfits worn by the Greek mountain brigands who launched a rebellion against the Ottoman Empire 194 years ago. Children will perform plays and recite poems emphasizing the injustices suffered by Greek Christians during the centuries-long Turkokratia, or Turkish domination.

These days, many Greeks see themselves fighting against a new foreign domination: that imposed by the country’s emergency creditors — the European Commission, the European Central Bank and the International Monetary Fund — known collectively as the “troika.” Independence day has therefore become a moment to reflect on what many in Greece call the “economic occupation” of their country.

During last year’s celebration, Greece’s then president, Karolos Papoulias, who is 85 and fought in the resistance during World War II, declared on national television: “Today our people are battling and struggling to break the stranglehold of the creditors. Our history guarantees that we will also be victorious in this fight.”

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Greece to present reforms package by Monday

Reuters
March 24, 2015

Greece will present its proposed package of reforms to its euro zone partners by next Monday in hopes they will release much needed cash, its government spokesman said on Tuesday.

"It will be done at the latest by Monday," government spokesman Gabriel Sakellaridis told Mega TV.

Greek Prime Minister Alexis Tsipras met with German Chancellor Angela Merkel in Berlin on Monday but it was unclearif they had narrowed differences on economic reforms Athens must implement to win urgently to get fresh aid from its creditors.

Sakellaridis said the package of reforms Athens will propose will not contain recessionary measures but structural changes.

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Alexis Tsipras and Angela Merkel Attempt to Bridge Differences

Wall Street Journal
March 23, 2015

The leaders of Germany and Greece sought to use their first bilateral meeting on Monday to defuse political tensions that have threatened negotiations over how to keep Greece afloat.

German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras pledged to work together to help resolve Greece’s financing crisis, dialing down the heated tone that relations between Athens and Berlin have taken on since the new left-wing government took power in Athens.

Still, the two leaders appeared to make little progress on substance during the Greek premier’s closely watched visit to Berlin. Mr. Tsipras insisted there was a political solution to the dispute that has pitted his government against its eurozone partners over the terms of Greece’s bailout. Ms. Merkel, meanwhile, repeated her mantra that the issue was for the region’s finance ministers to discuss in separate talks.

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Soros Says Greece Is Now ‘Lose-Lose Game’ After Being Mishandled

Bloomberg
March 24, 2015

The chances of Greece leaving the euro area are now 50-50 and the country could go “down the drain,” billionaire investor George Soros said.

“It’s now a lose-lose game and the best that can happen is actually muddling through,” Soros, 84, said in a Bloomberg Television interview due to air Tuesday. “Greece is a long-festering problem that was mishandled from the beginning by all parties.”

Greek Prime Minister Alexis Tsipras’s government needs to persuade its creditors to sign off on a package of economic measures to free up long-withheld aid payments that will keep the country afloat. Since his January election victory, the leader has tried to shape an alternative to the austerity program set out in the nation’s bailout agreement, spurring concern that it may be forced out of the euro.

The negotiations between Tsipras’s Syriza government and the institutions helping finance the Greek economy -- the European Commission, European Central Bank and International Monetary Fund -- could result in a “breakdown,” leading to the country leaving the common currency area, Soros said in the interview at his London home.

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Monday, March 23, 2015

5 Takeaways From Angela Merkel’s Meeting With Alexis Tsipras

by Marcus Walker

Wall Street Journal

March 23, 2015

German Chancellor Angela Merkel hosted Greek Prime Minister Alexis Tsipras at the leaders’ first bilateral summit on Monday, against a backdrop of open antipathy between the two nations’ politicians, media and publics. The purpose of the meeting was partly to defuse the tensions and prevent public acrimony from impeding the search for a way to keep Greece financially liquid and inside the euro. Here’s what the two leaders sought to convey on Monday, and the challenge that still faces them.

1. Personal Chemistry

Both leaders are calm, level-headed politicians. They’re unlikely to fall out and complain about each other like their finance ministers, the irascible Wolfgang Schäuble and the mercurial Yanis Varoufakis. But cool temperaments can’t hide a political gulf. The differences between Ms. Merkel and Mr. Tsipras remain vast as their joint press conference made clear. From war reparations to the conditions of Greece’s bailout funding, disagreements between Athens and Berlin haven’t been this big since the debt crisis began over five years ago.

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Merkel and Tsipras in bid to defuse tensions as cash fears rise

Financial Times
March 23, 2015

Angela Merkel, German chancellor, and Alexis Tsipras, Greek prime minister, pledged to work together on Monday to try to resolve the Greek financial crisis, striking a conciliatory note during their high-profile Berlin summit.

But both said that the meeting, which Ms Merkel arranged last week in a bid to defuse escalating tensions, was not the place for detailed talks over the eurozone’s Greek rescue programme.

Having spent an hour together before the press conference, the two leaders then talked for four hours more over dinner before Ms Tsipras left Ms Merkel’s chancellery just before midnight. Ms Merkel’s spokesman said the meeting was “good and constructive” but gave no details.

On Tuesday, Mr Tsipras was due to meet foreign minister Frank-Walter Steinmeier and German opposition leaders, including chiefs of the far-left Linke party which has backed his radical policies.

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Q&A: As Greece and creditors squabble, cash is running out

by Peter Spiegel

Financial Times

March 23, 2015

It does not get much simpler than this: the Greek government is rapidly running out of money and the EU authorities that could provide the cash to bail it out are refusing to do so.

That is at the heart of the two-month stand-off between Athens and its eurozone creditors and the main complaint contained in a five-page letter sent a week ago by Alexis Tsipras, the Greek prime minister, to his German counterpart, chancellor Angela Merkel, whom he met in Berlin on Monday evening.

There are only two sources of cash Greece can tap: the €7.2bn remaining in its current bailout or by issuing short-term debt that is then purchased by Greek banks. But eurozone authorities are refusing to allow either until Athens implements sweeping economic reforms, which Greek authorities have been resisting. Neither side is budging.

When will Greece run out of money?

That’s the €7.2bn question, and nobody knows the precise answer since national treasuries always seem to find ways to shift cash around — and Athens has thus far been pretty good at scraping together funds from bank accounts held by independent government agencies.

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Greeks Investigate Statistics Chief Over Deficit Figure

by Nektaria Stamouli & Stelios Bouras

Wall Street Journal

March 22, 2015

Greek authorities are escalating a criminal investigation against the head of the official statistics service, accused by some politicians of inflating the budget deficit to help Greece’s creditors justify the country’s unpopular bailout terms.

The country’s chief statistician, Andreas Georgiou, was summoned to testify to prosecutors late last week and faces further questioning on Monday, according to people familiar with the proceedings. The move reactivates a prosecution that was thought to be dormant and indicates that the case is likely headed for a trial, these people say.

The revival of the case comes as Greece’s new government—a coalition of the radical-left Syriza party and the right-wing nationalist Independent Greeks—seeks to challenge the tough austerity and free-market overhauls imposed by Greece’s main lenders: the rest of the eurozone and the International Monetary Fund.

The renewed pressure on Mr. Georgiou is likely to add to the acrimony between Athens and its European and IMF creditors, which demanded a politically independent statistics service as part of Greece’s overhauls under the bailout.

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In Greece, Syriza Struggles to Deliver Promises as Money Runs Out

by Jim Yardley

New York Times

March 22, 2015

Glowering with disdain, Evangelos Venizelos stepped into the well of the Greek Parliament and ridiculed members of the country’s new leftist government. They had vowed to roll back unpopular austerity measures that Mr. Venizelos and the prior government had pushed through. They had promised that Greece would stop kneeling to European creditors.

Mr. Venizelos, once a powerful minister given the task of defending austerity, offered a disgusted opinion: Who are you kidding?

“You were grossly unprepared and naïve,” Mr. Venizelos boomed during last Friday’s debate over a government amnesty program to collect unpaid taxes. He added: “The government is fooling itself by using double talk. They are saying one thing in the country and another thing to the lenders.”

Having promised an anti-austerity revolution, Prime Minister Alexis Tsipras and his Syriza party are now having a taste of comeuppance. Even as Syriza leaders say their program remains on track, the party is struggling to transition from rebel outsiders plotting to wrest Greek’s economic sovereignty back from Berlin and Brussels to running a government that is rapidly running out of money.

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Sunday, March 22, 2015

Greece’s leader warns Merkel of ‘impossible’ debt payments

by Peter Spiegel

Financial Times

March 22, 2015

Alexis Tsipras, the Greek prime minister, has warned Angela Merkel that it will be “impossible” for Athens to service its debt obligations due in the coming weeks if the EU fails to distribute any short-term financial assistance to the country.

The warning, contained in a letter sent by Mr Tsipras to the German chancellor and obtained by the Financial Times, comes as concerns mount that Athens will struggle to make pension and wage payments at the end of this month and could run out of cash before the end of April.

The letter, dated March 15, came just before Ms Merkel agreed to meet Mr Tsipras on the sidelines of an EU summit last Thursday and invited him for a one-on-one session in Berlin, scheduled for Monday evening.

In the letter, Mr Tsipras warns that his government will be forced to choose between paying off loans, owed primarily to the International Monetary Fund, or continue social spending. He blames European Central Bank limits on Greece’s ability to issue short-term debt as well as eurozone bailout authorities’ refusal to disburse any aid before Athens adopts a new round of economic reforms.

“Given that Greece has no access to money markets, and also in view of the ‘spikes’ in our debt repayment obligations during the spring and summer . . . it ought to be clear that the ECB’s special restrictions when combined with disbursement delays would make it impossible for any government to service its debt,” Mr Tsipras wrote.

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Read the annotated text of the letter

Only Technocrats Can Save Greece Now

by Yannis Palaiologos

Wall Street Journal

March 22, 2015

On Monday in Berlin, Greece’s prime minister, Alexis Tsipras, will have his first meaningful bilateral meeting with Germany’s chancellor, Angela Merkel. The omens are not encouraging.

Video emerged last week of Greece’s current Finance Minister, Yanis Varoufakis, raising his middle finger at Germany during a speech in 2013. Greece’s demands for World War II reparations from Germany, among other provocations, seem to have turned the German public decisively in favor of a divorce. In a YouGov poll last week, 59% of Germans said they would prefer that Greece leave the eurozone, up from 48% a month earlier.

After the miniature summit in Brussels in the early hours of Friday in which they both participated, Mr. Tsipras and Mrs. Merkel seemed to emerge with very different understandings of what they had agreed to. The same divergence of interpretation has plagued Greece’s Feb. 20 agreement to extend its bailout by four months.

This is no accident. The new government in Athens is trapped between its pre-election promises to voters and the demands of its creditors. Under the specter of a shutdown of the banks and the imposition of capital controls, Mr. Varoufakis signed on to the February deal, which left the bailout infrastructure essentially in place if under different names. (The troika of the European Central Bank, European Commission and the International Monetary Fund became the “institutions,” the new program to be agreed by June would be a “contract,” and so on.)

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No cash for Athens until reforms in place, says Spain

Financial Times
March 22, 2015

Greece’s cash-starved government will not receive any money from the eurozone rescue fund until all its proposed reforms have been implemented, the Spanish economy minister has said.

“We will see whether the list of reforms is comprehensive enough or not. [But] there will not be any disbursement before there is a real test that the reforms have been approved and implemented. That is the approach,” Luis de Guindos said in an interview with the Financial Times, dashing Greek hopes that the presentation of a new reform list alone could unlock fresh funds for Athens.

Madrid has taken a particularly hardline stance on Greece’s radical anti-austerity push, but patience is running thin in other eurozone capitals, not least Berlin where Chancellor Angela Merkel will meet Greek premier Alexis Tsipras on Monday.

“We have been losing time, and the communications from the Greek side have not been brilliant. They have not made a lot of friends,” Mr de Guindos said, adding that European governments were united in their stance on Greece: “There is no sign of divisions — not at all. And that is despite the fact that the Greeks have tried to exploit potential divergences. But those divergences don’t exist.”

The minister, who is one of the frontrunners to take over the presidency of the eurogroup of eurozone finance ministers this year, said Greece should push through a “real privatisation program” and refrain from “unilateral measures” such as last week’s anti-poverty law.

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Saturday, March 21, 2015

Merkel sets strict terms for Greek aid, Juncker flags EU cash

Reuters
March 20, 2015

European Union leaders welcomed a pledge on Friday from Greece to meet creditors' demands for a broad package of economic reform proposals within days to unlock the cash Athens needs to avoid stumbling out of the euro zone.

After overnight crisis talks on the sidelines of an EU summit in Brussels, new Greek Prime Minister Alexis Tsipras and German Chancellor Angela Merkel, the bloc's main paymaster, offered somewhat divergent understandings of how much Athens must do and how quickly. But EU officials insisted there was a broad agreement to act now on an accord struck a month ago.

Merkel said Greece, which faces a cash crunch within weeks, would receive fresh funds only once its creditors approve the comprehensive list of reforms Tsipras promised to present soon.

But she signalled some flexibility on what reforms Tsipras would have to make -- crucially giving his leftist-led coalition the chance to offer alternative savings strategies that will help it persuade its voters it is breaking with what Tsipras calls the failed austerity policies of his defeated predecessor.

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Greece, creditors hobble on amid low hopes for a bailout

by Alexandra Mayer-Hohdahl

German Press Agency

March 20, 2015

When Greek Prime Minister Alexis Tsipras first sat down with top European officials in the middle of the night on Thursday to discuss his country's economic woes, the atmosphere appeared almost light-hearted.

German Chancellor Angela Merkel was filmed merrily chatting with Eurogroup chief Jeroen Dijsselbloem, while European Commission President Jean-Claude Juncker laughed at a comment by EU President Donald Tusk.

But diplomats say the atmosphere quickly turned serious after the cameramen were ushered out of the room. Aid negotiations with the cash-strapped country had made only halting progress and fears were spreading that Greece could run out of money and leave the eurozone.

Tsipras was seeking quick access to his country's remaining bailout funds, but EU leaders had closed ranks earlier Thursday with a demand that Athens deliver reforms before any more cash could flow.

"This was not a meeting to take decisions but to have a reality check," Tusk said Friday. "This was an important meeting in which we managed to rebuild trust. It is now up to all of us, not least Greece, to live up to that."

"There was criticism of how [EU] officials were treated in Athens. These were frank words," one source said on condition of anonymity.

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The Greece Issue Breeds Brinkmanship in the Eurozone

New York Times
Editorial
March 20, 2015


Nobody expected that the discussions between Greece and the rest of the eurozone about a new loan agreement would go smoothly. But things seem to be going even worse than expected, with both sides sniping at each other and refusing to engage in meaningful negotiations.

Last month, Greece and its lenders — the 18 other countries that use the euro, the European Central Bank and the International Monetary Fund — agreed to extend a 240 billion euro (about $260 billion) bailout program for four months while they worked on a permanent deal. The hope was that during this time, Greece would start making changes like improving tax collection and reducing senseless regulations that make it hard to do business in the country. In exchange, Greece’s creditors would give it more leeway in how and when it paid back its loans.

But with debt repayments coming due, and fears mounting about a possible Greek default and exit from the euro, both sides seemed more eager to annoy each other than to grapple with fundamental issues. Greece’s prime minister, Alexis Tsipras, has been demanding German reparations for World War II, which seems almost beside the point. The German finance minister, Wolfgang Schäuble, has antagonized Greece with some name-calling, describing its finance minister as naïve.

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Friday, March 20, 2015

Greece’s Tsipras Gets ‘Reality Check’ at EU Summit

by Matthew Dalton

Wall Street Journal

March 20, 2015

Alexis Tsipras, the new Greek prime minister, came to Brussels on Thursday hoping to secure offers of desperately needed financial support from the currency bloc during a meeting with eurozone leaders.

What he got instead was a splash of cold water from the two people who control the eurozone’s purse strings: German Chancellor Angela Merkel and European Central Bank chief Mario Draghi. They said the eurozone won’t give Athens more money until it passes into law much of the bailout program the new Greek government signed up to late last month, according to people briefed on the meeting.

“This wasn't a meeting to make decisions, but to have a reality check,” European Council President Donald Tusk, who organized the meeting, told reporters on Friday, “and to avoid misunderstandings at the highest political level.”

The tough message renews pressure on Mr. Tsipras to execute a dramatic turnaround in talks on a revised bailout program at a time when clashes between his government and the eurozone are flaring up daily.

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Greece slides towards the euro trapdoor

Financial Times
Editorial

March 20, 2015


If there is one thing all sides in the Greek crisis publicly agree on, it is that Greece should stay in the eurozone. Yet with every day that passes without the Greek authorities and their creditors even finding a common basis for discussion, that exit creeps ever nearer.

The leaders met this week at an EU summit, again without agreement on how Greece can implement reforms that unlock lending from the troika of the eurogroup of finance ministers, the International Monetary Fund and the European Central Bank. What is becoming ever clearer is that, whatever the faults of the creditors, the Greek authorities are proving themselves to be unreliable negotiating partners.

Since the Syriza government was elected in January, the contours of a deal have been clear. In return for structural changes to release suppressed potential in the Greek economy, the troika will first relax primary fiscal deficit targets to encourage growth and then discuss a writedown of the overhanging debt stock. In the few months that it will take to negotiate this, the ECB will keep the Greek banking system afloat by permitting the Greek central bank to supply liquidity.

The problem is that nearly two months after Syriza took office, negotiators are barely any closer to a solution. Yanis Varoufakis, Greece’s finance minister, has proved himself an excellent self-publicist but not a reliable interlocutor. Some of the list of proposed reforms he produced to push the talks forward two weeks ago, including a proposal to wire up tourists as undercover tax inspectors to hunt for VAT fraud, have bordered on the eccentric. It is little surprise that his eurozone counterparts are often forced to bypass him and deal directly with Alexis Tsipras, the prime minister.

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Bond Markets Bet on Grexit

by Mark Gilbert

Bloomberg

March 20, 2015

Two taboos about Greece's future as a member of the euro club were broken this week when the German finance minister all but invited Greece to return to the drachma and the Dutch finance minister floated a temporary ban on Greeks' taking their money out of the country.

Suggestions that some German officials are less than enthusiastic about Greece remaining in the euro and that capital controls are possible aren't all that surprising. Nevertheless, the openness with which they were discussed shows the lack of progress the newly elected government has made in reaching agreement with the nation's creditors. Greece's financial future looks increasingly perilous.

The bond vigilantes are giving Greece a huge vote of no confidence, doubling the country's 10-year yield in the past six months and driving its three-year borrowing cost to a frankly unsustainable 23 percent. At that level, investors are signaling genuine concern that the country won't be able to pay its debts and can't retain its membership in the single-currency club:


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It Really Looks Like Greeks Are Hiding Cash Under the Mattress

Bloomberg
March 20, 2015

It is no secret that banks in Greece have been losing deposits in recent months.

The question that is somewhat open, though, is where Greeks have been moving their deposits to. Have they been transferring the cash to other banks, or have they been squirreling it away under the mattress—and under bathroom tiles?

At first glance, data from the Bank of Greece seem to point to the deposit transfer option rather than the cash-under-mattress option as the "banknotes in circulation" line item on its balance sheet hasn't shown any big spike in recent months.


This, however, does not tell the full story.

The banknotes in circulation item on the Bank of Greece balance sheet only shows the amount of cash Greece has been allocated under its share of overall euro-area banknote circulation. Any extra cash needs of the Greek economy are accounted for elsewhere on the Bank of Greece balance sheet under the rather drab headline of "net liabilities related to the allocation of euro banknotes within the Eurosystem."

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Greece’s Tsipras vows to accelerate reforms at meeting with EU creditors

Financial Times
March 20, 2015

Greece’s prime minister agreed to speed up his economic reform plans but failed to secure any short-term financing for his cash-strapped government at a meeting with German and French counterparts and EU leaders late on the sidelines of a summit in Brussels.

The agreement with Alexis Tsipras did not change the terms of a deal reached a month ago with eurozone finance ministers, which has floundered amid Greek objections to detailed talks with bailout monitors in Athens.

Nor did it bring Athens any closer to securing some of the €7.2bn remaining in the bailout, despite mounting evidence it is running so low on funds that it has had to scrape together cash from the bank accounts of independent government agencies.

But EU leaders said they hoped the three-hour discussion at the highest level would provide the needed spark for Greek authorities to co-operate more fully with the fact-finding team in Athens, which must sign off on a final list of reforms that Mr Tsipras vowed to present in a matter of days. Only when the list is agreed and the reforms implemented will bailout cash be released.

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Real or Fake, a Greek Video Rattles Germany

by Leonid Bershidsky

Bloomberg

March 20, 2015

As Greece drifts again towards a Euro exit and German Chancellor Angela Merkel prepares to make another last-ditch attempt to find a compromise, Germans are discussing one of the more bizarre aspects of the crisis: Did Yanis Varoufakis, now Greece's finance minister, really give Germany the finger during a speech two years ago?

The question came up late last month, when someone posted a YouTube video of Varoufakis talking at an event in Zagreb, Croatia, in May 2013. It didn't make much of a splash until last Sunday, when Guenther Jauch, one of Germany's most influential TV hosts, aired a clip from the video, in which Varoufakis makes the obscene gesture and says, "Greece should simply announce that it is defaulting, stick the finger to Germany and say, well, you can now solve this problem by yourself."

Jauch proceeded to show footage of Varoufakis angrily protesting that the video had been doctored and that he had "never given the finger ever." Then, guests of the show argued about the recording's authenticity.

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EU Dangles Prospect of Aid to Entice Greece Into Action

Bloomberg
March 20, 2015

Greece could win an infusion of bailout money as soon as next week if Prime Minister Alexis Tsipras can deliver an adequate package of reform measures, an EU official told reporters in Brussels.

European Union leaders sought to revive bailout talks at a meeting in Brussels by signaling they might soon be ready to release some funds so long as Greece fulfills its commitments. The first money could come from profits euro members made when the European Central Bank bought discounted Greek debt during an earlier phase of the financial crisis. There’s also money left in the country’s 240 billion-euro ($258 billion) bailout program.

While Greece has an extension through June to meet its reform requirements, “if we’re done earlier within the agreed framework, of course money can be paid out after all conditions are met,” German Chancellor Angela Merkel told reporters in Brussels on Friday afternoon. “That’s a decision for the Eurogroup.”

Merkel sought to quash speculation that her nation is prepared to let Greece leave the euro. Her comments came hours after nearly four hours of talks with a group including Tsipras and ECB President Mario Draghi.

“I haven’t entered into this debate and I will not do so now,” Merkel said. “Everything we do is aimed at pointing the way toward to keeping Greece as part of the euro, as we have done successfully in recent years.

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In Greece’s Bailout Talks, Why It’s 18 Eurozone Countries Versus One

by Stephen Fidler

Wall Street Journal

March 19, 2015

As talks over Greece’s bailout move closer to the brink, the 19 countries of the eurozone have split into two distinct camps: Greece and the other 18.

It didn’t start off quite like this. The new government of Alexis Tsipras was greeted warily by many when it took office in January, given the left-wing leader’s bold campaign promises of writing off the country’s debt. But there were some sympathizers on the left among the leaders of France and Italy, and many expected Mr. Tsipras would change tack once he took office.

That shift hasn’t been much in evidence and even the sympathy there was has evaporated somewhat. Finance Minister Yanis Varoufakis may have lost an ally in Italy when he declared that it too risks bankruptcy. Politicians across Europe of all political stripes are now saying both publicly and privately that Greece must follow the rules if it wants more aid.

Before a meeting of the Eurogroup forum of eurozone finance ministers last month, Austrian Finance Minister Hans Jörg Schelling declared, “In the Eurogroup meetings on Greece so far, there was a very determined finance ministers’ front, 18 to 1, and we stay true to that.”

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Thursday, March 19, 2015

Germany, Greece and history: Pointing fingers

Economist
March 21, 2015

The level of debate between Germany and Greece, protagonists in a drama that could make or break the euro zone, could hardly be called edifying. Take, for example, the YouTube video from 2013 which shows Yanis Varoufakis, then a left-leaning economics professor, arguing that Greece should simply default on its debts and “stick the finger to Germany”, and making an appropriate hand gesture for emphasis. When Mr Varoufakis, now Greece’s finance minister, was confronted with the clip on March 15th during a talk show on German television, he claimed the footage was doctored. The ensuing “Fingergate” lasted days, as the German media proved that the video was genuine, albeit taken out of context. Germany’s pundits spluttered with rage: the Greeks were mendacious as well as impertinent.

This week marked a nadir in relations between Greece and its largest creditor. The tone has been deteriorating ever since January when Alexis Tsipras, leader of the far-left Syriza party, took over as Greek prime minister. It is clear that Wolfgang Schäuble, Germany’s finance minister, and Mr Varoufakis no longer trust each other as partners in negotiations to extend Greece’s bail-out. When Mr Schäuble called his counterpart “foolishly naive”, Greece’s ambassador in Berlin filed a diplomatic protest.

Greece’s defence minister has threatened to let masses of Syrian refugees, possibly including terrorists, pass through to Germany. Europe has only itself to blame if that happens, he said. The Greek justice minister suggested that, as part of his country’s ongoing claims against its old oppressor, he might even seize the Athens property of the Goethe Institute, Germany’s cultural agency.

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Greece v Germany: Dangerous liaisons

Economist
March 21, 2015

The Greek crisis is not just an economic mess. Increasingly, it is becoming a geopolitical mess too. Alexis Tsipras, the country’s prime minister, whose radical-left Syriza party swept into government after January’s general election, has taken to tugging at crude political levers—from cosying up to Vladimir Putin to demanding war reparations from Germany—in the belief that this will somehow prompt concessions from the rest of the euro zone.

The whiff of blackmail has incensed Europe’s politicians. Mr Tsipras has a chance to calm things down in two meetings with Angela Merkel, Germany’s chancellor—the first this week on the fringes of a European summit in Brussels, and the second in Berlin on March 23rd for what should be some hard talking between the European Union’s most powerful leader and its biggest troublemaker. Instead of stirring up resentment, Mr Tsipras should focus on the urgent task at hand: forging a deal.

Just now the Greek government seems to prefer lobbing incendiary political gibes instead. The defence minister has threatened to flood Europe with migrants, including jihadists. The justice minister has demanded that Germany pay €160 billion ($170 billion) in war reparations and warned Greece might seize the buildings of the Goethe Institute and even German holiday homes if the money is not handed over (see article). And Mr Tsipras has brought forward to early April a trip to Moscow to see Russia’s president, Vladimir Putin. His hoped-for message is as clear as it is crude: Mr Putin might be only too happy to help a fellow Orthodox country that dislikes sanctions on Russia.

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Greek Banks Feel Tension as Market Faith Wanes

Wall Street Journal
March 19, 2015

Slowly, the pressure on Greece is ramping up once more.

Prime Minister Alexis Tsipras will on Thursday hold more talks with French and German leaders, president of the European Central Bank, Mario Draghi, and Jeroen Dijsselbloem, leader of a group of European finance ministers.

Mr. Tsipras’s reception is likely to be frosty after he pushed an anti-poverty bill through the Greek parliament in defiance of the country’s international creditors. But while he may feel politically emboldened by antiausterity demonstrations in Frankfurt, financial conditions at home are deteriorating.

Greek government bonds are suffering a renewed crisis of investor faith. The yield on the Greek 2017 bond has risen above 22%, according to Tradeweb, and the yield curve is sharply inverted—a classic sign of distress.

The share prices of Greek banks are at or near the lowest levels seen since the crisis began in 2009. Deposits have continued to flow out with reports of a mini-run on Wednesday after Mr. Dijsselbloem said capital controls may be needed.


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Germany’s Merkel Intervenes in Greek Rift With Creditors

Wall Street Journal
March 19, 2015

German Chancellor Angela Merkel intervened directly in a deepening rift between Greece and its international creditors, a sign of Berlin’s growing concern that the acrimony threatens the unity of the eurozone.

Ms. Merkel and other key leaders met with Greek Prime Minister Alexis Tsipras on the sidelines of a European Union summit on Thursday night in talks that lasted for almost four hours. The chancellor has also invited Mr. Tsipras for face-to-face talks in Berlin on Monday.

The meetings show that the Greek crisis is viewed in Berlin as enough of a threat to Europe’s stability for heads of government to get involved, European officials said. At Thursday night’s meeting, the chancellor rebuffed a request from Mr. Tsipras for quicker access to eurozone money, according to a eurozone official.

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Greek bank deposit outflows spike over new tensions with EU

Reuters
March 19, 2015

Greek banks saw deposit outflows of about 300 million euros on Wednesday, the highest in a single day since a February deal with the euro zone that staved off a banking collapse, two senior Greek bankers familiar with the matter said on Thursday.

Greek banks have seen deposits steadily flee the system since December when political tensions rose, sparking fears of a new financial crisis and the threat of a Greek euro zone exit.

The fears receded after a Feb. 20 deal extending Greece's bailout but have risen again in recent days as relations worsen between Athens and its euro zone creditors, which have frozen aid and left Greece on the verge of running out of cash.

Shares in Greek banks are down about 45 percent year to date.

"The uncertainty over the lack of progress in negotiations and the negative newsflow has affected sentiment," one banker told Reuters. "It's not a huge amount but the worry is whether this is the start of a trend that could get worse."

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ECB weighs curbs on Greek banks’ government debt purchases

Financial Times
March 19, 2015

The European Central Bank is considering banning Greek lenders from adding to their holdings of government debt in a move that would cut off a key source of funding for Athens and worsen discord with its creditors.

The governing council of national central bank governors and top ECB officials on Wednesday debated whether to make legally binding their recent warnings to Greek banks against loading up on their sovereign’s short-term debt, or T-bills.

The ECB in mid-February issued a recommendation to the four Greek lenders under its supervision to refrain from buying more of the debt. There are concerns among some eurozone central bankers that Greek lenders could ignore the recommendations and add to their stock of T-bills regardless.

A final decision is not expected ahead of Thursday evening’s EU summit in Brussels, where Alexis Tsipras, the Greek prime minister, will hold a separate meeting to discuss the crisis with Mario Draghi, ECB president, as well as leaders of Germany, France and the European Commission and Council.

The meeting comes amid growing concerns that Athens is running out of cash.

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ECB Said to Reject Supervisory Move on Greek Banks

Bloomberg
March 19, 2015

The European Central Bank rejected a proposal by its supervisory arm to prohibit Greek banks from increasing their holdings of short-term government debt, amid concern that such a move would endanger political negotiations.

The Single Supervisory Mechanism, the ECB’s new bank oversight body, wanted to cap Greek banks’ holdings of domestic treasury bills, a key financing source for the cash-strapped government, euro-area officials familiar with the discussions said. While supervisors are concerned about the default risk that the assets carry, the higher-ranking Governing Council sent back the proposal Wednesday. The officials declined to be named as the matter isn’t public.

ECB President Mario Draghi is due to join four-way talks between Greece’s leadership, French President Francois Hollande and German Chancellor Angela Merkel starting in Brussels late Thursday. Draghi is faced with finding a balance between not deliberately worsening Greece’s financial plight as it struggles to stay in the euro, and not riding roughshod over the rules of his own institution.

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Greece and the euro zone: Bumbling toward disaster

Economist
March 19, 2015

It was an act of doublethink to make Orwell proud. Yesterday afternoon Alexis Tsipras, Greece’s prime minister, told his parliament that he was “determined” to stick to the February 20th agreement with the euro zone that extended Greece’s bail-out by four months. He immediately proceeded to urge MPs to pass a “humanitarian” law providing food stamps and subsidised energy to Greece’s needy. This was precisely the sort of measure that the February deal obliged Greece to avoid taking without consulting its creditors.

Mr Tsipras therefore arrives in Brussels today, for a summit of Europe’s heads of government, under a cloud of mistrust. The Greek situation is not on the formal agenda, but it is at the top of everyone’s minds. Under the terms of February’s agreement Greece is supposed to draw up and begin implementing structural reforms in exchange for dollops of bail-out cash to keep its economy afloat.

Instead ministers in the Syriza-led government have spent their time behaving clownishly. Mr Tsipras has been bashing Germany for failing to honour past war reparations obligations in full. His defence minister threatened to open Greece's doors—and therefore Europe's—to poor and potentially dangerous migrants from the Middle East. Yanis Varoufakis, the finance minister, looked anything but troubled in a photo shoot with a glossy French magazine. Meanwhile, the work of solving Greece’s problems has barely begun. Technical teams dispatched to Athens to uncover the true state of Greece’s finances and discuss reform details have been met with stonewalling and delay. No one, therefore, knows precisely how bad Greece’s cash crunch is. Few expect it can fund itself for more than a few weeks, however. And a solution appears as distant as ever.

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Greece and creditors bicker ahead of summit

Financial Times
March 18, 2015

A Greek “humanitarian bill” to aid victims of the economic crisis has become the latest flashpoint in the country’s frayed relationship with its creditors and has set the stage for a high-level confrontation at Thursday’s EU summit.

Alexis Tsipras, the Greek prime minister, introduced the bill in parliament on Wednesday, angering creditors who believed they should have first been consulted.

Mr Tsipras defended the move in an emotive speech, saying: “We’re not going to allow [foreign] technocrats to draft our legislation any longer.”

The bill, which passed on Wednesday by an overwhelming majority, is part of the governing Syriza party’s campaign pledge to fight poverty in Greece caused by a prolonged recession and comes with a price tag of an estimated €200m.

But creditors said Athens’s decision to push through the legislation violated a deal reached with eurozone finance ministers to consult them and not change economic policy unilaterally. They also complained that other measures had been inserted into the legislation that did not directly address social spending.

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Wednesday, March 18, 2015

Desperate times, desperate measures

by Yannis Palaiologos

Policy Network

March 18, 2015

Syriza’s internal turmoil is seriously hampering Greece's relationship with Europe. Stoking nationalist, anti-German feeling to shore up party support is making matters worse

Seven weeks in, Greece’s new government is in deep water, and struggling to stay afloat. The negotiations between Athens and its official creditors are trudging forward at a snail’s pace, while debt repayments loom and the Greek banks are living dangerously, on the brink of full-blown liquidity crunch.

Alexis Tsipras, Greece’s young, leftist prime minister has shown a willingness, at least on a rhetorical level, to make the necessary concessions that will allow the current review of Greece’s bailout programme to be successfully concluded and a new programme – or contract, as his people like to call it – to be put in place by the end of June. In effect, he has accepted the bulk of the existing bailout infrastructure. And his finance minister, the mercurial Yanis Varoufakis, has said that the new government agrees with 70 per cent of the commitments made by its predecessors in the context of the bailout(s) – something the main ruling party, Syriza, had neglected to mention before the 25 January elections.

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Technical Talks on Greece’s Bailout Not Going Well, Officials Say

Wall Street Journal
March 18, 2015

Talks between Greece and its international creditors have made little progress, officials said, with each side blaming the other for the snags in negotiations over the future of the country’s bailout.

Greek officials are providing teams from the European Commission, the European Central Bank and the International Monetary Fund with very little information on the government’s finances and its plans for overhauling its economy and public sector, two European officials said Wednesday.

“The line was that the Greeks aren’t cooperating,” one of the officials said, summarizing the institutions’ account during a teleconference the day before among senior eurozone finance ministry officials.

A Greek official said the technical teams had gone beyond their role as fact-finders and had sought to intervene in politics, continuing a frequent line of complaint from Athens about the so-called troika of inspectors.

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'Varoufakis problem' weighs on Greek debt talks

Reuters
March 18, 2015

With incendiary interviews, an undiplomatic demeanor, a celebrity photo shoot and an obscene finger gesture, Yanis Varoufakis is becoming part of Greece's debt problem rather than the solution, or so his euro zone partners believe.

Many Greeks regard their new finance minister as a breath of fresh air, a man who has told his colleagues in the Eurogroup a few home truths about the futility of forcing austerity policies on an economy that has endured a depression for five years.

But his readiness to break the conventions of European discourse has caused consternation, and not just among the buttoned-up finance chiefs and bureaucrats who populate the Eurogroup.

The 53-year-old academic economist, who calls himself an "erratic Marxist", roared to prominence when the leftist Syriza party won an election in January and Prime Minister Alexis Tsipras chose him as finance minister.

Less than two months into the job, he has alienated many interlocutors in Berlin, Brussels and Frankfurt, and risks becoming a liability as Greece struggles to avert bankruptcy and stay in the euro zone.

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Moscovici says EU won't keep Greece in euro zone at any price

Reuters
March 18, 2015

The European Union is not prepared to keep Greece in the euro zone at any price, its financial affairs chief said in a newspaper interview on Wednesday, although he said that a Greek exit would inflict great damage on the currency union.

"The Eurogroup has an overwhelming will to keep Greece in the euro zone. Financial accidents can happen. Our task, however, is not to organise this but to prevent it," Pierre Moscovici, the financial affairs chief, told German daily Die Welt.

The Eurogroup is the group of euro zone finance ministers.

"We won't keep Greece in the euro zone at any price, but under strict conditions which are acceptable for both sides," Moscovici said, adding that any possible third aid package must look different to previous ones.

His comments follow remarks from German Finance Minister Wolfgang Schaeuble last week that Greece may stumble out of the euro zone because its leaders had failed to negotiate new borrowings.

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IMF Considers Greece Its Most Unhelpful Client Ever

Bloomberg
March 18, 2015

International Monetary Fund officials told their euro-area colleagues that Greece is the most unhelpful country the organization has dealt with in its 70-year history, according to two people familiar with the talks.

In a short and bad-tempered conference call on Tuesday, officials from the IMF, the European Central Bank and the European Commission complained that Greek officials aren’t adhering to a bailout extension deal reached in February or cooperating with creditors, said the people, who asked not to be identified because the call was private. The IMF’s press office had no immediate comment on the discussions.

German finance officials said trying to persuade the Greek government to draw up a rigorous economic policy program is like riding a dead horse, the people said, while the IMF team said Greece’s attitude to its official creditors was unacceptable. The German Finance Ministry didn’t respond to multiple requests seeking comment.

Concern is growing among officials that the recalcitrance of Prime Minister Alexis Tsipras’s government may end up forcing Greece out of the euro, as the cash-strapped country refuses to take the action needed to trigger more financial support. Tsipras is pinning his hopes for a breakthrough on a meeting with ECB President Mario Draghi, German Chancellor Angela Merkel, French President Francois Hollande and European Commission head Jean-Claude Juncker this week in Brussels.

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Biggest threat to the euro? The clowns who run Greece

by Matthew Lynn

Market Watch

March 18, 2015

A finance minister who poses for spreads in Paris Match, while he is not blogging or tweeting. A prime minister who angrily demands reparations for Nazi crimes, and taunts the Germans for their past. The double act of the two men in charge of the Greek economy, Yanis Varoufakis and Alexis Tsipras, has been keeping the world’s media entertained. Anyone who follows them on Twitter will have enjoyed the controversy they stir up.

But, amusing as they might be, you wouldn’t want them to hold the stability of the global financial system in their hands. Unfortunately, that is what is happening. There are signs that the eurozone economy is starting to recover, and the launch of quantitative easing by the European Central Bank will give that some added momentum.

The big problem remains Greece.

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Tuesday, March 17, 2015

Greek exit from the euro is not a risk worth taking

Financial Times
Editorial
March 17, 2015


The ugly word “Grexit” should never have been coined. More than a conventional default, a decision to walk away from a currency is more akin to ripping up the rules of the game. It has only happened at moments of historic failure, such as when Weimar Germany abandoned the old mark. No wonder the architects of the euro left no arrangements for a country to leave.

Since the radical leftwing party Syriza ascended to power, the obstreperous behaviour of its leaders has led to increasing talk of Greece leaving the euro. This is not just a threat designed to bring Athens in line. After governments of every hue failed convincingly to reform the economy, Greek voters in January elected a party that vowed to undo what progress had been made. Rather than endure the weary charade of promises delivered in bad faith in return for debts being extended, many Europeans (including most Germans) would prefer that Greece end the drama and restore the drachma.

They do so in the apparent confidence that this would no longer create an existential crisis for Europe. Financial exposure to Greece is much less than in 2012. Anyone holding Greek debts will have written them down a long way. There are now thick firewalls against the failure of one state cascading into the others. Finally, the ECB is much better equipped to tackle financial stress than at the apex of the euro-crisis three years ago.

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Don’t pass new anti-poverty law, commission tells Greece

by Paul Mason

Channel 4

March 17, 2015

At less than 24 hours’ notice the European Commission has vetoed a key law set to be passed by the Greek parliament tomorrow.

The so-called “humanitarian crisis bill” was set to provide free electricity for some households, and address poverty among pensioners and homeless families.

But in a communication seen by Channel 4 News, Declan Costello, director at the EC’s directorate for economic and financial affairs, has ordered the radical left-led coalition governemnt in Greece to stop. A planned law to allow tax arrears to be paid in instalments, set before the Greek parliament on Thursday, has also been vetoed.

The move comes as Alexis Tsipras, the Greek PM (pictured below left, with European Commission President Claude Juncker), called for five-party talks at Thursday’s summit, and ahead of a critical decision by the European Central Bank over restoring borrowing facilities to Greek banks.

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Greeks find support for German reparations claims — in Germany

Financial Times
March 17, 2015

When Greek governments have periodically sought reparations from Germany for crimes committed during the Nazi occupation, Berlin has tended to respond with an abrupt: geschlossen. As in, case closed.

But the latest Greek demand — aired in the context of an increasingly bitter fight with Germany over access to the country’s bailout loans — is finding an opening with unlikely allies in Berlin.

On Tuesday, two leading Social Democrats — Chancellor Angela Merkel’s coalition partners — urged the government to start talks with Athens over second world war reparations questions.

Gesine Schwan, a former Social Democrat presidential candidate, and Ralf Stegner, an SPD vice-chairman, were echoed by Anton Hofreiter, parliamentary chief of the opposition Greens. All three were quoted in the online version of Der Spiegel, the news magazine.

“The government’s legal argument isn’t convincing,” Ms Schwan told the Financial Times. “It leaves a bad impression that Germany doesn’t want to face up to its responsibilities. It was possible to find a solution in German-Polish relations. Something similar can be done with Greece.”

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All we ask is that Europe give Greece a chance

by Yannis Dragasakis, Yanis Varoufakis & Euclid Tsakalotos

Financial Times

March 17, 2015

It is a common belief that the Greek government is seeking special treatment relative to other stressed eurozone members. We are not; we are seeking equal treatment.

Since the onset of the crisis, our economy has shrunk 26 per cent; unemployment has risen from 8 to 26 per cent; and wages have declined 33 per cent. These outcomes are worse than those experienced by any country during the 1930s and far worse than those projected under the two Greek adjustment programmes. This is why the Greek government has criticised these programmes.

Our fiscal adjustment has been larger than in other countries. Since 2009, spending cuts and tax increases amounting to more than 45 per cent of household disposable income have been implemented. In Portugal it was 20 per cent; in Italy and Ireland 15 per cent.

Not only have the fiscal measures been larger, but for each percentage point of consolidation, the economy has contracted more. This is because the Greek economy is less open than others; any decline in demand hits domestically produced goods more than imports. Successive rounds of austerity exacerbated the contraction in gross domestic product. And with that the ratio of debt-to-GDP rises, making debt dynamics unmanageable. Greece is borrowing ever more to pay back earlier debts.

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Rival accuses Syriza of wanting to ‘blow up’ relations with Germany

by Kerin Hope

Financial Times

March 17, 2015

Stavros Theodorakis, a political newcomer and leader of the centre-left To Potami (the River) party, argues that the Syriza-led government is squandering political capital by consistently taking aim at Berlin.

“The Germans today are friends of Greece and we shouldn’t have government ministers pursuing a hostile relationship with them,” Mr Theodorakis said in an interview with the Financial Times.

“Millions of Germans come to Greece on holiday every year and there are close ties between our peoples . . . But there are some brainless people who want to blow up this relationship,” he added.

While Alexis Tsipras, the prime minister, has softened his own anti-German rhetoric since taking office he allows members of his cabinet to let rip against the Berlin government.

The verbal barrage is led by Panos Kammenos, defence minister and leader of Independent Greeks, a small rightwing party that unexpectedly became Syriza’s coalition partner in government.

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Greece's Euro Exit Seems Inevitable

by Mark Gilbert

Bloomberg

March 17, 2015

Greece's money troubles resemble a game of pass the parcel, where each successive participant rips another sheet of wrapping paper off the box -- which turns out to be empty when the final recipient reaches the core. With time and money running out, a successful endgame seems even less likely than it did a week or a month ago. It's increasingly obvious that the government's election promises are incompatible with the economic demands of its euro partners. Something's got to give.

The current money-go-round is unsustainable. Euro-region taxpayers fund their governments, which in turn bankroll the European Central Bank. Cash from the ECB's Emergency Liquidity Scheme flows to the Greek banks; they buy treasury bills from their government, which uses the proceeds to … repay its International Monetary Fund debts! No wonder a recent poll by German broadcaster ZDF shows 52 percent of Germans say they want Greece out of the euro, up from 41 percent last month.

There's blame on both sides for the current impasse. Euro-area leaders should be giving Greece breathing space to get its economic act together. But the Greek leadership has been cavalier in its treatment of its creditors. It's been amateurish in expecting that a vague promise to collect more taxes would win over Germany and its allies. And it's been unrealistic in expecting the ECB to plug a funding gap in the absence of a political agreement for getting back to solvency.

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Greece Grabs Cash as More Than $2 Billion in Payouts Loom

by Nikos Chrysoloras, Vassilis Karamanis & Christos Ziotis

Bloomberg

March 17, 2015

Greece will begin debating measures to boost liquidity as the cash-starved country braces for more than 2 billion euros ($2.12 billion) in debt payments Friday.

Unable to access bailout funding and locked out of capital markets, the government will outline emergency plans to parliament Tuesday to increase funding. Payments due March 20 include interest on a swap originally arranged by Goldman Sachs Group Inc., said a person familiar with the matter who asked not to be identified publicly discussing the derivative.

Prime Minister Alexis Tsipras’s government is burning through cash while trying to get its creditors -- euro area member states, the European Central Bank and the International Monetary Fund -- to release more money from its 240 billion-euro bailout program. European governments have said they won’t disburse any more emergency loans unless the government in Athens implements a set of economic overhauls agreed last month, including pension and sales tax reform.

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Monday, March 16, 2015

Greece’s Alexis Tsipras to Meet With Germany’s Angela Merkel Next Week

by Nektaria Stamouli

Wall Street Journal

March 16, 2015

Greek Prime Minister Alexis Tsipras is expected to meet with his German counterpart, Angela Merkel, in Berlin next Monday amid fraying relations over Greece’s planned overhauls and increasingly vocal demands from Athens about wartime reparations.

“[Ms.] Merkel asked for a phone meeting with the Greek PM [Monday],” a senior Greek government official said. During the phone conversation, the German chancellor asked Mr. Tsipras to visit Berlin and he accepted the invitation.

“The chancellor will receive Prime Minister Tsipras in the chancellery on Monday afternoon,” Ms. Merkel’s spokesman Steffen Seibert said.

The meeting comes as the tension between the two countries is rising, as the newly-appointed left-wing Greek government resists implementing the tough economic measures Germany and other eurozone countries insist are necessary to unlock further financial aid.

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Greek tactics annoying eurozone partners, says Belgium

Financial Times
March 16, 2015

Athens has “annoyed” and “frustrated” its eurozone partners with combative negotiating tactics, said Belgium’s finance minister, who warned Greece that the single currency could safely ride out its exit.

Johan Van Overtveldt, an economist who took charge of the finance ministry in the eurozone’s sixth-largest economy in October, said the currency bloc had sufficient safeguards in place to endure a Greek departure, adding he believed other ministers shared this view.

“What we have now in place would certainly allow us to survive that,” Mr Van Overtveldt said. “Nobody talks too much about that very openly, but my feeling is [the view] is quite present around the table.”

The new Greek government has singled out Berlin as its chief adversary in an acrimonious stand-off over how the cash-strapped government can access the remaining €7.2bn in its bailout programme.

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The Greek Debt Crisis’ Great Divide

by Nikos Konstandaras

New York Times

March 16, 2015

When CNBC conducted an Internet poll asking which Oscar-nominated song best described the Greek crisis, 51 percent picked “I’m Not Gonna Miss You.” In Greece, we have grown accustomed to tension with our partners in the European Union. But when even a flippant American poll shows impatience with our plight, the magnitude of our isolation is frightening. A Greek television station reported the poll, and my son, who is 16, muttered, “They hate us even when they don’t know us.”

Fatigue with the Greek crisis has taken hold at a crucial time. With state funds expected to run out before the end of the month, the new government needs to persuade its creditors that it will carry out reforms and earn the release of funds tied to a 240-billion-euro bailout agreement it had promised to scrap. The government is trapped between creditors who don’t trust it and hard-line Syriza members who insist on rolling back earlier measures — even at the cost of Greece’s exiting the eurozone, which most Greeks want to remain part of.

When voters elected Syriza on Jan. 25, they were expressing hope for the impossible mission that it promised: loosening austerity and slashing the country’s debt while maintaining the funding from Europe that would allow Greece to stay in the eurozone. Many observers, including prominent economists, hoped to see an alternative to the austerity-for-reform model, which they believe to be a failure. But the past few weeks have been marked by increasing economic instability, with revenues collapsing while a viable deal between Greece and its partners remains elusive.

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Greece Optimist Throws in Towel Seeing Tsipras Go ‘Plain Nuts’

by Simon Kennedy

Bloomberg

March 16, 2015

Erik Nielsen likes to spend Sunday mornings ruminating over the world economy at a cafe near his west London home.

Finding his favored Caffe Nero too crowded on Mother’s Day, the chief global economist of UniCredit Bank AG beat a retreat to his own study. From there, he also changed direction on Greece.

“I am throwing in the towel,” Nielsen wrote in his “Sunday Wrap” report. “If they don’t want to play by the rules (and the past weeks give me little hope,) they should get ready to leave!”

“And please appreciate what a difficult conclusion that is to draw for a deeply committed European like myself,” said Nielsen, who previously worked at the International Monetary Fund and Goldman Sachs Group Inc.

The reason? Greek Prime Minister Alexis Tsipras’s call last week that Germany pay World War II reparations shows things have gone “plain nuts” in Athens. That, combined with what he called “blatant hypocrisy” and ignorance of the constraints facing the European Central Bank, shows all the parties need to brace for Greece’s exit from the euro.

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Germans Tired of Greek Demands Want Country to Exit Euro

Bloomberg
March 16, 2015

Berlin cabdriver Jens Mueller says he’s had it with the Greek government and he doesn’t want Germany to send any more of his tax money to be squandered in Athens.

“They’ve got a lot of hubris and arrogance, being in the situation they’re in and making all these demands,” said Mueller, 49, waiting for fares near the Brandenburg Gate. “Maybe it’s better for Greece to just leave the euro.”

Mueller’s sentiment is shared by a majority of Germans. A poll published March 13 by public broadcaster ZDF found 52 percent of his countrymen no longer want Greece to remain in Europe’s common currency, up from 41 percent last month. The shift is due to a view held by 80 percent of Germans that Greece’s government “isn’t behaving seriously toward its European partners.”

The hardening of German opinion is significant because the country is the biggest contributor to Greece’s 240 billion-euro ($253 billion) twin bailouts and the chief proponent of budget cuts and reforms in return for aid. Tensions have been escalating between the two governments since Prime Minister Alexis Tsipras took office in January, promising to end an austerity drive that he blames on Chancellor Angela Merkel.

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Sunday, March 15, 2015

Why smoke and mirrors are safer than cold turkey

by Wolfgang Münchau

Financial Times

March 15, 2015

When German economic illiteracy meets with Greek diplomatic illiteracy, nothing good will come of it. Last week, a Greek minister threatened to swamp Germany with Islamic refugees. The Germans are again debating an accidental Greek exit from the eurozone: Grexident. Alexis Tsipras, the Greek prime minister, linked a claim about second world war reparation payments against Germany to present discussions on the extension of a loan agreement.

The reparations claim itself is not frivolous. There are even German lawyers who believe Athens has a case. But it is politically mad to link the two. What we are hearing is not the usual noise: there is a loss of trust.

The conclusion I draw from this is that the odds of a Greek exit from the eurozone have shortened dramatically in the past two weeks. The two sides may tone down their rhetoric in the coming days but I cannot see the creditor countries relenting on the conditions of last month’s debt rollover agreement. Nor can I see the Greek government fulfilling them. Since nobody knows how many days or weeks Athens is from insolvency, the risk of a sudden exit is clear and present. Grexit may never happen — but it is time to get ready.

Grexit is not an outcome any rational person would wish for. It will undermine the EU’s geostrategic influence. Economically, it will unmask a hidden truth: that the monetary union is just a beefed-up fixed-exchange system. A large number of financial contracts would instantly default. It is unclear how the global financial system would cope. The eurozone’s fledgling economic recovery would be at risk.

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Greek Crisis Tests ECB’s Credibility

by Simon Nixon

Wall Street Journal

March 15, 2015

When the eurozone decided in 2012 to create a banking union, it did so largely because other ideas for deepening economic integration seemed too contentious. Ceding sovereignty over national banking systems was an easier political sell than, for example, handing Brussels new powers to borrow and spend.

Yet the banking union involved a far greater transfer of sovereignty than has been widely understood, arguably greater even than the creation of the euro itself. After all, the banking union has handed the European Central Bank, as the eurozone’s new single banking supervisor, powers that directly affect citizens’ property rights and the ability to take decisions with potentially far-reaching fiscal consequences.

Now, just four months after assuming its new powers, the ECB faces an acute test of its credibility in the shape of the latest Greek crisis.

The success of the banking union hinges on the ECB convincing markets that it offers a decisive break with a European past in which national authorities were seen as too susceptible to political pressure, too willing to overlook weak bank balance sheets to shield government balance sheets.

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