Saturday, January 24, 2015

Greece’s Syriza Could Face Schism After Likely Election Triumph

by Damien Sharkov

Newsweek

January 24, 2015

Syriza, the left-wing coalition of parties leading in six different opinion polls ahead of Sunday’s parliamentary election in Greece, is in danger of a schism due to alleged infighting within the alliance itself over Eurozone membership according to political analysis from the University of Athens.

“After the elections everyone is waiting to see the results of the negotiations of the new Greek government with the troika [consisting of the International Monetary Fund, European Commission and European Central Bank],” says Aristides Hatzis, associate professor of law, economics and legal theory at the University of Athens. “However there is going to be a second, less discussed negotiation between the more moderate leadership of Syriza with the radical faction of the party.”

Syriza have become the most popular party in Greece, promising to freeze state layoffs and reverse wage cuts as public outrage against EU-imposed austerity has run high.

According to Hatzis, however, as polls continue to indicate Syriza is nearing winning a majority in the Greek parliament, the alliance has grown increasingly pragmatic and moderate, setting up a battle with the party’s left that could see leader Alexis Tsipras struggling to keep the alliance together.

“The leadership has slowly but steadily move to more centrist positions for the past weeks,” Hatzis says, predicting that, in the case of a Syriza landslide victory, the party’s leadership “will try to persuade the radical leftist faction that a compromise is necessary in order for Greece to stay in the Eurozone.”

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Greece election Sunday to test austerity measures

by Nikolia Apostolou

USA Today

January 24, 2015

Every day for the past two years, Konstantinos Polychronopoulos has set his pop-up soup kitchen in the street to offer free food to passersby.

"Our food is for everyone," says the former marketing executive who lost his job when the Greek financial crisis struck in 2009. "It's not charity, it's solidarity."

Greece's economic crisis and austerity measures the past six years have hit Polychronopoulos and his fellow citizens hard. They've lost patience with struggling and get to vote Sunday in a national election that gives them a tough choice on how to handle the country's economic crisis.

Polls show Syriza, a relatively new left-wing party, is likely to win big in the parliamentary elections, and its leader has pledged to renegotiate the terms of bailouts by the European Union and International Monetary Fund that have led the government to hike taxes and make cutbacks.

Greece's staggering debt topped $369 billion last year, equivalent to $34,600 for each resident.

Despite the bailouts, Greece's gross domestic product has contracted about 30% compared with seven years ago. Unemployment has reached 26% — among youth, the jobless rate jumps to 60%. A third of the population lives below the poverty line.

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Friday, January 23, 2015

Experts Say Syriza’s Landslide Victory, Radical Economic Measures Doubtful

by Anastasia Levchenko and Daria Chernyshova

Sputnik News

January 23, 2015

Although recent polls predict a victory for left-wing opposition party Syriza at the general elections in Greece on Sunday, it is not still clear whether it will manage to gain an absolute majority and form the government alone, experts on Greek policy told Sputnik on Friday.

"The polls today are showing that the difference between Syriza, the first party, and New Democracy is widening. It is about five percent. So it looks like Syriza will come first. The question is whether they will achieve an absolute majority. We will not be able to say that until Sunday, because of the percentage of undecided voters which is still at about 10 percent," Stella Ladi, member of the executive committee of the Greek Politics Specialist Group (GPSG) of the UK's Political Studies Assocation told Sputnik.

Yulie Foka-Kavalieraki, doctoral candidate at the University of Athens and Co-founder of GreekCrisis.net echoed the opinion of the GPSG expert and claimed it is still not “certain whether it [Syriza] will also win the absolute majority or it will have to form a coalition government.”

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Eurogroup Says Europe Certain About Greece Staying in Eurozone

by Anastasia Levchenko & Daria Chernyshova

Sputnik News

January 23, 2015

Speculation over the possible "Grexit" is irrelevant, and Europe is strongly committed to cooperate with Greece and bring the country to recovery after new government comes to power, Eurogroup president's spokesperson told Sputnik Friday.

"There are no real concerns about a possible Grexit. The leaders of all the large Greek political parties have indicated that they want Greece to stay in the eurozone. And there is a strong political commitment in Europe too to keep Greece in the eurozone," Simone Boitelle, spokesperson for the president of the Eurogroup told Sputnik.

Eurogroup is the main forum for the eurozone management, comprising finance ministers of states that use Euro as their currency.

Boitelle also added that Eurogroup's president Jeroen Dijsselbloem "has said on several occasions that the Eurogroup stands ready to work with the new government. Key is to keep Greece on the route of recovery."

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Greek Syriza Party Unlikely to Bring About Major Change, Analysts Claim

by Anastasia Levchenko & Tosi Ivanova

Sputnik News

January 23, 2015

The left-wing Syriza party has gained popularity among the Greeks, who are tired of austerity measures, but while it could win in the upcoming elections, it is unlikely to bring any major changes to the political arena, various experts have told Sputnik.

There is "widespread fatigue with austerity measures and the parties of the coalition government" among the Greeks, Roman Gerodimos, Principal Lecturer in Global Current Affairs in the Media School at Bournemouth University and Founder of the Greek Politics Specialist Group (GPSG) of the UK Political Studies Association, told Sputnik Friday.

"While having succeeded to keep Greece in the Eurozone and on a course of surplus-producing budgets [the parties] have not really articulated a clear or specific vision for the future," Gerodimos explained, juxtaposing the coalition government's positive, but "abstract" message with Syriza's "narrative of hope".

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Greeks stop paying taxes in expectation of Syriza poll victory

by Kerin Hope

Financial Times

January 23, 2015

A reluctance to pay taxes was much criticised by Greece’s creditors as one reason why the country needed a big international bailout. Now many Greeks are again avoiding the taxman as they bet the radical left Syriza party will quickly loosen fiscal policy if it comes to power in Sunday’s general election.

A finance ministry official confirmed on Friday that state revenues had collapsed this month. “It’s normal for the tax take to decline during an election campaign but this time it’s more noticeable,” the official said, avoiding any specific figures on the projected shortfall.

However, two private sector economists forecast the shortfall could exceed €1.5bn, or more than 40 per cent of projected revenues for January.

Angeliki Mousouri, a dentist who is paying off more than €20,000 of tax arrears, said she missed a monthly instalment due in December.

“I don’t expect to be penalised,” she said. “If Syriza is the government they will show leniency to cash-strapped taxpayers.”

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The Syriza factor

The Economist
January 23, 2015

After five years of austerity Greeks may elect Syriza, a left-wing populist party, to run their country. If they do, Greece's membership in the euro zone would be under threat.

Syriza win in Greece won't be a disaster for EU

by Nicholas Economides

CNBC

January 23, 2015

As we approach Sunday's Greek election, the extreme left party Syriza is leading in the polls, causing many in Europe and the United States to fear the worst when it comes to Greece's future economic stability and its status in the European Union. While everyone should be closely watching Greece's actions, it is unlikely that even a Syriza victory will spark widespread sovereign bank contagion or a Greek exit from the EU, recently referred to as a "Grexit."

Syriza has proposed significant increases in wages, pensions and of the state sector in general, conservatively estimated to cost 20 billion euros, with no immediate sources of funding. Existing uncovered financial needs of Greece in 2015 are about €20 billion, bringing the total needs of Greece to €40 billion in 2015 if the Syriza program is implemented. Syriza has also threatened not to pay Greek sovereign debt to European countries unless there is a reduction of the total Greek sovereign debt from 177 percent of GDP to 60 percent of GDP. This is a whopping €212 billion reduction — a 95 percent write-off when applied to the official sector loans from European countries, the European Financial Stability Facility and the European Central Bank (which total €222 billion). Syriza has also committed to voters not to renew the agreements between the European Union, the ECB, the IMF and Greece on fiscal consolidation and economic reforms.

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Greece: Austerity, Relief or Exit? The Short Answer

by Marcus Walker

Wall Street Journal

January 23, 2015

Greece’s elections on Sunday take place against the background of rising tensions between the small nation and its main creditors, eurozone governments and the IMF, about the country’s strict bailout regimen. Polls point to a win for leftwing opposition party Syriza over the ruling conservatives of New Democracy. Would a Syriza-led government start a game of chicken with Germany and other creditors that could lead to havoc and a Greek exit from the euro? Or can a compromise be found? Here’s our crystal ball.

Q: Who will lead the next Greek government?

A:
Very likely Syriza (whose leader, Alexis Tsipras is pictured above), the leftwing opposition party, unless the conservative incumbent, Premier Antonis Samaras, pulls off the biggest upset victory since Harry Truman in 1948. Syriza might win an absolute majority in Parliament, but polls suggest it will fall just short, requiring support from another party. A pact with centrist To Potami (The River) or center-left Pasok could make the government more pragmatic in talks with Greece’s international creditors. A pact with the nationalist Independent Greeks could make it more hardline.

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Το μόνο βέβαιο

του Αριστείδη Χατζή*

Τα Νέα

23 Ιανουαρίου 2015

Δεν θυμάμαι εκλογές με μεγαλύτερη αβεβαιότητα στην Ελλάδα της μεταπολίτευσης. Αβεβαιότητα για τον σχηματισμό κυβέρνησης, αβεβαιότητα για την επίδραση στην οικονομία, αβεβαιότητα για τη διαπραγμάτευση που θα ακολουθήσει, αβεβαιότητα ακόμα και για τη σταθερότητα του πολιτικού σκηνικού στην περίπτωση διπλών εκλογών ή εσωτερικής σύγκρουσης στα πλαίσια του ΣΥΡΙΖΑ, μετά τον αναμενόμενο συμβιβασμό με τους εταίρους.

Στις περιπτώσεις ακραίας αβεβαιότητας είναι καλό να απαριθμούμε τις βεβαιότητες. Η μία προφανώς είναι ότι θα έχουμε μια νέα κυβέρνηση, διαφορετική απ’ όσες είχαμε τα τελευταία 30 χρόνια. Μια άλλη, πολύ πιο σημαντική, έχει να κάνει με τις απολύτως απαραίτητες για την οικονομική ανάπτυξη πολιτικές, που είναι οι εξής:

(α) Απελευθέρωση της οικονομικής δραστηριότητας. Σπάσιμο των πανίσχυρων καρτέλ. Πραγματικό άνοιγμα των επαγγελμάτων. Κατάργηση όλων των «εμποδίων στην είσοδο» για νέους επιχειρηματίες και ξένους επενδυτές, ασφάλεια δικαίου, καλής ποιότητας ρυθμιστικό πλαίσιο.

(β) Μείωση του κόστους συναλλαγών (ειδικά του διοικητικού και γραφειοκρατικού κόστους). Απλοποίηση του θεσμικού πλαισίου αλλά και του φορολογικού συστήματος που πρέπει επιτέλους να σταθεροποιηθεί!

(γ) Αντιμετώπιση του Ασφαλιστικού επειγόντως. Είναι η δαμόκλειος σπάθη που απειλεί να οδηγήσει στην απόλυτη καταστροφή!

(δ) Επιτάχυνση των διαδικασιών για την επίλυση των δικαστικών διαφορών χωρίς εκπτώσεις στο κράτος δικαίου. Καταπολέμηση της διαφθοράς μικρής και μεγάλης κλίμακας.

(ε) Συνέχιση και εμβάθυνση των μεταρρυθμίσεων στην παιδεία. Ενίσχυση της πρωτοβάθμιας και της δευτεροβάθμιας κυρίως εκπαίδευσης. Αύξηση των κονδυλίων για την έρευνα στο ελάχιστο αλλά αξιοπρεπές 1,5%.

(στ) Ενίσχυση των θεσμών του κράτους πρόνοιας και κυρίως έμφαση στην αποτελεσματικότητά τους. Στόχος είναι η μείωση της φτώχιας και η στήριξη των οικονομικά αδύναμων, όχι η εξαγορά της μεσαίας τάξης.

Αν είναι να ξοδέψει κάπου το κράτος από το υστέρημα, ας το κάνει για τη βασική υποδομή του κράτους πρόνοιας και της ανάπτυξης.

Για όλα τα παραπάνω δεν χρειάζεται να ανακαλύψουμε τον τροχό. Τον έχουν ανακαλύψει άλλοι, και ο τροχός τους, όπως τον περιέγραψα, λειτουργεί πολύ ικανοποιητικά. Υπάρχει υψηλής ποιότητας θεσμική εργαλειοθήκη με καλογραμμένες οδηγίες χρήσης. Αλλά αυτή η εργαλειοθήκη έχει ένα πρόβλημα: το πολιτικό κόστος. Όμως το κόστος της μη χρήσης της είναι ακόμα μεγαλύτερο.

Αν η νέα κυβέρνηση δεν λάβει σοβαρά υπόψη αυτήν τη λίστα, θα πέσει πάλι από τα σύννεφα μαζί με την κοινωνία που θα την εμπιστευτεί. Αλλά πλέον κανείς δεν δικαιούται να ισχυριστεί ότι είναι αθώος ή αδαής.

* Ο Αριστείδης Χατζής είναι αναπληρωτής καθηγητής Φιλοσοφίας Δικαίου και Θεωρίας Θεσμών στο Πανεπιστήμιο Αθηνών.

Εδώ θα βρείτε το άρθρο σε PDF (όπως δημοσιεύθηκε στα Νέα)

Εδώ θα βρείτε το άρθρο στην ιστοσελίδα των Νέων (κλειδωμένο - μόνο για συνδρομητές

Εδώ μπορείτε να παρακολουθήσετε την ομιλία μου με θέμα «Το Θεσμικό Έλλειμμα» που έδωσα στην Αίθουσα της Γερουσίας (στο κτίριο της Βουλής των Ελλήνων) στις 15 Δεκεμβρίου 2014 στα πλαίσια συνεδρίου που οργάνωσε το Γραφείο Προϋπολογισμού του Κράτους. Η ομιλία μου έχει διάρκεια 22 λεπτών.

Greece’s Fatal Mistake, and Europe’s

by Joseph C. Sternberg

Wall Street Journal

January 22, 2015

Greek voters, foreigners worry, are on the verge of plunging the eurozone into another crisis if parliamentary elections on Sunday put an anti-euro party in power. That optimistically assumes a crisis can be averted if voters change their minds at the last minute. The bigger problem on display in this campaign is that another eurozone crisis is coming anyway.

That’s not to minimize the severity of the jam into which Greek voters could push the eurozone. The left-wing Syriza party has a lead in the polls and an unrealistic policy agenda, to put it kindly. The party’s grand idea is that the rest of the eurozone is sufficiently desperate to keep Greece in the fold that the country’s creditors will accept significant write-downs on their debt holdings. Syriza also seems to think it can conjure up the billions of euros necessary to reverse hated fiscal tightening.

It’s not clear that Greeks buy this. The party’s support, currently pegged at around 33%, appears to be wide but not deep. Polls suggest some three-quarters of the electorate want to stay in the euro. So with its bargain-hard strategy for dealing with the country’s creditors, Syriza is threatening to take a hostage that many of its voters presumably aren’t prepared to kill.

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Thursday, January 22, 2015

Draghi Corners Greek Anti-Austerity Candidate by Tying Stimulus to Good Behavior

Bloomberg
January 22, 2015

The European Central Bank set limits on accessing its bond-buying program that will exclude Greece for at least six months, raising pressure on whichever party wins Jan. 25 elections to heed the demands of official creditors.

The ECB decision locks Greece out of the quantitative easing program until policy questions raised by the vote have been resolved. Foremost among them is the strategy of Alexis Tsipras, whose Syriza party is leading Prime Minister Antonis Samaras’s New Democracy in polls after he pledged to wring substantial concessions from the so-called troika of creditors.

Greece will be ineligible for the ECB’s 1.1 trillion-euro ($1.3 trillion) program until at least July because of limits on how much debt the central bank buys from a single issuer, President Mario Draghi said Thursday in Frankfurt. Greece must also complete a stalled review of its current bailout, as purchases from program countries will be suspended during such assessments, according to a statement on the ECB’s website.

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Grexit 2015: A primer

by Daniel Gros

Centre for European Policy Studies

January 22, 2015

In the run-up to the Greek elections on January 25th and the subsequent renegotiation of the country's economic adjustment programme with the troika, Daniel Gros writes in this Commentary that "nobody officially wants Grexit": not Syriza, which wants Greece to stay in the euro. It is ‘only’ asking for a reduction in Greece’s official debt and an end to austerity. The German government also does not favour Grexit because European unification remains the central project for German policy-makers across all mainstream parties. Only some protest parties and vocal economists think Greece (and Germany) would better off with a new Drachma.

In his view, the substantive issues are thus the demands for a reduction of the official debt of Greece and an end to austerity, both of which he describes as eminently fudgeable. In any event, change in policy will be minor if a Syriza government is as successful in fulfilling its promise to spend as the previous government was in promising not to spend.

Read the Commentary (PDF)

Europe will benefit from Greece being given a fresh start

by Joseph Stiglitz, Chris Pissarides et al.

Financial Times

January 22, 2015

Letter

Sir, FT columnists have recently acknowledged that debt relief is a necessary (though not sufficient) condition for Greece to recover (Gillian Tett, January 17, Wolfgang Münchau, January 5, Peter Spiegel, January 7). Only with such relief will it be able to develop a growing economy that makes full use of the skills of its people to contribute to a united and democratic Europe.

On the vexed issue of debt resolution, the writers concerned are to be congratulated for taking an ethical and pragmatic stance. Ethical in rejecting a dogmatic insistence on debt repayment in full regardless of the social and political consequences — a dogma that is already dividing Europe. Pragmatic in recognising the breathing space that debt relief will give to a government intent on pursuing reforms — in challenging corruption and tax evasion and aiming at higher productivity­ — rather than pursuing austerity per se. We would take such pragmatism further to suggest three forms of financial restructuring that have practical precedents.

First, a further conditional increase in the grace period, so that Greece does not have to service any debt, for example for the next five years and then only if Greece is growing at 3 per cent or more, and until Greece has recovered at least 50 per cent of the gross domestic product it has lost since 2008. Precedents for this include the “bisque” clause in the UK loan from the US negotiated by J M Keynes after the second world war, where the UK did not service the debt until the economy met agreed conditions.

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Wednesday, January 21, 2015

Smaller Party Could Emerge as Kingmaker in Greek Election

Wall Street Journal
January 21, 2015

Greece’s elections on Sunday are poised to give one of a handful of smaller parties a central role in the direction of the country—and possibly the entire eurozone.

The opposition leftist Syriza party and the ruling conservatives, New Democracy, are battling for a first-place finish. But neither is likely to get a majority and will need to turn to another party to help govern, putting whoever comes in third in a position to become a kingmaker.

The contenders range from the far-right Golden Dawn, shunned by Greece’s mainstream parties, to Pasok—part of the ruling coalition, but a shadow of the party that dominated Greek politics for most of the past four decades.

The favorite to take third place, though, is To Potami. The middle-of-the-road party was launched by a prominent TV journalist in March and has rapidly drawn voters disillusioned with politics as usual. It is now running neck-and-neck with the ultranationalist Golden Dawn for third in the polls, at between 5% and 7%.

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Greece polls: Papandreou and Venizelos locked in political battle

by Pieter Spiegel

Financial Times

January 21, 2015

Just three years ago, they were the two political giants who embodied Greece’s struggle with its €245bn bailout: George Papandreou, the son and grandson of Greek prime ministers, was the sitting premier while Evangelos Venizelos, a brainy lawyer and political operator, sat close beside him as finance minister.

But heading into Sunday’s national elections, the one-time allies are now locked in a political death match, heading rival parties struggling to win enough votes to cross a 3 per cent threshold just to get into parliament.

Mr Venizelos is now the leader of the party both men long called their political home, centre-left Pasok, which in 2009 elections, the last before the crisis hit, took a whopping 44 per cent of the vote. Recent opinion polls put it between 4 and 5 per cent.

It is Mr Papandreou who forced the showdown last month by breaking from the party his father founded to set up his own, the Movement of Democratic Socialists, which the former prime minister says is intended to retake the reform initiative he believes was lost after his government fell — with a healthy nudge from Mr Venizelos — in November 2011.

“It was obviously a difficult decision,” Mr Papandreou said in an interview. “I worked with the party for many, many years. We had lost the centre of what I feel needs to change in Greece, and that is this highly clientelistic-driven politics and establishment.”

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Greece in limbo: Post-election 2015 scenarios

by Filippa Chatzistavrou & Sofia Michalaki

Centre for European Policy

EPIN Commentary
January 21, 2015

In the run-up to elections in Greece on January 25th, this EPIN commentary explores the likelihood and consequences of four potential post-election scenarios:
  1. Syriza single-party majority government or Syriza-led coalition government with anti-austerity parties
  2. Syriza-led coalition government with pro-austerity parties or Syriza minority government
  3. New Democracy government or ND-led coalition government
  4. No government is formed
Download the Commentary (PDF)

Greek political dynasties will bide their time

by Tony Barber

Financial Times

January 21, 2015

Greece’s parliamentary elections on Sunday are set to put in power the nation’s most leftwing government, led by the radical Syriza party, and its youngest prime minister, 40-year-old Alexis Tsipras, since the second world war.

But some familiar names and faces will survive Syriza’s expected victory. Despite six years of economic slump, and despite the reappearance of serious concerns about Greece’s ability to stay in the eurozone, the old Greek political order is not about to be swept away in its entirety.

Several members of the three great dynasties that have dominated Greek politics since the second world war – the Karamanlis, Mitsotakis and Papandreou families – are likely to win seats in the new parliament.

Most, if not all, of these dynastic scions will sit on the opposition benches. For the younger ones among them, however, the road to power seems sure one day to reopen.

Since 1944 the three dynasties have supplied six prime ministers, who have governed Greece for just over half the 71 years up to the present day.

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Greek Left’s New Issue: All-Inclusive Resorts

New York Times
January 20, 2015

David Phillips has been vacationing for over a decade at the Electra Palace Hotel on the island of Rhodes.

Everything is included. There is Chinese, Italian or Greek food. There is an endless supply of ouzo, beer and Greek wines. He can even bundle the cost of his flight as part of the package.

“I like to go somewhere a week or 10 days and not worry about where I’m going to get my next meal,” said Mr. Phillips, 52, a civil servant from South Wales, adding that he wanted “to have quiet time where I have no worries at all.”

He may soon have to look outside Greece.

The Syriza party, the upstart leftist coalition that is leading in the polls ahead of the Greek election on Jan. 25, disdains such “all-inclusive” deals as keeping tourists penned up in resorts and away from local businesses and attractions. It has proposed to limit them if it is elected. In fact, both of the top parties in the campaign are unnerving the tourism industry with proposals that would crimp hotels and resorts, even as the business has been a rare bright spot for the anemic Greek economy.

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Tuesday, January 20, 2015

If the Radicals Win in Greece

by Yannis Palaiologos

Wall Street Journal

January 20, 2015

Greece is once again on the brink. After six years of recession and five years of draconian, externally imposed austerity, Greek voters go to the polls Sunday in yet another early election, and the stakes for the country couldn’t be higher.

The radical Syriza party, overwhelmingly favored to win the contest, has moved to center-stage from the political margins it occupied in 2010 by offering a vociferous critique of Greece’s bailout program. The unreconstructed leftists of Syriza are committed to write off a major part of the country’s public debt, 80% of which is now held by the country’s eurozone partners, the European Central Bank and the International Monetary Fund—the so-called troika. Syriza has promised to massively increase spending, cut taxes (except on the rich) and loosen fiscal targets imposed by the current program, though it is unclear by how much.

Syriza has also displayed contempt for the structural reforms in the labor and product markets designed to open up Greece’s sclerotic, overregulated economy to competition. The party wants to reinstate industry-based collective bargaining, increase the minimum wage to precrisis levels (more than twice as high as that of some eurozone countries) and put an end to privatization.

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Crisis in Greece: The Numbers

by Nektaria Stamouli

Wall Street Journal

January 20, 2015

Greece is reeling from the effects of the biggest economic crisis in its recent history. Here are some statistics underscoring the severity of the crisis now reaching into all aspects of Greek life.

25%

The Greek economy has shrunk since its peak in mid-2008.

25.8%

Percentage of Greeks who remain out of work, according to the national statistics agency. This means that 1.2 million people are unemployed, according to the October figures.

3rd

The position Greece is ranked among its European partners for the percentage of population at risk of poverty and social exclusion, according to Eurostat.

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End austerity before fear kills Greek democracy

by Alexis Tsipras

Financial Times

January 20, 2015

Greece changes on January 25, the day of the election. My party, Syriza, guarantees a new social contract for political stability and economic security. We offer policies that will end austerity, enhance democracy and social cohesion and put the middle class back on its feet. This is the only way to strengthen the eurozone and make the European project attractive to citizens across the continent.

We must end austerity so as not to let fear kill democracy. Unless the forces of progress and democracy change Europe, it will be Marine Le Pen and her far-right allies that change it for us.

We have a duty to negotiate openly, honestly and as equals with our European partners. There is no sense in each side brandishing its weapons.

Let me clear up a misperception: balancing the government’s budget does not automatically require austerity. A Syriza government will respect Greece’s obligation, as a eurozone member, to maintain a balanced budget, and will commit to quantitative targets. However, it is a fundamental matter of democracy that a newly elected government decides on its own how to achieve those goals. Austerity is not part of the European treaties; democracy and the principle of popular sovereignty are. If the Greek people entrust us with their votes, implementing our economic programme will not be a “unilateral” act, but a democratic obligation.

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Germany's Schaeuble sees continued role for troika in EU bailouts

Reuters
January 20, 2015

German Finance Minister Wolfgang Schaeuble sees a continued role for "troika" inspectors from the European Commission, ECB and IMF in future euro zone bailouts, saying on a visit to India on Tuesday it was the "right instrument" for any state seeking aid.

European Commission chief Jean-Claude Juncker has said this formula of inspectors from the Commission, the European Central Bank and the International Monetary Fund, which has overseen the bailouts of countries like Greece, may have to change after recommendations by a top EU court adviser.

The advocate general's view on ECB plans to buy government bonds to bolster the euro zone economy, put to the European Court of Justice, included the opinion that the ECB should no longer be directly involved in monitoring such assistance.

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Syriza’s far-left imagines electoral victory as revenge

by Tony Barber

Financial Times

January 20, 2015

Plato, the Ancient Greek philosopher, thought human beings make correct choices when one part of the soul, rationality, prevails over another part, irrational desire. After Sunday’s parliamentary elections, the fate of modern Greece may likewise hang on a duel between reason and unreason inside Syriza, the radical leftwing party tipped to lead the next government.

Will rationality prevail? “I hope so, but I’m not sure,” says George Papandreou, a former Greek premier who is fighting the election with his small, new Movement of Democratic Socialists party.

If reason were to triumph, Alexis Tsipras, Syriza’s leader, would recognise that his party — which says it wants to keep Greece in the eurozone — would not be free to implement certain core policies on which he had just won the election. Upcoming debt repayments to Greece’s International Monetary Fund and EU creditors, and the need to keep the European Central Bank happy so that Greek banks can fund themselves on favourable terms, would leave Mr Tsipras with little choice.

It would be difficult, under any circumstances, to negotiate a reduction in foreign debt with Greece’s creditors. But it would be impossible if, at the same time, Mr Tsipras insisted on fulfilling his election promises of increasing public expenditure, expanding the public sector payroll, abandoning privatisations and throwing off the shackles of foreign supervision of the Greek economy.

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A Legal Victory for Monetary Policy in Europe

New York Times
Editorial
January 20, 2015


Among the many reasons for economic stagnation in the eurozone is the failure of the European Central Bank to buy government bonds to stimulate lending. A damaging lawsuit filed by a group of German citizens in 2012 made the bank even less likely to act. Last week, that legal challenge suffered a defeat when a preliminary opinion from the European Court of Justice sided with the bank.

The opinion from the advocate general of the court, Pedro Cruz Villalón, signals that the full court will rule that the central bank has the legal authority to buy government bonds. Mr. Villalón was unstinting in declaring that the central bank has “broad discretion” in how it conducts monetary policy. He said that a program of bond purchases announced in 2012 but has never been used does not violate European Union treaties. The full court, which generally sides with the advocate general, is expected to rule in a few months.

Officials at the central bank have said that the legal challenge is not the reason that they have held back from buying bonds, at least so far. But it is clear that the lawsuit has had some effect because the central bank has stalled for months on bond purchases even as the eurozone’s inflation rate has fallen steadily; in December, consumer prices fell at an annual rate of 0.2 percent.

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Monday, January 19, 2015

How a Syriza government would approach the eurozone

Telegraph
January 19, 2015

On Monday I attended a very interesting briefing on what economic policies Syriza — the political alliance leading in Greek opinion polls and expected to form a government after this weekend’s parliamentary elections — intends to pursue. The main speaker was the Syriza finance spokesman, Prof Euclid Tsakalotos.

Contrary to certain speculation in the City press, Prof Tsakalotos made it clear there is no chance of Syriza preferring opposition instead of forming a coalition; or of its struggling to form a coalition that would agree upon its central demands of negotiating a haircut of Greek government debts and abandoning the current target for Greece to run a primary surplus (i.e. before servicing debts) of 4.5pc of GDP. In particular, since all the (several) potential candidate coalition partners for Syriza were agreed upon the needs for eliminating the primary surplus target and a debt haircut, these didn’t even count as “red lines” in any coalition negotiation.

A question was raised about whether it was possible for Greece to be included in any eurozone QE programme if Syriza is in charge, given the reports of the past few days that eurozone QE will include Member State governments covering any losses on the purchase of their bonds (as, for example, Her Majesty’s Treasury does in respect of the bonds the Bank of England has bought under the UK’s QE programme). Surely a Syriza government could not agree to cover losses on bonds it is committed to securing haircuts for? Conversely, if Greece is not included in the eurozone’s main monetary policy, could Greece truly be said still to be part of the euro? How, it was asked, might Syriza respond to Greece’s being excluded from eurozone QE?

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Young, gifted and Greek: Generation G – the world’s biggest brain drain

by Helena Smith

Guardian

January 19, 2015

Call them Generation G: young, talented, Greek – and part of the biggest brain drain in an advanced western economy in modern times. As the country lurches towards critical elections this weekend, more than 200,000 Greeks who have left since the crisis bit five years ago will watch from overseas.

Doctors in Germany, academics in the UK, shopkeepers in America – the decimation of Greece’s population has perhaps been the most pernicious byproduct of the economic collapse which has beggared the country since its brush with bankruptcy.

“Greece is where I should be,” says Maritina Roppa, 28, a trainee doctor who left Greece three years ago for Minden, north-west Germany. “It’s such a pity that people like me, in their 20s, have had to go.”

Of the 2% of the population who have left, more than half have gone to Germany and the UK. Migration outflows have risen 300% on pre-crisis levels, as youth unemployment soars to more than 50%. Around 55% of those affected by record rates of unemployment are under 35, according to Endeavour, the international nonprofit group that supports entrepreneurship.

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Property tax backlash underpins Syriza’s poll prospects

by Kerin Hope

Financial Times

January 19, 2015

Aspasia Glynou has endured a barrage of pension cuts and tax increases during Greece’s six-year recession in which her monthly income has fallen by almost half.

But a property tax pushed through by Greece’s coalition government and then made permanent is more than the 68-year-old Athenian widow and conservative voter can bear.

That is why she intends to vote for Syriza in Sunday’s election, and one reason why the leftwing opposition party, which has promised to abolish the tax, is poised to win power.

“My late husband would be shocked that I could vote for an ex-communist like Alexis [Tsipras, the Syriza leader] but I think it’s time I took a stand,” said Ms Glynou in her spacious fourth-floor apartment in the capital’s once prosperous Halandri suburb. “Most of my pension now goes to pay [property tax] instalments.”

Known as Enfia, the annual levy on private property was introduced under pressure from Greece’s creditors — the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund — in 2011 as an emergency revenue-raising measure. It was justified on the grounds that an across-the-board annual property tax would bring Greece into line with other eurozone member states.

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Would forgiving Greece’s debt really be that bad?

CNBC
January 19, 2015

As anti-bailout party Syriza leads polls ahead of a general election in Greece this coming weekend, the head of the International Monetary Fund warned Monday that the country couldn't renegotiate any debt restructuring deal without accepting "the consequences."

Greece's leftist, anti-austerity party Syriza has widened its lead over Prime Minister Antonis Samaras' New Democracy party according to a poll published Sunday in newspaper To Vima. Syriza has said the level of austerity imposed on Greece as a condition of its billion-euro bailout is unsustainable, and it would renegotiate the deal with the Troika of international organizations making sure the country sticks to the terms -- the European Commission, European Central Bank (ECB) and IMF.

However, restructuring Greek debt would not be without "consequences," the IMF's Managing Director Christine Lagarde warned Monday.

"A debt is a debt and it is a contract," IMF Managing Director Christine Lagarde told The Irish Times in an interview on Monday when asked about the general idea of holding a debt conference. "Defaulting, restructuring, changing the terms has consequences on the signature and the confidence in the signature," she said.

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The Greek Election Explained

Wall Street Journal
January 19, 2015

Sunday, January 18, 2015

Greek Election Looms With Samaras Racing to Catch Syriza

by Eleni Chrepa

Bloomberg

January 18, 2015

Greece enters the final week of campaigning for national elections with time running out for Prime Minister Antonis Samaras’s New Democracy to overtake Alexis Tsipras’s opposition Syriza party and hold to the path of economic reform.

Syriza led New Democracy by between 3.1 percentage points and 3.8 percentage points in separate polls published this weekend in Athens by Kapa Research, Metron Analysis and Rass.

“We will see a clear Syriza victory,” Aristides Hatzis, an associate professor of law and economics at the University of Athens, said in a telephone interview. At those levels of support, it will prove hard for Syriza to secure a majority in the 300-seat parliament, and “even if they do, it will still be a fragile, slim majority,” Hatzis said.

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Saturday, January 17, 2015

A Grass-Roots Pitch in Greece Could Pay Off

by Suzanne Daley

New York Times

January 17, 2015

Alexis Tsipras, the left-wing candidate who may well become prime minister of Greece next weekend, was taking questions from the public the other night on Twitter. Someone asked if he would eliminate the country’s hefty value-added taxes on basic necessities.

No, he said, he was “not going to promise things we can’t do.”

But the promises he has made are enough to suggest that Greece under his leadership would take a sharp turn from its direction of the past five years, when it has grudgingly adhered to European insistence on deep budget cutting in return for the financial assistance necessary to keep it afloat.

Mr. Tsipras, boyishly handsome at 40, leads the Syriza Party, which polls suggest is likely to control the next government after elections next Sunday. He has emerged as a more polished figure than he was in 2012, when he first rose to prominence.

Back then, he was usually described as a left-wing “firebrand” who posed a potentially lethal challenge to the euro, the European Union and even the global economy, if he followed through on his threats to let Greece default on its debts or leave the eurozone — or both.

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Fitch Revises Greek Long-Term Outlook to Negative

Wall Street Journal
January 16, 2015

Fitch Ratings Inc. on Friday revised its outlook for Greece’s long-term foreign- and local-currency issuer default ratings to negative, citing the political uncertainty ahead of national elections on Jan. 25.

The move, on the day that two of Greece’s biggest lenders asked the country’s central bank for emergency cash assistance, signals a possible downgrade.

Fitch affirmed the country’s long-term foreign- and local-currency issuer default ratings along with unsecured foreign and local currency bonds at B, which denotes high credit risk, and kept the country ceiling rating at double-B, two notches below investment grade.

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Friday, January 16, 2015

Investor Unease Hangs Over Greece Ahead of Vote

Wall Street Journal
January 16, 2015

American billionaire Wilbur Ross bet the Greek economy was finally improving in April last year when he joined a group investing €1.33 billion ($1.55 billion) in lender Eurobank Ergasias SA .

The value of the investment has since fallen by a third, as markets have been shaken by Greek Prime Minister Antonis Samaras’s failure to win a parliamentary majority to elect a new president. That has triggered a snap general election on Jan. 25, which may open the door to left-wing firebrand Alexis Tsipras, who is leading in the polls.

Adding to the air of trepidation ahead of the vote, Eurobank and another lender, Alpha Bank SA, have requested access to an emergency cash facility run by the central bank. Both said the moves were only a precaution and that neither faced an immediate funding crunch.

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Euro zone ponders up to six-month Greek program extension, third bailout

Reuters
January 16, 2015

Euro zone officials discussed on Thursday extending Greece's bailout program by up to six months more to allow time for talks with any new government in Athens on closing the current bailout and on what should replace it.

The current bailout, which has already been extended by two months, runs out at the end of February. Athens had hoped to replace it with an Enhanced Conditions Credit Line (ECCL) from the euro zone bailout fund that it would never have to use.

"There will have to be an extension beyond February. It will be inevitable," one euro zone official with knowledge of the talks said. "It could be six months more."

The extension would have to be requested by the new Greek government that emerges after elections on Jan. 25.

But with Greek borrowing costs skyrocketing on uncertainty about policy after the elections, Athens looks set to need further euro zone support and a credit line for insurance purposes only may not be enough, euro zone officials said.

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Eurozone Explores Need for New Bailout Loans for Greece

Wall Street Journal
January 16, 2015

Some of Greece’s international creditors are worried that a precautionary credit line might not be enough to secure the country’s finances this year and that it might instead need new loans from the currency union’s bailout fund, three European officials said Friday.

These concerns were expressed at a meeting of senior officials from eurozone finance ministries and the “troika” of the European Commission, the European Central Bank and the International Monetary Fund on Thursday evening in Brussels, the three officials said. The fresh worries about Greece’s fiscal situation come ahead of parliamentary elections on Jan. 25, which the antiausterity Syriza party is widely expected to win.

Adding to the air of trepidation ahead of the vote, two Greek banks, Eurobank Ergasias SA and Alpha Bank SA, have requested access to an emergency cash facility run by the central bank. Both banks said that the moves were only a precaution and that neither faced an immediate funding crunch.

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Argentina’s Lessons for Greece

by Pierpaolo Barbieri & Dimitris Valatsas

New York Times

January 16, 2015

The last time Greeks faced a general election, two and a half years ago, the eurozone faced an existential crisis. There were rumors of bank runs in Athens, of pre-emptive Iberian exits from the monetary union, even of Germans unilaterally calling it quits. Greeks are now returning to the polls on Jan. 25 to face choices similar to those in 2012.

One beleaguered option is to “stay the course” of their international bailout arrangements and the harsh adjustments they impose. This is the position argued by Prime Minister Antonis Samaras. The alternative is “anything else” — a cacophonous policy mix proposed by the main opposition party, Syriza. Depending on whom you ask, this includes a unilateral moratorium on foreign debt and the rollback of the structural reforms that have helped restore international competitiveness and fiscal sustainability.

Yet something crucial that has been ignored by most media has changed since 2012. These elections are not about how to manage the economic debacle, but rather about how to steer an incipient recovery. The Greek economy has been growing since the first quarter of last year, according to Eurostat. In the third quarter, the country’s growth was higher than that of any other eurozone member, including Germany. This is not just a rebound: Unemployment has been declining and now stands roughly where it was before the worst point of the crisis two years ago. All this suggests that reforms are belatedly but surely yielding results.

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Thursday, January 15, 2015

Zoning out

Economist
January 17, 2015

In 2012 Greece held two elections which might have led to its exit from the euro zone. In the event, that was avoided—a good thing since the costs of a “Grexit” would almost certainly have outweighed any gains, not only for Greece but for the entire currency area. Now yet another election, on January 25th, threatens Greece’s membership of the euro zone. What would Grexit entail this time? And does it make any more sense?

The mechanics of Grexit would be straightforward. The change in currencies would be immediate as the government redenominated domestic assets and liabilities into drachma, most likely on a one-to-one basis with euros. The Greek central bank would be severed from the European Central Bank (ECB) in Frankfurt. Instead it would conduct Greek monetary policy, in drachma, through operations with banks whose domestic balance-sheets would now be in drachma, too.

Though the starting-point might be parity between a euro and a drachma, the new currency would quickly depreciate. Estimates from the IMF in 2012 suggested that it would fall against the euro by 50%. Such a reduction could spur an eventual economic revival by making Greece more competitive. After Argentina severed its decade-long link with the dollar in 2002, it experienced several years of rapid growth, helped admittedly by a commodity-price boom that played to its strengths as an agricultural exporter. The hope would be that Greece could also exploit its improved competitiveness, especially by attracting more tourists.

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The era of Syriza

by Charlemagne

Economist

January 17, 2015

Europe's leaders are often accused of having learned nothing from the euro crisis. But if the run-up to Greece’s election on January 25th has proved anything, it is that politicians have become masters in the dark arts of expectation management. Syriza, a far-left party which polls suggest is likely to win, tells voters it will end the era of austerity, while assuring German taxpayers that it seeks no quarrel with them. German officials quietly tell reporters they are prepared to see Greece leave the euro, while professing the opposite in public. Any vaguely relevant remark by a European Union politician is multiply parsed for subtext or double meaning. Greeks may be forgiven for thinking they need a degree in game theory to decide how to vote.

After six years of recession, five under the tutelage of the hated “troika” (the European Commission, the European Central Bank and the IMF), Greece’s future in the euro is again in question. Alexis Tsipras, Syriza’s fiery young leader, promises a panoply of feel-good policies, including tax cuts and a public-sector hiring spree, and a slashing of Greece’s debt load, which stands at over 170% of GDP. But such pledges seem at odds with those made by Greek governments in exchange for the bail-outs that have kept Greece in the single currency. Greek bond yields have spiked, and there are worrying signs of deposit outflows from banks.

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Is A Greek Exit Next For Europe?

by Alejandro Chafuen

Forbes

January 15, 2015

Last week Europe was hit with a terrorist attack that has raised awareness about the need to change how to deal with 21st century security threats. European unity will be tested again soon, but the question now will become how to deal with economic threats. Much will depend on Germany’s influence.

In Greece, the polls indicate that the radical left-wing party, Syriza, is poised to win the election on January 25. When I write “radical,” I mean it. In their words, the party “is based upon the Marxist and wider emancipatory thought and history, it strives to process it further by utilizing every significant theoretical contribution … it coalesces support from the communist, radical, reformist, anti-capitalist, revolutionary, and libertarian left in its entirety, leftist socialists, democrats, left wing feminists and radical environmentalists.”

Many analysts, including Forbes contributors, are predicting that a Syriza victory will lead to Greece abandoning the euro to avoid the disciplined economic reforms needed to pay off their euro-denominated debt: a Grexit, a new word in the international political jargon which will become commonplace during these next months. The euro has enemies even among advocates of free-markets. Others have argued that the euro has worked well to prevent the type of populist monetary nationalism that took many countries to ruin. One of the most prominent is Jesús Huerta de Soto, a renowned free-market Spanish economist of the Austrian tradition. In a paper delivered in 2012, he argued that the euro “is acting as a proxy of the gold standard disciplining politicians and putting a limit to the growth of the welfare state.” In the same paper, however, he cautioned that, “It is quite possible that once the historical memory of recent financial and monetary developments begins to fade, the European Central Bank (ECB) might retort to their past mistaken policies by giving impulse and accommodating to a new credit expansion bubble.” And so it seems. The ECB is debating the amount and condition for a round of debt monetization (quantitative easing). The figure discussed is €500 billion ($590 billion) and the ECB might make an exception to allow the purchase of Greek debt despite its low grade.

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The Greek Crisis – Origins and Implications

by Manolis Galenianos

ELIAMEP

January 15, 2015

The conventional wisdom is that the Greek and Eurozone crises are the result of fiscal profligacy, which has justified austerity as the primary policy to exit the crisis. This interpretation of the crisis fits the case of Greece and, to a lesser extent, Portugal, but cannot explain why Ireland and Spain had to request assistance, given that prior to 2008 they had lower deficits and public debt than most Eurozone countries. The features that set the four peripheral countries apart from the rest of the Eurozone are the large current account deficits they all experienced before 2008. This observation suggests that the origins of the Eurozone crisis are to be found in external rather than fiscal imbalances. The implication is that the exclusive policy focus on reducing fiscal deficits is misguided and the four peripheral countries should be helped to reduce external deficits by recovering competitiveness.

Read the Paper (PDF)

Who is Alexis Tsipras?

by Takis S. Pappas

openDemocracy

January 15, 2015

If his party wins the January 25 snap parliamentary election in Greece, and he himself succeeds in forming a government, then Alexis Tsipras, the 41-year-old firebrand leader of the Coalition of the Radical Left (or Syriza) party, will not only become Europe’s currently youngest prime minister, but, Cyprus apart, also the first leader of a hard-left government in the Continent.

As his populism does not bode well for the country’s badly harmed liberal institutions and his promise to tear up Greece’s bailout agreement and write off some of its debt has revived fears of a Greek exit from the Eurozone, the question is: who really is politician Alexis Tsipras and, given the circumstances in Greece, what is his leadership potential?

Born only four days after Greece’s transition to democracy on July 24, 1974, in a middle-class social milieu, his early life years were largely unexceptional. While in high school, he joined the Greek Communist Party youth, where he met his current partner, and excelled in school occupations.

As a student of civil engineering at the University of Athens, he became an active member of the student union. After that, he followed the typical career of political apparatchik. He joined the Synaspismos (meaning, coalition) party, then a merger of radical leftist forces, and served consecutively as political secretary of the party youth and an elected member of its Central Committee. In the 2006 municipal elections, the party chairman, Alekos Alavanos, proposed the 32-year-old Tsipras as a candidate mayor of Athens, thus elevating him to national prominence.

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Greece risks cash crunch if Syriza wins, finance minister warns

by Kerin Hope

Financial Times

January 15, 2015

Athens risks running out of cash to make debt repayments in March if the leftwing Syriza party comes to power, Greece’s finance minister has warned, raising the prospect of a break with international lenders and a chaotic exit from the country’s four-year bailout.

“I’m raising a flag because there is complacency about raising funds to pay our obligations and that complacency is not warranted,” Gikas Hardouvelis said in an interview with the Financial Times.

Mr Hardouvelis was referring to claims by Syriza, which is poised to win a January 25 general election, that Greece could avoid a looming cash crunch by issuing short-term debt for purchase by local banks and drawing on a buffer of treasury reserves.

George Stathakis, the shadow development minister, told the FT last week his party’s economic team saw “no reason to worry” over repaying €4.3bn of debt due in the first quarter. He argued that most of the payment could be covered by reserves with the remainder coming from a top-up issue of short-term treasury bills.

But Mr Hardouvelis, a technocrat who took over last June as finance minister in the coalition government of Antonis Samaras, the centre-right prime minister, stressed that a new administration would face “severe financial constraints” on taking office.

“The timeline is very pressing and the money isn’t there,” Mr Hardouvelis said.

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Wednesday, January 14, 2015

Finland emerges as major hurdle to Greek bailout deal

Financial Times
January 14, 2015

Finland has emerged as the biggest stumbling block to negotiating a new bailout deal with an incoming Greek government, telling its eurozone partners that it will not support debt forgiveness and is reluctant to back another extension of the €172bn rescue.

In an interview, Finland’s prime minister said he would give a “resounding no” to any move to forgive Greece’s debts and warned that a new government in Athens would have to stick to the terms of the existing bailout.

The comments by Alex Stubb represent a blunt intervention in Greece’s upcoming election where Syriza, the radical left party that is currently leading the polls, has put debt relief at the core of its programme.

“We will remain tough. It is clear that we would say a resounding no to forgiving the loans,” Mr Stubb said.

“We naturally do not want to influence the Greek elections,” Mr Stubb added. “But I think it’s fair to Greeks and Finns to say out loud that some of the statements by Greek parties, and their presentations and ideas about the current programmes are simply unacceptable for Finland.”

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Spain’s politicians keep a nervous watch on the rise of Syriza

Financial Times
January 14, 2015

As Greece heads towards a crucial general election later this month, few are watching the campaign more closely — and nervously — than political leaders in Spain.

Viewed from Madrid, the Greek contest looks almost like a trial run for Spain’s own general election later this year. Both countries have been through a bitter economic crisis, and both have seen trust in established parties plummet. Most importantly, both now face a similar political challenge: how to deal with the rise, and possible triumph, of a far-left anti-establishment party determined to break with the economic orthodoxies of the past.

Polls have given Greece’s Syriza party a consistent lead over its rivals — boosting the hopes of the Podemos movement in Spain that it can follow in the footsteps of its Athenian ally. Founded only a year ago, Podemos has developed close links with the Greek party: the two groups are part of the same bloc in the European parliament, and both make the case for an end to austerity and a sweeping restructuring of their countries’ debt. Alexis Tsipras, the Syriza leader, was the star guest at Podemos’s first party congress last year.

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Germany Gets Walloped by Its Own Austerity

by Mark Gilbert

Bloomberg

January 14, 2015

The euro region is suffering from austerity fatigue, exemplified by polls showing Greece on the verge of dumping its government for one with less enthusiasm for spending cuts. Germany has been the principal architect of fiscal rectitude and the main opponent to any relaxation of deficit rules. What's happening in the heartland of German industry, however, suggests it's not just Germany's neighbors who are threatened by its economic intransigence.

The backbone of the German economy is formed by about 3.7 million small- and medium-sized enterprises, defined as those with annual sales no greater than 50 million euros ($60 million) and known as the Mittelstand. It turns out their business environment is getting worse, they're reluctant to invest, and no matter how much cheap money the European Central Bank tries to steer their way, they're not interested in borrowing to expand.

That's the unavoidable conclusion of a report published by the German Savings Banks Association yesterday. The association polled more than 330 of the country's 416 savings banks in October, and examined more than a quarter of a million SME balance sheets.

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Tuesday, January 13, 2015

ECB’s Nowotny Warns of Contagion Effects of Greek Exit From Eurozone

Wall Street Journal
January 13, 2015

Greece’s exit from the eurozone would have unknown contagion effects on the other members of the currency union, said Ewald Notwotny, a member of the European Central Bank Governing Council.

The devaluation that would follow an exit would also likely cause prices to rise in Greece, as exports wouldn’t pick up as quickly as prices for imports would increase, he added.

Mr. Nowotny’s comments Tuesday come as Greece heads into elections at the end of the month, with the leftist Syriza party ahead in polls.

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Size of Greece’s debt limits scope for solutions

Financial Times
January 13, 2015

Looking back, the signs were ominous. On the day Greece made its celebrated return to international markets in April 2014, activists detonated a car bomb outside the central bank in Athens.

No one was hurt but the explosion was seen as a riposte to the sale of billions of euros of newly minted government debt and a protest at the continued strictures placed on Greece as part of its multibillion-euro bailout from international creditors.

Greece’s debt burden is now equal to 177 per cent of the country’s gross domestic product, a level many economists regard as unsustainable. The unpopularity of the swingeing austerity required to service it has propelled the radical left Syriza party with its promise of debt restructuring into pole position ahead of snap elections on January 26.

According to the Greek analytical website Macropolis, nearly half of the total loans provided to Athens by the eurozone and International Monetary Fund since the country’s bailout in 2010 have been used for debt servicing.

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Greece Can Learn from Brazil and Argentina

by Mohamed A. El-Erian

Bloomberg

January 13, 2015

The possibility of an untested and extreme-talking left-wing party coming to power in the next elections sparks a sell-off in the markets. Creditors become nervous about the country’s prospects, particularly its exchange-rate stability and ability to service its debt. The leader of the party reacts by trying to paint a more reassuring picture of the future under a new government. But his attempts fall on deaf ears, risking self-fueling economic and financial dislocations.

Greece in 2015? No. That was the situation in Brazil before the October 2002 presidential elections, when Luiz Inacio Lula da Silva took a lead in the polls that ultimately translated into an outright win for his Workers’ Party. For many years until then, Lula had flirted publicly and privately with an alternative economic approach that would have involved large-scale debt restructurings and heavy reliance on statism to drive growth.

Expecting such an outcome, markets priced in a very high likelihood of a debt default. As bond prices plummeted, yields were driven to very high levels and Brazil’s market access almost disappeared. Bank deposits also came under pressure and the currency fell precipitously, placing further pressure on the country’s economic and financial stability. Steadily, Brazil approached a market-induced liquidity crisis that could turn into a solvency crisis that would derail the economy for many years.

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Greece Could Exit the Euro by Accident, Warns Hardouvelis

Bloomberg
January 13, 2105

Greece could stumble out of the euro by accident if a new government fails to reach an agreement with international creditors soon after this month’s election, Finance Minister Gikas Hardouvelis said.

The main challenge facing whichever government emerges from the Jan. 25 vote will be to close the stalled review of Greek progress in meeting the terms of its financial rescue by the euro area and International Monetary Fund, he said. If that government is led by Syriza, it would be “prudent” to reverse its stance and negotiate an extension to the bailout before the aid supporting Greece expires on Feb. 28, Hardouvelis said.

The prospect of “leaving the euro area is not necessarily a bluff,” Hardouvelis, 59, said in a Bloomberg Television interview in Athens yesterday. “An accident could happen, and the whole idea is to avoid it.”

Opinion polls show the opposition Syriza party of Alexis Tsipras with a slim though consistent lead over Prime Minister Antonis Samaras’s New Democracy. Tsipras has said he’ll roll back the austerity measures tied to the bailout and seek a write down on some Greek debt, putting him on a collision course with the so-called troika of creditors including the European Central Bank, which have kept the country afloat with 240 billion euros ($284 billion) of loans pledged since 2010.

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Monday, January 12, 2015

No Exit for Greece

by Josef Joffe

New York Times

January 12, 2015

Another Chapter 11 for Greece, the third in five years — and no exit in sight. The Greeks won’t do the eurozone the favor of absconding from the common currency. Never mind that they should never have been accepted in the first place, when they cooked the books to look prim and proper.

Not even Alexis Tsipras, the leader of the radical leftist Syriza party, wants out. Apparently on track to win the snap elections on Jan. 25, he has vowed: “We will stick with the euro, no doubt.”

Nor does anybody else — including Germany — want Greece to leave, if truth be told, even though the German leader, Angela Merkel, now has her minions spreading the word that a “Grexit” is no longer an absolute no-no. If Mr. Tsipras wins and then imposes another haircut on the country’s creditors while nixing market reforms and fiscal rigor, then it will be auf Wiedersehen to Hellas. So goes the unspoken — but ultimately hollow — threat from Berlin.

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Syriza turns Greek oligarchs from taboo subject to economic priority

by Kerin Hope

Financial Times

January 12, 2015

They are Greece’s best-known tycoons, admired and loathed in equal measure for their vast wealth and deep political connections. While ordinary Greeks call them “diaplekomenoi” (the entangled ones) or “davatzides” (pimps), economists call them oligarchs because of their grip on the country’s business life.

However they are described, their role in Greek politics and society is under scrutiny ahead of this month’s election.

The far-left Syriza party, which is tipped to win a snap general election on January 25, has declared war on the oligarchs if it comes to power. George Stathakis, the party’s shadow development minister, told the Financial Times last week that Syriza would end the practice of governments handing out television licences for free to their political friends and review contentious privatisation sales. Tackling the oligarchs’ grip on the economy “will be a priority” he said.

Such comments already mark a change from form in Greece, where the oligarchs’ influence has long been felt but seldom discussed — at least publicly.

“The real enemy to market competition in Greece is the oligarchy, but it’s a taboo subject — politicians don’t discuss it and the media don’t write about it,” says Aristides Hatzis, a professor of law and economics at Athens University.

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Greece’s Leftist Syriza Party Holds the Lead in Opinion Polls

Wall Street Journal
January 12, 2015

Greece’s leftist opposition Syriza party continues to hold a narrow lead in a series of public-opinion polls published over the weekend, two weeks ahead of the country’s national elections.

In nine separate opinion polls that were published in the Greek media during the past two days, Syriza was poised to win the coming vote, edging out the ruling New Democracy party by a margin of between 2.7 and 5.5 percentage points, with most of the polls showing an average lead of about 3.2 percentage points—slightly above the margin of error. A 10th poll, published in a pro-Syriza newspaper and after adjusting for undecided voters, gave the party an eight-percentage-point lead.

According to the nine surveys, Syriza would garner between 27.1% and 31.2% of the vote, while the ruling conservatives would get between 22.6% and 28% of voters’ support. However, the polls also showed that about 10% of respondents on average remain undecided on how they will vote when they go to the ballot boxes on Jan. 25.

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Banks Ready Contingency Plans in Case of Greek Eurozone Exit

Wall Street Journal
January 12, 2015

Banks and other financial institutions in Europe are stress-testing their internal systems and dusting off two-year-old contingency plans for the possibility that Greece could leave the region’s monetary union after a key election later this month.

Among the firms running through drills are Citigroup Inc., Goldman Sachs Group Inc. and brokerage ICAP PLC, according to people familiar with the matter.

The firms’ plans include detailed checks on counterparties that could be significantly affected by a Greek exit, looking at credit exposures and testing how they would provide cross-border funding to local operations.

Some firms are also preparing for the impact on payment systems and conducting trial runs of currency-trading platforms to see how they would cope with adding a new Greek currency or dealing with potential capital controls.

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Retreat From Grexit

by Mark Gilbert

Bloomberg

January 12, 2015

The euro region is stepping back from the abyss. After weeks of media reports claiming that German officials were ready to accept losing Greece from the euro, saner thinking seems to have prevailed -- as the drastic drop in Greek bond yields today demonstrates. The whole episode is a timely reminder, though, that while European Union law describes the euro as irrevocable, investors aren't so sure about its permanence.

A more conciliatory tone from Alexis Tsipras, the most likely winner of the Greek election on Jan. 25, is helping make everyone more realistic. Over the weekend, he pledged to maintain the country's euro membership and to honor Greece's debt obligations. The nation is to repay more than 5.6 billion euros in March, up from the 1.4 billion euros it needs to pay this month and the 2.8 billion euros that come due in in February, according to Bloomberg data.

Comments from German officials have also soothed investors. Volker Kauder, the chief whip for Chancellor Angela Merkel's Christian Democrats, told Focus magazine that talk of Greece exiting the euro was "nonsense,'' and would prompt speculation about other countries leaving. The less sanguine Germany seems about a break-up of the euro, the better.

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