Monday, March 20, 2017

Greece Edges Toward Another Crisis as Bailout Quarrel Persists

by Nikos Chrysoloras, Ian Wishart & Sotiris Nikas


March 20, 2017

Greece is set to miss yet another deadline for unlocking bailout funds this week, edging closer to a repeat of the 2015 drama that pushed Europe’s most indebted state to the edge of economic collapse.

Euro-area finance ministers meeting in Brussels on Monday will reiterate that the government of Alexis Tsipras has yet to comply with the terms attached to the emergency loans that have kept the country afloat since 2010. While Tsipras had promised the long delayed review of the latest bailout would be completed by March 20, a European official said last week that reaching an agreement even in April is now considered a long shot.

The two sides are still far apart on reforms demanded by creditors in the Greek energy market and the government in Athens is resisting calls for additional pension cuts. And while discussions continue on how to overhaul the labor market, a finance ministry official said in an email to reporters on Friday that the issue can’t be solved in talks with technocrats.


Friday, March 17, 2017

IMF under pressure in Washington over Greek bailout

by Shawn Donnan

Financial Times

March 17, 2017

Conservatives in Congress are pushing Donald Trump to block the International Monetary Fund from participating in a European-led bailout of Greece, as his administration signalled it would take a tougher line with global institutions.

In what was labelled an “America First” budget revealed on Thursday, the president proposed a $650m cut in US funding over the next three years for multilateral development banks including the World Bank. He also this week nominated two conservative economists with a history of criticising the IMF and the Bank for the two top international posts at the US Treasury.

Those two moves came as Steven Mnuchin, Mr Trump’s Treasury secretary, travelled to Germany to meet his G20 counterparts. They also signal that Mr Trump, who railed against “globalists” throughout his run for president, is likely to deliver on campaign pledges to take a fundamentally different approach towards international organisations and the global economy.

But conservative Republicans in Congress are eager for him to go a step further. They want him to assert US power over such bodies by taking a hard line and opposing further IMF involvement in Greece, which is sliding towards another crisis this summer unless its European creditors agree to cover billions more in debt payments.


Monday, March 13, 2017

How does jailing the statisticians fix Greece’s financial crisis? It doesn’t.

by Anbar Aizenman, Anisha Chinwalla & Benjamin A.T. Graham

Washington Post

March 13, 2017

The Greek government’s ongoing attempts to imprison Andreas Georgiou will reshape the Greek economy — in ways that may last for decades. Georgiou is a statistician who’s been accused by the government of inflating data on the size of the Greek deficit. He’s awaiting trial — for telling the truth about the Greek economy.

Georgiou has been acquitted in four trials since 2011, most recently in December. Greek politicians are still pushing the case, which is now at the Greek Supreme Court. Georgiou appears to be a convenient scapegoat for Greek politicians trying to avoid blame for their country’s ongoing financial crisis.

The prosecution of Georgiou undermines the rule of law. As a member of the European Union, the Greek statistical office is required to follow E.U. accounting rules. By prosecuting Georgiou for following those rules, the government is telling other bureaucrats that they must break the rules if they want to stay out of jail. In particular, they are signaling to government statisticians that it is dangerous to report bad news about the economy.

Prosecuting statisticians effectively lets Greek politicians shut off the flow of reliable public information about the economy. If statisticians fear the consequences of publishing negative information, then it is in their best interest to hide bad news.


Emergency central bank funding to Greek banks rises by 300 million euros in February

March 13, 2017

Emergency central bank funding to Greek lenders rose by 300 million euros, or 0.7 percent, in February compared to the previous month, Bank of Greece data showed on Monday.

Emergency funding, which is more costly than borrowing from the European Central Bank, increased to 43.1 billion euros (37.66 billion pounds) at the end of February from 42.8 billion euros at the end of January, the data showed.

Banks have relied on emergency liquidity assistance (ELA) drawn from the Greek central bank since February 2015 after being cut off from the ECB's funding window due to stalled bailout talks between the government and its official lenders.


Friday, March 10, 2017

Greece: Playing with Matches in the Ammunition Warehouse

by Miranda Xafa

Centre for International Governance Innovation

CIGI Policy Brief No. 100
March 10, 2017

The current standoff with creditors over the second review of the third bailout increasingly resembles the catastrophic 2015 negotiations that brought Greece to the brink of Grexit. The protracted negotiations are taking a toll on the economy. Depending on when agreement is reached — or elections are called — three possible scenarios could unfold, none of which involves Grexit. After the July 2015 referendum, Greek Prime Minister Alexis Tsipras presented the proposed program as an improvement over the one rejected by voters because it included debt relief and excluded the “tough” International Monetary Fund from the troika. Now he will be asking Parliament to vote for tough measures for the exact opposite reasons.

Download the Policy Brief

Thursday, March 9, 2017

Piraeus picks Christos Megalou as its new chief executive

by Martin Arnold & Kerin Hope

Financial Times

March 9, 2017

Piraeus Bank has hired Christos Megalou as its chief executive, ending one of the longest senior job vacancies in European finance. The top job at Greece’s biggest lender has been vacant for 14 months.

Mr Megalou, a former investment banker in London, was chief executive of Piraeus’ Greek rival Eurobank for almost two years before stepping down in January 2015.

He is one of only a few Greek bankers deemed to meet the Greek financial stability fund’s criteria for heading one of the country’s systemic lenders — at least 10 years experience in a senior position abroad.

He worked for Credit Suisse for 15 years holding several investment banking positions before joining Eurobank in 2013 to oversee its restructuring and recapitalisation as Greece struggled to emerge from its first crisis.

Mr Megalou took credit for bringing in a group of anchor investors, among them Fairfax Financial, the Canadian group headed by Prem Watsa, and Wilbur Ross, the US investor. Eurobank successfully raised €2.9bn in 2014, to become the first Greek bank to return to private ownership after the crisis.


Wednesday, March 8, 2017

Greek economy flat last year, stats service says

March 8, 2017

Greek economic growth was flat last year, the country's statistics service ELSTAT said on Wednesday, releasing its first estimate of full-year 2016 gross domestic product.

It said gross domestic product in volume terms and measured at constant prices was 184.5 billion euros last year, unchanged from 2015.

ELSTAT's estimate, based on seasonally unadjusted data, showed the economy performed worse than the country's official creditors were expecting based on their recent forecasts.

The European Commission, in its winter forecast published in February, projected GDP growth of 0.3 percent in 2016 while the International Monetary Fund's upwardly revised estimate saw GDP growth of 0.4 percent.


Monday, March 6, 2017

The Refugee Archipelago: The Inside Story of What Went Wrong in Greece

by Daniel Howden & Apostolis Fotiadis

Refugees Deeply

March 6, 2017

Widad Madrati remembers the first snowfall at Oreokastro like most children would, as a thing of wonder. It threw a brilliant white cover over the squalor of a refugee camp pitched in the grounds of a disused warehouse in the hills above Greece’s second city, Thessaloniki. The 17-year-old Syrian did not mind that the water pipe to the outdoor sinks had frozen. She took photographs of the icicles.

The photos on her phone show nothing of the broken chemical toilets or the discarded, inedible food; nor of the flimsy tents pitched on freezing ground by refugees, like her family, who arrived too late to find a spot inside the concrete shell of the old warehouse. Instead, her photos show children playing in the snow.

Stranded outside the Oreokastro buildings, in a tent dusted with snow, the other members of the Madrati family were more realistic about survival and begged the authorities and volunteers for a way out of the camp. A family of four when they left Aleppo who became five along the way when Widad’s sister Maria was born in Turkey, they had endured worse indignities in Greece than pleading.

The family was also among the last to leave their previous temporary home at Idomeni, where they held on for 10 weeks after the chaotic encampment on Greece’s northern border closed in March 2016, in the hope it would reopen. It did not.


Sunday, March 5, 2017

Greece’s economy has turned corner, says central bank chief

by Kerin Hope

Financial Times

March 5, 2017

“Growth turned positive for the year [2016] as a whole, contrary to initial forecasts,” he told the Delphi Forum, an annual gathering of Greek economists, businesspeople and politicians, on Saturday. “A rapid closure of the review will help the economy build on the 2016 outperformance and move quickly to a faster growth path.”

Sounding an upbeat note for the first time this year, Mr Stournaras endorsed the EU’s latest growth forecast for Greece of 2.7 per cent this year rising to 3.1 per cent in 2018. The economy expanded by 0.3 per cent last year, despite falling back into negative territory in the fourth quarter

“Some recent softening of economic indicators can be put down to uncertainty in the face of delays in closing the second review of the programme. Hopefully this is now moving forward,” he said.


Friday, March 3, 2017

Greece seeks France's help on bailout, eyes 2017 bond 'test'

by Derek Gatopoulos & Elena Becatoros

Associated Press

Mar. 03, 2017

Greece is seeking help from France, its close ally in the 19-country eurozone, as it seeks to overcome stubborn sticking points in its bailout talks and return to international bond markets later this year.

France's Prime Minister Bernard Cazeneuve and Finance Minister Michel Sapin were in Athens Friday for talks, as negotiations with bailout inspectors in the Greek capital continued for a fourth consecutive day.

Cazeneuve met Prime Minister Alexis Tsipras and described recent improvements in Greek economy as "spectacular," while Sapin said France was working to keep the International Monetary Fund in the Greek rescue program.

"France is here to facilitate things, to show to everyone and to the institutions that it is time to reach an agreement, that it's time to look to the future," Sapin said.


Tuesday, February 28, 2017

Greece Said to Expect Revised Bailout Proposal for Tuesday Talks

by Sotiris Nikas


February 28, 2017

Greece’s auditors are pulling together a list of policies the country needs to implement to unlock additional bailout funds as they prepare for the resumption of talks with Athens on Tuesday, two people familiar with the matter said.

Greece has asked European lenders for a draft Supplemental Memorandum of Understanding and the International Monetary Fund for a Memorandum of Economic and Financial Policies as it braces for details of creditor demands, the people said, declining to be identified as negotiations between the two sides aren’t public. The government expects an accord in March or early April, but the scale of pending issues raises concerns they may be politically hard to sell at home, they said.

Greek Prime Minister Alexis Tsipras’s government last Monday agreed to legislate structural reforms demanded by the IMF that will lower the threshold of tax-free income and amend the pension system by 2019, effectively crossing what it had once characterized as a red line. The government says the deal won’t increase austerity since the new legislation will include stimulus measures in addition to belt-tightening reforms.


Sunday, February 26, 2017

Return of bailout monitors fails to lift Greek gloom

by Kerin Hope

Financial Times

February 26, 2017

For Christian Hadjiminas, who owns a company that makes night-vision equipment, the return on Monday to Athens of EU and International Monetary Fund bailout monitors will come as a “huge relief”.

“We’re grateful that we’re not going over the cliff,” says Mr Hadjiminas, referring to a two-month long dispute between the Greek government and its creditors that revived fears of a re-run of 2015, when Athens defaulted on an IMF debt payment and came close to crashing out of the euro.

The latest stand-off, which extended to a rare public clash between the EU and the IMF over the sustainability of Greece’s bloated debt was resolved after Athens accepted in principle to adopt tax and pension reforms pushed by the fund. The IMF says the measures are needed if Greece is to hit fiscal surplus targets in 2019 and beyond. The concession opens the way for Greece to receive bailout funding to cover a €7bn debt payment due in July.

But even though the bailout talks appear to be back on track, the prevailing mood in Greece’s business community is one of uncertainty tinged with gloom.


Wednesday, February 22, 2017

Save Greece by Saving Its Economy First

New York Times
February 21, 2017

With the Greek government set to run out of cash by the end of July, the country’s main creditors in Europe continue to demand harsh budget cuts as a condition for crucial loans. But after a decade of failing to save Greece, Germany and other European nations, along with the International Monetary Fund, ought to try a different approach, one that makes reviving the economy a priority.

Greece’s creditors appear willing to provide new loans to pay off debts coming due this year as long as the country commits to achieving a fiscal surplus of 3.5 percent of gross domestic product before interest payments by 2018. The I.M.F., more sensibly, has argued for a surplus of 1.5 percent. It also says that European officials should commit to reducing the Greek government’s debt, which is so huge that it equals about 180 percent of the country’s annual economic output. That debt relief could come in various forms, including giving the country more time to repay or reducing the amount owed.

The monetary fund is right. Requiring the country to run big budget surpluses when its economy is growing at an annual rate of only 0.4 percent is cruel and counterproductive. Based on current trends, the fund projects that the country’s debt will increase to more than 250 percent of G.D.P. during the next several decades. European officials are much more optimistic, but that hopefulness is based on the dubious assumption that Greece can run large budget surpluses for decades to come.


Tuesday, February 21, 2017

Greece Teeters Back to the Edge of the European Union

by Yannis Palaiologos

Wall Street Journal

February 21, 2017

Greece’s Prime Minister Alexis Tsipras has been in a defiant mood lately. Some say it’s just a ploy, others believe he’s sincere. Either way, he could be pushing his country back to the brink of Grexit.

Speaking to his party’s central committee earlier this month, the prime minister had harsh words for Wolfang Schäuble, speaking of the German finance minister’s “constant aggressiveness” against Greece and his “contemptuous remarks” toward the country.

At the same meeting, Mr. Tsipras also accused the International Monetary Fund of not telling the eurozone the truth about the requirements for Greece’s recovery. The IMF, he raged, has lost “all scientific credibility” because of its handling of the Greek crisis.

Last month, on the second anniversary of his party’s rise to power, Mr. Tsipras claimed that the latest review of Greece’s third bailout program would be completed without his government having to legislate “a single euro” in new fiscal measures.

And earlier, during a Dec. 20 speech in Crete, he defended the bonus he offered to 1.6 million pensioners, against the protestations of Greece’s creditors. “No one has the right,” he said, “to tell us how we will make use of the surplus sums that stem from the hard work of the Greek people.”


In Defence of Europe: Can the European Project Be Saved?

Oxford University Press, 2016

Europe has not been so weak and divided for a long time. Buffeted by a succession of crises, its collective capacity to deliver has been truly disappointing. In times when the tectonic plates are shifting and tension between global markets and national democracies is rising, can Europe hold together, under what terms - and indeed for what purpose?

The euro crisis has left big scars and is still far from over. The contradiction of a currency without a state will not be easy to resolve. And the combination of high debt with persistently slow growth, large numbers of unemployed in many parts of Europe, and inflation close to zero is hardly reassuring. Meanwhile, economic divergence has grown between and within countries, leading in turn to political fragmentation and the rise of populism.

Europe is in a bind: it is difficult to go forwards and scary to go backwards. In between, it is in an unhappy and unstable state of affairs. How can it accommodate such diversity - and hence prevent Grexit and Brexit? And, looking further afield, a more assertive Russia and a troubled wider neighbourhood exporting millions of refugees may not even allow Europe the luxury to decline in grace.

Drawing lessons from the European success story of the second half of the twentieth century, political economist and former special adviser to the President of European Commission Loukas Tsoukalis now addresses the key choices facing Europe today. He explains how the international financial crisis of recent years has become an existential crisis of European integration. And he asks whether there is an irreconcilable contradiction between Europe's apparent yearning for soft power and the often hard reality of the world outside?

Individual countries cannot handle these challenges on their own. While knowing full well the difficulties in reaching a common European stance, Tsoukalis is also acutely aware of the consequences of failure.

Loukas Tsoukalis is Professor of European Integration at the University of Athens and President of the Hellenic Foundation for European and Foreign Policy (ELIAMEP), the main Greek think tank on European and foreign policy. He has taught at many of the top universities around Europe, including Oxford, the London School of Economics, and the College of Europe. He has also held visiting professorships at Sciences Po in Paris, the European University Institute in Florence, and King's College, London. In 2016, he was Pierre Keller Visiting Professor at Harvard University. The author of many books on European integration and international political economy, he habitually crosses the boundary between economics and politics, theory and policy, and is familiar with the Brussels world, having served as special adviser to the former President of the European Commission. A public intellectual, he has for long been actively engaged in the European policy debate.

Eurozone Agrees to Greece Talks in Exchange for Bailout Payments

by James Kanter and Niki Kitsantonis

New York Times

February 20, 2017

Eurozone finance ministers agreed on Monday to begin negotiations in Athens as soon as next week over much-needed overhauls in exchange for bailout payments, with Greece appearing to win a reprieve from the crippling austerity that it has faced for years.

The agreement fell short of an all-encompassing deal, with key questions unresolved over the shape of the changes to Greece’s pensions, as well as its tax and labor rules. But it is a positive sign ahead of a meeting this week between Chancellor Angela Merkel of Germany and Christine Lagarde, the head of the International Monetary Fund, who have taken contrasting positions on debt relief toward Athens.

Greece does not have to make another major debt repayment to its creditors until the summer. But with elections due in France, Germany and the Netherlands this year, the country’s bailout is threatening to become a major political issue across the region. European officials are particularly eager to head off another full-blown crisis if only to avoid giving succor to far-right parties in those polls.


Saturday, February 18, 2017

Greece’s creditors are now the main impediment to solving the country’s woes

February 18, 2017

If history repeats itself first as tragedy and then as farce, it continues thereafter as endless iterations of Greek debt dramas. The script is wearyingly familiar. Greece’s European creditors are trying to close the second review of its third bail-out, which was signed in August 2015. That would enable them to lend Greece the funds it needs to meet €6.3bn ($6.7bn) of bond repayments due in July. But talks have run aground ahead of a meeting of euro-zone finance ministers in Brussels on February 20th. Bond yields have spiked, German ministers are issuing barbed comments, and dust is being blown off the Grexit files.

The review covers everything from health care to military wages. But thanks to pressure from the IMF—which has not yet joined the bail-out, as it did the previous two—Greece faces more pressing demands: to pass tax and pension reforms worth 2.5% of GDP, to kick in after the bail-out expires. Alexis Tsipras’s hard-left Syriza government will struggle to get these measures through parliament, but the alternative is to call elections that Syriza would probably lose to New Democracy, a centre-right party. Thousands of farmers wielding their produce took to the streets in Athens in outrage at more austerity (see picture). Unions are pondering further protests.

Greece has become a bystander to its own tragedy. The conditions attached to the bail-outs drastically reduce the government’s control over economic policy. For many Greeks, this makes politics itself pointless: 17% do not know a party they support (or will not say), while 15% will not vote at all. What sets today’s drama apart is the dispute among Greece’s creditors. These date back to the complex architecture of euro-zone bail-outs, jerry-built in haste in 2010. But today the debate is more public, and potentially more serious.


Friday, February 17, 2017

Greek debt crisis: what happens now?

by Vicky Pryce


February 17, 2017

Here we go again. A new impasse between the International Monetary Fund and Greece’s European creditors has raised once more the threat of “Grexit.” The IMF considers Greece’s debt, currently at 180 per cent of GDP, as unsustainable. It has therefore refused so far to take part in the country’s third bailout, agreed in July 2015, unless the European creditors offer debt relief. The Europeans are unwilling to write off debt ahead of national elections—when voters do not want to be told their taxes are going to help the Greek politicians.

The only other option on offer is even greater austerity to force Greece to aim for large primary surpluses in its yearly finances. This requires additional measures which the current left wing Syriza government, run by Alexis Tsipras, would have difficulty accepting.

There is a crucial Eurogroup meeting on Monday, 20th February which should—in theory—pave the way for a successful completion of the current review of Greece’s progress, and release a further chunk of money as some €8bn of loan and bond repayments are due this summer. But it may not. And the Dutch are saying that without IMF participation the whole bail-out is in doubt. The Commission has sent Pierre Moscovici, the EU’s economic Commissioner, to urge the Greeks to find a compromise solution. Without it, default or exit from the euro—maybe even from the EU—could follow.