Tuesday, June 30, 2015

Syriza is not Greece

by Yannis Palaiologos

Financial Times

June 30, 2015

Greece has always had an ambivalent relationship with Europe. Ever since Britain led the international coalition that rescued the failing Greek independence movement in the 1820s — the original modern-era Greek bailout — Greeks have viewed Europe with a mixture of mutual admiration and suspicion. Both attitudes have deep historical roots, and have survived to the present day. This week, in the run-up to the fateful referendum that will take place next Sunday, Greeks are called upon to pronounce on which one is the stronger.

Greek equivocation over Europe was present at the creation of its relationship with the institutions of European integration. In the late 1970s — when the centre-right prime minister Konstantinos Karamanlis overcame widespread European scepticism about the country’s readiness for membership and secured Greek admission to the European Economic Community — Andreas Papandreou, the head of the official opposition, railed against the idea. In a famous exchange between the two in parliament, when Karamanlis said that Greece belongs to the west, Papandreou responded, to wild applause, that he would rather it belong to the Greeks.

In the years between 1981, the year of admission, and 2009, when the present crisis began, Greece was always the problem child of the European family — from its repeated fiscal crises and its misuse of structural funds to its inability to shut down illegal rubbish dumps. But there was also progress on a number of fronts, often under European pressure or to meet the criteria in order to participate in a common European project (above all, the euro). Greece became richer, democratic stability was entrenched, the country and its people became deeply enmeshed in European networks of politics, business, work and education.

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Monday, June 29, 2015

Greece to Default on $1.73 Billion IMF Payment

Wall Street Journal
June 29, 2015

European leaders appealed to Greeks to vote “yes” in a referendum on their country’s bailout, warning that the risk of Greece’s exit from the euro was real, as Athens confirmed it wouldn’t be able to make a loan repayment to the International Monetary Fund due on Tuesday.

The Greek government’s decision to call a vote on measures its creditors demand in return for more bailout aid has cast the country into uncharted waters. As of Tuesday, Greece will be cut loose from international rescue loans for the first time in more than five years. It will also default on the €1.55 billion ($1.73 billion) IMF payment, whose deadline is the same day.

Many economists and officials fear that without further financial support, Greece may have to abandon the euro, sparking a messy departure from the bloc. The European Union also hopes to avoid contagion from spreading to other parts of the 19-country eurozone after Greece’s decision over the weekend to shut down its banking system for at least a week to prevent money from flooding out of the country.

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Europe’s dream is dying in Greece

by Gideon Rachman

Financial Times

June 29, 2015

The shuttered banks of Greece represent a profound failure for the EU. The current crisis is not just a reflection of the failings of the modern Greek state, it is also about the failure of a European dream of unity, peace and prosperity.

Over the past 30 years Europe has embraced its own version of the “end of history”. It became known as the European Union. The idea was that European nations could consign the tragedies of war, fascism and occupation to the past. By joining the EU, they could jointly embrace a better future based on democracy, the rule of law and the repudiation of nationalism.

As Lord Patten, a former EU commissioner, once boasted, the success of the union ensured that Europeans now spent their time “arguing about fish quotas or budgets, rather than murdering one another”.

When the Greek colonels were overthrown in 1974, Greece became the pioneer of a new model for Europe — in which the restoration of democracy at a national level was secured by a simultaneous application to join the European Economic Community (as it then was).

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A ‘take-it-or-leave it’ vote is a recipe for disaster for Greece

by Aristides Hatzis

Financial Times

June 28, 2015

Early Sunday morning the Greek parliament voted to hold a referendum that will be decisive for the country’s future. Supposedly this is going to be a vote on a “take-it-or-leave-it” proposal by Greece’s creditors — the EU, the European Central Bank and the International Monetary Fund.

But in fact this is going to be a referendum about whether Greece remains in the eurozone, the EU or even the west.

I cannot see how this plebiscite can even take place. The obstacles seem insurmountable.

The logistics are awful. The notoriously inefficient Greek administration will have a hard time organising the referendum in less than a week. Worse, it could cost more than €100m when the public coffers are literally empty.

Beyond the cost, though, there is the problem that this poll has no real objective. The bailout proposal was not final and it has already been recalled.

Voting on a non-existing proposal is surreal and only serves to highlight that the referendum is really about the standing of Greece in Europe. The Greek government will do its best to avoid the association, a difficult task given the apparent rupture with the rest of Europe.

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Greece Tries to Defy History of Capital Controls Doomed to Fail

Bloomberg
June 29, 2015

When a nation is fast running out of cash, it often tries to stop the hemorrhaging by clamping down on how much money can leave its borders.

Unfortunately for Greece, history suggests it hardly ever works. The country, teetering on the edge of economic ruin after refusing the demands of its creditors and euro-area officials on a debt agreement, joined on Monday a long list of embattled governments that turned to capital controls.

While dozens of countries from Mexico to Iceland and Thailand have imposed such measures since World War I to boost revenue, prop up currencies and hold down interest rates, the International Monetary Fund found that only those few with sound economies and strong institutions succeeded in slowing capital flight. That poses a challenge for Greece, which is facing a default and an exit from the 19-nation currency bloc after aid talks with creditors broke down and the European Central Bank froze its financial safety net for lenders.

“With Greece, a lot of money has already left the country and they’re sort of shutting the gate after the horse has left the barn,” Michael Klein, a professor of international economic affairs at Tufts University’s Fletcher School, said from Dallas prior to Greece’s announcement. With countries in crisis, “there are issues of how effective they can be.”

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Europe’s Attack on Greek Democracy

by Joseph E. Stiglitz

Project Syndicate

June 29, 2015

The rising crescendo of bickering and acrimony within Europe might seem to outsiders to be the inevitable result of the bitter endgame playing out between Greece and its creditors. In fact, European leaders are finally beginning to reveal the true nature of the ongoing debt dispute, and the answer is not pleasant: it is about power and democracy much more than money and economics.

Of course, the economics behind the program that the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country’s GDP. I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60%.

It is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe’s leaders have not even learned. The troika is still demanding that Greece achieve a primary budget surplus (excluding interest payments) of 3.5% of GDP by 2018.

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Grisis

by Paul Krugman

New York Times

June 28, 2015

OK, this is real: Greek banks closed, capital controls imposed. Grexit isn’t a hard stretch from here — the much feared mother of all bank runs has already happened, which means that the cost-benefit analysis starting from here is much more favorable to euro exit than it ever was before.

Clearly, though, some decisions now have to wait on the referendum.

I would vote no, for two reasons. First, much as the prospect of euro exit frightens everyone — me included — the troika is now effectively demanding that the policy regime of the past five years be continued indefinitely. Where is the hope in that? Maybe, just maybe, the willingness to leave will inspire a rethink, although probably not. But even so, devaluation couldn’t create that much more chaos than already exists, and would pave the way for eventual recovery, just as it has in many other times and places. Greece is not that different.

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Greek Suicide Watch

Wall Street Journal
Editorial
June 28, 2015


The collapse on the weekend of last-ditch talks to extend Greece’s bailout means Athens won’t be able to afford a €1.55 billion debt payment due to the International Monetary Fund on Tuesday, the day the 2012 bailout agreement expires. The European Central Bank said Sunday it won’t increase its liquidity assistance to Greek banks, and Greece ordered banks not to open Monday to avoid more deposit flight.

None of this automatically triggers a euro exit. But it’s hard to see how Greece could stay in the currency bloc for long if it defaults on its debt, refuses to implement fiscal and economic reforms and, in all likelihood, imposes capital controls.

This marks a long fall in the five months since Alexis Tsipras and his far-left Syriza Party were elected on a platform of rolling back reform. Ahead of January’s parliamentary vote, the economy had started growing again after four years of recession and a contraction of around 25%. Athens in 2014 sold bonds to private investors for the first time since 2010 and was on the verge of exiting its 2012 program.

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Sunday, June 28, 2015

Q&A: what options now for Greece’s strained banking system?

Financial Times
June 28, 2015

Greece looks set to enter uncharted waters this week, with the expiry on Tuesday of its creditors’ offer of a new €15.3bn rescue loan in exchange for a package of austerity and structural reforms.

Here are the key issues it faces as it lurches closer to becoming the first member state to leave the euro since the single currency was launched in 1999.

What are the next payment deadlines looming for Greece?

In the next few days, the government will have to make the usual monthly payments to pensioners and civil servants, as well as settling a €1.5bn loan repayment to the International Monetary Fund, which comes due on June 30.

Athens has already opted to bundle all the payments it had to make to the IMF this month in a single instalment, using a clause that was last used by Zambia in the 1980s, meaning it has no third option between paying up and defaulting.

Ministers have already made it clear they will prioritise paying pensioners and government employees over the IMF. Hence, in the absence of a deal, it is almost certain the fund will not see its money back for now.

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The road to Grexit and beyond

by Wolfgang Münchau

Financial Times

June 28, 2015

When a shock you predicted actually happens, it still feels like a shock. Alexis Tsipras was right to walk away. But it was a momentous decision nevertheless when the Greek prime minister rejected an offer that would have allowed it to pay its debt to the International Monetary Fund and the European Central Bank. What I am struggling to understand is why he suddenly decided to call a referendum on whether to accept a bailout for next Sunday.

There might be some super-smart strategy behind this beyond my capacity to comprehend. The problem with the referendum is that the offer on which the Greek people are asked to vote is no longer on the table. And the programme to which it relates expires tomorrow at midnight. Why should the Greeks vote Yes to a package the creditors themselves no longer support?

By far the biggest tactical error committed over the weekend, however, was the rejection by eurozone finance ministers of a five-day extension of the Greek bailout programme to beyond the referendum. With that decision, they foreclosed the only way to keep the show on the road. They have unwittingly strengthened the political argument of the Greek prime minister. He will now be able to say: first the creditors wanted to destroy the Greek economy with their austerity programme. And now they are hoping to destroy Greek democracy.

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The ECB will defend the euro even if Greece quits

by Lorenzo Bini Smaghi

Financial Times

June 28, 2015

As expected the European Central Bank has decided to maintain unchanged the ceiling for the Emergency Lending Assistance to Greek banks, following the breakdown of the negotiations on the Greek adjustment program and Tsipras’ decision to call for a referendum to be held next Sunday.

The ECB had no alternatives. Increasing ELA to Greek banks would have breached the ECB’s rules of providing financing only to banks of countries that have agreed to an adjustment program. It would have raised the ECB’s exposure to the Greek central bank to unprecedented level, which would become worthless if Greece exited the euro and result in huge losses for European taxpayers.

Without additional financing, Greek banks will not be able to serve the rising demand for cash coming from Greek citizens standing in line, fearing that their savings will be severely devalued when converted into the new currency.

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Explainer: If Greece leaves the euro

Financial Times
June 28, 2015

What happens once a country leaves the euro?

On financial markets a new currency first needs a new currency code that can be identified by computers for trading and payments. They are issued by the Swiss-based International Standards Organisation, a worldwide federation of national standards. It provides an alphabetic three-character code, with the first two letters representing the country and the third the name of the currency. In Greece’s case it could not go back to its old code for drachma, GRD, because there are still some outstanding payments to be made. It would require a new code, most likely GRN.

After that, the code must be entered into software and payments systems so the computers can recognise it for payments processing and trade confirmations and other critical but unseen functions. Market infrastructure providers say this can be done in one business day if needed.

Is that really all it takes for markets?

In reality it requires far more. Switching over to a new currency is trickier when it comes to resolving long-dated forward financial contracts, such as swaps and options.

There is a host of legal questions that have to be resolved as payments are switched from one currency to another. Some trades may have to be modified or even rebooked. It is far from an impossible job, but as it involves legal changes, it is a slow and careful process.

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Athens Implores Europe to Support Greek Referendum Next Sunday

Wall Street Journal
June 28, 2015

Athens implored Europe over the weekend to support a Greek referendum next Sunday on creditors’ bailout proposals, but much of the Continent responded with a quicker verdict of its own: enough already.

In Germany, Greece’s biggest creditor, large Sunday newspapers led with headlines such as “Game Over?” and the word “Exit” in ancient Greek. Leading politicians who had called for leniency with Athens in the past voiced fury, while many conservatives said it was high time for a Greek exit from the euro to be prepared.

Behind the scenes, German Chancellor Angela Merkel quickly signaled that she wouldn't support a short extension of Europe’s bailout scheduled to expire Tuesday to accommodate a Sunday referendum as long as the Greek government didn’t urge voters to back a bailout deal with Europe. In Brussels on Saturday, her powerful finance minister, Wolfgang Schäuble, vented his frustration with the Greeks hours after the referendum announcement.

“One can always say there is hope,” Mr. Schäuble said, “but none of the colleagues I have spoken to see any possibility of what we can do now.”

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Tsipras gambles political future on Greek bailout referendum

by Kerin Hope

Financial Times

June 28, 2015

Alexis Tsipras is gambling his political future as Greece’s prime minister on a hastily called referendum that could all too easily backfire.

Next Sunday’s vote on a failed Greek bailout proposal has divided constitutional experts over its legitimacy and left bureaucrats scrambling to arrange the logistics of holding the country’s first plebiscite in more than 40 years.

It is also puzzling and confusing voters.

“Greece is holding a referendum on a proposal that no longer exists for a bad programme that by then will have expired,” said Yannos, a business consultant who declined to give his second name. “It doesn’t make sense.”

Mr Tsipras has urged a “no” vote to endorse his leftwing government’s rejection of “blackmail” by the country’s creditors to apply further harsh austerity measures in return for a €15.3bn bailout. At the same time he has said he would respect a “yes” result.

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Tsipras takes Greece to the edge of the precipice

Financial Times
Editorial
June 28, 2015


Without friends or finance, Alexis Tsipras, Greece’s prime minister, has had few cards to play in the negotiations with his country’s creditors.

The Greek leader has tried to shame them by appealing to a sense of European solidarity. He has brandished his own electoral mandate to confront Greece’s economic crisis, ignoring the fact that in eurozone politics, there is no reason why a vote minted in Athens should trump one cast in Berlin or Helsinki.

But never far from the top of the pack has been the least honourable card in Mr Tsipras’s hand. This seeks to exploit the discomfort with which sensible Europeans, such as Germany’s chancellor Angela Merkel, contemplate the prospect of Greek exit from the single currency. At the critical moment in the Brussels talks, Mr Tsipras has put his knave of hearts on the table. He is not the first Greek leader to turn to a referendum in despair at the progress of talks over a bailout programme. George Papandreou attempted a similar manoeuvre in 2011 while he was prime minister. The harsh bailout deal survived; Mr Papandreou lost his job.

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Greek crisis: 'Nobody can say what will happen in the referendum'

by Helena Smith

Observer

June 28, 2015

One by one they came, smiling for the cameras, voicing optimism that at long last this day had arrived: the day when Greeks could decide for themselves.

Any doubts that the leftwing government in Athens would cave into the demands of the international creditors keeping Greece afloat were firmly dispelled on Saturday as the country’s great debt drama entered another act.

In scenes that spoke more of defiance than fear, leading Syriza party figures applauded prime minister Alexis Tsipras’s surprise decision to give Greek voters the final say over the terms of a bailout deal proposed by the EU and IMF.

The high-stakes move of calling a referendum only days away from the deadline for a €1.6bn (£1.1bn) loan repayment to the IMF may have raised fears of default – and cast an even longer shadow over Greece’s future in the eurozone – but in governing circles this weekend it was welcomed with nothing short of glee.

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Greek Lawmakers Approve Decision to Hold Referendum

by Stelios Bouras

Wall Street Journal

June 27, 2015

Greek lawmakers gave the green light early Sunday to a proposal by the coalition government to hold a referendum on whether austerity measures demanded by lenders in exchange for further aid should be accepted by the crisis-hit nation.

In Greece’s 300-seat parliament, lawmakers voted 178-120 in favor of the referendum, while two abstained.

Greece has called a referendum for July 5 on the austerity plan that includes pension cuts and steep value-added tax increases that the rest of the eurozone and the International Monetary Fund are demanding that Athens complete to maintain funding from its €245 billion ($274 billion) bailout.

In a 14-hour, often heated debate in parliament, officials from the ruling leftist party Syriza moved to quash talk that a rejection of the austerity plan will result in the country exiting the euro bloc amid continued strong public support for the country’s membership in the single-currency zone.

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Failure to agree to bailout increases probability of Grexit

by Wolfgang Münchau

Financial Times

June 27, 2015

The most important news this weekend is not that the Greek government has called a referendum. It is that the Greek government has not accepted the bailout proposal of its creditors. The second Greek programme will therefore expire midnight on Tuesday. Greece will be without a programme and without market access from Wednesday.

As I have argued before, this was the only rational decision for the Greek government to take. The programme that was proposed by the creditors would have prolonged the Greek recession by several years. Grexit, a Greek exit from the eurozone, would have more negative economic consequences in the short run. But at least there would be some upside for Greece eventually. The creditors programme was an economic version of Dante’s hell. It would have brought about the total economic destruction of Greece.

So what should happen now? The first thing to note is that the referendum will be meaningless. Even a ‘yes’ vote will not bring the programme back. And I cannot see a political majority in all the creditor countries for a new programme. The Germans will not do anything without the International Monetary Fund. And the IMF, in turn, will get defaulted on before the middle of the week.

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Saturday, June 27, 2015

Europe’s Moment of Truth

by Paul Krugman

New York Times

June 27, 2015

Until now, every warning about an imminent breakup of the euro has proved wrong. Governments, whatever they said during the election, give in to the demands of the troika; meanwhile, the ECB steps in to calm the markets. This process has held the currency together, but it has also perpetuated deeply destructive austerity — don’t let a few quarters of modest growth in some debtors obscure the immense cost of five years of mass unemployment.

As a political matter, the big losers from this process have been the parties of the center-left, whose acquiescence in harsh austerity — and hence abandonment of whatever they supposedly stood for — does them far more damage than similar policies do to the center-right.

It seems to me that the troika — I think it’s time to stop the pretense that anything changed, and go back to the old name — expected, or at least hoped, that Greece would be a repeat of this story. Either Tsipras would do the usual thing, abandoning much of his coalition and probably being forced into alliance with the center-right, or the Syriza government would fall. And it might yet happen.

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Eurozone Finance Ministers Reject Greek Request for One-Month Bailout Extension

by Viktoria Dendrinou & Gabriele Steinhauser

Wall Street Journal

June 27, 2015

The eurozone rejected a Greek request for a one-month extension to its bailout Saturday, plunging the country into a period of high uncertainty and raising concerns about wider financial fallout when markets open on Monday.

Jeroen Dijsselbloem, who presides over meetings of eurozone finance ministers, indicated Saturday that the eurozone authorities were ready to deal with possible contagion.

After a meeting of ministers from 18 of the 19 eurozone member states here, Mr. Dijsselbloem, the Dutch finance minister, said the bloc would “make full use of all the instruments available to preserve the integrity and stability of the euro area.”

Eurozone finance ministers said they would now focus on making sure that turmoil in Greece won’t affect the stability of their own countries and would otherwise work on keeping Greece in the eurozone.

“Greece is and stays a member of the eurozone,” said German Finance Minister Wolfgang Schäuble. However, he declined to answer how the government could hold on to the common currency given its lack of money and the growing deposit outflows from its banks.

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Greece must be saved from political, economic and social collapse

by Tony Barber

Financial Times

June 27, 2015

In spite of the recklessness of its radical leftist-led government, in spite of the failures of the political classes that have misruled the nation since the return of democracy in 1974, in spite of the chronic clientelism and corruption of the state, in spite of the selfishness of its business oligarchies and in spite of the unerring capacity of its foreign creditors to miss the big picture, Greece must today be saved from political, economic and social collapse.

Without such an effort, which must be led by the EU, Greece will be sucked ever more deeply into the political radicalism, economic misery, organised crime, uncontrolled migration and even outright war that characterises an arc of countries from Bosnia-Herzegovina in the Balkans to Syria on the east Mediterranean coast.

It is irrelevant today to assign blame for what is shaping up as a Greek debt default and exit from the eurozone. The clock will not stop just because Greece’s eurozone partners — if “partners” is even the right word any more — have stated their patience is at an end. Greece is in south-eastern Europe, and the stability of south-eastern Europe is a matter of the highest importance to the EU and the Nato alliance.

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Q&A: what options now for Greece’s strained banking system?

by Alex Barker

Financial Times

June 27, 2015

Greek banks are on the edge of failure. Deposit flight is accelerating and Greece’s funding options are running out.

Every euro withdrawn from cash machines is backed by emergency funding from the European Central Bank. Without an extension to Greece’s bailout, these ECB emergency loans are in doubt.

Alexis Tsipras, the Greek prime minister, has called a referendum next Sunday and has options to limit pressure on bank balance sheets. But every measure has serious downsides.

How can authorities shore up the Greek banks?

Should the ECB withdraw or cap the €89bn of emergency funding, Greece has two main options: a bank holiday or capital controls. A bank holiday would stem the flow of money out of banks, but at an obvious cost to the economy. Physical bank transactions would effectively be stopped.

Capital controls would by contrast allow withdrawals from cash machines and some payments, but within limits. These restrictions are hard to enforce, take at least three days to put in place, and banks need money available to meet the demands, even if they are more limited.

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Close to the threshold

Economist
June 27, 2015

"The crisis has commenced," declared Michael Noonan, Ireland's normally mild-mannered finance minister, as he left today's Eurogroup meeting in Brussels. It is hard to disagree. One week ago Greece-watchers were wondering whether Alexis Tsipras's left-wing government could strike a deal with its creditors in time to unlock the bail-out money it needs to avoid defaulting on a €1.5 billion ($1.7 billion) IMF payment due on June 30th. It is a sign of how quickly matters have deteriorated in the last 24 hours that the IMF bill, which will now surely be missed, is now a sideshow. Instead, after Mr Tsipras unexpectedly called a referendum over the creditors' latest offer, the question is whether there is still a place for Greece inside the euro zone.

On July 5th, assuming Mr Tsipras's plan holds, Greeks will vote on whether to approve a set of reforms and fiscal adjustments proposed last week to Mr Tsipras's government by the creditor institutions (the European Commission, European Central Bank and IMF). Announcing the referendum last night, Mr Tsipras made his own view clear. The creditors' offer, he said, proved that "certain partners and members of the institutions are not interested in reaching a viable and beneficial agreement for all parties, but rather the humiliation of the Greek people." After Mr Tsipras's speech Greek ministers fell over each other to say they would recommend a "no" vote.

Mr Tsipras's declaration seemed an acknowledgement of something his government has long denied: that Greece must choose between the creditors' path of austerity and leaving the euro. But it raises more questions than answers. After having insulted his euro-zone partners last night Mr Tsipras said he would ask them for a "short extension" of Greece's bail-out, which expires on June 30th, to cover the period of the referendum. At their meeting today, finance ministers outright rejected that suggestion. Without a radical change of direction from Mr Tsipras, therefore, the bail-out will expire on June 30th, along with €16.3 billion in potential bail-out support, and Greeks will be voting on a defunct proposal. The meaning of a "yes" vote will be impossible to divine.

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What Will Greeks Vote on? The Referendum Question

by Nikos Chrysoloras & Paul Tugwell

Bloomberg

June 27, 2015

Greek lawmakers are set to decide at a midnight vote Saturday whether to approve a proposal by Prime Minister Alexis Tsipras’s government to hold a referendum on July 5, which could decide the country’s future in the euro area.

If parliament gives its nod, Greek voters will be asked to rule on two complex draft documents that detail a proposal by the country’s creditors to unlock aid of as much as 15.5 billion euros for Greece in return for sales-tax increases and pension reforms. An agreement on the package has remained elusive after five months of contentious negotiations that have left the country at the brink of default when the bailout expires on Tuesday.

The hastily called vote poses significant logistical challenges that make it doubtful it could be held as early as next Sunday, experts said.

“First of all there’s an organizational and logistical challenge, to organize a vote in such a short notice,” said Aristides Hatzis, an associate professor of law and economics at the University of Athens. “Second, there’s also the question on whether the offer on which people will vote will still be on the table by the time of the referendum,” he said in a phone conversation on Saturday. “If the referendum is held indeed, which is not certain, it risks being a charade.”

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Greece's Tsipras calls referendum to break bailout deadlock

Reuters
June 27, 2015

Greek Prime Minister Alexis Tsipras called a referendum on austerity demands from foreign creditors on Saturday, rejecting an "ultimatum" from lenders and putting a deal that could determine Greece's future in Europe to a risky popular vote.

The surprise call marked the most dramatic twist yet in five-month negotiations between Greece and its lenders, plunging the cash-strapped nation into uncharted waters and risking a default and capital controls as hopes for an aid agreement faded.

After a week of acrimonious talks in Brussels, Tsipras dismissed lenders' proposals as "blackmail" before flying to Athens to huddle with ministers. After midnight, he appeared on television to announce plans for a referendum on July 5.

"Our responsibility is for the future of our country. This responsibility obliges us to respond to the ultimatum through the sovereign will of the Greek people," Tsipras said in a televised address to the nation.

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Merkel faces Greek challenge with strong political capital

Associated Press
June 27, 2015

German Chancellor Angela Merkel has emerged undamaged from the global financial crisis, European bailouts, an astonishing U-turn on nuclear power and the crisis over Ukraine.

Now, with the future of efforts to resolve Greece's fiscal woes up in the air, the long-serving leader looks well-placed to emerge strong even if they fail.

Over a decade leading Europe's biggest economy, Merkel has enjoyed consistently high popularity and accumulated a store of political capital at home that would be the envy of most other leaders on the continent.

Her conservative party has a seemingly unassailable poll lead, no credible challenger is in sight and the German economy is strong. Her steady-handed, reassuring and risk-averse leadership style resonates with German voters and has earned her the nickname "Mutti," or Mama.

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Tsipras gambles Greece

by Hugo Dixon

Reuters

June 27, 2015

Alexis Tsipras has taken a massive gamble on Greece’s future. By calling a referendum on whether to accept the creditors’ latest offer of cash in return for unpopular reforms, the Greek prime minister is offering the people a choice between the bad and the extremely bad.

Meanwhile, the world may be about to face the biggest default in history. The euro zone will probably survive, but its rickety structure will be sorely tested.

Capital controls are likely before the Greek vote on the creditors’ terms is held on July 5. It’s not clear their offer will be on the table even if the people want it. If they don’t want it, a return to the drachma and more misery lie ahead. Tsipras is effectively calling for Greece to quit the euro.

Both Greece and its creditors, the euro zone countries and the International Monetary Fund, deserve blame for the breakdown in talks. But Tsipras mishandled negotiations particularly badly by taking an excessively confrontational approach.

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Tsipras announces referendum on creditors’ bailout demands

by Peter Spiegel

Financial Times

June 26, 2015

Alexis Tsipras, the Greek prime minister, has announced a national referendum on whether his country should agree to creditors’ demands that would release desperately-needed bailout aid to avoid national bankruptcy.

In a televised address to the nation after a late-night meeting of his cabinet, Mr Tsipras announced that the plebiscite would be held on July 5, a week on Sunday.

Mr Tsipras was unenthusiastic about the referendum, saying the creditors’ proposal was “blackmail” and an “indecent proposal”. But he said he would abide by the will of the Greek people as to whether to accept the agreement, presented at a meeting of eurozone finance ministers on Thursday.

In a sign of how tendentious the vote will be, Panagiotis Lafazanis, the leader of the hard-left group in Mr Tsipras’s governing Syriza party, announced he and his faction would not support a “yes” vote.

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Friday, June 26, 2015

Greece Calls Referendum on Bailout Terms

by Marcus Walker & Stelios Bouras

Wall Street Journal

June 26, 2015

Greek Prime Minister Alexis Tsipras called a surprise referendum for July 5 on the tough economic policies the country’s creditors want in exchange for more rescue funding, escalating the drama surrounding the country’s long-running bailout and deepening doubt over Greece’s fate in the eurozone.

Addressing the nation at 1 a.m. in Athens, Mr. Tsipras told a television audience that Greek voters should have their say on the economic retrenchment that other eurozone countries and the International Monetary Fund are demanding of Greece. He said he couldn't accept the list of policies that creditors presented in Brussels this week, which include some drastic tax hikes and sharp cuts to government spending, including on pensions.

Most European policy makers were taken by surprise by the Greek premier’s announcement, though Mr. Tsipras said he had informed German Chancellor Angela Merkel and French President François Hollande about his decision.

The Greek government will ask voters to reject the creditors’ terms in the referendum, Interior Minister Nikos Voutsis said Saturday.

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If Greece Defaults, Imagine Argentina, but Much Worse

by James B. Stewart

New York Times

June 25, 2015

There may be a one-word explanation for why Greece will ultimately capitulate to European demands for more austerity:

Argentina.

Greece is hardly the first nation to face the prospect of defaulting on its sovereign debt obligations. Argentina has defaulted on its external debt no fewer than seven times since gaining independence in 1816, most recently last year. But it’s Argentina’s 2001 default on nearly $100 billion in sovereign debt, the largest at the time, that poses a cautionary example for Greece.

Should Greece default, “Argentina is an apt analogy,” said Arturo C. Porzecanski, a specialist in international finance at American University and author of numerous papers on Argentina’s default. But for Greece, “It would likely be worse. Argentina was comparatively lucky.”

Daniel Gros, director of the Center for European Policy Studies in Brussels and the author of “A Tale of Two Defaults,” a paper comparing Greece and Argentina, agreed. “Default would be much worse for Greece than it was for Argentina,” he said.

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Thursday, June 25, 2015

Greek pledges rest on hard-to-keep promise of tax reforms

by Karolina Tagaris

Reuters

June 25, 2015

When Greece's tax police squad raided a busy cafe-restaurant in an upscale central Athens district earlier this year, it discovered two cash registers and an elaborate system of issuing fake receipts -- at least 15,000 of them, over four years.

Four months later, the cafe has been shut but local tax authorities have yet to pin down the exact amount of revenue the business concealed. A date for a court hearing for one of the owners has not yet been set, police officials say.

The cafe's misdeeds are one of the more flagrant cases of tax evasion to emerge this year, but monthly reports by Greece's financial crimes units highlight just how common tax dodging is, from doctors to farmers to contractors and civil servants.

That, and the prevalence of small- and medium-sized businesses and the self-employed, as well as the sizeable shadow economy, shows just how difficult it is to crack down on Greece's corruption and tax evasion, which leftist Prime Minister Alexis Tsipras has made one of his priorities.

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Breaking Greece

by Paul Krugman

New York Times

June 25, 2015

I’ve been staying fairly quiet on Greece, not wanting to shout Grexit in a crowded theater. But given reports from the negotiations in Brussels, something must be said — namely, what do the creditors, and in particular the IMF, think they’re doing?

This ought to be a negotiation about targets for the primary surplus, and then about debt relief that heads off endless future crises. And the Greek government has agreed to what are actually fairly high surplus targets, especially given the fact that the budget would be in huge primary surplus if the economy weren’t so depressed. But the creditors keep rejecting Greek proposals on the grounds that they rely too much on taxes and not enough on spending cuts. So we’re still in the business of dictating domestic policy.

The supposed reason for the rejection of a tax-based response is that it will hurt growth. The obvious response is, are you kidding us? The people who utterly failed to see the damage austerity would do — see the chart, which compares the projections in the 2010 standby agreement with reality — are now lecturing others on growth? Furthermore, the growth concerns are all supply-side, in an economy surely operating at least 20 percent below capacity.

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Dumping the Euro Isn’t a Cure-All: Easy Money Lets Governments Avoid Free-Market Reforms

by Frank Hollenbeck

Mises Daily

June 25, 2015

The Greek drama continues to unfold with the risk of “grexit” becoming increasingly likely. Yet, a large majority of the Greek people want to keep the euro. This, however, would require the Greek government to live within its means — something it has not been able to do for decades. With anti-austerity parties gaining strength continent wide, Greece may be the first, but not the last, to leave.

For many years, it has been fashionable among some economists to blame the euro for all of Europe’s problems. Yet, the problem in Europe is not that it has a common currency, but that it has excessive government regulations, spending, and taxation. Economists who suggest that breaking up the euro will solve the region’s economic problems are like people selling gimmicks promising massive weight loss without either exercise or dieting. They want the gains without the pain.

What they really want is just more flexibility to inflate fiat monies. For them, it’s much better to reduce government debt by simply inflating it away — thus sticking it to creditors — than having to take on the painful adjustment of limiting government size to what can be justified only with direct taxation.

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Here’s How Greece Can Fix Itself

by Peter Coy & Dimitra Kessenides

Bloomberg

June 24, 2015

A lot about Greece right now is obscured by the fog of financial diplomacy, but here’s something we do know: The snow will fall again on the high peaks of Crete next winter, and in the spring, people will sit on the beaches with their toes in the sand and their eyes on the white mountains, and they will say that this is the gods’ own country. What will matter for Greece once this crisis ends isn’t balance-sheet entries but real stuff—like Crete; Kozani, the region that produces some of the world’s finest saffron; Piraeus, the excellent deep-water port that Themistocles fortified in better days; and the vineyards thriving on the volcanic soil of Santorini.

Greece has underperformed since 146 B.C.E., when Corinth—and eventually the rest of Hellas—fell to the Romans. It’s been in default on its sovereign debt for half the years since winning independence from the Ottoman Empire in 1832. Its economy is stultified by statism and corruption. But it remains blessed with breathtaking scenery, treasures of antiquity, and a creative, industrious people who have enjoyed great success—albeit more often outside Greece. Its potential is vast. If Greece can get its act together even a bit, this drama doesn’t have to end in tragedy.

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Wednesday, June 24, 2015

A last chance for Alexis Tsipras to choose country over party

by Mark Mazower

Financial Times

June 24, 2015

So Alexis Tsipras has failed. A weak hand was weakened as Greece became more isolated than ever before, and the pan-European anti-austerity front that he promised in the last election failed to materialise. Five months of negotiations have yielded nothing to match the radical rhetoric that swept him and his party to power.

But the failure is not the Greek prime minister’s alone. His predecessors failed as well, omitting at each stage to tell their voters the true story when they were in opposition and suffering the consequences once in power.

Compare the depression in Greece with the fortunes of Ireland, Portugal and Spain since the crisis erupted five years ago, and what stands out is the consistent preference of Greece’s political class for placing short-term party gain over the national interest. But as details emerge of the proposed new agreement, it is clear that the failure goes wider still and is not confined to Greece. The policy of austerity that has been forced on the country by its creditors, as Olivier Blanchard, the International Monetary Fund chief economist, acknowledged in 2013, made Greece’s recession longer and deeper than it need have been.

Now it is to be intensified. For all the reported differences between the IMF and the European Commission, it is clear that the tactics of Mr Tsipras have united his interlocutors, and united them specifically in their resolution to push Greece further down the same disastrous road as before.

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Greece’s Lenders Weigh Proposals Ahead of Crunch Meetings

by Marcus Walker & Gabriele Steinhauser

Wall Street Journal

June 23, 2015

Greece’s lenders on Tuesday were scrutinizing a proposal seen as a potential breakthrough on a last-minute bailout deal, but significant concerns by more demanding creditors suggest that further days of tough negotiations lie ahead before an agreement can be clinched.

After months of virtual deadlock, officials emerged from a string of meetings in Brussels on Monday optimistic over a Greek concession on pensions. European officials hope that eurozone finance ministers can sign off on a policy package agreed to between Greece and the institutions overseeing its bailout program—the IMF, European Commission and European Central Bank—on Wednesday.

“I am convinced we will find an agreement, as an agreement is now possible this week,” European Economic Commissioner Pierre Moscovici said in an interview with French radio France Inter on Tuesday.

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Tuesday, June 23, 2015

Europe wants Greece to suffer: The truth about the never-ending financial crisis & the cult of extreme austerity

by David Dayen

Salon

June 23, 2015

For someone who writes about economics, the situation in Greece offers two enticing elements: the ability to spin out moments of high drama, and the probability it will endlessly repeat forever. We’ve experienced five years (really, here’s one of my first stories on Greece, from April 2010) of wondering whether the deeply indebted country will exit the euro or submit to more painful conditions from its European creditors. Two governments – the center-right and the center-left – took the latter option, and paid dearly for it. Now the far-left Syriza appears poised to do the same, after delivering a new proposal to unlock bailout funds.

Meanwhile, the prospects for ordinary Greek citizens never changes, adding a nightmarish “Groundhog Day” touch to the proceedings. Regardless of whether the country is spiraling into near-default or praising a debt deal, unemployment has remained over 25 percent for the past three years. Half a decade into the Great Depression, there was at least some semblance of a brighter day; in Greece there are only gradations of misery. And what could break this terrible cycle is the only thing the political system and the public imagination cannot seem to contemplate: leaving the euro.

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It’s Not the Economy, Stupid

by Anne Applebaum

Slate

June 23, 2015

Default, bankruptcy, Grexit, crash: If you feel you’ve read before that these things were about to happen in Greece, that’s because you have. Every debate about Greece’s financial crisis deteriorates rapidly into a discussion of deadlines: repayments, refinancings, meetings of the International Monetary Fund or the European Central Bank. Until now these deadlines have always resulted in further delay. Another one is coming on June 30. That’s when Greece owes $1.7 billion more it doesn’t have.

If you’ve tried to keep up with these stories, you may become lost in economic jargon. Greece, which can no longer borrow money on capital markets, is now wholly dependent on international and European financial institutions. To ensure that they are not throwing good money after bad, these institutions have placed restrictions on Greek government spending. Greece, in turn, has sought to dodge these restrictions and negate agreements, exploiting the rules in mind-boggling ways, borrowing from one account to pay back another. It takes a special head for numbers to follow the saga.

And yet—the numbers don’t really represent what is at stake. The crisis in Greece is not, at base, an economic story: It is a political story, a story about the promises that governments make to their citizens and about the ability of any state to guarantee a particular standard of living to its citizens, not only in Greece but all over Europe.

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Knives out for Tsipras as Syriza hardliners threaten mutiny

by Kerin Hope

Financial Times

June 23, 2015

Even before Alexis Tsipras arrived back in Athens from Monday night’s emergency eurozone summit in Brussels, the knives were out in his fractious leftwing Syriza party.

Speaking with European colleagues, the Greek prime minister talked up his latest, more conciliatory proposals for a bailout deal in a last-ditch attempt to unlock €7.2bn of bailout aid and avert a default on June 30.

But members of Syriza’s restive hard left faction fear Mr Tsipras is about to agree to tax increases and pension cuts resembling the austerity measures he condemned while in opposition as “barbarous” and “unacceptable”.

The mood in the party turned mutinous on Tuesday, even as a leaked Greek version of the proposals claimed Athens had rejected tough demands by the creditors in favour of socially responsible alternatives.

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Syriza Members Warn Alexis Tsipras Against Betrayal With Greek Bailout Compromise

by Charles Forelle

Wall Street Journal

June 23, 2015

To avert a default and possible exit from the eurozone, Greek Prime Minister Alexis Tsipras must sell Germany’s chancellor, Angela Merkel, on his plan to fix Greece’s finances.

Then he needs to persuade Vassilis Chatzilamprou.

But the lawmaker from Mr. Tsipras’s left-wing Syriza party said he was in no mood for submission.

“We cannot accept strict, recessionary measures,” Mr. Chatzilamprou said at the Resistance Festival, an annual gathering of Greece’s far left. It was after midnight Sunday, and the weekend festival was winding down. “People have now reached their limits.”

Syriza isn’t a traditional party but a coalition of left-wing groups with an intricate family tree formed out of doctrinal splinters and squabbles. It is those many, disparate factions that Mr. Tsipras must also satisfy with any potential bailout agreement with Greece’s creditors.

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Tsipras' Other Problem: Holding Together His Coalition at Home

by Theophilos Argitis & Marcus Bensasson

Bloomberg

June 23, 2015

Greek Prime Minister Alexis Tsipras turned Tuesday to shoring up support at home for his plan to end a five-month standoff with creditors that has brought his nation to the edge of default.

Tsipras needs to ensure his coalition, ranging from Maoists to Social Democrats, will back proposals he outlined Monday that include eliminating early retirement options, raising the sales tax, increasing taxes on middle- and high-income earners and introducing a new levy for companies with annual profit of more than 500,000 euros ($568,000).

“Very large problems remain for a solution,” said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington. “The Greek government -- somewhat surprising for a self-professed reform and anti-austerity government -- seems to have merely agreed to impose a lot more austerity through higher taxes, but offers relatively little commitment to genuine economic reform.”

Tsipras is seeking to assuage the left flank of his party - - some of whom want Greece to default on its debt altogether -- by focusing on tax increases for companies and high-income individuals instead of spending cuts. The Left Platform, which holds about 40 seats in parliament and is composed of former communists and others closely aligned with labor unions, could defeat the government if its members vote against the plan.

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Papachelas: Timescale for Greek IMF Payment Looks Tight

Bloomberg
June 23, 2015

Alexis Papachelas, chief editor at Greece's Kathimerini newspaper, discusses Prime Minister Alexis Tsipras's plan to end a five-month standoff with creditors as a deadline for a payment to the International Monetary Fund looms. He talks with Guy Johnson in Athens on Bloomberg's "The Pulse."

Monday, June 22, 2015

Thousands pour on to Athens streets in support of deal to keep Greece in eurozone

by Nathalie Savaricas

Independent

June 22, 2015

As cautious optimism began to trickle in from Brussels, thousands of Greeks were pouring into the streets of Athens to rally in support of a deal that would keep Greece in the eurozone.

Among the demonstrators waving Greek and European flags was IT consultant Dimitris, 43, and his two-year-old daughter Myrto. He said his presence at the demonstration was not political.

“We belong to the West and have enjoyed 250 years of European enlightenment that I’m not ready to give up on,” he said. “We enjoy freedoms and other privileges that the rest of the world can’t even imagine… and that’s the world I want my child to grow up in.”

Retired tour operator Panayiotis Papanikolopiloulos blamed successive administrations for the country’s predicament – not the austerity measures imposed by Greece’s creditors. “Our country not only belongs to Europe but it’s also our second home. We will lose everything if we lose the euro,” he said.

The grey, still skies on Monday evening reflected enduring concerns that talks could fail, despite the glad tidings from the government.

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The big fat Greek blame game

by Hugo Dixon

Reuters

June 22, 2015

If Greece collapses, there will be giant dollops of blame to go round. The biggest ones will stick on whoever behaves most unreasonably in the standoff between Athens and its creditors, which could easily end in default and disaster.

This linkage between the blame game and the game of chicken is one reason to hope the Greek crisis might, even at the 11th hour, have a satisfactory conclusion. Both sides have an incentive to accommodate each other’s reasonable positions; otherwise, they will be lambasted for failing to prevent an avoidable catastrophe.

In calling euro zone leaders to a summit this Monday evening, Donald Tusk, the European Council president, made a similar point: “The game of chicken needs to end, and so does the blame game.”

In the worst scenario, Greece could become a failed state if the two sides cannot reach a satisfactory accommodation. The rest of Europe will also suffer a body blow.

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Sunday, June 21, 2015

Greece – five pictures of a troubled country

by Paul Mason

Channel 4

June 21, 2015

In a special long-read, Paul Mason offers five pictures of Greece.


A divided population?

As the crunch approaches the atmosphere has changed. For six months the centre right in Greece was prepared to wait and let Alexis Tsipras try – and fail – to secure a letup on austerity. Now the old political establishment has understood he intends to take this to the bitter end: a default on Greece’s June payment to the IMF, with possible dire consequences for the banks as early as Monday night.

The ECB’s life support facility – known as Emergency Lending Assistance (ELA) – is conditional on Greece being “in a programme” agreed with lenders. I understand on Friday it was only the intervention of Mario Draghi, the ECB’s boss, that prevented the termination of ELA.

So on Thursday, amid an accelerating bank run that has seen €5bn withdrawn this week, the opposition took to the streets.

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Saturday, June 20, 2015

Greece Considers Last-Ditch Proposals to Avoid Collision With Bailout Creditors

by Marcus Walker & Nektaria Stamouli

Wall Street Journal

June 20, 2015

Greece’s government is considering new fiscal proposals to avoid a collision with its creditors on Monday, in what could be a last-ditch effort to avert capital controls and a debt default, according to two Athens officials.

Government members are putting together a plan they hope would achieve budget targets that bailout creditors want, while relying more on eliminating tax breaks and less on pension cuts than the lenders’ own proposal, the officials said.

The Greek cabinet is due to discuss the proposal on Sunday morning. It isn’t clear whether the cabinet under Prime Minister Alexis Tsipras will endorse the plan, which was being prepared on the weekend by Deputy Prime Minister Yannis Dragasakis and others who are considered among the more pragmatic members of the leftist Syriza-led government.

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Greece is Europe’s failed state in waiting

by Lawrence Summers

Financial Times

June 20, 2015

When, as now appears likely, Greece financially separates from Europe it will at one level be no one’s fault.

The Greek leaders will rightly explain that having imposed more austerity on themselves than any industrialised country has suffered since the Depression, they could not have done more without light at the end of tunnel in the form of a clear commitment to debt relief. European leaders will rightly explain that they adjusted their positions repeatedly to accommodate the Greeks. They will stress that their citizens would not permit Greece to play by different rules to the rest of Europe. And the IMF will rightly explain that it would have blessed any plan agreed by Greece and Europe that added up.

The trouble is that all the parties are going to get much more of what they fear from a breakdown than they would even from what they regard as an unacceptable compromise. Historians understand how the first world war was allowed to start but are still, a century later, incredulous that it happened. Financial historians may look back at the events of next week and wonder how Europe’s financial unravelling was permitted.

Make no mistake about the consequence of a breakdown. With an end to European support and consequent bank closures and credit problems, austerity in Greece will get far worse than it is today and it will probably become a failed state to the great detriment of all its people and their leadership.

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Friday, June 19, 2015

Greece: Dispatches from the brink

by Henry Foy & Kerin Hope

Financial Times

June 19, 2015

For Mikis, a trim-looking 73-year-old, the defining moment of Greece’s six-year long financial crisis came in 2012, when his 68-year-old neighbour committed suicide by jumping off the terrace of the next-door apartment building.

“He was someone everyone here knew,” he says. “It was a terrible shock.”

Over small cups of grainy Greek coffee, Mikis explains the plight of pensioners like him, hit by 10 successive income cuts in less than four years thanks to austerity measures agreed with the EU and International Monetary Fund.

“By the end of it my pension had been reduced by almost half . . . We went from being comfortably off to worrying about whether we could afford to buy heating fuel,” says Mikis, who did not want his surname to be used. “My wife took it badly. She’s been on antidepressants for nearly three years.”

Greece’s date with economic destiny appears closer than ever after last-ditch talks to avert bankruptcy at the end of the month failed and exasperated EU leaders were summoned to an emergency meeting on Monday. Though it could mark the final attempt to avert the country’s exit from the eurozone, crisis-weary Greek citizens show few public signs of panic. They have seen this movie too many times before.

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A modern Greek tragedy – the crisis years in context

by Keith Fray & Valentina Romei

Financial Times

June 19, 2015

During the six years from 2007 to 2013 the annual output of the Greek economy fell by more than 26 per cent. On the FT's statistics desk we wanted to know how that fall ranked compared with sustained periods of economic retrenchment and dislocation in other countries.


We crunched data from the US Conference Board, which has real gross domestic product, adjusted for purchasing power, for most countries in the world, going back to 1950 (with estimates for this year).

We identified the biggest consecutive falls in annual GDP from peak to trough. Ranking periods ranging from one to 10 years, we found that the Greek economy had the largest contraction of any advanced economy since 1950.

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Let Greece Go

by Barry Ritholtz

Bloomberg

June 19, 2015

The never ending sturm und drang over the state of Greek debt, membership in the euro zone and the potential shocks of a debt default have moved from tragedy to comedy to monotony.

The solution is simple. It won’t be fast, it won’t be easy, but it will be a huge improvement for all concerned.

Let Greece go.

Hey Greece -- if anyone is listening -- just default on the debt and start anew. The rest of Europe has caused the country and everyone else enough agita: just let Greece leave the euro zone in peace. Sure, it will be a long torturous process, but at least Greece -- and maybe the euro region -- will start moving in the right direction.

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Greek banks: Athens’ Achilles heel

by Ferdinando Giugliano

Financial Times

June 19, 2015

Until this week, the big suspense surrounding Greece was whether Athens would be able to meet a €1.6bn debt repayment to the International Monetary Fund due at the end of June or go bankrupt.

But the fear of default is rapidly being overtaken by a separate — and possibly more dangerous — ticking time bomb: the solvency of Greece’s banks.

As anxious savers withdraw deposits, economists warn that Greece’s precarious lenders could collapse. During a meeting of eurogroup finance ministers on Thursday, Benoît Cœuré, a member of the European Central Bank’s board, speculated that Greek banks might not be able to open for business on Monday.

The European Central Bank has provided crucial, emergency funding to Greek banks that has sustained them in recent months. Yet as Greece’s finances continue to deteriorate, the ECB’s own rules may soon prevent it from extending further help, paving the way for a Greek exit from the eurozone.

“The fate of Greek banks hinges on political developments, which will affect both their liquidity and their solvency,” said Jonas Floriani, an analyst at KBW Research.

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Greek bank deposit outflows topped 1 billion euros on Thursday

Reuters
June 19, 2015

Greek savers pulled more than 1 billion euros from banks in one day on Thursday, three senior banking sources told Reuters, with the pace of withdrawals gaining speed since talks between the government and its creditors collapsed last weekend.

The withdrawals between Monday and Thursday have reached about 3 billion euros (£2.1 billion), representing about 2.2 percent of household and corporate deposits held by Greek banks at the end of April.

"There are no lines or panic, it has been a quiet and gradual phase of withdrawals," one of the bankers said. "They are due to worries whether a deal will be clinched with the country's lenders."

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Thursday, June 18, 2015

Thousands Rally in Athens to Urge Deal as Default Threat Grows

by Andrew J. Barden

Bloomberg

June 18, 2015

Thousands of Greeks rallied outside parliament in central Athens to urge the government to reach an agreement with its creditors that will keep the country inside Europe’s monetary union.

The protest swelled as the latest talks in Luxembourg broke down after four hours, again failing to break the deadlock over the country’s bailout plan. Demonstrators climbed the steps leading up to the Parliament, draping the walls with Greek flags and surrounding the ceremonial guard at its base.

“I’m here to support the cause of staying in Europe,” said Spyros Kasimatis, 61. “The ripple effects would be disastrous, but it’s difficult to explain this to the unemployed youth.”

The crisis over Greek debt is coming to a head, with each failed negotiating session escalating the risk of default and exit from the euro. The government of Prime Minister Alexis Tsipras vows to reject any new bailout that doesn’t ease the budget austerity that has crippled the economy, while creditors in the European Union and International Monetary Fund are demanding tighter policy to ensure that repayment continues.

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Greek pensions: Why they are a flashpoint

Economist
June 18, 2015

Greek pensions have been a source of acrimony since the first bail-out five years ago. Germans in particular, who were being asked to retire later, resented having to help what they regarded as feckless Greeks, many of whom were drawing pensions in their 50s. Yet since then there have been two major reforms, pushing the statutory retirement age up from 60 for women and 65 for men to 67, while pension benefits have been cut. So why are they still such a point of contention?

One reason was the dire starting-point. As George Symeonidis, a board member of the Hellenic Actuarial Authority, said earlier this year, “the reforms have not finished, nor is it possible to reform a system in four years, when nothing has actually been changed for decades.” Before the first bail-out in May 2010 the system was already heading for disaster, with pension outlays among the highest in Europe at 13.5% of GDP in 2009 and projected to reach nearly 25% of GDP by 2050.

In part this reflected an especially generous set of benefits, which provided the highest “replacement rate” (of earnings before retirement) for public pensions among the OECD club of 30 or so mainly rich countries before the euro crisis, in 2008. The basic system required only 35 years of contributions rather than the 40 generally needed in pension systems to get a full pension. Pensions could be taken much earlier than in other countries, with people who had contributed 37 years able to retire in their late 50s on full pensions.

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Greek government suffers collapse in revenue in May

Financial Times
June 18, 2015

The Greek government suffered a collapse in revenue in May after companies and individuals delayed filing tax returns amid fears that emergency levies were imminent in order to secure a deal with bailout creditors.

The news of the sharp drop in receipts comes as eurozone finance ministers held a crunch meeting to discuss the country’s bailout.

As eurozone finance ministers gathered in Luxembourg, leaders appeared as deadlocked as ever and officials continued to minimise the chance of a breakthrough, raising the likelihood of a sovereign debt default.

Unless Greece agrees economic reforms with its creditors by the weekend, EU officials believe time will run out for Athens to access a much-needed €7.2bn tranche remaining in its bailout programme before it expires in two weeks.

Without the funds, the government will probably be unable to repay a €1.6bn loan from the International Monetary Fund, a scenario the country’s central bank has warned would trigger a “painful course” leading to exit from the eurozone and “most likely” from the EU.

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Varoufakis predicts no deal at eurozone finance ministers meeting

Financial Times
June 18, 2015

Yanis Varoufakis, Greece’s finance minister, said he does not expect to reach a deal to resolve his country’s five-month stand-off with bailout creditors when eurozone finance ministers hold a crunch meeting on Thursday.

Unless Greece agrees economic reforms with its creditors by the weekend, officials believe time will run out for Athens to receive a desperately needed €7.2bn remaining in its bailout programme before it expires in two weeks.

Without the funds, the government will probably default on its debts, a move that the country’s central bank has warned would trigger a “painful course” leading to exit from the eurozone and “most likely” from the EU.

Michel Sapin, France’s finance minister, said on Thursday it would be a “total catastrophe for Greece” if it leaves the single currency.

“We will fight till the end to find an agreement with Greece,” he said on France Info radio.

When asked by reporters in Paris whether ministers would reach a deal, Mr Varoufakis said on Wednesday: “I do not believe so.”

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Greek Central Bank Issues Dire Warning on Bailout Talks

by Stelios Bouras & Brian Blackstone

Wall Street Journal

June 17, 2015

Greece’s central bank, in unusually stark language that angered the ruling party, warned Wednesday that failure to clinch a deal with international creditors on desperately needed funding could “snowball into an uncontrollable crisis” for the country.

The left-wing party Syriza responded by accusing the central bank of overstepping its role and undermining the government’s negotiating position. The standoff between Athens and its lenders has become politically charged, with each side deeply mistrustful of the other and neither showing signs of giving ground.

The European Central Bank—which includes the Bank of Greece as a member—is facing increasingly tough decisions as the threat of default grows, underlining how even institutions that strive to remain above politics are being drawn into the fray.

“They’re under pressure from a lot of sides,” said Jacob Funk Kirkegaard, senior fellow at the Peterson Institute for International Economics.

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Wednesday, June 17, 2015

EU confronts Greek legal puzzle

by Matthew Karnitschnig & Nicholas Hirst

Politico

June 17, 2015

As Athens edges ever closer to the precipice of default, a thorny question looms for the European Union’s top lawyers: How to let Greece out of the euro while keeping it in the EU.

The worry is that European law could force Greece to abandon the EU before it can leave the eurozone.

At a time when anti-EU parties are on the rise across much of the Continent and the U.K. is debating its future in the union, Europe’s leaders don’t want to risk letting Greece go.

A departure would raise serious questions about the EU’s viability and cast doubt on the principle of solidarity at the heart of European integration. What’s more, Greece plays an important strategic role in Europe. Forcing the country out of the EU could drive it into the arms of Russia.

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A Greek Deal Is Still Possible

by Yannis Palaiologos

Wall Street Journal

June 17, 2015

Greece’s long renegotiation of its second bailout program is now in the final stretch. On June 30, the current four-month extension of the 2012 bailout agreement expires. Without a deal, the €7.2 billion ($8.1 billion) yet to be paid to Athens under the bailout will no longer be available. On the same day, Greece has to make a €1.6 billion payment to the International Monetary Fund. Without some inflow of cash, the country will default on that payment, with consequences unknown but likely to be devastating.

The five months of negotiations between creditors and the government of Prime Minister Alexis Tsipras, who came to office in late January, have increased mutual suspicion instead of building trust. Mr. Tsipras this week accused those creditors of “pillaging” the country and of trying to “humiliate an entire people.” European Commission President Jean-Claude Juncker, widely considered the European leader who is most sympathetic to Athens, has charged that Mr. Tsipras is deceiving Greeks about the state of negotiations.

Heading into Thursday’s meeting of eurozone finance ministers, there remain significant disagreements on how to close to fiscal gap for this year and the next. With both sides claiming they have moved as far as they can, a sense of inevitability is growing about the failure of the negotiations. All over Europe, governments are reported to be stepping up their preparations for the eventuality of a default and Greek exit from the euro.

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