Monday, April 24, 2017

Greece to sell stake in Thessaloniki port operator to German-led consortium

by Kerin Hope

Financial Times

April 25, 2017

A German-led consortium is the highest bidder for a two-thirds stake in OLTH, operator of the northern Greek port of Thessaloniki, in a deal valued at €1.1bn, Greece’s privatisation agency HRADF said.

The disposal of Greece’s second-largest port, which is strategically located to serve the Balkan countries and the Black Sea region, was agreed under terms of the country’s current bailout by the European Union and the International Monetary Fund.

Infrastructure sales are a key part of an ambitious privatisation programme but have been delayed by opposition from hard-line members of the left-wing Syriza-led government.

Private-equity firm Deutsche Invest Equity Partners, France’s Terminal Link and Greece’s Belterra Investments, controlled by Russian-Greek businessman Ivan Savvides, offered €231.9m for 67 per cent of OLTH shares. The price represents a 70 per cent premium over the shares’ market value.

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Sunday, April 23, 2017

IMF Warns Greece That Additional Economic Overhauls Are Needed

by Ian Talley

Wall Street Journal

April 23, 2017

The International Monetary Fund had a sobering message for Greece this weekend: Even if the country secures debt relief from its European creditors—a question that is by no means assured with bailout talks still deadlocked—the nation still needs even more painful economic overhauls than currently planned.

Seven years into an economic crisis and another near-term financial emergency looming, that is a message no Greek wants to hear and a key reason why the IMF is also urging Germany and Athens’ other European creditors to give the country hope in the form of real debt relief.

The country’s “fiscal and structural reforms...pension reforms, tax reforms, are only a down payment,” said Poul Thomsen, IMF’s European department chief and Greece’s original bailout architect, on the sidelines of the fund’s semiannual meeting of finance ministers and central bankers.

To bring the country’s unemployment and income levels back to precrisis rates will take “deep structural reforms, many of which are not yet on the books,” he said. The jobless rate is currently at 22% and half of all the youth labor force are without work.

“This is a long-term project,” he said.

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Greek bankers during financial crisis face bond swaps charges

by Kerin Hope

Financial Times

April 23, 2017

The former governor of Greece’s central bank and the ex-chairman of Piraeus Bank are facing criminal charges over bond swaps worth hundreds of millions of euros in the run-up to the country’s economic crisis.

The case has come to light as the leftwing Syriza-led government intensifies its crackdown on high-level corruption. Many observers view the campaign as an attempt by the ruling party to divert attention from a new round of tax increases and pension cuts agreed with bailout creditors.

A former defence minister already faces a parliamentary investigation over alleged bribe-taking, while procedures are underway to restart a long-delayed court case involving backhanders allegedly paid by Siemens of Germany to Greek suppliers.

The two bankers, George Provopoulos, the central bank chief between 2002 and 2014, and Michalis Sallas, who ran Piraeus for 25 years, face charges of breach of trust. Both men deny any wrongdoing.

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Saturday, April 22, 2017

I.M.F. Torn Over Whether to Bail Out Greece Once Again

by Landon Thomas Jr.

New York Times

April 21, 2017

As the International Monetary Fund approaches the seventh anniversary of the contentious Greek bailout, it is torn over whether to commit new loans to a nearly bankrupt Greece.

For more than a year, I.M.F. officials have been saying — loudly — that they cannot participate in a new rescue package for Greece unless Europe agrees to ease Greece’s onerous debt burden.

The fund’s reluctance to commit additional money to Greece also highlights a widely held view among I.M.F. officials — and in the Trump administration — that the fund overextended itself in Greece. They also see the responsibility for restoring the country’s economic health as resting primarily with Europe, which currently holds 80 percent of Greek debt.

At the same time, Greece, which has acceded to demands from the fund to cut spending and bring in more revenue, faces a 7 billion euro debt repayment in July, which it may not be able to meet if the I.M.F. and Europe cannot reach a new bailout agreement.

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Thursday, April 20, 2017

Greece Hits a Bailout Target. The IMF Is Not Convinced

by Sotiris Nikas

Bloomberg

April 20, 2017

Greece achieved a 2016 primary surplus almost seven times higher than its bailout target, but the International Monetary Fund is skeptical the country can sustain that performance.

The Hellenic Statistical Authority is set on Friday to unveil data on last year’s primary surplus, which Eurostat is expected to validate on Monday. The surplus will be close to 4 percent of gross domestic product, according to a finance ministry official who asked not to be identified in line with policy. The bailout target was for a primary surplus of 0.5 percent of GDP.

In spite of its better-than-expected primary surplus last year, the IMF is not convinced Greece will be able to maintain that level of performance for 2018 and beyond. The fund estimates that at least half of the primarily surplus for 2016 came from one-off measures rather than structural changes that will continue delivering results in the years to come, according to a person familiar with its analysis. That has prompted the fund to demand more austerity measures.

Greece’s level of primary surplus is key in determining the kind of debt relief it will need. The more such surplus it has, the less debt relief will be needed. Whether or not Greece should get such relief is a source of contention between the country’s euro-area creditors and the IMF.

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Wednesday, April 19, 2017

Why the troika and Syriza must remove Greece’s debt roadblocks together

by Miranda Xafa

World Economic Forum

April 19, 2017

On 7 April in Malta, euro-area finance ministers agreed on the key elements of a deal that would unlock further financial assistance to Greece under the current (third) €86 billion bailout. The “in principle” agreement came as a huge relief, as Greece will be unable to meet the €7.4 billion in debt payments due in July without external financing.

But the economic drama continues. Several more steps need to be taken for Greece to avert default.

First, the troika of creditors must return to Athens to finalize the review and present it to Eurogroup ministers by June at the latest. Once it has agreed terms, Greece needs to legislate the agreed measures to ensure that, ignoring outstanding debt, tax income exceeds spending by 3.5% of GDP annually (what is known as a primary surplus) at least until 2020. Prime Minister Alexis Tsipras, leader of the ruling radical left Syriza party, has said he would not submit the measures to a vote in parliament without agreement on debt relief. Creditors, on the other hand, say that debt relief will not be discussed before the measures are voted, and the review is completed.

Once staff-level agreement is reached, the IMF needs to decide whether it will participate in the Greek program with financing. Some euro-area creditors – notably Germany and the Netherlands – have made it clear they will not approve further assistance to Greece without IMF participation. The roadblock? The IMF believes the Greek debt is “highly unsustainable” at 180% of GDP, and has said it would only present a program to its executive board if it receives “satisfactory assurances on a credible strategy to restore debt sustainability”.


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Monday, April 17, 2017

After Economic Crisis, Low Birthrates Challenge Southern Europe

by Liz Alderman

New York Times

April 16, 2017

As a longtime fertility doctor, Minas Mastrominas has helped couples in Greece give birth to thousands of bouncing babies. But recently, disturbing trends have escalated at his clinic.

Couples insisting on only one child. Women tearfully renouncing plans to conceive. And a surge in single-child parents asking him to destroy all of their remaining embryos.

“People are saying they can’t afford more than one child, or any at all,” Dr. Mastrominas, a director at Embryogenesis, a large in vitro fertilization center, said as videos of gurgling toddlers played in the waiting room. “After eight years of economic stagnation, they’re giving up on their dreams.”

Like women in the United States and other mature economies, women across Europe have been having fewer children for decades. But demographers are warning of a new hot spot for childlessness on the Mediterranean rim, where Europe’s economic crisis hit hardest.

As couples grapple with a longer-than-expected stretch of low growth, high unemployment, precarious jobs and financial strain, they are increasingly deciding to have just one child — or none.

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Tuesday, April 11, 2017

Surprise! Pro-Washington Declarations in Athens

by Nikos Kostandaras

New York Times

April 11, 2017

Before Donald Trump’s election turned much geopolitical conventional wisdom on its head, if you were in the Greek government, you’d have to be a fool to proclaim, “Only America can help us.”

But someone has, and the fact that it was a member of a coalition led by a radical left-wing party, Syriza — whose members have traditionally opposed United States policy — underlines the contradictions of a government comprising members of the extreme left and extreme right. It shows also how the past seven years of austerity and reforms have reshaped politics and attitudes. And it suggests that anti-Americanism in Greece has faded over the past few years, as the Obama administration supported Athens’s efforts to remain in the common European currency and preached against creditors’ harsh treatment.

Above all, it suggests that in difficult times, old alliances become more precious.

Suspicion and sometimes vilification of the United States by the left has been a standard feature of Greek politics since 1947, when the Truman Doctrine and later the Marshall Plan helped stave off a Communist victory in the civil war that followed World War II and the German occupation. Then, a right-wing military dictatorship from 1967 to 1974 had at least tacit support from Washington. Each year, a march commemorating the student revolt that triggered the end of the junta culminates at the United States Embassy, a constant reminder of a complicated past.

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Θόδωρος Πελαγίδης: Μέση Γη: Η Επιστροφή του Πολιτικού Κέντρου



Monday, April 10, 2017

Greece’s creditors must act to end the gridlock

Financial Times
Editorial
April 9, 2017


As an economic recovery gathers strength in even the more troubled parts of the eurozone’s periphery, the desperate situation in which Greece remains mired becomes ever more apparent. Almost a quarter of the workforce is unemployed. Growth stalled at the end of last year and business owners have been withdrawing their money from banks. The recent deterioration in confidence is in large part due to the pervasive uncertainty over the next stages of the country’s €86bn bailout programme.

The deal reached last week with monitors of the aid programme therefore comes as a huge relief. The agreement centres on income tax and pension reforms that Athens must enact now, in order to unlock further aid. It should pave the way for Greece to receive further financial assistance before July, when debt repayments of more than €6bn are due — a sum that would otherwise cripple the economy.

The measures, which will broaden the tax base and make the cost of pensions more sustainable, are worthwhile in and of themselves in the medium term. If they end the gridlock, the boost to confidence could also more than offset the immediate hit to incomes.

However, if the outlines of an agreement between creditors and debtor are now clear, there remain huge divisions to be bridged between the creditors.

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Friday, April 7, 2017

Greece Rescue Payout Moves Closer With Deal to Quicken Talks

by Viktoria Dendrinou, Nikos Chrysoloras & Ian Wishart

Bloomberg

April 7, 2017

Greece and its international creditors struck an agreement at a meeting of euro-area finance ministers in Malta on Friday, breaking the latest deadlock over the country’s rescue and paving the way for about 7 billion euros ($7.5 billion) in aid for Athens.

The two sides, which have been wrangling over key economic overhauls for months, reached a tentative agreement which allows bailout auditors to return to Athens to finish negotiations on the measures that Greece needs to implement to qualify for the next tranche of emergency loans. Although Friday’s decision represents progress, the euro area won’t unlock the payout until their audit is concluded.

“The big blocks have now been sorted out and that should allow us to speed up and go for the final stretch,” Dutch Finance Minister Jeroen Dijsselbloem, who leads the euro-area meetings, told reporters at the conclusion of the talks. “Further work will continue in the coming days with a view of the mission returning as soon as possible to Athens to complete the work.”

Talks between the government of Prime Minister Alexis Tsipras, euro-area creditors and the International Monetary Fund have been stalled for months as the parties haven’t been able to agree on how to amend Greece’s pensions, labor market and tax system. Greece finally accepted a proposal which was presented earlier this week.

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Thursday, April 6, 2017

The scale of Greece’s economic problems

by Kerin Hope

Financial Times

April 6, 2017

As Greece continues talks with creditors over the next stages of its international bailout programme, Donald Tusk, president of the European Council, has warned that it is “no success story” yet. Further discussions will take place at the meeting of EU finance ministers in Malta on Friday. Greek prime minister Alexis Tsipras has called for an emergency summit of EU leaders if a deal is not struck by the end of the week.

But while Greece tussles over the reforms required to unlock the next tranche of bailout aid, its economy is sliding back towards recession, making the need for funding all the more urgent. The charts below give a measure of Greece’s economic health to date.

Forecasts revised down

In December, Greece looked set for a strong recovery, with the country’s central bank and the International Monetary Fund both forecasting the economy would grow by at least 2.5 per cent in 2017. Their projections were markedly more optimistic than those of a consensus of leading international economists.

But a return to contraction in the fourth quarter of last year along with Athens’ failure to complete the latest bailout process within 2016, as Mr Tsipras had promised, brought a downward revision. The central bank last month cut its growth projection for 2017 to 1.5 per cent.

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Wednesday, April 5, 2017

Greece Said to Near Bailout Compromise on Pensions, Taxes

by Viktoria Dendrinou

Bloomberg

April 5, 2017

Greece and its creditors are closing in on a deal over the reforms needed to unlock fresh loans for the country, even as Prime Minister Alexis Tsipras warned that a summit of euro-area leaders may be required if an agreement isn’t reached by Friday.

In a proposed compromise discussed on Tuesday, Greece would reduce its pension outlays by 1 percent of gross domestic product in 2019 and lower its tax-free threshold in 2020 by a similar amount, according to three officials with knowledge of the talks. The tax measures would be accelerated by a year if Greece is set to miss its primary surplus target, which excludes interest payments, in 2018, said the officials, who asked not to be identified since discussions are ongoing.

Finance Minister Euclid Tsakalotos led a Greek delegation to Brussels on Tuesday to try to overcome differences with the nation’s creditors over pension and labor market overhauls. Agreement on the plan, which still needs the approval of the International Monetary Fund and the government in Athens, would clear the way for auditors to return to Greece to conclude negotiations and allow for an aid disbursement before the country has to make more than 7 billion euros ($7.5 billion) in bond payments in July.

One of the officials said the exact breakdown of additional savings envisaged in the proposed compromise was still not fully agreed. Technical issues, including reforms to the energy sector, will also need to be resolved before the review can be completed.

“Had talks and contacts on Greece during the day. Work continues,” Jeroen Dijsselbloem, the Dutch finance minister who presides over meetings with his euro-area counterparts, said in twitter post. A planned conference call between the two sides on Wednesday evening was canceled, one of the officials said.

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Tuesday, April 4, 2017

Greece pursues pension and labour reform deal to unlock more aid

by Jim Brunsden, Kerin Hope & Mehreen Khan

Financial Times

April 4, 2017

Greek ministers and the country’s bailout monitors were on Tuesday trying to strike a deal on the pension and labour market reforms needed to unlock further financial aid.

With the clock ticking down to more than €6bn in debt repayments that Athens must make in July, negotiators say an accord on the main elements of the policy package must be reached soon to stave off the risk of a crisis this summer.

Reaching the deadline without a further tranche of bailout loans would leave Greece’s economy “in such a state that all parameters of decision-making would have to be revisited”, one EU official said. It “would be extremely detrimental”.

A deal on the reform package is one of several requirements for the International Monetary Fund to join the €86bn bailout as a financial partner — a step that Germany says is pivotal if further tranches of aid are to be provided to Greece.

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Does Greece Need More Official Debt Relief? If So, How Much?

by Jeromin Zettelmeyer, Eike Kreplin & Ugo Panizza

Peterson Institute for International Economics

Working Paper 17-6
April 2017


Creditor countries and international organizations continue to disagree whether Greece should receive additional official debt relief, and if so how much. This paper first shows that these disagreements can be attributed to competing assumptions about Greece’s future capacity to repay, particularly about economic growth and the fiscal primary balance. It next evaluates the plausibility of alternative primary balance assumptions using international evidence about fiscal adjustment experiences. It concludes that primary balance paths required to make Greece’s debt sustainable are not plausible and that Greece will therefore require additional debt relief. Finally, the paper shows that the debt relief measures suggested by the Eurogroup in May 2016 (albeit with significant caveats on whether they will in fact be granted or not) could be sufficient to address Greece’s sustainability problem, provided the Eurogroup is prepared to accept both very long maturity extensions on European Financial Stability Facility (EFSF) debt (to 2080 and beyond) and interest deferrals that could lead to a large rise in EFSF exposure to Greece before it begins to decline. If the Eurogroup wishes to avoid the latter, it will become necessary to either (1) extend the scope of the debt restructuring, (2) lower the interest rates charged by the EFSF significantly below current predictions, or (3) extend European Stability Mechanism (ESM) financing beyond 2018 and delay Greece’s return to capital markets for a protracted period.

Working Paper (PDF)

Greek Pensions Hot Potato Puts Tsipras in Bailout Tight Spot

by Sotiris Nikas & Antonis Galanopoulos

Bloomberg

April 4, 2017

Athens resident Spiros is among the reasons Greece is having a hard time reaching a bailout accord with creditors.

The 82-year-old is one of about 2.7 million pensioners likely to face a cut in monthly payments for the 12th time since the debt crisis in 2010, as part of the measures required for the disbursement of the next tranche of emergency loans. The government of Alexis Tsipras wants any new cuts in pensions to be phased in gradually and not be put in place from 2019 -- an election year -- as creditors demand. It says it wants to protect pensioners like Spiros, who account for more than a quarter of the country’s 10 million population and are already bracing for higher health insurance costs and a lower income-tax-free threshold.

The government says a brutal cut will further erode the purchasing power of pensioners and worsen an economy that has shrunk by a quarter in the past seven years and left more than 23 percent of the work-age population without jobs. Spiros, who takes home a pension of 1,200 euros ($1,281) a month, is supporting not just himself and his wife, but two adult children, their spouses and a grandchild.

“I am struggling to meet my obligations,” he said, declining to provide his last name because he fears he’ll embarrass his family. “So far I’ve been able to pay all my taxes and bills, but I don’t know if I can keep doing it.”

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Wednesday, March 29, 2017

Greek parliament to probe possible defence corruption

by Kerin Hope

Financial Times

March 29, 2017

Greek lawmakers have unanimously backed a parliamentary probe into possible corruption involving some €4bn of security procurements signed between 2001 and 2003 while Yannos Papantoniou, a senior Socialist politician, held the post of defence minister.

“In the past these issues [of corruption] were covered up either by political interventions in the justice system or by a conspiracy of silence . . . We’re going to unmask them,” Alexis Tsipras, the prime minister, told parliament ahead of Tuesday night’s vote.

Under parliamentary rules, an all-party committee will examine thousands of pages of evidence before deciding whether Mr Papantoniou should face trial before a special court composed of senior judges. The investigation is expected to take several months.

Mr Papantoniou has strongly denied wrongdoing. He said in a statement that “a dozen” previous judicial probes of defence and security contracts signed while he was minister failed to produce any evidence to support corruption allegations.

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Thursday, March 23, 2017

The Greek God of Populism

by Alexander Clapp

Foreign Policy

March 23, 2017

In September 2012, as the European economic crisis entered its third autumn, a plump Greek man from the port city of Patras came to Athens and put on a press conference at the President Hotel, a few blocks away from the Acropolis. Few in the audience had heard of him, but he brought an astonishing charge against the Greek state. “Artemis Sorras here,” he began mildly. “You should know that your government is in league against you. Now is the time for them to come clean with it!” Sorras went on to explain that he was the inheritor of bonds from the Bank of Anatolia, which had been acquired — and, it was generally thought, incorporated into — the National Bank of Greece in the 1920s. Nonsense, Sorras said. Anatolia’s bonds, far from expired, had in fact accrued tremendous value. Just two of them could more than pay off the Greek national debt. Sorras claimed to possess 40 — a fortune of 145 trillion euro.

Few took notice, at first. Greek government spokesmen dismissed the story; Athens talk radio mused how a man missing three teeth could possess more wealth than the rest of Greece combined. Sorras waved off the critics, doubled down on his claims — he said he also possessed bonds in Montreal-based banks and would be willing to bail out the personal debt of all his supporters, as well as that of Cyprus and Jefferson County, Alabama — and watched as a following of thousands gathered behind him, carrying him to the brink of being elected into Greece’s parliament. Now those thousands of followers are clinging desperately to the latest saga in the Sorras story: a warrant for his arrest stemming from an old case in which Sorras was caught illegally exchanging expired Kuwaiti dinars for his best man’s used luxury car. Summoned to court, Sorras fled — to the innards of the Peloponnese, some now claim; to Italy, allege others; to Central America, runs still another rumor. He remains at large.

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Monday, March 20, 2017

Greece Edges Toward Another Crisis as Bailout Quarrel Persists

by Nikos Chrysoloras, Ian Wishart & Sotiris Nikas

Bloomberg

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.


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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.

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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.

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

Reuters
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.

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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.

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Wednesday, March 8, 2017

Greek economy flat last year, stats service says

Reuters
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.

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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.

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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.

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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.

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Tuesday, February 28, 2017

Greece Said to Expect Revised Bailout Proposal for Tuesday Talks

by Sotiris Nikas

Bloomberg

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.

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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.

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Wednesday, February 22, 2017

Save Greece by Saving Its Economy First

New York Times
Editorial
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.

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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.”

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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.

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Saturday, February 18, 2017

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

Economist
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.

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Friday, February 17, 2017

Greek debt crisis: what happens now?

by Vicky Pryce

Prospect

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.

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Thursday, February 16, 2017

Greece says 'not a euro more' in cuts as EU officials call for speedy deal

by Renee Maltezou & Francois Murphy

Reuters

February 16, 2017

European Union officials urged Greece and its lenders on Thursday to conclude a long-overdue bailout review quickly to safeguard economic recovery but Athens said it wouldn't ask "a euro more" from its austerity-wracked citizens.

Inconclusive talks between Greece and its international creditors on economic reforms and debt relief are in danger of retriggering the crisis that almost ended in Greece being pushed out of the euro zone two years ago.

Failure to agree on various aspects of what must be done has cast doubt over the future of Greece's 86 billion euro (£73 billion) bailout programme, with new aid withheld while the stalemate persists.

On Thursday, EU officials were urging speed to avoid catastrophe and one German politician close to Chancellor Angela Merkel hinted that one bone of contention - the participation of the International Monetary Fund - may be got around.

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Saturday, February 11, 2017

US must understand that Greek default could lead to global crisis

by Desmond Lachman

The Hill

February 11, 2017

One has to hope that the new administration is not complacent about the latest episode in Greece's ongoing economic crisis. Unlike earlier episodes, there is every reason to think that this episode will not easily be resolved.

There is also reason to fear that this crisis is occurring at a very awkward moment for the European political economy. This heightens the risk that, well before this year is out, trouble in Greece could spill over to the rest of the eurozone economy, which could pose a serious economic challenge for President Trump.

At the heart of the latest Greek crisis, which has seen yields on two-year Greek bonds soar to over 10 percent, is a fundamental policy disagreement between the International Monetary Fund (IMF), Germany and Greece.

This disagreement relates to how much further budget belt-tightening Greece should undertake and how much debt relief Greece's European partners should grant it if the IMF is to participate in future Greek rescue packages.

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Tsipras warns IMF and Germany over bailout talks

by Eleftheria Kourtali

Financial Times

February 11, 2017

Greece’s prime minister Alexis Tsipras has warned the IMF and Germany to “stop playing with fire” at the expense of the Greek people, saying he is confident a bailout deal is within reach.

Markets were hit this week by concerns that a deal might not be reached before July, when Greece is due to make a €7bn debt repayment. European negotiators are trying to seal a new agreement so Greece can release another tranche of funds from its most recent €86bn bailout to make the payment.

Representatives of Greece’s lenders are set to return to Athens this week to check whether Greece has complied with a second batch of reforms agreed under the current bailout.

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Friday, February 10, 2017

Greece Faces Creditors in Brussels in Bid to Salvage Talks

by Sotiris Nikas & Nikos Chrysoloras

Bloomberg

February 10, 2017

Europe’s bailout monitors sat down with Greece on Friday to outline a new rescue plan meant to avert a brewing crisis that could -- once again -- threaten the integrity of the currency bloc.

Dutch Finance Minister Jeroen Dijsselbloem, who heads the meetings of his euro-area counterparts, along with Klaus Regling, who runs the euro area’s crisis fund, were set to present the offer to Greek Finance Minister Euclid Tsakalotos in Brussels, according to an official with knowledge of the meeting.

Greece and its creditors are scrambling to complete a review of the nation’s bailout, which would pave the way for additional aid before about 6 billion euros ($6.4 billion) of bonds come due in July. The new proposal would require Greece to legislate additional fiscal cuts equal to about 2 percent of its gross domestic product, which would be triggered if the country failed to meet certain budget targets, another official said.

Dijsselbloem said in an interview that he hopes the two sides would come to an agreement on issues including the labor market, pensions, taxes and budget. “Greece must reach a budget surplus of 3.5 percent and there are discussions about what is needed extra,” he said.

A Greek official sought to damp expectations from the meeting, telling reporters in Brussels that no deal is expected on Friday, and talks shouldn’t be dramatized. The official asked not to be named, in line with policy.

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Thursday, February 9, 2017

Greek bonds sell off sharply as EU-IMF rift deepens

by Jim Brunsden & Mehreen Khan

Financial Times

February 9, 2017

Greek debt sold off sharply on Thursday amid fears the country’s bailout lenders will not be able to bridge their differences in time to lend Athens the €7bn it needs to avoid bankruptcy.

The International Monetary Fund has refused to sign on to the aid programme unless EU authorities grant further debt relief to Greece, but the rift deepened after the head of the eurozone’s €500bn rescue fund dismissed the IMF’s demand.

Eurozone finance ministry deputies were locked in meetings on Thursday night attempting to resolve the dispute. Although Athens’ debt bill does not come due until July, authorities fear they must achieve a breakthrough by mid-February to avoid the issue becoming politicised in the upcoming Dutch and French national elections.

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Greece’s Never-Ending Fiscal Drama

by Simon Nixon

Wall Street Journal

February 9, 2017

No one wants another Greek debt crisis, least of all just ahead of a series of knife-edge elections in Europe. No one this time is trying to push Greece out of the eurozone. No one thinks what Greece needs now after eight years of acute depression is another dose of austerity. Nor does anyone seriously think Greece’s current debt burden is sustainable. So why is Greece once again back in the headlines, its future in the eurozone again called into question amid yet another standoff with its creditors?

The official explanation is that Greece’s bailout program is being held up by a dispute over the country’s fiscal targets. Under the deal struck in 2015, Greece is supposed to achieve a primary surplus before interest payments in 2018 of 3.5% and maintain this surplus for the medium term. Germany says medium term should mean 10 years; the European Commission would prefer it to mean one or two years. This matters because Germany has said it would only continue to fund Greece’s bailout if the International Monetary Fund puts money in too—and the IMF will only participate if the numbers add up. The lower the surplus target, the bigger the debt relief needed to make the numbers add up. That is a problem for Germany.

To make matters more complicated, the IMF takes a very pessimistic view of Greece’s current fiscal position. It now seems clear that Greece delivered a primary surplus of at least 2% in 2016, far above the initial program target of minus 0.5%. With the Greek economy now growing, the European Commission is confident the country can achieve the 3.5% target for 2018 with few extra fiscal measures. But the IMF says this year’s surplus was largely due to one-off factors and is sticking to its forecast that the surplus will only amount to 0.9% in 2018. Just to reach the 3.5% target in 2018, the IMF says Greece will need to legislate in advance extra austerity measures equivalent to 2% of gross domestic product. Athens says this is politically impossible. Brussels agrees.

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This Is Why Investors Are Suddenly Worrying About Greece Again

by Marcus Bensasson

Bloomberg

February 9, 2017

Greece is once again caught between the interests of its lenders and its own citizens. As part of a 2015 rescue package, Greece must meet strict fiscal targets to unlock more financial aid and keep the International Monetary Fund, an important creditor, involved. The IMF says the country won’t meet those targets, touching off yet another global spectacle over the fate of Greece, the future of the euro area and the viability of the single currency.

1. What’s the hullabaloo about now?

Same as it ever was. Greece’s government, unable to borrow from bond markets at affordable rates, has relied for years on loans from Europe’s bailout fund and the IMF to pay its bills. Those loans come with strict conditions, and the government and its creditors are arguing over whether Greece is fulfilling them. Investors are once again on red alert.

2. But wait, didn’t Greece just get a huge bailout?

It got an 86 billion-euro ($92 billion) bailout in August 2015, the country’s third (well, technically it was the fifth, but let’s come back to that). That ended a period of great turmoil, leading the casual observer to think the Greek problem had been “solved.” But the money doesn’t get released at once. Away from the spotlight, the government and debt inspectors are in near-continuous talks about compliance with the conditions. Two are central to the current impasse: Greece must grow its budget surplus (before paying interest on its debt) to 3.5 percent of gross domestic product by 2018, and the IMF must be on board.

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Solidarity with Greece will render its debt sustainable

by Klaus Regling

Financial Times

February 9, 2017

Greece has been under financial assistance programmes for almost seven years. There have been delays, concerns and real drama that brought the country close to leaving the eurozone. There has also been a lot of progress in making the Greek economy more competitive. But for many, Greece remains synonymous with bad news. Few were surprised, therefore, when the International Monetary Fund recently stated that the country’s debt was on an explosive trajectory.

A sober look at the facts shows that Greece’s debt situation does not have to be cause for alarm. The European Financial Stability Facility and the European Stability Mechanism, the eurozone’s rescue funds, have disbursed €174bn to Greece. We would not have lent this amount if we did not think we would get our money back.

Much has already happened to ease the country’s debt burden. Both public and private creditors have made unprecedented efforts to keep Greece’s debt sustainable. No other country in the world has ever received greater debt reduction. In 2012, private investors took a haircut on their holdings, scrapping €107bn in loans from Greece’s books.

Then, public creditors eased lending conditions significantly. This reduced the economic value of the country’s debt by around 40 per cent. As a result, Greece enjoys budgetary savings of about €8bn annually — the equivalent of about 4.5 per cent of gross domestic product — and will continue to do so for years to come. This does not lead to budgetary cost for European taxpayers. However, they do take on risks.

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Conflict over Athens’ surplus needles the IMF

Financial Times
Editorial
February 9, 2017


With much of the eurozone economy humming along nicely, and the sovereign debt crisis that engulfed the single currency region having largely receded, it is easy to forget that the country where it all started is still deep in trouble.

This week the enduring problem of Greece took a new and disturbing turn. It was revealed that the executive board of the International Monetary Fund is split on the question of what fiscal surplus Greece should be required to hit — which in itself will affect whether it needs official debt relief to reach sustainable growth.

Disputes between the IMF and the eurozone governments are hardly new but the fact that the fund admitted a division between its member countries is significant. European nations are over-represented on the board relative to their size in the global economy. Wielding that power to dissuade the fund from demanding debt relief from eurozone governments is a clear conflict of interest and poses a threat to the fund’s credibility and independence.

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Worries Grow Over Euro’s Fate as Debts Smolder in Italy and Greece

by Landon Thomas Jr.

New York Times

February 8, 2017

Even as global stock markets climb, worries are building among investors that long-simmering debt troubles in Greece and Italy will put additional strain on the euro.

Over the past year, aggressive bond buying by the European Central Bank and encouraging signs of economic growth across Europe have helped the eurozone overcome a series of political jolts, including Britain electing to quit the European Union and Italian voters rejecting the proposals of a reform-minded government.

Yet with the central bank expected to eventually unwind its purchases of government bonds and other assets, investors are increasingly becoming concerned about how Europe — and Germany, in particular — can cope with escalating debt pressures in Italy and Greece.

The result has been a sell-off of European government bonds as investment funds reassess the risks of holding such securities. In Italy, for instance, some hedge funds are making direct bets that the prices of Italian bonds will collapse.

The yield on Italy’s benchmark 10-year note — which moves in the opposite direction of its price — has doubled to 2.3 percent since late last fall. The yield on the equivalent Greek note has jumped to nearly 8 percent from 6.7 percent at the beginning of the year.

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Wednesday, February 8, 2017

Greek Government Divided Over Deadlock in Creditor Talks

by Nektaria Stamouli & Marcus Walker

Wall Street Journal

February 8, 2017

The Greek government is split over how to break a deadlock with creditors that has revived bond-market jitters and talk of “Grexit.”

Some aides to Prime Minister Alexis Tsipras are pressing for immediate fiscal concessions, while others are pushing for a tough stance toward the government’s creditors and the International Monetary Fund, Greek officials said.

The debate within the government, which is led by the Syriza party, comes as the IMF haggles behind the scenes with the German-led eurozone over the duration of Greek austerity and the cost of debt relief.

Amid the wrangling, doubts are mounting in financial markets about whether Greece can fulfill the tough terms of its latest, €86 billion ($91.9 billion) bailout plan, signed in 2015. The bailout was Greece’s third since 2010 and is encountering the same problems as the others: Repeated fiscal retrenchment is straining Greek politics without restoring confidence that the country can grow and recover.

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The IMF Staff Has It Right on Greece

by Mohamed A. El-Erian

Bloomberg

February 8, 2017

When the International Monetary Fund’s board met Monday to discuss Greece, it was heartening to read that “most Executive Directors” agreed with the staff’s view that the country’s debt, at 179 percent of gross domestic product at the end of 2015, was “unsustainable.” Yet “some directors had different views on the fiscal path and debt sustainability.” This division within the board also applied to what Greece still needs to do with its budget. With the medium-term primary fiscal surplus heading to 1.5 percent of GDP, “most Directors agreed that Greece does not require further fiscal consolidation at this time.” But, again, “some Directors favored a surplus of 3.5 of GDP by 2018.”

Despite the backing of a majority of the board for the staff’s technical assessment that Greece does not need to tighten its budget screws further but does require debt reduction, the institution is still unable to break a deadlock that harms the country, undermines the integrity of the euro zone, and puts the IMF’s own finances at some risk. Understanding why sheds light on the outdated governance that still plagues the IMF’s good functioning, dents its global standing and weakens its effectiveness.

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Greece’s Financial Odyssey: Pushing Back Against Austerity

by Marcus Bensasson

Bloomberg

February 7, 2017

Greece fought austerity and austerity won. When Alexis Tsipras, the brash young leader of a left-wing party, became prime minister in January 2015, he vowed to stop taking the economic medicine that shrank the country's economy by a quarter, saw more than a million jobs disappear and drove thousands of Greeks below the poverty line. His European counterparts, who had lent Greece more than 200 billion euros ($215 billion) to prevent its default, had a simple response: no. Six months later Greece's banks were shuttered, its stock market was closed, the economy was falling back into recession and the country stood on the brink of expulsion from the euro zone. Tsipras blinked, accepting a new bailout on terms harsher than those he had rebelled against. For more than a year, an uneasy peace held between Athens and Brussels, and Greece's place in the euro seemed assured. But the International Monetary Fund, which is barred from lending to countries unable to repay their debt, in early February 2017 said it didn't think Greece could meet fiscal targets set in the 2015 bailout. That makes it hard for the fund to remain as a creditor. It also threatens to unravel the 2015 deal; the IMF's commitment is necessary to keep Germany and other states as creditors. Wide divisions among euro-area states over the common currency and upcoming German elections further complicate any resolution.

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Tuesday, February 7, 2017

The new IMF Report for Greece

IMF
February 7, 2017

Greece: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Greece

Despite the policy constraints imposed by its membership in the currency union, Greece has made significant progress in unwinding its macroeconomic imbalances. But extensive fiscal consolidation and internal devaluation have come with substantial costs for society, which contributed to delays in reform implementation and to policy reversals since the last Article IV Consultation, culminating in a renewed crisis of confidence in 2015. Since then, the situation has stabilized, and growth is estimated to have resumed modestly in 2016. Notwithstanding the substantial progress achieved by Greece, it still faces fundamental challenges: (i) a vulnerable structure of the public finances; (ii) significant tax evasion and an ineffective tax administration; (iii) impaired bank and private sector balance sheets; and (iv) pervasive structural obstacles to investment and growth. Moreover, its public debt remains highly unsustainable, despite generous official relief already provided by its European partners. Addressing these remaining challenges and restoring debt sustainability are essential to creating a vibrant and dynamic private sector capable of generating sustainable and equitable growth and employment.

Read the Report (PDF)

Greece: Ex-Post Evaluation of Exceptional Access Under the 2012 Extended Arrangement-Press Release; Staff Report;and Statement by the Executive Director for Greece

In accordance with Fund policies, this report conducts an ex-post evaluation of a four-year exceptional access extended arrangement under the Extended Fund Facility (EFF) with Greece approved in March 2012. The Fund committed €28 billion under the extended arrangement (SDR 23.8 billion or 2,159 percent of Greece’s quota at the time), following the cancellation of the 2010–12 Stand-By Arrangement (SBA). The program was supported by Greece’s EU partners, who committed €144.7 billion. Significant private sector debt relief (€106 billion) was completed at the outset of the program and large official debt relief was provided as well. The Fund disbursed SDR 10.2 billion. Only five out of 16 program reviews were completed as the program went off track finally in mid-2014. The arrangement was cancelled in January 2016.

Read the Report (PDF)

Greece: Selected Issues

Read the Report (PDF)

Greece Won’t Meet Fiscal Surplus Targets Set By Europe, IMF Says

by Andrew Mayeda & Ian Wishart

Bloomberg

February 7, 2017

Greece is on track to fall short of budget-surplus targets set under a bailout by the nation’s euro-zone creditors, the International Monetary Fund said.

Greece’s primary budget surplus will rise to 1.5 percent over the long run from about 1 percent last year, amid a modest recovery, the IMF said Monday after executive directors met to discuss the fund’s annual assessment of the nation’s economy. Still, the projected surplus falls short of the 3.1 percent forecast by the country’s European creditors.

The fund reiterated its view that Greece’s debt is unsustainable. Most of the executive directors don’t believe the economy needs more fiscal consolidation, the IMF said.

IMF board split over bailout terms for Greece

by Shawn Donnan

Financial Times

February 7, 2017

A stand-off with European authorities over the terms and future of Greece’s bailout has led to a rare public split on the International Monetary Fund’s board, amid growing questions over the fund’s participation.

European institutions and the IMF have for more than a year been at loggerheads over what the fund argues are far too stringent fiscal targets being demanded of Athens by its European creditors and calls by the IMF’s staff for Greece to receive more long-term debt relief.

The battle has raised questions over the IMF’s financial involvement in the current €86bn bailout, with German officials again on Monday saying that without the fund’s participation the rescue programme would end, potentially causing a new funding crisis for the government in Athens.

In an as-yet unpublished report on the Greek economy, the IMF’s staff argue that Greece’s debts are unsustainable and on an “explosive” path to reaching almost three times the country’s annual economic output by 2060.

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