Greece and the economic crisis 2015

NEWS ARCHIVE - May 20 - May 26

May 26, 2015

Why Greece’s Negotiators Can’t Afford to Ignore Spain Now - WSJ

"Time is running out for Greece. Its government needs to strike a deal with the country’s creditors some time in the coming few days if Greece isn’t to default on the next payment to the International Monetary Fund, due in early June.

And as if this turn of events isn’t dramatic enough, the result of Spain’s municipal and regional elections held on Sunday ratchet the tension up that little bit further. There, the ruling People’s Party was battered by upstarts, not least the anti-austerity Podemos party, Spain’s version of Greece’s Syriza.

If the Syriza government manages a favorable settlement with its creditors, pressure is bound to grow in Spain and other eurozone economies that suffered most heavily from the crisis and that have struggled for growth since for similar treatment."

"Finance Minister Yanis Varoufakis on Tuesday urged the country’s international creditors to “get their act together” and help cobble together a new loan deal before the struggling nation’s money runs out.

The call came amid the Greek government’s inability to agree with its creditors — the International Monetary Fund, the European Union and the European Central Bank — on reforms that would unlock some 7.2 billion euros (Dh28.8 billion) in promised bailout funds.

“It’s about time the institutions, in particular the IMF, get their act together, and come to an agreement with us,” Varoufakis told CNN.

“It’s about time they come to the table and meet us, not half the way, but one quarter of the way, we have already met them three quarters of the way,” Varoufakis said."

May 25, 2015

Greece says wants to make debt payments but needs aid urgently - Yahoo

"Shut out of bond markets and with bailout aid locked, Greece is running out of cash to pay its bills. It must repay four loans totaling 1.6 billion euros to the International Monetary Fund next month, starting with a 300 million euro payment on June 5 that is seen as the next crunch point for state coffers.

Athens has the money to make monthly wage and pension payments this week, government spokesman Gabriel Sakellaridis told a news conference. But he was less direct when asked about the June 5 payment, reiterating the government's official stance that it has the responsibility to pay all its obligations."

"Greece's government on Monday ruled out restricting access to bank accounts and the free movement of money if there is no breakthrough soon in tortuous talks with bailout creditors and its dwindling cash reserves dry up.

The possibility of imposing capital controls — part of a chain of events that could lead to Greece leaving the euro if things take a disastrous turn — "simply does not exist," said Gabriel Sakellaridis, spokesman for the radical left-led government.

...Experts say Greece could eventually have to impose capital controls to prevent a bank run, when depositors flock to bank branches and ATMs to withdraw their savings. An estimated 30 billion euros ($33.5 billion) have already flowed out of Greek banks since elections were called late last year, but a more sudden surge in withdrawals would cause the banks to collapse."

"All those who care about Greece, starting with its prime minister Alexis Tsipras, need to work hard on the least bad path forward.

This will require Tsipras not only to eat his words, but also to call a new election. The timing is tough, given a series of payments Athens needs to make to both the International Monetary Fund and the European Central Bank in the next three months, but just doable.

The essential first step is for Greece to agree a short-term deal with its creditors: to unlock 7.2 billion euros of loans and avoid a bankruptcy that will probably otherwise occur next month. Given that the two sides are still far apart, this won’t be easy. On the other hand, Tsipras says he is hopeful of a deal – so maybe that indicates he is finally ready to make concessions.

The most important one Athens needs to make is on pensions. The Greek system is unsustainable, largely because of a large number of exemptions that allow people to take pensions long before the official retirement age. The creditors must not give ground on this point.

On the other hand, the euro zone and the IMF should be prepared to compromise on labour reform. While they are right to insist on Greece not rolling back changes that have improved competitiveness, there is no need to dismantle yet more protection for workers.

Assuming such a short-term deal can be done, there would still be three questions. Will Tsipras be able to get his radical left Syriza party to support the deal? "

"...After two days of deliberations, the party's central committee on Sunday approved Tsipras's proposed line on the negotiations - that a deal should include low primary budget surpluses, no cuts in wages and pensions, a debt restructuring and an investment programme.

The hard-left faction's call for a clash with lenders was rejected.

"The fact that we are rejecting ultimatums does not mean that we are not seeking a mutually beneficial solution. All this time we have made effort to break the deadlock," the central committee said in the proposal that was approved.

Finance Minister Yanis Varoufakis said Greece had made "enormous strides" towards reaching a deal with its lenders to avert bankruptcy but it was now up to the institutions to do their bit.

"We have met them three-quarters of the way, they need to meet us one quarter of the way," he told Britain's BBC on Sunday.

Varoufakis also said it would be "catastrophic" if Greece left the euro, predicting it would be "the beginning of the end of the common currency project"."

"Mr. Voutsis told privately owned television station Mega that Greece is scheduled to repay €1.6 billion ($1.76 billion) to the IMF between June 5-19, but the payments cannot be met. “This money won't be given,” he said. “It doesn’t exist.”

Mr. Sakellaridis, the spokesman, said the government isn’t considering bundling all the payments the government has to make to the IMF in one payment at the end of the month.

He added that this option hasn’t been proposed by the any of the institutions overseeing the country’s austerity program.

Despite months of negotiations between Greece’s leftist-led government and creditors—the European Union and the IMF—over the country’s bailout, little progress has been made."

"...Party hardliners known as the Left Platform invoke non-payment as a matter of principle. Most Syriza officials, however, use the threat as a means to pressure lenders to provide immediate relief.

The party instead approved a text which claims the government will not sign a deal based on previous bailout agreements and rejects "ultimatums" by "the austerity fanatics." Still, Syriza believes a "mutually advantageous" deal can emerge.

Earlier Sunday, Left Platform leader Panayiotis Lafazanis, a cabinet minister overseeing energy, the environment and agriculture, declared that "it would not be a catastrophe to exit the euro (nor) a terrorist act not to pay the next installment to the IMF."

May 24,2015

"A call by hardliners within Greece's ruling Radical Left Coalition (Syriza) party to not pay the next installment to the International Monetary Fund and to nationalize the country's banks has been narrowly defeated.

Syriza's central committee rejected the proposal by the party's Left Platform on a vote of 95-75 and one blank vote. Thirty other members of the 201-member central committee had already left for their hometowns."

Video report

"Greek Prime Minister Alexi Tsipras says Athens in ''final stretch'' to reach deal with lenders, and that Greece is ''obliged in these critical moments to have collective responsibility.'' Gavino Garay reports. "

May 22,2015

"With Greece facing a potential default in two weeks, German Chancellor Angela Merkel on Friday sought to add urgency to the talks between the country and its international creditors, warning that "very, very intensive work is still needed."

Merkel and French President Francois Hollande spoke for about two hours with their Greek counterpart, Alexis Tsipras, at a summit in Latvia in an effort to pave the way for a deal to get Greece more loans.

The "friendly and constructive exchange" came after a leading official from Tsipras' party warned that Greece will not be able to repay a loan to the International Monetary Fund on June 5 unless a deal is reached with its creditors to unblock bailout funds.

Tsipras said he was "optimistic that we can soon reach a stable long-term and sustainable solution, without the mistakes of the past."

"Greece and its creditors are not in talks on extending the country's bailout until the autumn, with negotiations focused on meeting the program's conditions by the time it expires in June, a senior European Commission official said.

Greece and the European Commission, the European Central Bank and the International Monetary Fund -- the institutions representing the lenders -- are in intensive talks on what reforms Athens must implement to get the funds remaining under the current bailout deal.

The negotiators are running out of time to clinch a deal before Greece runs out of money next month and German newspaper Sueddeutsche Zeitung reported a senior EU official as saying euro zone countries were considering extending the bailout over the summer."

HIGHEST RATES

1. Greece, 25.7 percent.

2. Spain, 23.0 percent

3. Cyprus 16.0 percent

4. Portugal 13.5 percent

5. Italy 13.0 percent

May 21, 2015

"In an interview in his spartan Berlin office on Tuesday, Mr. Schäuble, a key architect of Europe’s controversial austerity-driven response to the eurozone debt crisis, showed no willingness to compromise in the negotiations to unlock the final installment of Greece’s €245 billion ($272 billion) bailout. Without a deal, the program will expire in six weeks, leaving Greece with no option but to default on billions of euros in debt repayments coming due this summer.

...On the subject of Greece, Mr. Schäuble, who will lead a meeting of Group of Seven finance ministers and central bankers next week in Dresden, rebuffed most ideas from Brussels to carve a way out of the impasse in bailout negotiations.

He also cautioned the European Commission, which is seen in Berlin as too lenient with Athens, to keep to its role as one of the three monitors of the program’s implementation, alongside the International Monetary Fund and the European Central Bank. “Many people talk about things they either do not understand or are not responsible for,” he said. “The Commission plays its role as part of the three institutions. But it acts within the limits of this function.”

Mr. Schäuble is known for taking a hard line on Greece. However, Ms. Merkel has taken a somewhat more pragmatic view, and is eager to avoid a Greek bankruptcy or euro exit, according to officials in Berlin."

"Germany’s finance minister has cautioned that a Greek breakthrough is not imminent.

In an interview just published with Reuters, Wolfgang Schäuble stuck to his position that progress between officials from Greece and its creditors remains slow.

Schäuble argued:

“What I know from discussions with the three institutions does not back up the optimism arising from announcements from Athens.

There is not yet any substance to the mere announcement that we are closer to an agreement. This is still within the realms of atmosphere.”

"Greek Finance Minister Yanis Varoufakis was forced to say he respected the confidentiality of debt talks with his European counterparts after a news report claimed he recorded an April meeting.

A lengthy New York Times profile of the outspoken minister published online Wednesday said: "He (Varoufakis) says he taped the meeting but cannot release the tape because of confidentiality rules."

Varoufakis courts controversy anew with taping remark - Reuters

"The writer of the report argued that the relations between Varoufakis and his European Union colleagues are already at their worst state, and after his admission of the wire-tapping will become even worse. He also wondered if the Greek Finance Minister has secretly taped other Eurogroup meetings, while stressing that from now on it is very likely that European officials will be very cautious when speaking in front of Greeks.

On Thursday morning, Varoufakis denied that he secretly recorded the Finance Ministers meeting. While entering the Greek Finance Ministry, reporters asked him if his statement to the New York Times was true. To that, the Varoufakis replied, “Fairy tales, fairy tales, fairy tales.”

"To begin, it is odd to claim that a crisis caused by a 10-year infusion of excessive cash can be cured by means of further stimulus. The theory that it can assumes that Greece lacks sufficient “effective demand,” or the capacity of consumers to purchase goods and services at current prices. Restore this and a virtuous circle of growth will follow.

A single statistic should suffice to cast doubt on this assumption. Greece's gross domestic product was similar in 2001 and 2014, measured in constant 2005 prices, meaning that “effective demand” in these two years before and after the debt crisis was approximately equal. And yet unemployment in 2014 was almost triple the 2001 level. The key to resolving Greece's economic woes must, therefore, lie in something other than demand.

....After the euro was introduced in 1999, Greece received more in credit than it needed every year, between 5 percent and 10 percent of gross domestic product. Populist politicians funneled this excess money to their political clients, explaining the windfall as a “development dividend” that resulted from “structural convergence” with the core euro area countries. This was a fantasy, because there was no such convergence. Yet, it was natural for the recipients of this largesse to see it as real and permanent income."

May 20, 2015

"Greece will not be able to repay a loan to the International Monetary Fund early next month unless a deal is reached with its creditors to unblock bailout funds, the governing party's parliament spokesman said Wednesday.

...be reached with lenders within a week - a prediction that eased market anxiety that had seen borrowing rates spike once more and the Athens stock market slide.

Tsipras has also faced dissent within his own party, with some members saying Tuesday that lenders were trying to force the government to abandon pre-election promises, and advocating the government make clear it intends to delay repayments."

"Varoufakis has been Greece’s finance minister for only four months, but the story of how he has thrown Europe into turmoil is one many years in the making. After Greece joined the European Union’s monetary union in 2001, the tiny country of 10 million was flooded with money from elsewhere on the Continent. Over the course of the next decade, Greek leaders, whose sclerotic and corrupt economy had long been rife with patronage and tax evasion, borrowed billions from imprudent European banks and then lied to E.U. officials about its mounting debts. When the financial crisis finally rolled into Greece in 2009 and 2010, the country was an estimated $430 billion in debt, a staggering figure that imperiled the economic health of its near and distant neighbors — indeed, all of Europe. The European Commission, International Monetary Fund and the European Central Bank (often referred to as the troika) agreed to bail out the sinking economy by loaning it $146 billion. In return, as Athenians rioted in the streets in protest, the government promised the troika it would reduce state spending by slashing pensions and wages, eliminating jobs and raising taxes, an approach to debt reduction known as “austerity.”

That bailout, along with another, even larger rescue in 2012, temporarily buoyed Greece, but the spending cuts have produced what many Greeks consider to be a humanitarian crisis. Twenty-five percent of the country’s population is unemployed; Greece’s gross domestic product has shrunk by a quarter; suicides and homelessness have increased; hospitals, woefully underfunded, scrounge for medicines. Just this month, Varoufakis warned that the country could run out of money in weeks."

...“For the people who are now 15, 16, 17 years old, to have a chance by the time they are 20 — this is what matters,” he told me this month. “There’s no doubt that this economy now is far worse off in the last two months as a result of our hard bargaining.” He described that change as a trade-off, an investment in a better future. “And an investment always involves a short-term cost,” he said.

I asked him about that short-term cost. Is he worried about the Greek economy today?

“Terrified,” he said. “Terrified and aghast.”

Growing risk of capital controls, with IMF repayment in doubt

"Greece would enter a legal minefield if it were to default on its IMF repayments, as it is now threatening."

Greece Among 10 Countries Who Made It to Eurovision Final - Greek Reporter

"Maria Elena Kyriakou with her song “One Last Breath” sent Greece to the 2015 Eurovision Grand Final scheduled to take place this Saturday in Vienna, Austria."

"The euro fell as low as US$1.1065 early on Wednesday, off almost three cents since ECB Executive Board member Benoit Coeure said this week that the bank may "moderately" increase its bond-buying programme in May and June.

It was last down 0.3 percent on the day at US$1.1110.

The Greek government's parliamentary speaker said on Wednesday that Athens will not make a payment to the IMF that falls due on June 5 unless it has reached a deal with its creditors by then.

Euro zone government bond yields were also lower, widening the gap between benchmark U.S. and German yields further in favour of the dollar.

The 10-year yield spread moved out to around 169 basis points , marking an increase of almost 20 basis points in just two days."

"How bare are Greece's coffers? Without an urgent cash-for-fiscal reforms deal, the left-led Syriza government will run out of cash. It's been said many times before, but now it really does appear to be true.

Somehow, the money was scraped together to survive €1bn in debt payments to the International Monetary Fund in May, but an expensive summer looms, with hefty bills due to the IMF and European Central Bank, and payments to holders of short-term treasury bills."

"With this new tax scheme, replacing the current 23 percent, 13 percent and 6.5 percent rates, the government will increase revenues by at least 200 million euros ($223.6 million) per year, the minister said.

By encouraging card payments, the government also expects to reduce fraud in the collection of VAT, a significant headache for the government."

NEWS ARCHIVE - May 2015

2015 - May 1 - May 5

2015 - May 6 - May 11

2015 - May 12 - May 19

2015 - May 20 - May 26

2015 - May 27 - May 31

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