Greece and the economic crisis 2015

NEWS ARCHIVE - Aug 12 - Aug 16

Aug 16, 2015

"Their smugglers point them toward the flashing lighthouse on the Greek island of Kos, as little as 25 minutes away in a good boat.

In their flimsy inflatables, they usually reach there by dawn, quickly puncture their dinghies so no one can force them back, then walk into town.

Viewed from either side, the passage, while risky, is remarkably organized and unfettered. Compared with other routes for migrants crossing the Mediterranean, where more than 2,000 people have died this year, it is a relatively first-class ride. So easy and efficient is it, in fact, that in July the route was used by more than 7,000 refugees — most fleeing wars in Afghanistan, Iraq and Syria. At least 2,000 crossed this past week alone.

...The human tide has overwhelmed the island of Kos, leading its mayor, George Kiritsis, to predict that if he does not get help from Athens, “blood will be shed.” And it has left Greece — for now, foremost in Europe — struggling to balance how to humanely accommodate the refugees against the risk of encouraging still more.

Once in Greece, the smugglers organize trips for the migrants, give them tips and connect them with buses, trains and taxis, all for a prearranged fee, while merchants sell them gear, such as tents.

...Pack your 500-euro notes in zip-lock bags and carry them in your underwear, they are told. Download WhatsApp, so you can send instant messages.

The profiteering is both large and small. The passage from Bodrum to Kos might cost about $1,500, but once in Kos, Greek merchants also make money by selling equipment or charging as much as 4 euros, about $4.40, the price of a cappuccino, just to use the bathroom. "

"The final rescue package would eventually give Greece up to 86 billion euros ($93 billion) in loans over three years in exchange for harsh spending cuts and tax hikes.

The deal must still be approved by some national parliaments, including Germany, but that is largely considered to be a formality. Some nations, such as Finland, have already given their approval.

The move saves Greece from a disorderly default on its debts which could have come as soon as next week and helps end months of uncertainty that has shaken world markets, but it means more hardship for ordinary Greeks.

Greece's most influential creditor and perhaps its harshest critic welcomed the agreement as "a good result."

Aug 15, 2015

Eurozone Finance Ministers Approve New Bailout For Greece - WSJ

"The eurozone cleared €86 billion ($96 billion) in new bailout loans for Greece on Friday, sending the country a lifeline as it hurtles toward new political instability and a battle among its creditors over how to reduce its hulking debt.

The deal marks an end to more than six months of turbulent negotiations between the left-wing government in Athens and its creditors, the other eurozone countries and the International Monetary Fund, that brought Europe’s currency union closer to breakup than before in its almost-six-year-old debt crisis.

...The deal also expects that shareholders, junior creditors and senior bondholders in Greece’s battered banks will take losses before the lenders will be recapitalized. That will likely cause further uncertainty for a financial sector already reeling from capital controls that are unlikely to be lifted anytime soon.

“In the end, how good this deal is depends on how Greek society, the Greek state, the Greek economy—how social actors and economic actors respond to it,” said Greek Finance Minister Euclid Tsakalotos. “Any deal is only as good as what you make of it.”

"Greece’s budget showed a 1.022-billion-euro deficit in the January-July 2015 period, while state revenue dropped by 4.125 billion euros during the same period, according to the country’s Finance Ministry figures.

At the same time, the Greek government defaulted payments worth 4.4 billion euros to suppliers. This resulted in the state budget showing a 3.5-billion-euro primary surplus. The Greek government and creditors have changed the already revised target of the 2015 primary surplus, which now is projected to be 0.25% of GDP instead of 1%. Initially, the primary surplus target was 3% of GDP. "

Aug 14, 2015

"More than 40 Syriza hardliners, including controversial former finance minister Yannis Varoufakis, failed to toe the party line, angry at the punishing terms of the €85bn (£60bn) package and what they said was a sell-out of the party’s principles and a betrayal of its promises.

...The Athens parliament did not start debating the 400-page text of the draft bailout plan until nearly 4am after parliamentary speaker Zoe Konstantopoulou, a Syriza hardliner, ignored Tsipras’s request to speed up proceedings and instead raised a lengthy series of procedural questions and objections.

...The debate followed better-than-expected Greek economic growth figures, with official estimates on Thursday showing the economy had expanded by 0.8% in the second quarter of 2015 despite the imposition of capital controls to prevent a bank run. The national statistics agency, ELSTAT, also revised upwards its first-quarter growth estimate, from a 0.2% contraction to zero growth."

More Coverage:

Greece votes YES to rescue package - USA Today

Third debt deal as Syriza split laid bare: live - UK Telegraph

Lawmakers Back 3rd Bailout After All-Night Debate - ABC News

"Although approved by a comfortable majority, the result was a blow to Prime Minister Alexis Tsipras, who saw more than 40 of his 149 radical left Syriza party lawmakers vote against him. He has come under intense criticism from party hardliners for capitulating to the creditors' demands for budget cuts — austerity measures he had promised to oppose when he won elections in January.

The bill includes reforms increasing personal, company and shipping taxes, reducing some pensions, abolishing tax breaks for some groups considered vulnerable and implementing deep spending cuts, including to the armed forces.

The mounting discord within Syriza is threatening to split the party and could lead to early elections. That stock market in Athens slid on the news and was down 2.3 percent in midday trading."

Alexander Stubb, Finland’s finance minister and until June its prime minister, has had an unusual involvement in the eurozone negotiations over new financing for Greece this year, attending both summits and then the so-called Eurogroup meetings of finance ministers. In an interview with The Wall Street Journal, he set out his take on the tense events of this year.

...WSJ: When [Greek Prime Minister Alexis] Tsipras was elected to government you were still the prime minister. What were your expectations of how the next few months would unroll and how you would deal with this very different new politician on the European stage?

Mr. Stubb: I’ve been involved in EU negotiations pretty much since 1995. I started as an honorable young civil servant. And I always believed that at the end of the day a solution would be found. I never expected the Greek government to take the types of actions that it did throughout the process. Having said that, it did and at the end of the day we managed to find a solution. But there were moments of despair, there’s no denying that. One of them was when we had given another lease of life through the aide memoire and suddenly the Greek prime minister makes a speech in parliament saying that he doesn’t believe in the aide memoire, we’ll call a referendum and we’ll ask the people to vote against it. For me that is a serious breach of confidence. And again, here we come back to the reason why at the end of the day we were 18 against one. If you as a political leader do that to other political leaders it’s a serious breach of trust.

...WSJ: It seemed like the Greek negotiators were lacking some experience.

Mr. Stubb: The Greek negotiators were probably very ideological. But at the same time, I’ve never seen risks like that in negotiations, to be honest. Whether that risk paid off or not? I don’t see the negotiations as a win-lose game, I see it as, if these negotiations led to the survival of the Greek economy and the survival of the eurozone then they were a success. If these negotiations led to the failure of the Greek economy and a dent to the eurozone then they were a failure. History will judge us.

Aug 13, 2015

"Greece's ruling Syriza party edged towards a formal split on Thursday, hours before rebel leftist lawmakers have promised to vote against a new bailout deal to keep the country afloat.

With opposition support, the government is asking parliament to approve a 85 billion euro bailout deal that Greece needs to avoid defaulting on a debt repayment next week.

The parliamentary vote, expected in the early hours of Friday, will test the strength of a rebellion by anti-austerity Syriza lawmakers, which could raise pressure on Prime Minister Alexis Tsipras to call snap elections as early as September.

The rebels' leader, former energy minister Panagiotis Lafazanis, took a step towards breaking away from Syriza, a coalition of leftist groups which stormed to power in January on promises to reverse austerity policies demanded by the euro zone and IMF creditors.

...Gerovasili, the government spokeswoman, made clear the government's displeasure. "Ms Konstantopoulou has her own ways," she said. "There are two differing views which are creating disharmony." Pressed on speculation that Syriza might formally split, leading to elections in the autumn, Gerovasili said: "It is possible that in the future there could be procedures to seek a new mandate from the people... This will happen when there is an assessment that there must be fresh elections."

"Our economics editor Larry Elliott looked at the debt analysis drawn up by Greece’s European creditors. You can read the full story here.

"Greece’s European creditors have underlined the temporary nature of the country’s surprise return to growth by warning that they have “serious concerns” about the spiralling debts of the eurozone’s weakest member.

The three European institutions negotiating a third bailout package with the government in Athens said that the Greek economy had plunged into a deep recession from which it would not emerge until 2017.

According to an analysis completed by the European commission, the European Central Bank and the eurozone bailout fund, Greece’s debts will peak at 201% of its national output (GDP) in 2016.

The study says that Greece’s debt burden can be made more bearable by waiving payments until the economy has recovered and then giving Athens longer to pay. However, it opposes the idea of a so-called “haircut” – reducing the size of the debt, a course of action the International Monetary Fund thinks may be necessary for Greece’s debts to become sustainable.”

And if you are wondering what exactly Greece has signed up for in the new memorandum of understanding struck with its creditors in exchange for an €86bn bailout, take a look at this analysis from our economics correspondent Heather Stewart."

"The details of a third bailout for Greece - worth about €85bn (£61bn; $95bn) - have been hammered out and now it requires approval by the Greek parliament and eurozone governments.

As in the previous bailouts, Greece's EU partners have set tough conditions, demanding more austerity.

1. End fuel tax benefits for farmers
2. Phase out VAT (sales tax) discounts applied on Greek islands, so that they disappear fully by the end of 2016
3. Scrap a range of exemptions and amnesties applied in tax collection
4. Clarify who is eligible for the minimum guaranteed pension at age 67 and start phasing out most early retirement. By 2022 at the latest the statutory retirement age will be 67
5. Reinstate key reforms in the healthcare system, including: scrapping price controls for medicines; increasing centralised procurement of hospital supplies
6. Overhaul social welfare, to achieve annual savings of 0.5% of GDP (total national output)
7. Move to tackle the problem of non-performing loans, including amending laws on insolvency
8. Open up restricted professions, including solicitors, actuaries, bailiffs
9. Deregulate the natural gas market
10. Relaunch privatisation, including plans to sell port facilities in Piraeus and Thessaloniki and regional airports - a special asset management fund will be set up
11. Reduce travel allowances and perks for state administration staff, aligning them with EU best practice

Aug 12, 2015

Third Bailout at a Glance: Five Things You Need to Know - Bloomberg

"The Greek government presented a raft of reform proposals to lawmakers in Athens early on Wednesday as mandated by its international creditors for a rescue package that can pave the way for 85 billion euros ($95 billion).

In return for the funds -- which will be Greece’s third bailout in five years -- Europe’s most indebted nation must submit to additional fiscal austerity measures and an increased debt load, as well as market-opening steps that threaten to widen a rift in the ruling Syriza party of Prime Minister Alexis Tsipras.

...Assuming a deal is finalized, Greek banks are due to receive 10 billion euros initially as part of a package for lenders of up to 25 billion euros. The 10 billion euro immediate payout for banks would be part of a 20 billion-euro initial disbursement to the country that would also include 7 billion euros to cover a previous rescue loan and 3.2 billion euros to make an Aug. 20 payment to the ECB."

"Greek Prime Minister Alexis Tsipras called for MPs to vote on the accord Thursday, although the parliament website did not indicate when examination of the text would start.

The Greek government and the European Commission said Tuesday that they had reached the outlines of the rescue package, which calls for a gas market overhaul, ends most early retirement schemes, eliminates fuel price benefits for farmers and raises some taxes, among other measures."

NEWS ARCHIVE - August 2015

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