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Greek Privatization Proceeds for Anti-Poverty Policies? Probably Not, But We’ll See

With negotiations between Greece and the troika over how to resolve the latest austerity-impasse still ongoing, a rather intriguing potential source of both conflict and compromise emerged between the Syriza-led Greek government trying to find a way out Greece’s austerity-trap and a “troika” that would strongly prefer Greece stays in the austerity-trap: Greece is offering to continue with the privatization of state assets that the troika demands but it would rather use the proceeds to set up a fund dedicated to tackling Greece’s humanitarian crises instead of immediately paying back Greece’s creditors. And while the troika has yet to formally rule out Greece’s proposal, European Commission president Jean-Claude Juncker made a fascinatingly uncharacteristic offer last week to let the 2 billion euros in unspent EU “development funds” in order to “support efforts to create growth and social cohesion in Greece”. Considering virtually all past attitudes by the troika regarding Greece’s “growth and social cohesion”, it was an oddly generous offer…except for the fact that the proceeds from the privatizations are projected to be potentially worth a lot more. So maybe it wasn’t so generous.

Still, it’s a fascinating proposal by the Greek government that puts the troika in a rather unusual position because when it comes to the troika:
Privatization = “Can’t get enough“.
Helping poor people = “Fine, as long as it doesn’t cost much, but they need to learn their lesson so maybe it’s not so good. And not if you’re too poor
Paying back creditors = “The most positive force in the universe

So by making this “privatization for humanitarian aid” proposal Greece appears to have done the seemingly impossible: Greece may have forced the troika to reconsider something and compromise in a way that’s actually helpful. Just a bit, which is still amazing.

That said, it’s still all quite ominous since the troika is still crazy.

—————————–

Well this should be interesting to watch: With the troika demanding more “reforms” from Greece during the latest round of troika-led negotiations over how much abuse and social degradation should take place as part of the Greek “bailout” and with the ECB restricting emergency access to credit lines for Greece’s banks, it’s pretty clear that the troika is intent on making it very clear to the Greeks that the screws can only get tighter.

Except now we get reports of German Chancellor Angela Merkel indicating “flexibility” for Greece as the Greek government scrambles to put together a set of “reforms” that meet its troika creditor demands. In addition, on Friday EU Commission President Jean-Claude Juncker made a rather surprising offer to the Greeks: the EU has a spare 2 billion euros lying around…and maybe it could use that money to help alleviate Greece’s humanitarian crisis. Given the troika’s past attitudes towards Greece’s humanitarian crises this was some uncharacteristically benevolent behavior:

Merkel sets strict terms for Greek aid, Juncker flags EU cash

By Renee Maltezou and Alastair Macdonald

BRUSSELS Fri Mar 20, 2015 3:42pm EDT

(Reuters) – European Union leaders welcomed a pledge on Friday from Greece to meet creditors’ demands for a broad package of economic reform proposals within days to unlock the cash Athens needs to avoid stumbling out of the euro zone.

After overnight crisis talks on the sidelines of an EU summit in Brussels, new Greek Prime Minister Alexis Tsipras and German Chancellor Angela Merkel, the bloc’s main paymaster, offered somewhat divergent understandings of how much Athens must do and how quickly. But EU officials insisted there was a broad agreement to act now on an accord struck a month ago.

Merkel said Greece, which faces a cash crunch within weeks, would receive fresh funds only once its creditors approve the comprehensive list of reforms Tsipras promised to present soon.

But she signaled some flexibility on what reforms Tsipras would have to make — crucially giving his leftist-led coalition the chance to offer alternative savings strategies that will help it persuade its voters it is breaking with what Tsipras calls the failed austerity policies of his defeated predecessor.

And European Commission President Jean-Claude Juncker offered Tsipras a sweetener by saying 2 billion euros from the European Union’s modest collective budget were available to ease the humanitarian impact of five years of spending cuts.

Tsipras said he would fully respect a deal struck with euro zone finance ministers on Feb. 20 that extended an EU bailout deal until June. But he insisted that a condition in that pact requiring Athens to pass a final review of its efforts to bring its debts under control before receiving funds did not apply.

After two months of mounting frustration on both sides, marked by public squabbling, Tsipras held three hours of talks with the leaders of Germany, France and the main EU institutions to try to break an impasse that risks depriving Athens of the euros it needs to function fully within the currency area.

A joint statement by the EU institutions spoke of a “spirit of mutual trust”. But it remained uncertain Tsipras and Merkel were talking about the same reforms, and how far Greece would have to start implementing them before it receives any new cash.

DIVERGENT TAKES

The risk of a continued standoff, exactly a month after Greece secured a last-gasp four-month extension of an EU/IMF bailout, was highlighted by comments from Merkel and Tsipras.

“The agreement of Feb. 20 is still valid in its entirety. Every paragraph of the agreement counts,” Merkel told German journalists who questioned whether she was now offering cash for promises that many of her supporters have stopped believing in.

Tsipras appeared to differ. “It is clear that Greece is not obliged to implement recessionary measures,” he said. “Greece will submit its own structural reforms which it will implement.”

Merkel insisted only the completion of approved measures — in a final review by creditor institutions — would satisfy lenders including the Euro Group of euro zone finance ministers.

“The Greek government has the possibility of replacing individual reforms outstanding from Dec. 10 with other reforms, if these … have the same effect. The institutions and then the Euro Group must decide whether they do have the same effect,” she said, noting Ireland had made such changes with EU backing.

Tsipras, however, insisted that while his government would fully respect a deal struck with the euro zone on Feb. 20 it would not have to complete a final bailout review process begun by the last government to secure more aid: “We all have the same reading of the Feb. 20 accord… There is no such thing as a fifth review,” he told a news conference after the summit.

EU officials, keen to play up the prospects the talks had raised of preventing “Grexit”, or an inadvertent “Grexident” that pushed Greece out of the euro, said differences were merely ones of emphasis for audiences in their respective countries.

Sources aware of how the three hours of talks overnight had gone said Tsipras, aged 40 and only two months into his first ever government job, had quickly appeared to accept that he was facing a united front from creditors and would have no choice but to meet their impatient demands for cost-cutting measures.

“He has seen … that he cannot divide the Europeans,” one senior EU official said. “He can only work with them, not play them off against each other. He has also seen that there is goodwill if he sticks to his word and actually delivers.”

Another EU official said Tsipras, who will visit Merkel in Berlin on Monday after weeks of increasingly rancorous relations between ministers in their two cabinets, had indicated he could offer a full package of reforms within a week or 10 days.

Nonetheless, with some German leaders saying they might prefer Greece out of the euro zone, and Tsipras trying to satisfy a coalition of radicals unused to power, senior EU officials do not rule out a further collapse of the process.

Crucial for the Greek leader, EU officials believe, is being able to present his package as a break with his conservative predecessor — even if many of the measures are broadly similar.

Aha, well, as we can see, the offers of “flexibility” from Angela Merkel were actually very charactistic of the troika’s general attitude thus far:

Merkel insisted only the completion of approved measures — in a final review by creditor institutions — would satisfy lenders including the Euro Group of euro zone finance ministers.

“The Greek government has the possibility of replacing individual reforms outstanding from Dec. 10 with other reforms, if these … have the same effect. The institutions and then the Euro Group must decide whether they do have the same effect,” she said, noting Ireland had made such changes with EU backing.

How flexible! Greece is free to come up with its own reforms, as long as they have the same effect as the existing reforms. And what’s been the effect of those reforms thus far? A humanitarian crisis!

Still, that offer of two 2 billion euros was a nice change of pace. Normally it’s just assumed in the new EU that the only way to escape a humanitarian crisis is to somehow “reform” your way to riches via crisis-inducing austerity. So you have to wonder what prompted that change of attitude?

Reformed Cannibalism
Well, there is one possible motive for the EU’s 2 billion euro “humanitarian crisis” surprise, and it appeared just this week:

Greece already has a number of reforms to the troika’s “reforms” in mind (yes, reform reforms) and it’s already started implementing some of them. And they are exactly the kind of reform the troika is primed to hate. It’s a reform that centers around prioritizing Greece’s humanitarian crisis over paying back the troika that started the crisis in the first place:

Greece says to use asset sales for social welfare, not to cut debt

ATHENS Tue Mar 17, 2015 7:27am EDT

(Reuters) – Greece will shortly present a law to turn its privatisation agency into a wealth fund that will use proceeds to finance social welfare policies instead of reducing its public debt, the deputy finance minister said.

The move could further strain relations between Prime Minister Alexis Tsipras’ new left-wing government and Greece’s international creditors, who want Athens to use the revenues to cut its huge debtload.

“There will be a new Sovereign Wealth fund … and the revenue will be used to fund the government’s social policies and to support the social security system,” said Deputy Finance Minister Nadia Valavani.

Valavani told a parliamentary committee she would present legislation in the coming weeks to merge the privatisation agency (HRADF) with the country’s state property company, ETAD, to set up the new body.

The leftist government is opposed to some key asset sales but has been forced to moderate somewhat its stance as it negotiates with its European partners over a new aid package.

Privatizations for humanitarian crises? Yeah, it’s kind of hard to see how the troika is going to be enthusiastic about that idea. Using the proceeds from creditor-mandated state assets sales for social social welfare policies instead of paying back Greece’s creditors isn’t exactly the creditor’s paradise Europe’s elites have been working to hard to build. Helping the poor is an “Old Europe” thing. The new troika-led Europe is all about helping the creditors even if it means planned poverty for the masses. That’s the new normal

So was Juncker’s 2 billion euro offer a sort of indirect response to the Greek government’s proposal? That’s unclear. Alexis Tsipras declared that any spending on Greece’s humanitarian crisis wouldn’t impact the Greek budget back in February, but that might still imply changing the “bailout” repayment schedule to the troika. And there hasn’t really been an official troika response to the idea so far. Although there probably will be a response fairly soon since Greece’s parliament just turned that idea into law:

Greek parliament approves law to coax more tax payments

ATHENS, March 21 Fri Mar 20, 2015 6:56pm EDT

(Reuters) – Greece’s parliament on Saturday approved a bill that offers hefty cuts in fines and long repayment plans to citizens owing billions of euros in overdue taxes in a bid to boost depleted state coffers.

Shut out from debt markets and with remaining international bailout aid on hold, Athens risks running out of cash in the coming weeks and is scrambling to secure ways to finance itself and meet payment obligations.

The legislation, dubbed “regulations to kick-start the economy,” is part of the new left-wing government’s first batch of reforms.

It follows an anti-poverty law voted on earlier in the week, the first legislation the new government passed since coming to power in January. More bills are in the pipeline in hopes international creditors will release fresh aid after a loan review that needs to be wrapped up by April.

Greece is due to receive 7.2 billion euros in remaining European Union/International Monetary Fund bailout funds if it delivers on its reforms.

Under the new legislation, Greece’s privatisation agency will be turned into a wealth fund and will use proceeds to finance social welfare policies instead of paying down public debt.

Given that “more bills are in the pipeline in hopes international creditors will release fresh aid after a loan review that needs to be wrapped up by April,” the content of those upcoming bills is no doubt on the troika’s mind, as are the implications of showing any leniency to the rabble.

No one wants to be a ‘troikan’ protectorate. Especially ‘troikan’ protectorates
So some sort of response from the troika over this latest privatization agency move seems likely. Maybe Juncker’s offer was such a response or maybe not. But one thing is clear: When an outside force demands that your country sell off strategic assets to pay back that outside force the rabble tends to get restless:

Greek government ‘radically opposed’ to some privatizations as reforms talks underway
Associated Press March 11, 2015 | 10:40 a.m. EDT

By ELENA BECATOROS, Associated Press

ATHENS, Greece (AP) — Greece’s new government is “radically opposed” to the privatization of certain businesses, particularly in the energy and infrastructure sectors, a senior cabinet minister said Wednesday as reforms talks with creditors were due to begin.

Selling state-owned enterprises is one of the actions Greece has been asked to take to raise funds and reduce debt in exchange for rescue loans from the eurozone and International Monetary Fund.

Talks between Greece and its creditors began on a technical level in Brussels on Wednesday to cement a series of reforms Athens must implement in order to get the remaining bailout funds released and avoid bankruptcy.

“We are radically opposed to the privatization, particularly of the strategic sectors and businesses of our economy, and primarily in the sector of infrastructure and energy,” said Panagiotis Lafazanis, the energy and environment minister and a government hardliner, at a conference in Athens.

Lafazanis added that “honestly, I haven’t understood why for some schools of thought, privatizations have become synonymous with reforms.”

He argued that what he called the “neoliberal deregulation in the energy market, which occurred particularly during the recent (bailout) years with the insistence of the (European) Commission and the troika” had prolonged and exacerbated Greece’s financial crisis and energy poverty in the country.

“Troika” refers to the Commission, International Monetary Fund and European Central Bank, who together oversee the 240 billion euro rescue loans Greece began receiving in 2010.

The word “troika” got a bad name in Greece after mid-level officials from those institutions would visit Greece to carry out debt inspections. The new government has refused to deal with those officials, saying they are not welcome in Greece. On Wednesday, it said the team of lower-level technical experts with whom Greek officials would be negotiating on reforms would now be known as the ‘Brussels Group.’

Lafazanis has frequently repeated his opposition to privatizations. Last month, he said the privatization of the country’s power grid and power utility, DEH, would be halted as final binding bids had not yet been submitted.

In his speech Wednesday, Lafazanis said his country wanted diverse energy sources but would not be dependent on “any large power and of any coalition of countries.”

“Greece is too small a country to remain a type of dependent ‘troikan’ economic protectorate … with the status of an energy banana republic.”

As Greece’s energy and environment minister points out:

Greece is too small a country to remain a type of dependent ‘troikan’ economic protectorate … with the status of an energy banana republic.

And that’s certainly true, although it would also apply to large ‘troikan’ economic protectorates. Generally speaking, being a ‘troikan’ economic protectorate sucks regardless of size

Still, being a small ‘troikan’ economic protectorate is certainly a lot worse than being a smaller one. As the saying goes, “If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” And while a ‘Grexit’ certainly carries the risk of a financial or political ‘contagion’, it’s also the case that a ‘Grexit’ might be manageable for the rest of the EU in the sense that the financial costs would mostly hit national budgets and not private banks since most of Greece’s debt at this point is owed to the IMF, ECB, and EU governments (although private banks would still be weakened). If Greece was the size of, say, France, the manageability of a ‘Grexit’ wouldn’t even be in question. A ‘Francexit’ would be a complete and immediate disaster for all parties involved and no one would even be pondering the manageability of the event.

That’s part of what makes the contemporary Greek tragedy so gripping: At this point, tiny Greece is the only European country that has really put up a significant resistance to the Berlin-run troika-regime. The only one.

So given Greece’s overall ‘troikan’ situation the nations has to resist somehow and change the situation, but it can’t really resist alone. At least not very effectively. And before the great collective Greek beat down by the entire EU it was the rest of Southern Europe (plus Ireland) that was (and still largely is) basically in the same ‘troikan’ position of powerlessness in the face of of the EU’s new Ordoliberal ‘golden rule‘ paradigm. So when you see the rest of Europe fall into line with the “Lazy Greeks, let’s kick them out” meme (which is the dominant attitude across the EU today), that’s basically a manifestation of the acceptance of “dependent ‘troikan’ economic protectorate” status by the rest of EU periphery. It’s really quite shocking and sad.

Still, at least there’s one government left in Europe that isn’t casually accepting its ‘troikan’ protectorate status. Whether or not the resistance ends up being successful or largely symbolic remains to be seen, but given the mass capitulation across Europe to far-right dogma in recent years, any attempt to pull Europe back from the abyss of society-destroying economics is a lot better than nothing:

Greece appoints new management at privatisation agency

ATHENS, March 17
Mon Mar 16, 2015 7:07pm EDT

(Reuters) – Greece appointed early on Tuesday new management at the country’s privatisation agency (HRADF), which is expected to play a key role in implementing the leftist government’s plans to limit further state asset sell-offs.

Asterios Pitsiorlas, a businessman involved in the tourism sector, will become chairman of the agency while Antonis Leoussis, former chief executive at Greece’s fourth biggest lender Alpha Bank’s real estate arm, will be chief executive.

Pitsiorlas and Leoussis will replace Emmanuel Kondylis and Paschalis Bouchoris, appointed to the helm of the agency in July by the former conservative government.

During a parliamentary committee which ran over into the early hours of Tuesday, Valavani said she would present legislation to create a new body to manage state assets, reiterating a previous suggestion that the HRADF would eventually be replaced.

Syriza has long opposed sell-offs undertaken by the previous conservative-led government but has been forced to somewhat moderate its stance as Greece negotiates with its European partners over a new aid package.

Greek representatives started talks with official international creditors in Brussels last week in a bid to agree on a set of reforms and unlock much-needed funds.

Privatisations had been meant to raise billions for Greece’s depleted state coffers under its 240-billion-euro bailout with the European Union and the International Monetary Fund since 2010.

Proceeds have been disappointing so far, amounting to about 3 billion euros, a fraction of an initially targeted 22 billion euros.

Note that Greece replaced the head of the state privatization agency just days before Juncker’s “humanitarian assistance” offer. Could that have prompted Juncker’s humanitarian aid offer?

Also note how:

Privatisations had been meant to raise billions for Greece’s depleted state coffers under its 240-billion-euro bailout with the European Union and the International Monetary Fund since 2010.

Proceeds have been disappointing so far, amounting to about 3 billion euros, a fraction of an initially targeted 22 billion euros.

Yep, The whole privatization idea has basically been a bust so far anyways.

But with a large fraction of the troika’s desired privatizations yet to be done, there’s still quite a bit of potential privatizations still on the chopping block. So the troika may not take Greece’s “privatizations for the public good” proposals very lightly despite the lackluster privatization scheme thus far.

Still, on the surface the Greek government’s reformed privatization plans may not seem like something that should piss the troika off too much. After all, the empirical evidence that privatizations help alleviate fiscal crises isn’t really there.

So if the proceeds get spent on social welfare instead of paying back creditors quite as quickly and it keeps the rabble from totally rebelling, who cares as long as Greece basically stays under the thumb of the troika?

When is 2 billion euros for humanitarian aid not generous? When it’s in place of 4 billion euros for humanitarian aid. And maybe a lot more
Given that Juncker just made the 2 billion euro “humanitarian aid” offer day, one might be tempted to assume that this privatization proposal isn’t any different than just having Greece spending the privatizations proceeds on humanitarian aid instead of paying back its troika creditors. The numbers might not be quite the same, but still, if Greece pays back the troika through privatizations and recieves 2 billion in humanitarian aid, is that really all that different from Greece obtaining that humanitarian aid itself through privatizations and instead of paying back the troika entirely?

Well, the troika might care, in part because the 2 billion euros the European Commission offered to Greece for humanitarian aid is half the amount the troika is expecting privatizations to bring in this year alone:

Hard for Greece to avoid privatization, pension reform: EU officials

By Jan Strupczewski

BRUSSELS Mon Mar 23, 2015 1:27pm EDT

(Reuters) – Greece can choose its own reforms to unblock the flow of loans from international creditors and stave off bankruptcy, but it will have a hard time avoiding privatizations and a pension reform because of their budget impact, European officials said.

A new left-wing government and euro zone creditors agreed last week that Athens would present within days a list of its own reforms that must achieve similar fiscal results to the measures agreed by the previous conservative-led cabinet.

“The last government did not complete the ‘prior actions’ necessary for the final disbursement. Nothing has changed, the prior actions are the same. But the measures can be changed if they do not jeopardize debt sustainability,” one euro zone official said.

Which reforms to choose is politically sensitive because the Syriza party of Prime Minister Alexis Tsipras won a general election in January on a platform of ending the policies of its predecessors, including budget austerity and measures it regards as recessionary.

If the creditors agree the substitute plans will achieve an impact equivalent to the previously agreed measures, Greece would get more loans from the euro zone and the International Monetary Fund, averting bankruptcy and a possible euro exit.

The starting point for talks with the IMF, the European Central Bank and the European Commission — “the institutions” — is a long list agreed to by Tsipras’ predecessors.

“They need to persuade the institutions that some of the measures should not be undertaken – to be either dropped, or supplemented by others,” one senior euro zone official said.

Privatization is likely to be one of the major hurdles, officials said, because it was due to contribute 4 billion euros to the budget this year alone. The Tsipras government does not want to sell state assets, although it has agreed in principle not to stop sales that had been initiated already.

A reform of the pension system is another sticking point, where the EU is concerned about early retirement privileges and the need to link benefits to the size of contributions.

Once Athens agrees on the list with its creditors and starts implementing the changes, more loans could start flowing gradually.

“This is where there can be flexibility, they can do it step by step and get step by step money,” the senior official said.

Yes, the troika clearly isn’t keen on allowing Greece to waive the privatizations, with privatizations from this year alone expected to contribute 4 billion euros to Greece’s budget, a significant amount when you consider that only 3 billion euros has been raised by all the privatizations up to now.

Also now that the 4 billion euros the troika is expecting the privatizations to contribute to Greece’s coffers is also double the 2 billion euros that Jean-Claude Juncker pledged for Greece’s “humanitarian aid”? Double. Could that have been part of the motivation before the 2 billion euro offer? After all, if the troika can convince Greece to waive its “privatizations for humanitarian needs” plan and just take the 2 billion euros of aid instead, that potentially gets the troika 2 billion in extra proceeds this year since so much of what goes into Greece’s coffers goes right back out and into the troika’s coffers.

So, in that context, the EU’s 2 billion euro humanitarian aid offer is perhaps less a belatedly generous offer of 2 billion euros to the suffering Greece and more an attempt to spending 2 billion in humanitarian aid to prevent 4 billion euros from getting spent humanely. At least that seems like a possible explanation for the EU Commissions unusual behavior. And that’s just 4 billion euros projected to be raised this this year…recall that the original plan was for 22 billion euros to be raised through privatizations.

What’s the value of a really bad idea? More that 2 billion euros?
But it may not simply be about saving billions of euros for the troika. Look at it this way: At this point, it’s abundantly clear that intertwined economies of the EU, and especially in the eurozone, are acting as both the glue that holds Europe together and the cudgel that keeps member nations in line. And strict adherence to “the rules” and balancing ledgers and trade imbalances is clearly intended to be a top priority in order to allow the money-glue-cudgel to work its magic (“magic” being defined as getting the rabble to do what they’re told without fully realizing they’re being told what to do). Mammon and technocrats (and Berlin) run Europe now. Democracy is sort of old school.

That’s all one of the reasons why rolling back of social and economic programs that protect the vulnerable and make life better for everyone makes so much sense for Europe’s elites: The 20th century welfare state that middle classes around the world have come to rely on is also one of the greatest political tools for empowering the rabble ever created. Non-economically desperate people are political empowered people, and you can’t have a money-glue-cudgel if the rabble is politically empowered. And few things can more effective politically disempower a society than rolling back economic safeguards so much that no one has the time or financial security to truly. Pro-poverty policies are a no-brainer for the troika.

But it’s not just about disempowering the masses and taking away their socioeconomic protections. If you want to transition to a stable form of vassal state-technocracy you also need to fill people’s heads with the kind of garbage ideas that prevent them from ever presenting any meaningful form of resistance. And if you look at the ideas and justifications behind what the troika has been doing it’s pretty clear that hammering horrible economic ideas into the heads of Europe’s masses is a top priority.

And it’s that drive to teach the kinds of lessons that can be exploited over and over As part of the process of explaining why Europe is intentionally imploding its societies and aggressively dismantling the social safety-net. Ideas like:

“High debt is the primary root of evil”

have been coupled with ideas like:

“Just keep cutting expenses and paying back that debt and you will become free and strong”

Those two core concepts are now dominating not just EU policy-making but the hearts and minds of the European public. But the absolutely crucials complementary ideas like:

“Avoiding usury is a good idea”

and:

“If a nation simultaneously cuts back on spending it’s going to have a recession or worse. And if many nations simultaneously do this you might have a depression

were intentionally unpersoned!

Even worse, ideas like:

“Poverty is a destructive force that should not be tolerated”

is not only not present in the pan-European discourse but that anti-poverty idea would derail the entire troika agenda.

As a result of this mix of bad ideas (and omitted good ideas), the overriding meme that’s come to dominate the EU’s reasoning during this crisis is something like:

“High debt is bad. Poverty is ok. Therefore, inducing poverty as a means of alleviating bad debt is not only fine but our only option since all of the other (Keynesian) options involve temporarily taking on more debt

Bad ideas like that must reign supreme if the new creditor’s paradise is going to be sustained. The rabble needs to truly believe ideas like:

The whole of Europe can prosper if only they all become export powerhouses with massive trade surpluses just like Germany. That won’t screw up the world economy or anything. Nope.

Totally crazy ideas like that have become the politically correct official truisms for much of Europe.

But just imagine if 4 billion euros got spent on helping Greece’s neediest instead of going right back into the troika’s coffers? And just imagine if that 4 billion euros worked wonders in lives across Greece and everyone got to compare those wonders to a bunch of numbers on the troika’s ledgers. That probably wouldn’t be a troika-friendly comparison in many minds (on the other hand…). So if the troika lets Greece spend its privatization proceeds on humanitarian aid instead of paying back its creditors, and that aid is seen actually helping people (just imagine 4 billion euros in actual social welfare spending), the seemingly endless drive towards creating a new EU ‘creditor’s paradise‘ suddenly hits a speed bump. People might actually start asking themselves what the hell they’re doing to themselves.

A creditor’s paradise is a private paradise
So with Greece’s negotiations with the troika yet to be concluded, keep an eye on the privatization component of the negotiations because that new “social welfare sovereign wealth fund” proposal may not amount to very much in terms of the size of the fund relative to the needs of Greece’s society, but the very ideas behind it are antithetical to the pro-market-supremacy/Ordoliberal foundations that the new Europe is supposed to be based on. Humanitarian aid to your people comes after you’ve developed a strong export sector in the new EU. Especially the eurozone.

The new, permanently right-wing Europe needs a populace that thinks kitchen table economics makes for good nation-state economics because that’s a populace that could can be crushed over and over. What’s that? There’s a temporary fiscal crisis? Let’s slash public spending on useful social programs and deregulate business! Once business explodes we can bring back the useful programs. An economically confused, easily manipulated populace that is perpetually navigating a socioeconomic landscape it can’t possibly understand because that landscape doesn’t make any sense and the public discourse about it is a bunch of nonsense intended to keep the rabble confused and oblivious.

THAT’s the dream! That perfect, special dream where elites use garbage socioeconomic paradigms to somehow “prove” to the rubes that it’s really in their best interests to we give up on this whole “empowerment and non-poverty for the masses” thing and instead divide and conquer themselves and let the big boys run things unchecked again. A return to the historic norm. It’s a classic.

But it’s a dream so beautiful that something like a privatization fund intended for social programs would just spoil everything. Ok, not everything, but it would certainly go against Europe’s new unofficial right-wing neoliberal ideology.

Why? Because a privation fund for social programs isn’t part of the troika’s plan and the long-term plan for Europe is obviously to have a collection of ‘troikan’ protectorates that dutifully follow whatever plan Europe’s elites hand them, regardless of the consequences to their people. In other words, humanitarian aid from privatization proceeds isn’t just an attempt to alleviate a humanitarian crisis. It’s an act of defiance, albeit moderate defiance since the Greek government would prefer to not do any privatizations at all. And while there are certainly instances when member states in a union can defy a federal power in unjustifiable ways that warrant federal action (this of John F. Kennedy’s showdown with Governor Wallace), in Greece’s case we’re talking about an act of defiance that’s necessary to alleviate a humanitarian crisis directly caused by the actions of those ruling international institutions that are being defied. And you can’t have that elite ‘creditor’s paradise‘ dream if governments are allowed to engage in acts of defiance even when they’re trying save their own people. That’s just not going to work.

All in all, we’re in a very strange place in the ever-evolving new EU. It’s true that you have to have some sort of sharing of sovereignty for the EU to work and that’s significantly more true for the eurozone. And if member states are able just ignore past agreements that’s not going to work at all. But at the same time, you can’t just have a “rules”-based union that is completely divorced from reality, especially when those rules prioritize national finances and other macroeconomic metrics over basic human needs. This tension should sounds familiar at this point since it’s very similar to the tension between creditor and debtor member states that EU leaders and elites have been usuriously misunderstanding for years now.

And while that tension between the need for adherence to the rules and the need for sane, humane rules has always existed, what makes this situation so strange for Europe is that large swathes of the content seems to have collectively forgotten that if you expect people to follow your rules those rules need to be sane rules in the first place. This should be obvious, but it apparently isn’t. And, sadly, the only reason the EU is trying to resolve this tension at all is because a lone government has decided to point out that tension by openly challenging the inhumane rules and calling a bloody spade a bloody spade. Just one.

So we can expect to find out the troika’s official response to Greece’s ‘privatization for humanitarian aid’ proposal soon enough. But given everything we’ve seen so far, we can really expect it to be a reasonable or humane response. Privatizations are part of the elite vision for Europe and that vision will not be F***ed with, regardless of circumstance. If you’re going to build a ‘creditor’s paradise‘, blind adherence to the rules is the first rule.

Discussion

97 comments for “Greek Privatization Proceeds for Anti-Poverty Policies? Probably Not, But We’ll See”

  1. Germany and Belgium terrorizing Greece? This the same Germany from which 19 guys went to visit south Florida to fly planes which then ended up pushing USA into a decades long period of fear and wamongering… Screwing up the US economy in the process??? Same country that produced Curveball?

    You think Germany might not be above terrorizing a small nation like Greece into being its Debt bitch forever?

    YA THINK?

    Posted by WhooddaThunkIt | July 13, 2015, 8:35 pm
  2. Housekeeping Note: Comments 1 – 50 available here.

    Posted by Pterrafractyl | July 16, 2015, 9:18 pm
  3. @WHOODATHUNKIT: Part of what’s so depressing about the situation unfolding in Europe is that it’s becoming more and more clear that the eurozone is a union that is economically structured to induce fiscal and economic divergences while the political decisions are all made via arriving at a group consensus. So whenever a financial crisis emerges, all of a sudden the economic situation in the eurozone starts diverging too and the only political way out of the crisis is to suddenly reach a consensus on which one-size-fits-all policies to implement.

    This is all, to some extent, a predictable consequence of the absolute refusal to turn the eurozone into a transfer union like the US, with routine transfers from wealthy to poor states. But it’s also a rather unpredictable situation since it wasn’t really clear that the shocking rejection of some of the most fundamental lessons of economics the 20th century taught the world was going to take place. Especially the lessons of the Great Depression which just happens to have a number of parallels with today’s eurozone crisis. The eurozone crisis really didn’t have to be nearly this bad. But it is what it is, and now we have a world with a blindfolded Europe that somehow put itself in a cursed socioeconomic straightjacket that actually guarantees pain and injury in a manner that induces anger and insanity.

    These structural issues and elite ambitions to rewrite the laws of economic would be a nasty enough to deal with even if there’s a great deal of internal solidarity and everyone viewed each other as fellow ‘Europeans’ (or, better yet, fellow ‘earthlings’). But in a place like the eurozone, where all sorts of old bigotries and stereotypes about nations and peoples continue to thrive (or took one crisis to get rehabilitated), we’re looking at the kind of circumstances that almost guarantees that the populations are each country are almost guaranteed to eventually turn on each other because the system is set up to ensure crises never really get resolved and the policies that exacerbate the crises are generally imposed on one group of nations by another. That’s the kind of system that creates conflicts that, unfortunately, for a large swath of the eurozone rabble becomes personal. For the people living in austerity-riddled countries just experienced years of senselessly socioeconomic kneecapping, and for everyone else they got years of endless media coverage about how all these deadbeats were stealing their tax dollars. And because the eurozone elites are attempting to replace the fundamental economic lessons of the 20th century with the Bundesbank’s mercantilist Ordoliberal doctrine, the crises can’t really end.

    So it’s hard not to wonder (with great fear) about what on earth is that going to happen to Europe’s social cohesion over the next five years? Maybe there’s going to be a sustainable recovery in Europe. Stranger things have happened and given the degree of the depression a big bounce back isn’t out of the question. But given the mandate of “export or die” for any sort of economic recovery, it’s very unclear why a sustained global recovery isn’t going to be required for a sustained European recovery. And with factors like the GOP in the US still clamoring to cause as much economic damage as possible, it’s also very unclear how likely a sustained global recovery is going to be over the medium-term. In other words, even if Europe somehow avoids self-destructing its economies again through gross economic policy mismanagement over the next five years or so, a sustained recovery in Europe robust enough to ease the tensions that are fracturing the ‘European’ identity (something rather invaluable) doesn’t seem very likely. At least not likely in the short or medium-term.

    It’s really quite stunning. At the same time, it’s also very understandable, from a human instinct standpoint, that the eurozone’s collective psyche might involve increasing levels of nationalism when the going gets tough, so maybe it shouldn’t be so stunning. Either way, it’s looking like a lot of Europe (not to mention the rest of the world) is rather shocked at both the treatment of Greece and the implications for the future of Europe. Germany is understandably taking the brunt of the blame and, based on a number of reports, the German establishment seems to be rather pissed about it. And since the insane eurozone economic policies can’t be reversed (because the eurozone is designed to make Europe permanently right-wing, and the kind of forces that can make that happen don’t take ‘no’ for an answer) there’s the possibility of something very damaging to the European project: Europe might fall out of love with itself. Soon.

    That’s not being flippant. Europe loving itself, where nationalist identities get subsumed into a larger ‘all of us’ identity, isn’t just a utopian goal. Europe needs to love itself for the eurozone to work. It’s basically a requirement when you have a superstate like the eurozone run on reaching consensus. Especially when the permanent economic policies promote divergence during times of crisis. For the eurozone to work, the austerity needs to end, and that can’t happen in a union that doesn’t love itself to some minimal threshold. Falling out of love isn’t really optional for the eurozone to work.

    And yet there’s no denying that the eurozone is structured to make one block of nations periodically pummel the other blocks with policies that induce the next crisis and never make things better. It’s one of the most tragic polyamorous relationships ever.

    But it is what it is. And now Europe is about to have a giant long-overdue squabble:

    Time
    Germany Finds Itself Cast as the Villain in Greek Drama

    Simon Shuster / Berlin @shustry

    July 15, 2015 5:25 PM ET

    Berlin’s role as the enforcer in negotiations over Greece’s debt could cause lasting damage to Germany’s global image

    A few days ago, a group of German comedians produced a satire of their country’s attitude toward Greece under the title “Our Precious German Euros.” Filmed in a pair of swanky hotel rooms, the clip lampoons two pampered yuppies, Klaus and Jan, as they vent their annoyance at all the money their country has spent bailing out the “bankrupt” and “greedy” Greeks. “These swindling Greeks are destroying our euro,” says Klaus. “Nobody’s ever given us Germans something for nothing,” says Jan.

    In case it wasn’t clear, the moral of the sketch then appears with a chirpy melody: Germans have the “historic opportunity,” it says, “not to behave like a–holes for once” and to show Greece a bit of sympathy.

    It’s a message that seems to have passed Germany’s leaders by. Across Europe and increasingly in Germany itself, the government of Chancellor Angela Merkel is being blamed for treating Greece like a disobedient stepchild rather than an equal member of the European currency union. The fallout has revealed not only the depth of European angst over Germany’s growing influence in the E.U., but also how uncomfortable the Germans are in wielding that influence as a political weapon.

    “This country is having a hard time getting used to this leadership role, to being in the driver’s seat,” says Joerg Forbrig, a foreign policy expert at the German Marshall Fund in Berlin. “For Germans the role of a leader, or a benevolent hegemon, is acceptable,” he adds. “But our skin is super thin when it comes to the reactions you elicit in that role.”

    Those reactions have been fierce in the wake of the Greek bailout agreement reached on Monday in Brussels. As the Greek parliament prepared to vote Wednesday on a financial rescue package worth up to 86 billion euros over the next three years, more than a hundred members of the ruling Syriza party said Greece had only accepted the deal because its creditors – especially Germany – had threatened “immediate financial strangulation” if Greece resisted. The statement, released just hours before anti-austerity in Athens turned violent Wednesday night, went on to call the agreement “a coup that goes directly against any kind of notion of democracy and popular sovereignty.”

    And there was little doubt to Greeks who was to blame. Although Germany was not the only European country that wanted to saddle Greece with harsh austerity measures in exchange for a deal, the delegates from Berlin were the most forceful and visible in making these demands. Wolfgang Schäuble, the German Finance Minister, even insisted that Greece should be pushed out of the euro currency union for five years unless it submits to more spending cuts, tax hikes and a massive sell-off of state assets.

    It wasn’t just the Greeks driven into a rage by such demands; the German government has also faced criticism at home. While Merkel’s ruling coalition has mostly toed the party line, opposition figures have been sniping at the Greek bailout deal all week from across the political spectrum. “This negotiation result is a German diktat and nothing other than blackmail,” said Dietmar Bartsch, the deputy head of a left-wing party that has about 10% of the seats in the German parliament.

    Many in the German media also attacked the agreement. The online edition of Der Spiegel called it a “catalogue of cruelties” toward Greece, while the daily Sueddeutsche Zeitung said that Merkel’s conservative government had come out looking “ugly, hard-hearted and stingy” in the eyes of Europe and the world. “Every cent of aid to Greece that the Germans tried to save will have to be spent two and three times over in the coming years to polish that image again,” the center-left newspaper wrote.

    The fallout has the potential to damage Germany’s hard-won ranking in the world’s esteem. In recent years, polls have suggested that Germany had shed its public perception as the perpetrator of horrific atrocities in World War II and successfully rebranded itself as a beneficent economic power with modest ambitions on the world stage. An international survey of more than 26,000 people in 2013 found that Germany was the most popular country in the world.

    But the crisis in Greece has hurt that popularity. When the terms of the bailout deal were announced on Monday, a campaign to boycott German products started spreading on social media, alongside vicious cartoons comparing Germany’s current leaders to the Nazis. As Spiegel Online put it, “The German government destroyed seven decades of post-war diplomacy in a single weekend.”

    In the coming weeks, Germany will have a chance to assuage some of that criticism by agreeing to forgive a portion of Greece’s debt — and doing so would be in line with a growing international consensus. On Tuesday, the International Monetary Fund, which has helped bankroll both of the bailouts Greece has received since 2010, suggested that it would not support the third bailout unless part of Greece’s debt burden is eased or erased. “Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far,” the Fund wrote in its report.

    Standing defiant through all that diplomatic pressure would put Germany in a position it has not known in decades. It would be seen as the bully of Europe, no longer helping wayward members of the eurozone get their books in order but punishing them with all the influence its economic power affords.

    Forbrig, the foreign policy expert, says that is an image most Germans would hate to project. “People find it hard to accept that if you do take on a leadership role, you will single yourself out for attacks and criticism,” he says. But as Germany asserts itself in Europe and beyond, it will have to learn to take such attacks in stride, even at the cost of its cherished popularity.

    “People find it hard to accept that if you do take on a leadership role, you will single yourself out for attacks and criticism”. Buckle up Europe!

    And, yes, on top of all the finger-pointing within the eurozone over whether or not Germany had just led a coalition of cruelty on Greece, the IMF is demanding that Greece get some sort of debt-relief ($93.50 billion over the next three years) if the IMF is going to sign onto any agreement. And since we’ve already seen key decision makers like Wolfgang Schaeuble indicate that he agrees Greece needs debt relief but doesn’t think it should happen anyways and Greece should just leave, it’s very unclear what’s going to make the squabble become the deeper embrace the eurozone is predicated on.

    Especially if all the squabbling becomes a reason for more squabbling:

    The New York Times
    Op-Ed
    Germany’s Destructive Anger

    By JACOB SOLL JULY 15, 2015

    A DEAL has finally been reached that could keep Greece in the eurozone. Few are happy with the outcome. We’ve heard a lot about how the Greeks feel humiliated. But we’ve heard less about German anger, and we know they are angry. Finance Minister Wolfgang Schäuble was reported to have started yelling during Saturday night’s negotiations. France and Italy have both made huge loans to Greece, but neither country has expressed hostility to Greece. Why is Germany so angry?

    As an economic historian, I got a taste of this resentment during a conference on Greek sovereign debt held in Munich last week.. It took place at the Center for Economic Studies and the Ifo Institute, which are headed by Hans-Werner Sinn, the German economist and longtime proponent of a Grexit. The conference included economists, accountants, journalists, investors and government officials from both Greece and Germany. Diverging views were aired by Mitu Gulati, the Duke law professor who helped devise an earlier Greek bailout; by Ashoka Mody, an economist, formerly of the International Monetary Fund, who preaches debt forgiveness; by accounting experts, who agreed that Greece’s total debts seem to have been inflated; and by Mr. Sinn.

    But when the German economists spoke at the final session, a completely different tone took over the room. Within the economic theories and numbers came a moral message: The Germans were honest dupes and the Greeks corrupt, unreliable and incompetent. Both parties were reduced to caricatures of themselves. We’ve heard this story throughout the negotiations, but in that room, it was clear how much resentment shapes the views of German economists.

    Clemens Fuest, of the Center for European Economic Research, who has advised Mr. Schäuble, kept reciting numbers about Greek debt and growth, and said the Greeks had failed at every level over the past several years to manage their debt. He believed they should simply be thrown out of the eurozone. Henrik Enderlein, of the pro-European Jacques Delors Institute, said that Greece should stay in the eurozone, but only if it applied more austerity and better management. Daniel Gros, director of the Center for European Policy Studies, theorized that Greek debt and economic woes could be countered only with better export numbers.

    All points were important, but to hear it from these economists, Germany played no real part in the Greek tragedy. They handed over their money and watched as the Greeks destroyed themselves over the past four years. Now the Greeks deserved what was coming to them.

    When I pointed out that the Germans had played a major role in this situation, helping at the very least by insisting on austerity and unsustainable debt over the last three years, doing little to improve accounting standards, and now effectively imposing devastating capital controls, Mr. Enderlein and Mr. Fuest scoffed. When I mentioned that many saw austerity as a new version of the 1919 Versailles Treaty that would bring in a future “chaotic and unreliable” government in Greece — the very kind that Mr. Enderlein warned about in an essay in The Guardian — they countered that they were furious about being compared to Nazis and terrorists.

    When I noted that no matter how badly the Greeks had handled their economy, German demands and the possible chaos of a Grexit risked political populism, unrest and social misery, they were unmoved. Debtors who default, they explained, would simply have to suffer, no matter how rough and even unfair the terms of the loans. There were those who handled their economies well, and took their suffering silently, like Finland and Latvia, they said. In contrast, a country like Greece, where many people don’t pay their taxes, did not seem to merit empathy. It reminded me that in German, debt, “schuld,” also means moral fault or blame.

    When I asked if any had visited Greece to assess poverty, brain drain and business closings, they simply shook their heads. When I asked what responsibility these leading economists felt in the Greek crisis, they told me that I could not understand the situation by simply flying in from the United States. (For the record, I have spent much of the year in Europe, meeting with the previous Greek government in Athens — where I saw hungry old people rummaging in trash cans — and later with members of the European Commission in Brussels.)

    Here lies a major cultural disconnect, and also a risk for the Germans. For it seems that their sense of victimization has made them lose their cool, both in negotiations and in their economic assessments. If the Germans are going to lead Europe, they can’t do it as victims.

    That was the view from someone that chats with the kinds of people crafting the economic policies that made the eurozone crisis a depression. so it probably shouldn’t be surprising that, for the folks at a conference like that, the eurozone crisis is personal because they helped start it and keep it going.

    But the big question going forward for Europe is still how much longer before the euro-rabble takes all this so personally we start seeing serious calls for a mass divorce. Most marriages presumably start off well, but that can change fast. Especially once it becomes clear to one of the spouses that the other spouse feels that beatings are a necessary feature of any relationship and nothing to complain about:

    The Washington Post
    Greece has surrendered, but Europe has lost, too

    By Matt O’Brien July 14, 2015

    At least they still get to call it “Greece.”

    After months of deadlines gave way to last chances and more 11th hours than you can count, the negotiations ended with Athens surrendering on — not coming to — terms set by Europe on a third bailout worth between 82 billion and 86 billion euros for the next three years. All Greece had to give up in return was everything.

    The Greek revolt is over — but only for now.

    The specifics of the deal were appropriately draconian for the country that invented the word. Greece has until Wednesday to increase its sales tax, pare pensions for poorer workers, and set up a fiscal council to double check the government’s budgets — and that’s just so the actual talks can begin. Greece and Europe haven’t so much agreed to a deal as agreed to agree to a deal if Athens makes a show of good faith first by doing everything it would have had to do under the bailout it decisively rejected last week.

    On top of that, though, Greece has to make a slew of reforms that range from the rigorous to the infinitesimally detailed. It has to redo all the things it had undone the past few months, like firing the public workers it had rehired, and allow bailout monitors back on the ground in Athens. It also has to streamline its bureaucracy whatever way Europe tells it to, ratify the euro zone’s rules about resolving dying banks, speed up its judicial process, privatize its electricity network, allow stores to open on Sundays, and create more competition among pharmacies and bakeries. These last few go further than anything Germany does itself. It’s micro-micromanaging, but it’s what Athens has to agree to if it wants to unlock its bailout money. That’s because even though Europe called this a “negotiation,” it was only one in the sense that there are two sides here. It was really an ultimatum — and one that Greece has submitted to.

    It almost didn’t, though, because of the humiliating way that Germany made it surrender its sovereignty. Athens is being compelled to sell 50 billion euros (about $55 billion) of “valuable Greek assets” — it can keep the ones that aren’t — to help reduce its debt and recapitalize its banks. This was politically toxic enough that the Financial Times reports Greek Prime Minister Alexis Tsipras almost walked away from the deal and the euro itself in the wee hours of Monday morning. The only reason he didn’t is he got two concessions that make it look like the country is being coerced into handing over its wealth: The fund will run out of Greece instead of Luxembourg, and some of the money it raises will be invested in Greece’s own economy.

    This gets at one of the euro’s two fundamental flaws. The first is that euro doesn’t work as currently constructed. Countries that fall into recession can get stuck in them since the common currency takes away their ability to fight them. But the second is that the euro probably can never work since it’s virtually impossible to construct it well enough. That means, before long, we’ll be back in a crisis, wondering if Greece, or maybe Italy or Spain or Portugal, is going to have to leave the euro zone altogether. Another 86 billion euros isn’t going to make this go away for long.

    So now, the people of Greece are going to suffer even more because of a currency union that leaves them in a slump that won’t and can’t end for a long time. But why can’t it? Well, the euro has a problem of too much democracy at the same time that it has a problem of too little democracy. And so, as a political matter, Europe can’t build what it needs for the common currency to be anything other than a contraption for turning recessions into deep depressions.

    In other words, the economics of the euro are a disaster, but the politics of the euro are an even bigger one that keep them from fixing any of it. Not that this should be surprising. Indeed, the euro’s problems were so predictable that Milton Friedman, well, predicted them. The euro’s original sin was having countries share a currency without also sharing a treasury — and the European government that would have to go with it. That’s a crisis just waiting to happen since having the same currency means having the same monetary policy, but different countries need different monetary policies. Greece and Germany can’t have a single bank setting the same interest rates for both of them without one of them having rates be too high or too low for them. The only way to make up for this is to have the countries that are doing well send checks every year to the ones that aren’t. That’s what happens automatically in a well-functioning currency union like the dollar zone — a.k.a., the United States — where struggling states are able to pay less in federal taxes than they receive in federal benefits, because strong states do the opposite.

    But if Europe needs to forge an even closer union, where rich countries transfer money to poor ones, to make its currency union work, why wouldn’t it? After all, it’s spent the past 60 years trying to get to this very point. It started with the European Coal and Steel Community in 1951 as a way to make war impossible. It continued with the euro in 1999 as a paper monument to peace and prosperity that was supposed to secure both. And the next step is, or was supposed to be, a United States of Europe. Now, if it sounds like a bad idea to create a currency that was bound to create a crisis as a pretext for creating a central government, well, that’s because it is. But that’s what Europe has done. German Finance Minister Wolfgang Schäuble just said that they knew constructing “a monetary union without fiscal and political union would be a risky business” but they went ahead because, as he explained, “if we had waited to create political union first, monetary union would never have happened.” So, again, why would Europe let this crisis go to waste?

    Well, the snag is figuring out who pays what and who decides what. In a word, sovereignty. Now, the first problem is of too little democracy at the European level. Sure, there’s a European Parliament, but it doesn’t have any legislative legitimacy or real power of the purse since its purse is so small. And that’s the way the people of Europe want it. That’s right: The elites of Europe might want a United States of Europe, but the people don’t. That brings us to the second problem of too much democracy at the national level. Think about the Greek crisis. The other 18 members of the euro zone feel like Athens has lied to them about reforming its economy, and have democratic mandates to stop bailing it out. But Greece feels like it’s been pushed into self-defeating austerity, and has a democratic mandate to end that. So whose democracy counts more? Should Greece be able to vote itself money from the other 18 countries, or should the other 18 countries be able to vote on how much Greece’s pensions should pay people?

    The answer, in this case, is that whoever has the money has the power — especially if their friends at the European Central Bank can force your banks to close — and that’s Germany.

    But financial might makes right isn’t much of a principle. If Germany tries to bully countries like it has bullied Greece, then nobody is going to want to cede any sovereignty to any kind of central government. And that would leave the euro zone stuck in a status quo where the European government doesn’t have any power and the German government has too much for anyone else to give up any of theirs. The result is a system where even the smallest squabbles can turn into existential ones. Just look at Greece. Its bailout is only 0.23 percent of the euro zone’s annual economic output, but that was still such an explosive issue that Germany has taken over its budget and threatened to kick it out of the euro entirely. Compare that with the U.S., where rich states transfer about 5 percent of their annual income to poorer ones, but nobody thinks that’s a reason to tell, say, Alabama how much it should tax people, let alone force it out of the dollar zone.

    So how are you going to convince northern Europe to do something that’s 20 times worse for them than bailing Greece out — and do it every year — at the same time that you convince southern Europe to follow its neighbor’s fiscal orders? You’re not. And that leads to a depressing conclusion. If the euro isn’t going to get better, and countries can now be thrown out of the euro, then a country will be thrown out of the euro — and that will probably be Greece. Now, there’s a good chance the current government will collapse, but there’s not a much better chance that any other government could implement this deal either. Austerity will continue to hurt Greece’s economy more than Europe expects, so it will continue to miss its budget targets — which, in turn, will force Athens to cut even more and harm its economy even more. At some point, whoever is in charge will try to end this downward spiral. If Germany doesn’t hit the eject button over that, Greece might actually leave the euro first — and from there, who knows who else.

    As Matt O’Brien puts it, “If Germany tries to bully countries like it has bullied Greece, then nobody is going to want to cede any sovereignty to any kind of central government” and if there’s one this the eurozone is going to need if it’s going to become a functional union, it’s a stronger central government that isn’t dominated by a single country or run at its behest but instead systematically shares the wealth from rich to poor nations without special strings attached. And, instead or creating that ever-closer union, we have a bloc of nations, led by Europe’s new hegemon, that is ruling out fiscal transfers now and forever.

    :

    The New York Times
    Germany’s Tone Grows Sharper in Greek Debt Crisis

    By MELISSA EDDY
    JULY 16, 2015

    BERLIN — Despite bitter opposition in many quarters to the austerity-first policies Germany has imposed on Europe’s poorer nations, Chancellor Angela Merkel’s government has hung on to its role as champion of integration on the Continent through deft use of diplomacy and the country’s economic clout.

    But in negotiating a new deal this week to bail out Greece, Germany displayed what many Europeans saw as a harder, more selfish edge, demanding painful measures from Athens and resisting any firm commitment to granting Greece relief from its crippling debt. And that perception was fueled on Thursday when the German finance minister, Wolfgang Schäuble, suggested that Greece would get its best shot at a substantial cut in its debt only if it was willing to give up membership in the European common currency.

    Mr. Schäuble stressed that he was not pushing the Greeks to take any particular course and that in any case he was only talking about a temporary exit from the euro. But coming a day before German lawmakers are to give the go-ahead to negotiate the details of the bailout package for Athens, his remarks were evidence of a continuing deep ambivalence among conservatives in Germany about the costs of keeping Greece in the currency zone and a greater willingness to question whether the goal of “ever-closer union” in Europe should be reassessed.

    Many in Germany still support the idea that keeping Greece in the eurozone is important for the future of the European Union, and German lawmakers are expected to support the new bailout plan, agreed to by European leaders early Monday after a contentious weekend of negotiations, when it comes up for a vote in Berlin on Friday.

    But Mr. Schäuble’s reminder that another option exists — the second time he had raised the idea this week — came as close partners like France were expressing greater willingness to help Greece and some Germans are uneasy that their finance minister’s handling of the situation has hurt their reputation in Europe and around the world.

    Critics of the German-led austerity policies have called for boycotts of German products and have suggested that Ms. Merkel and Mr. Schäuble had unjustifiably humiliated Greece and its prime minister, Alexis Tsipras. Italy’s prime minister, Matteo Renzi, said of the German stance over the weekend, “Enough is enough.”

    Speaking in Berlin after meeting with members of the center-left Social Democratic Party, Jeroen Dijsselbloem of the Netherlands, the leader of the eurozone finance ministers, criticized Mr. Schäuble for raising the suggestion of a Greek exit. “If you reach an agreement after such long and hard talks, you have to stand behind it,” he said. “And that goes for all sides.”

    But within Germany, there is still strong backing for being tough on Greece, or even seeing it leave the euro rather than undermine the common currency’s chances of thriving in the future. Mr. Schäuble made his remarks in a radio interview hours after the Greek Parliament voted reluctantly to approve the first set of austerity measures demanded by its European creditors in return for a chance to negotiate the new bailout package, its third in five years. And his remarks came as some Greek officials asserted that he has been in favor of Greece leaving the euro all along.

    “It is beginning to look like a very dirty game that he is playing,” Johannes Kahrs, a Social Democratic lawmaker, said of Mr. Schäuble.

    Mr. Schäuble emphasized that no one was trying to dictate to Greece how it should proceed. But he made a case that forgiving a substantial amount of Greece’s public debt of more than 300 billion euros, or about $330 billion, was not compatible with membership in the eurozone.

    “We have not said that we will impose this, we can’t, we don’t want to, and no one has suggested it, but it would perhaps be the better way for Greece,” Mr. Schäuble said in the interview with Deutschlandfunk radio on Thursday when asked about allowing Greece to take a time out from the eurozone.

    He also questioned whether the package Greece was seeking would be enough to bring the country’s financial situation back into a manageable position. “Nobody knows in the moment how it is supposed to happen without debt relief, but everyone knows that debt relief is not possible within the eurozone,” he said.

    His position appeared to be based on European rules that are not interpreted as strictly by other nations, or by the International Monetary Fund, which called this week for deeper debt relief for Greece than Europe has been willing to consider. European rules for membership in the euro, such as those on budget deficits, are routinely skirted or broken.

    Mr. Schäuble’s hard-line views on austerity and debt are not limited to him, or even to Germany. Much of Eastern Europe and a number of conservative northern countries share his view that Greece has been profligate and should get further aid only under the strictest conditions.

    But more than anyone, Mr. Schäuble has come to embody the consensus that has helped shape European economic policy for years: that the path to sustained economic recovery for financially troubled countries is to slash spending, raise taxes when necessary and win back the trust of bond markets and other investors by displaying commitment to fiscal prudence — even if that process imposes deep economic pain as it plays out. Supporters point to Ireland, Portugal and Spain as nations that have bounced back to varying degrees after austerity programs; critics point to Greece, which has remained economically troubled.

    Germany’s finance minister since the Greek crisis erupted in 2010, Mr. Schäuble is known as resilient and forceful, with a Germanic embrace of the rules and a Nietzschean attitude of “That which does not kill us, makes us stronger.” He has held offices in four governments, serving as Helmut Kohl’s chief of staff and Ms. Merkel’s interior and finance minister. Even an attempt on his life in 1990 that left him using a wheelchair kept him from the political stage for less than a year.

    Ms. Merkel has ruled out forgiving any of Greece’s debt but has left the door open to a new negotiation over extending the payment terms or reducing interest rates to help bring down Greece’s annual debt payments. But the I.M.F. and some other countries, including the United States, are pressing for Germany to lead Europe in doing more.

    Still, some conservative German lawmakers have indicated ahead of Friday’s vote reservations about whether they believe Greece fully meets the conditions required to tap aid from the European Union’s bailout fund, much less qualifies for debt relief.

    At a vote to extend the previous bailout package in February, a record number of dissenters from the chancellor’s conservative camp showed growing impatience with the anti-austerity government in Athens, with 29 voting against it. An additional 109 among about 310 conservative lawmakers indicated reservations, although they went along with the vote.

    Mr. Schäuble signaled on Thursday that it might be difficult to reduce the burden of Greece’s debt payments sufficiently without some debt forgiveness — a step he said could not be taken while Greece is a member of the currency union.

    “The more difficult question will be to reach sustainability of the debt, whether a package that is large enough can be agreed upon without any debt reduction,” Mr. Schäuble said. “Then we are back in the situation that debt reduction is not allowed in the eurozone.”

    Some analysts said Mr. Schäuble’s discussion of a “temporary” exit from the eurozone for Greece was a veiled attempt to push it out of the 19-member currency union for good. Sony Kapoor, an analyst at Re-Define, a research group, recalled Mr. Schäuble expressing similar thoughts in 2012.

    “The idea behind couching it in temporary terms is to make it sound less onerous and a bit more compliant with the legal situation,” Mr. Kapoor said. “There is nothing as permanent as a temporary divorce.”

    As we can see, despite the IMF’s threats that it won’t sign on to any agreement without significant debt-relief for Greece, Angela Merkel continues to rule it out (although she’s open to extending the maturities and reducing interest). And Wolfgang Schaeuble continues to make the point that Greece really does need debt relief if this bailout package is going to work, but that’s not allowed according to the eurozone rules (despite the fact that those rules are routinely flouted in other situations) while also pointing out that, even if Greece did get the ~85 billion euros in debt-relief the IMF is calling for, it still might not be enough given Greece +300 billion euro debt. And on that last point, Schaeuble is probably correct. Even with the debt-relief, given the austerity measures the entire troika supports for Greece without any real stimulus.

    So the eurozone family of nations is now on the verge of kicking out one of its members because Berlin and a band of fellow right-wing governments is demanding that the eurozone stick to rules that even they agree are inadequate. Even though the eurozone rules have been routinely broken for years. And because Berlin basically calls the shots for the entire eurozone, that means Wolfgang Schaeuble is probably correct about the ‘Grexit’: given the pledges to make the eurozone a permanently dysfunctional experiment in junk economic theories, it really might be in Greece’s best interest to take the ‘Grexit’ option now, especially if they can get the rest of the euozone to help cushion the plow and rebuild without more harmful strings attached. Greece could always try to rejoin the eurozone later, assuming Schaeuble is being genuine when he calls for a temporary ‘Grexit’.

    But whether or not Greece ‘Grexits’, it’s still very unclear what the future of the eurozone is going to be because the crisis in Greece is clearly no longer just about Greece. Now it’s about whether or not Germany just crossed the eurozone Rubicon too. And, as Matt O’Brien pointed out above, all of this is happening at a time when the eurozone is supposed to be in the process of creating an “ever-closer union” and can’t really function properly unless it becomes one.

    So what happens to the eurozone if the “ever-closer union” process stalls because no one wants to become the next Ordoliberal-punching bag? Will Europe still have the capacity to like itself if this drags on for another decade, let alone love itself and become a functional union?

    That’s all part of what we’re going to find out in coming years. And maybe even coming months. Yes, the response by France’s Hollande to this latest crisis is to call for an even closer union with a new eurozone economic government and budget:

    The Financial Times
    France’s François Hollande to push for more eurozone integration

    Anne-Sylvaine Chassany in Paris
    July 14, 2015 6:27 pm

    French president François Hollande has vowed to push for more integration of the eurozone a day after he helped broker a last-minute deal to keep Greece in the single currency and prevent a historic rupture.

    Mr Hollande, who on Monday served as one of Greece’s chief allies through 17 hours of tense negotiations in Brussels, said France will present proposals to establish an “economic government” and a common budget for the eurozone.

    “The eurozone is a protection. We need to move forward, in coherence with Germany,” Mr Hollande said in a televised interview after the Bastille Day military parade on the Champs-Élysées. “France will put together a document on an economic government. We’ll have to go further, with a eurozone budget.”

    Paris has long sought deeper convergence among eurozone members, but with a French emphasis on investment and social policies to counter the rigid fiscal rules championed by Germany.

    The contrasting visions of Mr Hollande, the socialist leader, and Germany’s conservative chancellor, Angela Merkel, were evident in recent weeks in the fraught debate over Greece, and may presage a broader struggle about the future of the eurozone. Paris is expected to put forward concrete proposals in the coming months.

    In line with a French public opinion that is more sympathetic to the Greeks than in other parts of Europe, Mr Hollande described the prime minister as “courageous.” Mr Tsipras, he said, was “elected on a programme that was very on the left, and he finds himself carrying out difficult reforms.”

    Mr Hollande, who, to a lesser extent, has also had to implement unpopular reforms and carry out budget cuts to meet eurozone rules, has signalled he would not change the business-friendly posture he adopted last year.

    Manuel Valls, France’s reformist prime minister that many on the left resent for being too market-oriented, will stay on until the next presidential elections in 2017, Mr Hollande said.

    France’s socialist prime minister is calling for a new eurozone economic government and budget, which would be a step in the right direction of the eurozone wasn’t being run like an Ordobliberal economic laboratory. At the same time:


    Mr Hollande, who, to a lesser extent, has also had to implement unpopular reforms and carry out budget cuts to meet eurozone rules, has signalled he would not change the business-friendly posture he adopted last year.

    Manuel Valls, France’s reformist prime minister that many on the left resent for being too market-oriented, will stay on until the next presidential elections in 2017, Mr Hollande said.

    So the guy calling for an ever-close union in response to rising tensions over the rise of an overpowering Germany is, himself, a socialist that is too cowed to overturn the neoliberal policies he was forced to adopt.

    This probably isn’t going to end well.

    Posted by Pterrafractyl | July 16, 2015, 9:24 pm
  4. The lack of self-consciousness of Germany as it gives Greece the proverbial “Faust In Arsch” as the whole world looks on doesn’t surprise me. Allen Dulles and Prescott Bush (Banker) and what they were up to with the Nazis is starting to look all too familiar isn’t it? Just banks instead of tanks this time around.

    End Game is apparently a United States of Europe with both a fiscally and politically centralized Northern Euro based government… Debt will be the weapon used to force countries to strip sovereignty. Euro heads essentially admit this is what they are up to.

    Posted by WHOODDATHUNKIT | July 18, 2015, 12:06 am
  5. Greece banks finally reopened today after the ECB raised its emergency credit lines. This is following the closing of the banks after the Greece financial system locked up late last month in response to the ECB’s freezing of that emergency credit as part of a troikan effort to pressure the Greek government during the negotiations.

    All that said, remember folks: the actions of the troika had nothing to do with the collapse of Greece’s economy and freezing of its banking system in the last few weeks that caused the final cost of the “bailout” package to rise from 53 billion euros to 86 billion euros. That was somehow all Greece’s fault:

    Reuters
    Special Report: The man who cost Greece billions
    ATHENS | By Dina Kyriakidou

    Mon Jul 20, 2015 5:41am EDT

    Once again Alexis Tsipras was struggling to make a decision. For hours on July 13, the Greek prime minister and Europe’s leaders had been trying to thrash out a new deal to bail out bankrupt Greece and keep the country in the euro zone.

    Now a clean copy of the latest text had been printed, and German Chancellor Angela Merkel, French President Francois Hollande and European Council President Donald Tusk were satisfied with the terms. So too appeared Tsipras – but he left the room to check the details one more time with colleagues in his leftist party Syriza.

    Nearly an hour later he had still not returned. Heads of government and state paced around, fiddling with their phones. The Lithuanian president and Slovenian prime minister said they could wait no longer and left through a backdoor, a diplomat involved in the summit said.

    When Tsipras finally reappeared, his response confirmed what Europe’s leaders had suspected for some time: without the full backing of his party, the Greek leader could not commit. The drafting process had to begin anew.

    The setback reinforced European doubts that Tsipras could control his party. Friends and associates say the 40-year-old’s calm demeanor belies a man struggling to balance Syriza, Greece’s economic interests and his own leftist ideology. At many points he has turned to a small team of advisers, conferring with them again and again before making major decisions.

    Tsipras’s strategy going into the bailout talks was to push international partners to the edge, betting they would make concessions to prevent Greece crashing out of the euro zone. In the event, though, he was forced to blink first and then ad-lib his way through the crisis that ensued.

    He found himself pressed on the one side by the Germans, who didn’t want to give another penny to prop up Greece, and on the other by his own political party, which opposed the austerity demanded in return for a bailout.

    The indecision and delays have cost Greece about 30 billion euros in the last three weeks alone, according to one senior European Union (EU) official. Tsipras’ inability to cut a deal in early July, which forced Greek banks to close their doors and sent the economy plunging, has pushed up the cost of the latest bailout to 86 billion euros, from the 53 billion euros Greece was requesting only a few weeks ago.

    Tsipras would not speak to Reuters for this story. But he told Greek state broadcaster ERT on July 15 that he had made mistakes and taken some bad decisions. But at least he was a straight talker, he said. “You can accuse me of many things, that I had illusions that this Europe can be defeated, that the power of what’s right can defeat the power of banks and money. But you cannot accuse me of lying to the Greek people.”

    A former Syriza colleague who has known Tsipras since he was a teenager and is now with another party said: “He has grown in leaps politically, but his decisions are a result of his fears. Fear that he will be the prime minister who led Greece out of the euro, fear his party will split, and also fear he is betraying the ideology he has fought for and believed in since he was a child.”

    COMRADES

    In the referendum, Greeks voted against tough bailout terms involving austerity. It was a huge victory for Tsipras, but the sense of elation didn’t last. He sought parliament’s approval to go back to the EU negotiating table and, unsure whether he could hold his government together, reached out to his political rivals for support.

    The leaders of all Greece’s main parties except far-right Golden Dawn were called to a meeting at the presidential mansion on July 6. It lasted nearly seven hours. Insiders said Tsipras was accused of bringing Greece to the brink of disaster with his erratic behavior. Though Tsipras spent most of the time consulting EU leaders by telephone, he listened to his critics, spoke little and kept copious notes, the insider said. He looked tired and anxious and responded by saying: “We must all exercise self-criticism.”

    At the end of the marathon meeting, a joint statement was issued, declaring the referendum’s resounding rejection of a bailout deal as a mandate to negotiate further. During a five-hour parliamentary debate that started after midnight and ended with Tsipras delivering a final appeal in a trembling voice, Syriza was in uproar.

    Parliamentary offices filled with cigarette smoke despite a smoking ban. Syriza lawmakers walked the corridors telling reporters the government might not survive the night. Some Syriza lawmakers rebelled, but Tsipras won the vote with the support of other parties.

    Wounded, but armed with parliament’s approval, he returned to Brussels for the final showdown. In reality, though, he was losing any leverage to negotiate and decisions were being forced on him.

    As EU funding ran out, the government was compelled to close Greek banks and limited people to 60 euros a day from cash machines.

    Tsipras looked exhausted. Some European leaders even urged him to get some rest. But with the intervention of the French, a deal was reached under which Greece agreed to accept even tougher economic reforms than had been on offer before. Tsipras announced it to his team calmly: “OK, we signed.”

    In Athens, a group of Syriza supporters gathered around wine and meze in the leafy yard of a house in the leftist district of Exarcheia. The group was split between those who had wanted Tsipras to get a bailout deal and keep Greece in the euro, and those who advocated ending austerity – even if it meant going back to the drachma.

    What was unanimous, however, was sympathy for Tsipras. “He may not have political experience but he is honorable and a fighter,” said Nikos Kapios, 80, a retired actor at the gathering.

    At the weekend Tsipras reshuffled his cabinet, replacing several ministers who opposed the new EU deal. With Syriza divided, Tsipras, who remains popular with voters, may decide to hold another election later this year. “If he doesn’t make it,” said Kapios, “the blame is with his own comrades.”

    Here’s the key ‘WTF?!’ part:


    The indecision and delays have cost Greece about 30 billion euros in the last three weeks alone, according to one senior European Union (EU) official. Tsipras’ inability to cut a deal in early July, which forced Greek banks to close their doors and sent the economy plunging, has pushed up the cost of the latest bailout to 86 billion euros, from the 53 billion euros Greece was requesting only a few weeks ago

    Yes, it was apparently Alexis Tsipras’s inability to come to an agreement with the same troika that has now shocked the world with its cruelty and created an existential crisis for Europe that caused the sudden retrenchment of Greece’s economy in recent weeks. Why didn’t Greece keep its banks open after the ECB basically forced the government to declare a bank holiday or face a series of bank runs? It’s one of life’s little mysteries.

    Posted by Pterrafractyl | July 20, 2015, 12:34 pm
  6. Here’s a great example of why Europe is probably in for a multi-generation adventure in schadenfreude-driven mutual-cannibalism: It isn’t just the wealthiest eurozone members that want to turn Greece into the latest experiment in using mass poverty to create mass prosperity. The biggest cheerleaders are often the very same people that were subjected to Europe’s last experiments at using mass poverty to create mass prosperity:

    Reuters
    Euro Zone’s Have-Nots Ask-Why Should Greece Get More Than Us?

    JULY 21, 2015, 7:34 A.M. E.D.T.

    NITRA, Slovakia — Bozena Vargova, a retired physiotherapist from Slovakia, cannot understand why her country should bail out Greeks who often earn twice as much as Slovaks and run up debts.

    “I don’t feel like we should give anything to Greece,” said Vargova, who lives on a pension of 370 euros a month, while the average Greek pension is 833 euros.

    In the bitter wrangling over whether the euro zone should bail out Greece, some people sympathetic to Athens framed the debate as a stand-off between Europe’s rich and poor: wealthy Germany humiliating poverty-stricken Greece.

    But in the case of Slovakia – and other ex-Communist countries now in the euro zone – the dividing line is not about wealth levels but about attitudes to indebtedness and sacrifice.

    That perceived gulf in values could be the biggest threat to the already shaky unity of the euro zone, and it is starkly exposed in Nitra, a city off 85,000 people in south-western Slovakia.
    t
    Sixty-year-old Vargova, and her husband, who works as a masseur, have sold their four-room apartment in Nitra and moved to a cheaper house in a nearby village to eke out their limited funds.

    Vargova, who retired after working for 40 years, believes it is time Greeks felt some of the hardship Slovaks went through when their country transformed itself from a Communist economy.

    “They lived beyond their means, now they have to tighten their belts,” she said of the Greek people.

    HARSH REALITIES

    Slovak leaders have frequently shared their impatience with Athens during Greece’s debt crisis, which culminated last week with a decision to give the country a new bailout package worth up to 86 billion euros (£60.1 billion).

    Prime Minister Robert Fico said it would be “immoral” to write off any Greek debt and he would call for Greece’s exit from the euro zone if Athens fails to meet agreed conditions.

    “Greeks must pay a tax for how they behaved in the past,” Fico said on Tuesday.

    “We have gone through our own tough path in Slovakia. If we could do it, as a country with substantially weaker economy (at the time), another country must do it as well.”

    One Twitter post by Slovak Finance Minister Peter Kazimir, suggesting Greece’s government brought the harsh bailout terms on itself, led to a complaint by the Greek ambassador, according to a Slovak government source. The Greek embassy in Slovakia’s capital, Bratislava, had no immediate comment.

    After a sharp slump in the Greek economy in recent years, Slovakia has now edged ahead of Greece in economic output per capita. Slovak output now stands at 76 percent of the EU average, while Greece is at 72 percent, according to 2014 data by Eurostat, the EU’s statistics service.

    But figures on household incomes still put Slovaks behind. Minimum wages are 380 euros in Slovakia and 684 euros in Greece. Slovakia’s average pension is 408 euros.

    Even adjusted for the lower cost of living in Slovakia, average Greek wages are still 25 percent higher than in Slovakia, according to the Organisation for Economic Cooperation and Development.

    REFORM SWEEP

    With a monthly pension of 437 euros, 67-year old widow Maria Halmesova is better off than most pensioners her age living alone in Slovakia, yet she still struggles to get by.

    She spends two hours a day cleaning offices and homes to stretch her income.

    “I spend 200 euros on rent and energy, food is very expensive, I’m lucky I don’t need expensive drugs. Still, without additional jobs my pension wouldn’t be enough to pay all the bills,” Halmesova told Reuters.

    If life is tough for many of Slovakia’s 5.4 million people, it is in part because of market reforms in the early 2000s that made it easier to fire employees and made the tax system more effective – similar to some of the measures Athens now faces under the terms of its bailout.

    Slovakia was dubbed the black hole of central Europe under Prime Minister Vladimir Meciar in the 1990s.

    Slovaks instead voted in a new government which undertook sweeping market-friendly reforms, including major privatisations, tax changes, a labour market revamp, a pension overhaul and increased transparency.

    The World Bank called the country the “World’s Top Reformer” in 2004. The new policies brought in investors, boosted exports and growth, and kept debt down to well below the euro zone average.

    Having lived through those tumultuous changes, Halmesova has little sympathy for Greek people protesting over the terms of the euro zone’s bailout.

    “When Slovakia went through painful reforms people sucked it up, there were no mass protests, no strikes,” she said. “It’s not solidarity for such a small country to contribute to Greece.”

    And this is why the eurozone is screwed. In one country after another, “reforms” have been put in place that primarily helped international business interests and local elites while making life harder for everyone now, and it’s happened in so many countries (especially the poorest one) that now there are two general ways to sort of make things fairer: elevate the poor or further beat down everyone but the rich. And if all you’ve received from “the system” in life so far is more beatings, it’s a totally human, if unfortunate (and not exclusively human), response to demand that others get the same beatings. And when it comes to Slovakian pensioners, it’s pretty apparent that more beatings is all they’ve received:

    With a monthly pension of 437 euros, 67-year old widow Maria Halmesova is better off than most pensioners her age living alone in Slovakia, yet she still struggles to get by.

    She spends two hours a day cleaning offices and homes to stretch her income.

    “I spend 200 euros on rent and energy, food is very expensive, I’m lucky I don’t need expensive drugs. Still, without additional jobs my pension wouldn’t be enough to pay all the bills,” Halmesova told Reuters.

    If life is tough for many of Slovakia’s 5.4 million people, it is in part because of market reforms in the early 2000s that made it easier to fire employees and made the tax system more effective – similar to some of the measures Athens now faces under the terms of its bailout.

    Yes, the well off elderly pensioners have to only work two hours a day to survive in Slovakia. That they demand the same for Greece instead of demanding better treatment for themselves is no surprise. After all, what are the odds of better treatment if all you’ve received from your government thus far is more struggle with limited help?

    It’s no surprise that the people of the former Eastern Bloc republics would be a little cynical about the possibilities of a life without daily struggle. First they endure the hardships of communism and then had to go through often far worse levels of poverty under the post-Soviet eras of neoliberal reform. Cynicism has empirical backing in this case.

    But it’s worth keeping in mind how tragic it is if the smallest and poorest European nations, especially the small eurozone nations, just abandon the idea that even the retirees in poorest of the poor member nations should be paid enough to actually retire. That’s ‘race to the bottom’ economics. Is that really what the the eurozone’s poorest states want? ‘Race to the bottom’ economics? If not, what’s so sad about the poorer members electing right-wing governments is that if there’s one advantage to creating a giant union it’s that blocks of little nations can band together and do things that help everyone. And if there’s one thing that could help everyone, it’s having nations band together in a union that prevents things like races to the bottom. Whether it’s tax evasion or deregulation, the ‘race to the bottom’ dynamic is one of the most powerful forces shaping the modern world because it really is like a mathematical force driving human behavior once the rules of the economy are set up so catering to international business for their investment dollars is just the game virtually everyone has to play. When that happens, retirees don’t really retire in places like Slovakia. And a big union, like either the Europan Union or the eurozone, would have been great ways to start the process of ending the twisted race to the bottom that’s impacted that entire global economy. In other words, despite the fact that the eurozone is turning out to be somewhat of a nightmare, it’s worth keeping in mind that it could have been kind of awesome if things had turned out differently. Europe could be the world’s “No Austerity” Block of nations. It would have been pretty sweet.

    Instead, we get updates like this:

    The Slovak Spectator
    Slovakia lags in longevity and quality of life, health care

    SLOVAKIA lags behind developed countries in longevity and quality of life while also facing the rapidly growing deficit in health care, a report by the Institute for Economic and Social Reforms (INEKO) concludes.
    25. Jun 2015 at 14:13

    “Our country lags behind in comparison of health quality during one’s s life,” INEKO’s head Peter Goliaš said at a press conference on June 24. “Slovaks, together with Latvians, live the shortest years of healthy life form among all 28 European-Union member states,” he added.

    This is – on average – 54 years, seven years fewer than EU average, and 15 years less than in Norway.

    “The share of seniors who can still live a full-valued life is thus merely half of that in the Czech Republic, Poland, Austria, or Hungary – and less than one-quarter compared to Norway, Sweden or Switzerland,” INEKO’s analyst Ján Kovalcík said, as quoted by the TASR newswire.

    Slovakia also scores poorly in avertable death rate – premature deaths that should not occur if the treatment is adequate. “This mortality belongs among the highest in the EU, and is the second worst in the OECD, after Hungary,” Kovalcík added.

    Financial prospects in health care in the upcoming decades will be adversely affected by the ageing population, according to INEKO.

    “Slovakia also scores poorly in avertable death rate – premature deaths that should not occur if the treatment is adequate.”
    Elevated levels of avertable deaths. And that’s the plan for Greece so the Greek people can pay for the the sins of living a country where where the upper-class prefers to evade taxes and the oligarchs prefer to use the same international tax shelters that oligarchs everywhere use) just as the people of Slovakia had to pay for the sins of being born into a small country whose fate has been heavily determined by the tides of history. Avertable deaths here we come:

    MarketWatch
    Opinion: How we can already see the debt deal killing Greece

    Published: July 22, 2015 11:46 a.m. ET

    By Tim Mullaney

    Tourism drops sharply, dooming hopes of reviving economy

    Well, this didn’t take long.

    Before the ink is even dry and all the conditions agreed to, there are signs that the deal to “restructure” Greece’s debt in exchange for “reforms” is killing the economic goose that in Greece lays what are increasingly toxic fiscal and macroeconomic farts.

    The evidence is data released by Booking.com, the largest travel agency in Europe, owned by Priceline Group. As the chart below shows, the chaos surrounding the debt deal slashed the number of people willing to book vacations in Greece nearly to zero. Even now, with the situation ostensibly resolved, the number of cancellations is up nearly 20% from a year ago.

    Tourism doesn’t just matter a little to Greece’s economy — for purposes of generating the imported currency that will let Greece even begin to make payments on the soon-to-be 400 billion euro debt owed by a poor country with a population the size of Ohio, tourism IS the economy.

    With few other export industries, and olive oil generating less than $1 billion a year, the 17% to 18% of the economy represented by tourism is where the debt will be serviced, let alone repaid. If it is serviced at all.

    The sag in tourism even in the last few weeks tells Greece’s fortune — outright panic when, as is often the case, the situation seems out of control, pockmarking the longer-run situation of torpor and slight decline that has pushed Greece’s unemployment rate about 25% and will push it farther up if the deal is implemented.

    The economy only gets even worse when the deal takes effect — complete with a big tax hike on travel to the Greek islands. That’s only part of a broader insistence that Greece run a much bigger surplus than even Germany, where unemployment is just 4.7%. We’ve seen tax hikes and spending cuts applied to an economy in depression — in the U.S., in 1937, prompting a jump in unemployment to 19% from 14%. Among other things, they mean that the Greek budget won’t run the surplus that official creditors demand.

    The options now run from the tragic to the comic.

    The tragic begins with the slow-motion train wreck everyone can see coming now, where more austerity leads to a deeper depression, with Europe putting in more money like the 7 billion euro Greece used to make missed interest payments this week. The grimly comic potential of this lies in the prospect of northern European officials pretending this is progress.

    After all, you don’t need to be a weatherman to see which way the wind is blowing for Greece’s third-quarter economy.

    The solution, which will not be quick or easy, begins with devaluing Greece’s currency and letting what needs to happen, happen. While analogies to Argentina’s early-2000s devaluation are popular now, the better analogy may be to the shock therapy regimes that once-corrupt Communist states like Poland and the Czech Republic went through after the Berlin Wall fell.

    The devaluation could mean bringing the drachma back — or, as economists have suggested in recent days with varying degrees of seriousness, fiscally responsible states such as Germany could leave the euro and let debtor nations remaining in the eurozone devalue together.

    Either way, Greece is going nowhere without a tourist boom, and a cheaper currency would do much more to make that happen than Europe’s bright idea — which is raising value-added taxes on Greek holidays.

    There is no amount of trucking or pharmacy deregulation (reform, if you will) that is going to service a debt that is closing in on double Greece’s shrinking gross domestic product. But structural reforms to make Greece’s economy sound in 2017 and beyond will only work if the country doesn’t drown in debt before it gets there.

    Yes, it’s true that:


    There is no amount of trucking or pharmacy deregulation (reform, if you will) that is going to service a debt that is closing in on double Greece’s shrinking gross domestic product. But structural reforms to make Greece’s economy sound in 2017 and beyond will only work if the country doesn’t drown in debt before it gets there.

    but note that “the solution” for Greece shouldn’t actually involve shock therapy regimes that once-corrupt Communist states like Poland and the Czech Republic went through after the Berlin Wall fell.” That’s just more ‘race to the bottom’ nonsense. Unfortunately, what Greece needs is what most of the rest of the world needs which is a nation and a global community of nations that play by similar rules that all prioritize providing basic human needs (like a retirement) over bogus bankster debts and the needs of the oligarchy. Being humane is just good economics but as any zombie apocalypse teaches us, it’s hard to be humane on your own.

    The eurozone may have started off as a right-wing experiment/straightjacket, there’s no law of physics that says it had to stay that way. But as long as things don’t change politically, and eye-for-an-eye ethics rules the day, this is a law of math that’s going to continue shaping the state of affairs across Europe. The ‘race to the bottom’ math, where hitting rock bottom is always another round of reforms and another round of crises away. Math that doesn’t just apply to poor countries like Slovakia:

    Reuters
    On reform, Europe asks Greece to go where many fear to tread

    PARIS/BERLIN | By Mark John and Holger Hansen

    Wed Jul 22, 2015 11:04am EDT

    Greece’s new bail-out deal imposes a stiff dose of budget rigor and market deregulation which critics say few leaders of Western Europe’s biggest nations have dared serve their own voters.

    “Francois Hollande is very good at telling others how to do their reforms,” opposition French conservative Xavier Bertrand said in a dig at France’s Socialist leader, a key broker in the Greek accord clinched on July 13 after all-night Brussels talks.

    “So what’s he waiting for in France?” said Bertrand, who was labor minister in the 2007-2012 government of former President Nicolas Sarkozy, which also struggled to make good on campaign pledges to revamp the euro zone’s second largest economy.

    While euro zone leaders deflect cries of double standards by insisting the tough measures are justified to rescue Greece from collapse, such jibes underline how uneven reform has been in the 19-member currency area since its launch in 1999.

    While she has balanced Germany’s budget for the first time since 1969, Angela Merkel faces regular criticism that she has done little in a decade in power to modernize the bloc’s biggest economy since taking over from Gerhard Schroeder, voted out in 2005 after introducing a raft of painful labor reforms.
    h
    The demands made on Athens to win a new bail-out worth up to 86 billion euros would, if implemented, transform the Greek economy from the bad boy of Europe into a reform poster-child.

    They come as Greece pursues spending cuts of such rigor that it eked out a small primary budget surplus before debt service for the second successive year in 2014, in stark contrast to repeat deficit-sinning by France.

    Desperate times call for desperate measures, Greek creditors respond, arguing that this is what happens when your national debt hits 177 percent of gross domestic product and a crumbling economy leaves one in four of the workforce with no job.

    But as Greek Prime Minister Alexis Tsipras braced to push a further batch of measures through parliament on Wednesday, it is worth recalling that much of what Athens has been told to achieve has proven so socially and politically explosive that others in Europe have struggled to do the same.

    PENSION REFORM – THE ELUSIVE GOAL

    As protesters threw stones and petrol bombs outside, Greek lawmakers last week passed a first batch of austerity moves stipulated in the Brussels accord, including “upfront measures to improve long-term sustainability” of pensions.

    While few dispute the need to revamp a pension system which drains nearly 10 percent of GDP a year from the state budget – four times the euro zone average – balancing retirement accounts has proven elusive across a continent with ageing populations.

    Sarkozy’s move in 2010 to raise the statutory retirement age by two years to 62 sparked France’s biggest street protests in years. Hollande has made more tweaks, but the annual deficit of the state pension fund will still hit 9.2 billion euros by 2020.

    Greece’s bail-out imposes a statutory pension age of 67 by 2022 – seven years ahead of the deadline Germany set itself to reach the same target in a law agreed back in 2007.

    Further divergences emerge in the market reforms Greece must undertake, including liberalization of Sunday trading and deregulation of its dairy, bakery and pharmacy sectors.

    These are based on a best practice “toolkit” designed by the Organisation for Economic Cooperation and Development, an inter-governmental think tank. In an executive summary, the OECD extols the growth potential of such measures, pointing to their contribution to a 1990s revamp of the Australian economy.

    Their application in the euro zone is somewhat patchier.

    While one “toolkit” recommendation to Greece is to liberalize pharmacy distribution channels, French pharmacists retain a monopoly on selling common non-prescription drugs. They staged a one-day strike earlier this year to defend that right.

    Sunday trade is still banned in Germany, apart from very specific exemptions, which is one reason why railway stations often resemble shopping arcades.

    In France, mayors may now allow stores to open on up to 12 Sundays a year. But the government had to use a constitutional device to pass the controversial law through parliament without a vote due to opposition among its own Socialist lawmakers.

    “They want to asphyxiate the small stores so that the big international ones can enter,” Vassilis Korkidis, president of the Athens Retailers Association, said of what he suspected were the ulterior motives for imposing such measures on Greece.

    GREECE “NOT ALONE” ON REFORM PATH

    EU officials deny accusations of double standards, arguing that Greece fell so far behind the curve of gradual reform elsewhere in the bloc that it now must race to catch up.

    “Businesses in Greece continue to face more regulations and restrictions than in many other EU and OECD countries,” the European Commission said in an emailed statement. Citing efforts in Spain, Italy and Belgium, it noted that Greece was “by far not the only country” overhauling its pension regime.

    Countries in the former Communist east which have already gone the extra mile with tough reforms needed to secure their euro membership make that argument more forcefully.

    Poland says its state pension system is sustainable in the long run, even as its population ages. But the price will be a low level of provision, with state pensions potentially falling to as low as 20 percent of final salary by 2060.

    Eastern newcomers to the euro zone say their pensions are less than half the average Greek pay-out of 833 euros a month. On the regulatory front, they say their economies are already more open in some areas than those in western Europe.

    EU policymakers have complained for years about member states who pay lip service to reform at Brussels summits, then drag their heels back home faced with powerful vested interests.

    A joint report by the chiefs of the main EU institutions and the European Central Bank said last month the bloc’s pensions systems still need a major overhaul and proposed more binding reform targets for member states on everything from labor markets to business regulation.

    Hollande is leading calls for the euro zone to have its own government and parliament to improve policy-making – a move Berlin backs in principle. But there is plenty of scope for divergence on the substance.

    Backers of “more Europe” argue that tighter euro zone rules might have prevented the Greek crisis. The question is whether anything will be in place in time to avert the next crisis.

    As we can see, what’s good for the Greek goose is good for the euro-gander. And that includes what’s “good” for Greek pensioners:

    PENSION REFORM – THE ELUSIVE GOAL

    As protesters threw stones and petrol bombs outside, Greek lawmakers last week passed a first batch of austerity moves stipulated in the Brussels accord, including “upfront measures to improve long-term sustainability” of pensions.

    While few dispute the need to revamp a pension system which drains nearly 10 percent of GDP a year from the state budget – four times the euro zone average – balancing retirement accounts has proven elusive across a continent with ageing populations.

    Sarkozy’s move in 2010 to raise the statutory retirement age by two years to 62 sparked France’s biggest street protests in years. Hollande has made more tweaks, but the annual deficit of the state pension fund will still hit 9.2 billion euros by 2020.

    Greece’s bail-out imposes a statutory pension age of 67 by 2022 – seven years ahead of the deadline Germany set itself to reach the same target in a law agreed back in 2007.

    A joint report by the chiefs of the main EU institutions and the European Central Bank said last month the bloc’s pensions systems still need a major overhaul and proposed more binding reform targets for member states on everything from labor markets to business regulation.

    Hollande is leading calls for the euro zone to have its own government and parliament to improve policy-making – a move Berlin backs in principle. But there is plenty of scope for divergence on the substance.

    Yes, “balancing retirement accounts has proven elusive across a continent with ageing populations”. Something that one would totally expect given the math of both demographics, advancements in medicine, and the predictable outcome of austerity policies in the face of a generational financial crisis is actually happening. And at a time when youth unemployment is at record highs in nations across Europe, postponing retirement is the top priority. Imagine that. And now that austerity and the race to the bottom have basically become permanent policies across Europe, France’s Hollande is making a push for a new central eurozone government, long a goal of the European Project.

    This is all part of why it’s so sad that the poorest societies that have suffered the greatest consequences of the West’s obsession with right-wing economics over the past few decades are now austerity champions. If a eurozone government what Hollande is proposing happens (and it probably will since Berlin backs the idea in principle), it should become a mechanism of channeling investments and cash into those poorer member states as part of making the eurozone a transfer union because that’s sound economics calls for if the eurozone is going to be sustainable without being a nightmare race to the bottom. And since Greece’s austerity experience is clearly being set up as a precedent to be applied to the rest of Europe in due time, it’s pretty obvious that it isn’t just the poorest nations that need to form a “No Austerity” Bloc of eurozone nations. They all need to. At least the rabble needs it if it actually wants to retire. Otherwise it’s the race to the bottom for everyone and in that world quality social safety-nets are luxuries that only the wealthiest of nations should be able to afford and not valuable investments that played in critical roles in creating the wealth wealthiest nations.

    Past societies had an excuse for not trying to create a society where no one is a “have-not”. In today’s societies, which could create a a whole world of “haves” if we actually oriented the economy towards that, our best excuse for prioritizing the creation of such a world is mass confusion that collectively caused us to forgot that creating such a world is pretty much the main goal any self-respecting civilization. That and adequate Borg defenses (there are some synergistic policy options there).

    But there’s really no excuse for not prioritizing freedom from want and need and the freedom to retire and that’s going to inevitably involve things like removing the freedom of millionaires and billionaires to utilize international tax havens across Europe and the world or banning elderly poverty and mandating making government spending big enough to fulfill that humane demand, safe in the knowledge that demand-driven economics is sound economics as long as you don’t let corruption get out of control. A union of nations that bans things like elderly poverty, tax havens, charter-mongering, and rejects the garbage economics that uses artificial financial scarcity to create real material scarcity (and waste what we have at the same time) and puts unemployment youths to work on useful things would be just what the world needs. Now.

    Posted by Pterrafractyl | July 26, 2015, 11:08 pm
  7. France’s farmers have been protesting lately, including protests that involve spraying manure on passing cars to protest falling food prices.

    This is a week after France announced $1.2 billion in farming prices supports. But that was just a short-term measure. In the long run, France has a different solution to its farming woes: increase the “competitiveness” of France’s farms so they can catch up with other European countries were prices are significantly lower. Including countries like Greece

    Reuters
    UPDATE 1-France offers financial help for protesting livestock farmers

    By Sybille de La Hamaide
    Wed Jul 22, 2015 11:02am EDT

    (Reuters) – France announced measures worth up to 1.1 billion euros ($1.2 billion) on Wednesday to support its livestock farmers and try to halt protests which have escalated in recent days into road blockades in the northwest.

    “The aim of the plan is to deal with the emergency but also to bring sustainable solutions,” Prime Minister Manuel Valls said at the presidential Elysee palace after a cabinet meeting.

    President Francois Hollande had on Tuesday promised a plan to help struggling cattle, pork and dairy producers suffering from low prices, tough competition and a squeeze on margins by food processors and retailers.

    French Agriculture Minister Stephane Le Foll, who has said about 10 percent of livestock farmers were on the brink of bankruptcy, detailed 24 measures mainly aimed at easing struggling farmers’ cash flow.

    The package offers up to 600 million euros ($655 million) worth of tax exemptions and delayed payments that would cost the French treasury about 100 million.

    In addition, the state would guarantee up to 500 million euros worth of loans for producers through its public investment bank, mainly to reimburse debts to suppliers. That would cost the government another 100 million euros.

    In a set of longer term measures, France also aims to reverse a drop in competitiveness on local and export meat and dairy markets, notably against other European countries where prices have been significantly lower, with an initial focus on Greece, Turkey, Lebanon and Vietnam, Valls said.

    France’s largest farm union FNSEA welcomed the plan.

    “This is going in the right direction,” FNSEA chairman Xavier Beulin told reporters.

    Farmers were starting to lift some of the blockades.

    Traditionally mostly right-wing, French farmers have become increasingly frustrated with the Socialist government of Hollande, saying increased paperwork and high labour costs are the main cause for their loss in competitiveness.

    Russia’s embargo on European food imports and a milk surplus linked to the end of EU quotas, lower Chinese demand and supermarkets’ pricing power have further dented their profits and morale.

    Polls released at the latest elections showed a rising number of farmers were turning to the far-right National Front.

    Le Foll was due to meet sector representatives later on Wednesday, largely to convince the meat industry to respect a deal signed in June, in which they agreed to raise prices paid to farmers.

    Uh oh:


    Traditionally mostly right-wing, French farmers have become increasingly frustrated with the Socialist government of Hollande, saying increased paperwork and high labour costs are the main cause for their loss in competitiveness.

    Russia’s embargo on European food imports and a milk surplus linked to the end of EU quotas, lower Chinese demand and supermarkets’ pricing power have further dented their profits and morale.

    Polls released at the latest elections showed a rising number of farmers were turning to the far-right National Front.

    Yes, France’s farmers are on the verge of a fascist freakout, with the poo flinging phase having already begun. And despite the promises of prices supports, it’s pretty clear that France’s farms have a long way to go before their going to compete in the global agricultural race to the bottom, especially since “competitiveness” is just as much about a willingness for workers to be underpaid as it is an ability for a company to do more with less (actual productivity) and one of the big items on the Greek “reform” agenda is making Greece’s farms more “competitive” by cutting labor costs and increasing the use of technology. And since 90 percent of Greece’s farms are small, family owned enterprises, the room for “cutting costs” in Greece’s agricultural sector is actually pretty massive. After all, one of the primaries reasons Greece’s economy is considered to be so unproductive is that, compared to their European neighbors, the Greeks are just a lot more likely to work on a farm. In other words, while the “lazy Greek” stereotype gets perpetuated by the low productivity of Greece’s economy, one of those reasons the economy is so low in its per-capita productivity is because so many “lazy Greeks” are busting their asses on low-productivity farms:

    The Wall Street Journal
    Greece Has Too Many Farmers

    By Matthew Dalton

    Apr 4, 2012 9:11 am ET

    Southern Europe has a productivity problem. Workers in Greece, Portugal, Spain and Italy all produce below the euro-zone average per hour worked; the difference is particularly stark for Greece and Portugal, two of the countries getting loans from the euro zone and the International Monetary Fund.

    Why? You frequently hear baseless speculation that southern Europeans don’t work as “hard” as their northern counterparts, whatever that means.

    One explanation actually supported by the data is that southern Europeans are more likely to work on farms, and agriculture is a low-productivity (yet very-hard-work) sector. The divergence is particularly noticeable for Greece and Portugal: 12% of Greek workers and 7% of Portuguese work in agriculture, forestry or fishing, according to Eurostat data from 2010. The euro-zone average for employment in the sector is 3%. Just 2% of German workers are employed in agriculture (forestry or fishing)..

    Spain and Italy are slightly above the euro-zone average, each with 4% of the labor force employed in the sector. But in the two countries’ less productive regions – southern Italy, for example – small farms are significant employers.

    Small farms are particularly common in Greece, explaining why a higher percentage of Greeks work in agriculture than any other country in the euro zone.

    A rural landscape dotted with small, family-owned farms sounds charming, but it’s actually a recipe for low productivity. Labor productivity improves dramatically when workers live in cities. That’s why stories about Greeks moving out of Athens and back to work on farms aren’t a welcome development. Working is better than being unemployed, but the Greek economy needs to become less agricultural, not more so.

    But what can the European Union do? It’s hard in a democracy to quickly engineer large structural shifts in the economy. China’s massive internal migration from the country to cities has been astounding, but Chinese peasants are orders of magnitude poorer than Greek farmers and thus face much stronger incentives to move. And then of course, there are jobs in Chinese cities.

    One idea might be to reform the EU’s system for doling out subsidies to its farmers. That’s already underway, but the direction these reforms are taking doesn’t seem to acknowledge that making farms more productive will (and should) reduce the number of people working on farms and living in the country.

    That’s the problem with the EU’s “Rural Development Policy.” Farming is something that should be done in the countryside, where land is cheaper. But why spend money to “diversify” the rural economy? What’s the vision here: a tech start-up stuck in the middle of a former corn-field?

    So France’s farmers are pissed because they’re expected to compete with the Greek farmers, and the Greek farmers are, by EU standards, too unproductive for the government to support. And instead, the policy solution the reformers might look at (the above article is from 2012) is reforming (reducing) government agricultural subsidies in order to make the farms “more productive” which will, or course, actually reduces rural employment:


    One idea might be to reform the EU’s system for doling out subsidies to its farmers. That’s already underway, but the direction these reforms are taking doesn’t seem to acknowledge that making farms more productive will (and should) reduce the number of people working on farms and living in the country.

    That’s the problem with the EU’s “Rural Development Policy.” Farming is something that should be done in the countryside, where land is cheaper. But why spend money to “diversify” the rural economy? What’s the vision here: a tech start-up stuck in the middle of a former corn-field?

    And that’s why it’s going to be VERY interesting to see what happens to the farmers not just in Greece and France, but all over Europe. Because despite France’s short-term prices supports, it’s pretty obvious that the policy-makers is looking to maximizing agricultural “productivity” across the EU and that basically means the death of the small farmer everywhere. There’s no reason this sentiment is going to be limited to the Greeks:


    A rural landscape dotted with small, family-owned farms sounds charming, but it’s actually a recipe for low productivity. Labor productivity improves dramatically when workers live in cities. That’s why stories about Greeks moving out of Athens and back to work on farms aren’t a welcome development. Working is better than being unemployed, but the Greek economy needs to become less agricultural, not more so.

    So lets hope France’s farmers don’t go full fascist and instead spray their manure in the spirit of democracy and social justice. And let’s hope they have plenty of high-grade manure all stored up for future protests. And make no mistake, if France’s farmers are facing a future without prices supports where they have to directly compete with the Greek farmers, there’s going to be a lot more poo to be flung on Europe’s road to harmonization:

    NPR
    For Greece’s Farmers, Growing Pressure To Be More Competitive

    Jim Zarroli
    July 27, 2015 5:09 PM ET

    Nick Lapatas spent 18 years living in Chicago. Then he returned home to Greece and bought a small farm. Today he and his son sell tomatoes in an open-air market in Athens. Despite the depressed economy and cheaper imports from Bulgaria and Albania, he’s doing OK.

    “I don’t know how, but we are making some money,” he says. “Now, what is going to happen a month from now, I don’t know.”

    The Greek government has long allowed farmers like Lapatas to charge their customers lower taxes, but under the terms of the nation’s bailout by European creditors, that exemption is expected to be phased out.

    Lapatas is dreading the change.

    “For us, when they do that, we’re going to stay home,” he says. “I’m going to take a few chickens. I’m going to put [in] a little tomatoes for myself. I’m going to have my land. You cannot do that.”

    Some 90 percent of Greece’s farms are family owned and most are very small — 5 acres, on average. Yiouli Doxanaki, who runs a consulting firm that works with farmers, says Greece’s rugged and hilly terrain doesn’t lend itself to big farms. And small farms have trouble investing in the machinery that would make them more productive.

    “We don’t have economies of scale,” she says. “Production costs are high in terms of, you know, buying everything you need to produce. And we end up with a product that’s quite expensive.”

    As a result, Greece’s farms often have trouble competing internationally. They’re undercut by cheaper producers in places like Egypt and Albania. And they’re less productive than farms in the Netherlands and Spain.

    Menelaos Tzouris runs a trading company in Athens that buys fruits and vegetables from small farmers and sells them to retailers. He says it’s almost too easy to grow food in Greece. People never had to try too hard to feed themselves.

    “Other European countries like Holland or Poland, which did not have the climate, the natural advantage to grow, they had to do it using a smarter way,” he says.

    Tzouris says Greek farmers are beginning to embrace technology, but they need to go further.

    “We need to do a better job, have a better product,” he says. “That’s what we need to do.”

    If Greece’s economy is to begin growing, it will also have to export more. Doxanaki says Greece has plenty of good agricultural products, such as olives and cheese. The challenge, she says, is to convince the rest of the world that Greece’s exports are worth the extra cost.

    “That’s the turning point now,” she says. “If this doesn’t happen, then the farmers will have no reason of existing because they won’t be able to compete [with] other countries with the same products.”

    The farmers have gotto love this part: After years of pointing out that the artificially high exchange rate is squeezing Greece’s exports, we get still get to hear fun commentarty about how Greece’s big agricultural problem is that its products cost too for exports and the only thing to do is cut the costs. Also, it’s too easy to grow food in Greece so it should be made harder:


    Menelaos Tzouris runs a trading company in Athens that buys fruits and vegetables from small farmers and sells them to retailers. He says it’s almost too easy to grow food in Greece. People never had to try too hard to feed themselves.

    “Other European countries like Holland or Poland, which did not have the climate, the natural advantage to grow, they had to do it using a smarter way,” he says.

    Tzouris says Greek farmers are beginning to embrace technology, but they need to go further.

    “We need to do a better job, have a better product,” he says. “That’s what we need to do.”

    If Greece’s economy is to begin growing, it will also have to export more. Doxanaki says Greece has plenty of good agricultural products, such as olives and cheese. The challenge, she says, is to convince the rest of the world that Greece’s exports are worth the extra cost.

    “That’s the turning point now,” she says. “If this doesn’t happen, then the farmers will have no reason of existing because they won’t be able to compete [with] other countries with the same products.”

    “He says it’s almost too easy to grow food in Greece. People never had to try too hard to feed themselves.”
    Yikes. Let’s hope the Greeks manure stockpiles are adequate. Let’s also hope their anti-fascist impulses remain strong. They’re going to need plenty of both.

    Posted by Pterrafractyl | July 29, 2015, 3:26 pm
  8. Here we go again?

    Reuters
    Pressed by left, Greece’s Tsipras vows ‘thus far and no further’
    ATHENS | By Renee Maltezou and Angeliki Koutantou

    Thu Jul 30, 2015 2:00am BST

    Greek Prime Minister Alexis Tsipras, struggling to contain a revolt in his left-wing Syriza party, said on Wednesday that his government would not implement reform measures beyond those agreed with lenders at a euro zone summit this month.

    Tsipras faces a tough Syriza central committee session on Thursday with many activists angered by his acceptance of bailout terms more stringent than those voters rejected in a July 5 referendum.

    In a clear warning to Syriza rebels, Tsipras said he could be forced to call early elections if he no longer had a parliamentary majority, and suggested an emergency party congress could be held in early September.

    At the same time, he is under pressure from Greece’s creditors to go beyond the two packages of so-called prior actions passed by parliament and include unpopular steps to curb early retirement and tax breaks for farmers, EU sources say.

    “I know well the framework of the deal we signed at the euro zone summit on July 12,” Tsipras told Sto Kokkino radio. “We will implement these commitments, irrespective of whether we agree with it or not. Nothing beyond that.”

    With Greece close to the financial abyss last month, the government closed the banks for three weeks and Tsipras was forced to make the major concessions on reform and austerity to open negotiations on a third bailout of up to 86 billion euros (£60.7 billion).

    In a setback for government efforts to restore more economic normality, the Athens stock exchange will stay closed probably until the end of a fifth week because banks need to adapt IT systems to enforce limits on trading by Greeks.

    A European Commission spokeswoman declined to say what additional measures Athens was expected to take before the conclusion of the new bailout, although she said earlier this week more reforms were due before the first aid is disbursed.

    Tsipras said Greece’s primary budget balance before debt service would break even at best or show a deficit this year, depending on a financial situation that has deteriorated sharply since the imposition of capital controls on June 28.

    The Brussels summit agreement did not specify fiscal targets but Athens had previously been expected to achieve a primary surplus equivalent to 1 percent of annual Greek economic output this year and 2 percent in 2016.

    Germany’s Der Spiegel magazine reported that the creditors were willing to allow a gentler fiscal path taking account of Greece’s return to recession, provided Athens pursued economic and administrative reforms more energetically.

    This is a great way to summarize the situation:


    A European Commission spokeswoman declined to say what additional measures Athens was expected to take before the conclusion of the new bailout, although she said earlier this week more reforms were due before the first aid is disbursed.

    Yes, we don’t get to know what kind of additional austerity measures – beyond the already agreed to demands – the troika specifically has in mind for Greece. We just get to know even more austerity is definitely what they in mind. And if Greece doesn’t meet this shifting goal post, the 86 billion euro “bailout” that Greece and the troika tacitly agreed to a couple of weeks ago just might go *poof* and we’re back to a “to ‘Grexit’, or not to ‘Grexit’?” situation.

    So how bad could that additional austerity demands get? Well, note the nature of the troika’s offer: The creditors are willing to allow “a gentler fiscal path taking account of Greece’s return to recession” (e.g. not demand that Greece meet the primary surprlus schedule that it can’t possibly meet) in exchange for Greece implementing the austerity more energetically:


    Germany’s Der Spiegel magazine reported that the creditors were willing to allow a gentler fiscal path taking account of Greece’s return to recession, provided Athens pursued economic and administrative reforms more energetically.

    And when that’s the messaging coming out of the troika, it’s pretty clear that the troika’s plan for Greece is to simply demand that Greece had better implement significantly more austerity than has ever been suggested thus far before any “bailout” deal will be agreed to.

    But that’s not the only fun “surprise” of late. The IMF just added a whole new twist to the “bailout” negotiation process:
    Unless two key criteria are met, the IMF might be forced to pull out of the “bailout” talks altogether. First, Greece needs to implement substantially more “reforms”. And, second, Greece also must get substantial debt relief because the IMF isn’t allowed to offer bailout packages with that even its own pro-austerity models suggest would leave the nation mired in debt.

    So Greece needs more debt-relief and more austerity or the troika loses a member and the remaining dynamic duos of despair (the European Commission and the ECB) will be left to work out the “bailout” on their own…or just kick Greece out altogether…or maybe just dillydally so long while demanding more and more austerity that Greece finally leaves on its own. And on top of all that, the IMF may not decide with or not it’s going to participate in the “bailout” until 2016. And THAT means that the rest of the troika can just sit back, keep Greece in a state of paralysis, watch the economy erode some more, and demand that Greece do even more austerity in response to Greece’s eroding economy until 2016 too:

    Financial Times
    Greece disqualified from new IMF bailout, board told

    Peter Spiegel in Brussels
    July 30, 2015 2:28 pm

    The International Monetary Fund’s board has been told Athens’ high debt levels and poor record of implementing reforms disqualify Greece from a third IMF bailout of the country, raising new questions over whether the fund will join the EU’s latest financial rescue.

    The determination, presented by IMF staff at a two-hour board meeting on Wednesday, means that while IMF staff will participate in bailout negotiations currently under way in Athens, the fund will not decide whether to agree a new programme for months — potentially into next year.

    That delay could have significant repercussions, particularly in Germany, where officials have long said it would be impossible to win Bundestag approval for the new €86bn bailout without the IMF on board.

    The IMF’s assessment adds another source of complexity, just as Athens and its bailout monitors begin discussions to try to conclude a deal before a tight August 20 deadline.

    While the creditors harbour misgivings, Alexis Tsipras, Greece’s prime minister, is also facing a mutiny from leftwing members of his Syriza party unhappy with the conditions attached to the bailout.

    The IMF decided last week that its existing bailout programme, which was originally to run until March, needed to be scrapped because it could no longer achieve its stated goal of helping Greece recover to the point where it could return to private debt markets. The IMF then forced Athens to request a new IMF programme, which requires board approval, necessitating Wednesday’s meeting.

    According to a four-page “strictly confidential” summary of Wednesday’s board meeting, IMF negotiators will take part in policy discussions to ensure the eurozone’s new bailout “is consistent with what the fund has in mind”.

    But they “cannot reach staff-level agreement at this stage”. The fund will decide whether to take part only after Greece has “agreed on a comprehensive set of reforms” and, crucially, after eurozone bailout lenders have “agreed on debt relief”.

    That condition could prove a sticking point, since Berlin and other creditor governments have so far strongly resisted any suggestion of forgiving Greece’s debts.

    According to the summary, Germany’s representative to the IMF board said Berlin “would have preferred the fund … move in parallel” with the eurozone bailout talks. Instead, it now faces the prospect of trying to move an €86bn bailout through a sceptical Bundestag in a matter of weeks, without the IMF’s imprimatur.

    Some Greek officials suspect the IMF and Wolfgang Schäuble, the hardline German finance minister, are determined to scupper a Greek rescue, despite the July agreement to move forward with a third bailout.

    In a private teleconference made public this week, Yanis Varoufakis, the former Greek finance minister, said he feared that his government would pass new rounds of economic reforms only for the IMF to pull the plug on the programme later this year.

    “According to its own rules, the IMF cannot participate in any new bailout. I mean, they’ve already violated their rules twice to do so, but I don’t think they will do it a third time,” said Mr Varoufakis. “Dr Schäuble and the IMF have a common interest: they don’t want this deal to go ahead.”

    Senior EU officials have insisted that Christine Lagarde, the IMF managing director, signalled her willingness to participate in a new bailout at the high-stakes summit that agreed the new rescue earlier in July.

    But Greece has become a growing source of rancour within the fund and among its shareholders. People who have spoken with senior IMF officials say Ms Lagarde is facing a unified staff view that the fund’s reputation is on the line and that it cannot agree to a new programme without significant changes.

    According to the board minutes, several non-European board members — including from Asia, Brazil and Canada — gave warning over the need to “protect the reputation of the fund”, and the document says Ms Lagarde acknowledged their concerns.

    “[Ms Lagarde] stressed that in their engagement they have to be mindful about the reputation of the fund,” the summary says.

    According to the summary, IMF staff concluded that Greece no longer cleared two of the four requirements in the IMF’s “exceptional access criteria” — the fund framework that allows it to grant bailouts of larger-than-normal size.

    Under the criteria, a bailout recipient must be able to prove it has the “institutional and political capacity” to implement economic reforms, and that “there is a high probability that the member’s public debt is sustainable in the medium term”.

    IMF staff determined that neither criterion has been met — and they would not know whether Athens would meet those benchmarks until the autumn.

    “Greece wants to decide on some important reforms only in the fall, and the Europeans only want to deal with the debt issue after the first review, because they first want to rebuild trust,” the summary states. “The differences between the IMF’s thinking about the debt issue and what the Europeans are currently discussing are very large.”

    At the early stages of the Greek crisis, the IMF waived the debt criteria because of rules allowing it to grant a bailout if there was “a high risk of international systemic spillover”. But IMF staff told the board this risk no longer existed because a Greek default would no longer hurt private bondholders, who now own a very small share of Greek debt.

    So, to summarize the situation: Alexis Tsipras faces a rebellion within Syriza that’s forcing him to demand no more austerity than what was already agreed to while the European Commission demands more austerity and Berlin hints at a “smaller surpluses for more austerity” offer but remains adamantly opposed to any overt debt relief. And the IMF is demanding debt relief for Greece, however only if it can be convinced that Greece has implemented enough austerity to put it on track for medium-term financial sustainability. But the IMF also doesn’t feel like it will be able to determine whether or not Greece is up to the task of “reform” until the fall, after Greece has presumably implemented enough of its growing austerity demands in order to prove that Greece possesses the “institutional and political capacity” required to carry out even more austerity in exchange for the “bailout” and debt relief.

    So at the same time that one wing of the troika (the European Commission) is hinting that a lot more austerity is going to be required of Greece in light of its ailing economy if its going to participate in the 86 billion euro “bailout”, we get the IMF dangling the prospect of debt relief, but only if it can be convinced that Greece is ‘serious’ about implementing more austerity. In other words, the IMF and European Commission agree: what Greece needs right now is more austerity. And as long as it agrees to do everything it’s told now, nice things will happen later.

    This might be a good time to remind ourselves of a few more relevant troikan fun facts:

    The Telegraph
    Greece is being treated like a hostile occupied state
    A new deal for Athens is the worst of all worlds and solves nothing

    By Ambrose Evans-Pritchard

    5:39PM BST 13 Jul 2015

    Like the Neapolitan Bourbons – benign by comparison – the leaders of the eurozone have learned nothing, and forgotten nothing.

    The cruel capitulation forced upon Greece after 31 hours on the diplomatic rack offers no conceivable way out the country’s perpetual crisis. The terms are harsher by a full order of magnitude than those rejected by Greek voters in a landslide referendum a week ago, and therefore can never command democratic assent.

    As the International Monetary Fund acknowledged in its famous mea culpa, if you misjudge the fiscal multiplier and force austerity beyond the therapeutic dose, you make matters worse. The debt to GDP ratio rises despite the cuts.

    EMU leaders have an answer to this. Like Canute’s courtiers, they will simply command the waves to retreat. The text states that on top of pension cuts and tax increases there should be “quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets”,.

    In other words, they will be forced to implement pro-cyclical contractionary policies. The fiscal slippage that acted as a slight cushion over the last five years will be not be tolerated this time.

    To make matters worse Greek premier Alexis Tsipras cannot make a plausible case to his own people that he has secured debt relief, the one prize that could have saved him. Germany blocked even this.

    It did so despite massive pressure from the Obama White House and the IMF, and even though France, Italy, and the leaders of the EU Commission and Council accept that a haircut of some sort is necessary.

    The IMF says debt relief must be at least 30pc of GDP. Even this is too low. Given the damage done by six years of economic implosion, a lost decade of investment, chronic hysteresis, youth unemployment of 50pc or higher, a brain drain of the educated, and a ruined banking system, it would still be inadequate even if the entire debt was written off. That is what this EMU experiment has done to the country.

    Yet all the Greeks get is vague talk of a “possible” extension of maturities, at some point in the future, once they have jumped through umpteen hoops and passed their exams. This is what they were promised in 2012. It never happened.

    “If the specifics of debt relief are not written clearly into the overall package, this is not worth anything,” said Mr Varoufakis.

    Yet all the Greeks get is vague talk of a “possible” extension of maturities, at some point in the future, once they have jumped through umpteen hoops and passed their exams. This is what they were promised in 2012. It never happened.

    Posted by Pterrafractyl | July 30, 2015, 11:10 pm
  9. Here’s another peek at the state of Greece’s healthcare sector after years of austerity: And, surprise, surprise, it turns out that Greece’s austerity mandates actually caused people to use Greece’s private hospitals less and public hospitals and charity medical services more because less and less people can afford to pay for the more expensive private services. And this is in a healthcare system where the government plays a smaller role than in the rest of the EU on average. Once again, austerity saves the day:

    Quartz
    With Greece’s healthcare system in ruins, people are turning to illegal free clinics

    Written by
    Lilah Raptopoulos
    August 08, 2015

    THESSALONIKI, GREECE—”I prefer to find a job, but this is a dream right now in Greece,” said Eva Vaveloua, as she rolled a cigarette in an outdoor cafe in this northern Greek city. She is 38 years old, with a PhD in chemical engineering. “And I don’t want to leave my country. Life here is not easy anymore. It’s ugly. The threat of fascism increases. But I love this place, I fight for this place, and I cannot just leave.”

    Vaveloua, who lives off of her father’s pension in her family home, has donated all of her time to organizing and helping run the Social Solidarity Clinic in Thessaloniki, which serves city residents who don’t have free healthcare— including immigrants and the unemployed, as well as their children. Today, the clinic has 90,000 patients and almost 300 volunteers.

    In the years since the current Greek debt crisis began, questions remain about effectiveness of austerity. For the health sector, things have only gotten worse: the spending cuts imposed by Greece’s creditors broke a healthcare system that was already poorly organized and mismanaged.

    As people live on less money, private hospitals lose patients while public hospitals—free for those with healthcare—overflow. And then there are the 2.5 million people who, for the first time, have no options—the 2011 austerity measures cut health insurance for people who have been unemployed for more than a year. That’s a quarter of the population.

    Officially illegal

    To help these people, a third option was born: free clinics like Vaveloua’s, of which there are more than 40 around Greece. Nobody takes money, nobody gives money; they run off of private donations.

    Although some belong to churches and towns, most are autonomous and politically motivated. Vaveloua’s clinic has been organized under a leftist, anti-fascist disobedience movement. It has chosen to not formally register with the state. “It’s an obligation of the Greek state, over any new laws, to take care of all people, independently of whether they have papers,” she said—and indeed, Article 21 of the constitution says so (pdf). “We refuse to ask a state that doesn’t recognize that law to legalize us.”

    Volunteers do much of their work in-house—that means check-ups, dental work, vaccines—but if there’s something more complex, they match patients with one of over 200 doctors in the area willing to donate their time. They’ve also created a network with over 500 pharmacies in the city, which collect non-expired medications from customers who would otherwise throw them out. This gives the clinic access to most of the medication they need.

    In turn, much of what the clinic does is officially illegal.

    When they receive medical material they can’t use in their clinic, they donate it to hospitals through the back door—despite public hospitals’ strain for resources, this is not allowed. Also, public doctors who help the clinic’s patients with more than just a simple checkup are also technically violating the law.

    Public and private

    The Hippokration General Hospital was all dark hallways drenched in heat. Light burst in sparsely. Between buildings, a cat stretched in the sun. Upstairs, a man sat in a waiting area, one hand on the stand that held his IV drip, the other holding his cigarette. This is the public option.

    “This is a system that has always had problems,” said Alexandros Garyfallos, a rheumatologist at Hippokration and head of the medical school at the Aristotelion University of Thessaloniki. “The public care system was completely overhauled in 1985 in same manner that every Greek thing is created: a little from here, a little from there. Many of our problems didn’t happen because of the crisis. They are problems that the crisis exaggerated.

    Meanwhile, the benefits of paying yourself are reflected in the offices of Prodromos Isaakidis, a surgeon for a private hospital in the nearby city of Veria, and president of the region’s medical society. They are cleaner, more comfortable, less strained. Advanced technology is more often available in places like these; for example, Thessaloniki’s only robotic machine for laboroscopic surgery is owned by a private hospital.

    Greece’s private sector is quite big; larger per capita than most European countries. About a quarter of the hospitals and clinics in Greece are private, despite their high out-of-pocket expense. But now many people just can’t afford Isaakidis’s services anymore. “Everything is nosediving,” he said. “Especially in the past few months. We have decreased our rates very much, but we also have to live. We have a lot of expenses.”

    And with people less able to afford private services like Isaakidis’s, public hospitals are at least 40% fuller than in the past. Hippokration’s emergency room visits have doubled. Emergency room first-aid is the only still form of care free for all.

    Austerity measures led to a hiring freeze at public hospitals in 2011, so personnel are stretched and overworked. Themis Nikolaidis, a 60-year-old senior neurologist, looks exhausted, distracted, and sad—a common sight His salary has been cut from €4,000 to €1,800 ($1,958) per month. This equates to a senior neurologist making $24,000 per year. And when it comes to the additional income they depend on from shifts on call, forget it—they haven’t been paid that in months.

    But still, Nikolaidis does what he can from Hippokration for Vaveloua’s clinic. Simple examinations are easy, but bigger medical needs provide roadblocks. “If someone needs a CT scan, sometimes they send people to me, and I can find a way to do it—as a favor to someone,” he said. “But I can’t do many things, because I can’t force other departments to help.”

    The future stability of public and private hospitals is still unclear, but the clinics filling the void don’t seem to be in danger. “Because the solidarity movement had so rapidly spread all over Greece, and the services it offers are so huge, nobody dares,” Vaveloua said. “It’s not easy for them to stop us.”

    As we can see, austerity isn’t really a Hippocratic oath-compatible policy solution. And it doesn’t help shrink demand for public services either. Skyrocketing unemployment doesn’t help transition people away from government safety-net services. Imagine that.

    But Greek medical service providers are still finding a way to provide those services, although it sounds like the way they found it by providing those services for free. Sometimes illegally. And as a consequence, Greece’s relatively large private healthcare sector is at risk of collapsing at the same time demand for private charity and public service is skyrocketing:


    Greece’s private sector is quite big; larger per capita than most European countries. About a quarter of the hospitals and clinics in Greece are private, despite their high out-of-pocket expense. But now many people just can’t afford Isaakidis’s services anymore. “Everything is nosediving,” he said. “Especially in the past few months. We have decreased our rates very much, but we also have to live. We have a lot of expenses.”

    And with people less able to afford private services like Isaakidis’s, public hospitals are at least 40% fuller than in the past. Hippokration’s emergency room visits have doubled. Emergency room first-aid is the only still form of care free for all.

    With that typically stunning austerity success story in mind, it’s worth reminding ourselves that if you’re relying on private charity and public hospitals to provide vital services like medical care for free in the midst of a depression and massive budget and wage cuts, you’re basically relying on people to give 110% percent. Indefinitely. And maybe give their lives. Because simply giving people the money they need to just buy those services is too painful even though it works:

    Vox.com
    Don’t teach a man to fish. Just give him the goddamn fish.

    Updated by Dylan Matthews on August 4, 2015, 3:58 p.m. ET

    I write a lot about the benefits of fighting poverty by giving poor people cash. It’s supported by good evidence, it’s relatively easy, it respects the decisions of poor people as to how to spend it, and it avoids the central planning challenges of some other anti-poverty policies.

    The most common response is something along the lines of “give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.”

    I’ve always hated that saying, not least because a healthy diet requires eating more than just fish, but it’s actually sort of helpful in this context. The main reason I prefer just giving someone a fish is that we really don’t know, especially in international development, how to teach people to fish.

    We haven’t figured out how to make poor countries grow

    In this context, “teaching to fish” means something like “getting a poor country on a sustainable long-term growth path.” There are plenty of theories of how to do this, but it’s hard to think of an aid program that actually did it. For years, the default approach of the World Bank and the International Monetary Fund was an approach that came to be known as the “Washington Consensus,” and emphasized trade liberalization, deregulation, fiscal austerity, privatization, floating exchange rates, and other free market reforms. There’s little evidence that those policies actually did much to promote growth or poverty reduction.

    We can be pretty sure some things — like supplying free anti-malarial bednets and providing deworming pills, or cash — work. But for a lot of important interventions, we just don’t know. And the stuff that really matters (political stability, trustworthy institution, good health infrastructure) isn’t that amenable to randomized evaluation.

    Cash works in rich countries too

    We know more about how to tackle poverty within rich countries. Programs to help people move out of disadvantaged neighborhoods with concentrated poverty appear to be quite effective in raising the lifetime incomes of children whose families move. We’re getting better at knowing what kinds of schools work for kids growing up in poverty. But one of the best-supported ways we’ve figured out to help people is giving them cash through programs like the Earned Income Tax Credit. And the one time a proposal to just give every citizen cash every year was implemented in a North American city, the city got healthier, saw more teenagers go to school and graduate, and, with the exception of new moms and teenagers, didn’t work any less.

    We shouldn’t stop trying to figure out ways to solve bigger structural problems. But the fact remains that we don’t really know how to teach people to fish. We do, however, know how to give people fish — and we know it leaves them a lot better off as a result.

    “We shouldn’t stop trying to figure out ways to solve bigger structural problems. But the fact remains that we don’t really know how to teach people to fish. We do, however, know how to give people fish — and we know it leaves them a lot better off as a result.”
    Yep, handing out free money and services to poor people people actually succeeds where austerity fails. But the opposite it happening because the opposite is the only path allowed. There can be only one.

    Posted by Pterrafractyl | August 9, 2015, 11:23 pm
  10. Even if you assume the “bailout” package currently under negotiations actually constitutes a form of help and not an act of punishment for an uppity vassal state, here’s the latest indication that “help” for Greece may not be arriving any time soon, despite the looming August 20th deadline to prevent the next round of looming defaults:

    The Wall Street Journal
    Germany Cautions on Rushing Into Third Greek Bailout Deal
    Angela Merkel’s government says quality comes before speed as deadline looms

    y Andrea Thomas
    Aug. 10, 2015 8:26 a.m. ET

    BERLIN—German Chancellor Angela Merkel’s government cautioned on Monday that it wouldn’t rush into a bailout deal between international creditors and cash-strapped Greece.

    “Of course, a speedy conclusion of the negotiations is desirable, but we must not forget that this is about a three-year program, a program with a comprehensive list of reforms and additional measures, a program that should then be a long-term reliable basis for cooperation,” Ms. Merkel’s spokesman, Steffen Seibert, said at a news conference. “Thoroughness comes before rapidness.”

    Athens and its creditors are under pressure to secure a third bailout deal by Aug. 20 to prevent Greece from defaulting on 3.2 billion euro ($3.51 billion) worth of bonds owned by the European Central Bank.

    “We are ready for a speedy examination [of a deal] this week, if necessary,” German finance ministry spokesman Juerg Weissgerber said Monday. “However, quality comes before speed.”

    He said Greece must agree to an “ambitious budget and fiscal planning, a credible funding strategy and a sustainable pension reform.”

    Greece’s overall funding needs and debt sustainability depend on these measures, Mr. Weissgerber said.

    A new bailout for Greece is a controversial issue in Germany, which is the country’s largest creditor. Germany’s Bundestag and several other European parliaments must back a third rescue package. Over the weekend, the parliamentary floor leader of Ms. Merkel’s conservative bloc in parliament, Volker Kauder, caused an uproar among his lawmakers after he said those members of parliament who voted against authorizing the start of bailout talks in July should be excluded from parliamentary committees dealing with the Greek issue.

    Ms. Merkel and others have insisted that the IMF needs to be on board of a third bailout package. The IMF insists Greece needs a comprehensive debt restructuring by the eurozone while Germany opposes a debt haircut and has signaled Berlin would consider debt-maturity extension instead. A parliamentary group official said that without the participation of the IMF, the number of conservative lawmakers voting against a third bailout would probably exceed the 60 out of 310 who voted on July 17 against authorizing new bailout talks.

    Halle-based German think tank IWH said Monday that contrary to widespread belief, Germany has benefited substantially from the European debt crisis, which helped the country to balance its budget since 2012. That is because Germany’s borrowing rates fell, yielding interest savings of more than €100 billion during the period 2010 to 2015, according to the research institute.

    “When discussing the costs to the German taxpayer of saving Greece, these benefits should not be overlooked, as they tend to be larger than the expenses, even in a scenario where Greece does not repay any of its debts,” IWH said in a statement.

    Yes, despite the fact that basically no one at this point thinks the ‘new an improved’ austerity package that’s even worse than the previous proposal will actually put Greece on a sustainable path, Berlin wants to make sure the troika takes its time while crafting the “bailout” plan for Greece. So, you know, they can be sure it will put Greece on a sustainable path. You got to dot those “i’s” and cross those “t’s”! It’s takes time. You can’t spell “austerity” without “i” and “t”.

    Of course, given the ongoing showdown between the IMF and the European governments over Greek debt relief, it’s unclear how any progress can be made:


    Ms. Merkel and others have insisted that the IMF needs to be on board of a third bailout package. The IMF insists Greece needs a comprehensive debt restructuring by the eurozone while Germany opposes a debt haircut and has signaled Berlin would consider debt-maturity extension instead. A parliamentary group official said that without the participation of the IMF, the number of conservative lawmakers voting against a third bailout would probably exceed the 60 out of 310 who voted on July 17 against authorizing new bailout talks.

    It’s all part of why any suggestions from the German government that the troika not rush the negotiations are probably as much a reflection over the unresolved nature of that key intra-troikan disagreement over any desire to work out the details of a plan no one expects to work.

    Of course, there’s the other obvious reason for the lack of urgency, as the article hints towards at the end: why rush to end a crisis that’s helping you balance your budgets?

    The Wall Street Journal
    How Greece’s Drama Helped Balance Germany’s Books

    By Andrea Thomas

    Aug 10, 2015, 11:07 am ET

    BERLIN–Germany will make a profit from the eurozone debt crisis and saving Greece, even if Athens doesn’t pay back its debt, according to a leading German economic institute.

    The findings by Halle-based Institute for Economic Research, known as IWH, might come a surprise to German taxpayers who believe that Germany, as Greece’s largest creditor, is sitting on the highest bill.

    “Germany benefited substantially from the Greek crisis. The balanced budget in Germany is largely the result of lower interest payments due to the European debt crisis,” IWH said in a statement Monday.

    “The debt crisis resulted in a reduction in German bund rates of about 300 basis points, yielding interest savings of more than €100 billion ($110 billion) or more than 3% of gross domestic product during the period 2010 to 2015.”

    “Germany benefited substantially from the Greek crisis. The balanced budget in Germany is largely the result of lower interest payments due to the European debt crisis”.
    Yep, it’s not just the basic structure of the eurozone that benefits Germany’s massive export sector with a cheaper currency. The crises caused in the rest of the eurozone (typically in those with artificially inflated currencies as a result of pooling with Germany) also helps Germany with extra-low interest rates that translates into major savings as this eurozone crisis drags on. No need to rush, people! Take your time.

    Posted by Pterrafractyl | August 10, 2015, 2:50 pm
  11. Greece secured a “bailout” deal! Well, ok, not really since EU parliaments still need to approve it and the troika isn’t even going to consider actual debt relief until October. But at least the general framework is now worked out: On top of all of the austerity demands that Greece must implement immediately, Greece is once again expected to run unrealistic and growing primary surpluses at levels that countries almost never achieve, for years on end:

    Slate
    Greece’s New Bailout Deal Sounds Like It’s Destined to Fail

    By Jordan Weissmann
    Aug. 11 2015 5:57 PM

    Greece, it seems, has finally locked up a bailout deal. In principle, at least. This morning, following an 18-hour negotiating session, the country agreed to terms with its European creditors for a package of aid worth up to €86 billion in return for more economic reforms and budget austerity. National legislatures will have to give their stamp of approval, but it seems like the world will soon officially get a break from wondering whether Greece will be able to remain in the eurozone.

    A temporary break, anyway. If you’re the sort of person who was hoping never to hear the phrase “Grexit” ever again, the details of this rescue don’t seem especially promising. The problem? In order to pay its debts, Europe still expects Greece to run unrealistically large primary budget surpluses. Here’s how the Wall Street Journal sums it up:

    Already this year, Greece will have to limit its primary budget deficit, which strips out interest payments on government debt, to 0.25% of gross domestic product—a tough call for an economy expected to shrink as much as 2.3%.

    In 2016, the government will have to run a surplus of 0.5%, which has to go up to 1.75% in 2017. From 2018 onward, Greece is expected to run primary surpluses of 3.5% of GDP to help pay off its debt, which few advanced economies have managed to do for years on end.

    The International Monetary Fund has already derided the idea that Greece can run that large a surplus into the foreseeable future, and for good reason—countries rarely manage that sort of restraint, and politically, the ones that do tend not to look a whole lot like Greece.* The most recent work on this issue comes from University of California–Berkeley economist Barry Eichengreen and Ugo Panizza of the Graduate Institute in Geneva, Switzerland. They looked at a group of 54 economies between 1974 and 2013 to find how many ever managed to run large primary surpluses for an extended period of time. It didn’t happen often. They were able to find just 36 instances in which a country managed to hit a 3 percent surplus for at least five years. There were just 12 in which a country managed to do it for a decade.

    The countries that accomplished those amazing feats of fiscal prudence usually managed it under somewhat unusual circumstances. Ireland famously managed to slash government spending and tame its deficits in the early 1990s so it could qualify for eurozone membership, all without dashing its economic growth. But it was able to do so in part by devaluing its currency (which Greece can’t do, since it’s on the euro) to improve its exports and by turning itself into an international tax haven for large multinationals (again, not an easy trick to replicate). Norway kept its budget in the black with the help of copious oil money. New Zealand self-imposed massive budget and government reforms during the late 1980s and early 1990s that led to years of surpluses, but the lesson most economists have taken away from that episode, as Eichengreen and Panizza write, is that countries with a “strong rule of law, low levels of corruption and strong institutions and markets are in the best position to emulate its example.”

    ….

    Eichengreen and Panizza also offer another reason why we should be skeptical about Greece’s ability to keep spending in check long term: Countries are more likely to pull off sustained surpluses “when growth is strong.” That makes sense: A stronger economy means more tax revenue and less stress on the social safety net. It also gives the government the political room to implement reforms, because people don’t suffer the same kind of pain that they do when you, say, cut their pension or welfare check in the middle of a recession.

    Greece’s economy is expected to shrink this year. It’s expected to shrink next year. When it does begin to grow again, it will still be digging itself out from a deep depression, and the government is going to feel pressure to spend on the people who have spent the last several years suffering. Any debt deal that assumes otherwise seems destined to collapse under the weight of its delusions.

    * Of note: Europe would like the IMF to help pay for this latest bailout, but the fund says it won’t chip in until Greece’s creditors offer it some debt relief, in order to make its burden sustainable. The eurozone’s leaders say they will discuss that possibility in the fall, according to the WSJ, but if the surplus targets are any hint, it doesn’t exactly look like they’re going to offer the scale of debt restructuring or forgiveness the IMF wants.

    Growing levels of austerity and no meaningful prospects of real debt relief (it could happen in the Fall, but we’ll see). That’s the plan for Greece. Again. And this is all at a time when Greece’s economy is forecast to shrink by 2.3 percent this year and 1.3% in 2016. And this is all happening without any apparent shame on the part of the troikan officials that are putting their names behind a deal that basically no one thinks will work and only make the situation worse. Of all of the profoundly disturbing ‘red flags’ flying in this situation, the enthusiastically shameless feigned cluelessness on the part of Europe’s leadership might be the most alarming.

    Posted by Pterrafractyl | August 12, 2015, 7:21 pm
  12. Here’s a fun peek at the general view in the Bloomberg News editorial offices of the Greek deal getting hammered out. It’s noteworthy in part because their view seems to be pretty much everyone’s view, and yet no other path forward is seen as possible by anyone: Greece must pay with even more austerity than ever and with dwindling prospects of meaningful debt relief:

    Bloomberg View
    This Latest Greek Deal Is Nothing to Celebrate

    Aug 17, 2015 12:01 AM EDT
    By The Editors

    At the end of last week, amid much smiling and hand-shaking, European finance ministers said they were ready to give Greece a new bailout of 86 billion euros. It’s the third time in five years they’ve declared victory in the battle to revive the Greek economy. This latest triumph shows every sign of being as durable as those previous failures.

    The first challenge is to get the deal, regardless of its merits, up and running. Germany’s parliament is due to vote on it this week, and rebellion is stirring in Chancellor Angela Merkel’s party. The bailout is thought likely to pass despite the protests, thanks to support from other parties in the Bundestag — but skepticism in Germany and some other euro-area countries runs deep.

    That’s a problem because it suggests low or zero tolerance of any departure by Greece from the program it has agreed to — an extraordinarily demanding series of tax increases, spending cuts and structural reforms. The scope of the plan all but guarantees some backsliding. Greece is resentful and agreed to the terms only under extreme duress. Prime Minister Alexis Tsipras’s ruling Syriza party is deeply split on the issue, and fresh elections may soon be necessary.

    Supposing that these difficulties can be overcome, and the program is followed conscientiously, will it work? That depends on what “work” means. The program assumes that output will contract even further both this year and next. Recovery after that, according to the International Monetary Fund and most observers, will depend on new debt relief. Speaking after last week’s meetings, IMF Managing Director Christine Lagarde said: “I remain firmly of the view that Greece’s debt has become unsustainable and that Greece cannot restore debt sustainability solely through actions on its own.”

    This complicates things even more. The IMF is rightly embarrassed by its participation in the two previous bungled bailouts, and has warned that it won’t join the third unless debt relief “well beyond what has been considered so far” is part of the plan. Germany and its supporters, on the other hand, have opposed new debt reduction throughout — while insisting that IMF participation in the new bailout is vital.

    Merkel this weekend said lower interest rates and new maturity extensions — though not, presumably, outright write-downs — were possible, and she was confident the IMF would sign up. German Finance Minister Wolfgang Schaeuble, who has spent most of this year insisting on steely-eyed clarity about Greece’s obligations, says he is “assuming” the fund will get on board. If this is clarity, one shudders to think what confusion would look like.

    Greece still needs the same three things it has needed since 2010: a home-grown commitment to structural economic reform; a program of fiscal consolidation, sufficiently forward-looking to leave room for short-term recovery; and outright reduction of debts that it has no hope of being able to repay. The deal announced last week might be better than nothing, and will probably succeed in postponing the next crisis by a few months. It fails nonetheless in all three respects.

    “The deal announced last week might be better than nothing, and will probably succeed in postponing the next crisis by a few months”.
    That was the view from the Bloomberg editorial team and it’s hard to find many people, anywhere, that are significantly more optimistic. No one thinks the Greek “bailout” is going to work, but everyone is committed to this same vague promise that Greece agreed to: austerity worse than anyone ever publicly imagined six months ago as the baseline agreement that everyone agrees on, coupled with the IMF’s demand that the austerity be coupled with debt relief that’s created this vague promise of showdown that no one really expects the IMF to seriously fight. And under these conditions, Angela Merkel apparently has to fight off a rebellion because “no debt relief” is to be made an inviolate eurozone principle:

    The New York Times
    Merkel Seeks to Head Off Opposition to Greek Bailout

    By ALISON SMALE
    AUG. 16, 2015

    BERLIN — Chancellor Angela Merkel said on Sunday that she expected the International Monetary Fund to take part in the new bailout for Greece, as she sought to head off opposition to the aid package in the German Parliament.

    In her first public comments on the bailout, an interview with the public broadcaster ZDF, Ms. Merkel cautioned that one could not yet say with certainty that the bailout would work, but said there was definitely hope.

    Her wariness seemed partly to be a nod to the skepticism of many lawmakers in her own conservative bloc, who must vote along with other parliamentary deputies on whether to approve the package in a special session on Wednesday.

    Last month, 60 of the 311 conservative deputies voted against opening talks with Greece on a third bailout, and five abstained. While there is no doubt that the 631-member Parliament will approve the package, speculation is rife here about whether Ms. Merkel will face more opposition this week.

    In Germany’s consensus-based system, opposition from more than 20 percent of her own lawmakers would be seen as a blow to Ms. Merkel, though she can count on her Social Democratic coalition partners and some Green opposition deputies to approve the package.

    The chancellor declined to speculate on the possible opposition, stressing that she and her finance minister, Wolfgang Schäuble, would argue for adopting the package.

    Mr. Schäuble, whose word carries weight with the skeptics, made clear on Sunday in an interview with the mass circulation daily newspaper Bild Zeitung that he felt the risk with Greece was worth taking.

    “After truly arduous negotiations, in Greece they now understand that the country cannot get around real and far-reaching reforms,” Mr. Schäuble said.

    The I.M.F.’s participation is a critical component of the Greek bailout, but the fund’s director, Christine Lagarde, has raised doubts about whether the fund’s charter prohibits its involvement if there is no debt restructuring. On Sunday, though, Ms. Merkel said Ms. Lagarde had agreed to take the matter to her board.

    Ms. Merkel reiterated that a so-called haircut, or write-off of debt, remained out of the question for Germany, but added that extending debt maturities and tweaking rates remained possibilities.

    “Ms. Lagarde has made very clear,” Ms. Merkel said, that if certain improvements are made, “she will give the word that the I.M.F. in October enters the program. I have no doubt that what Ms. Lagarde has said will become reality.”

    Yes, Merkel is ‘hopeful’ that the bailout could work, while noting that debt relief, the one thing that the IMF and sane economists insist is necessary for the “bailout” (of austerity and neoliberal reforms) to have a chance of working (given the negative impact of all the austerity and neobliberal reforms), remains out of the question. Extending debt maturities could happen, but writing off the debt remains out of the question.

    And in order to shore up support, Merkel points to Wolfgang Schaeuble’s support of the Greek bailout deal. And it’s a valid point for someone trying to convince German lawmakers that generally support Schaeuble’s pro-austerity Ordoliberal worldview given that there’s no reason for Wolfgang Schaeuble to oppose the “bailout” deal since it includes austerity measures and a loss of sovereignty for Greece that are far worse than anyone could have imagined even six months ago and Merkel is demanding that there be no debt relief. Really low interest for the next century on the bulk of Greece’s debt is basically the only thing at this point that could feasibly make Greece’s debt sustainable given the insane austerity measures that just turn Greece into a corporate vassal state. Everything other than debt extension is ruled out and these are the terms heading into October when the negotiations over possible debt relief are expected to happen. Merkel is quite understandably ‘hopeful’.

    It’s also worth noting that, back in July, Wolfgang Schaeuble agreed with the IMF’s assessment that Greece needs debt relief, but says it’s not allowed anyways:

    Reuters
    UPDATE 1-Germany’s Schaeuble: Greece needs debt haircut but we can’t help
    Thu Jul 9, 2015 11:09am EDT
    Related: Currencies, Bonds, Markets, Financials

    * Schaeuble concedes Greek debts unmanageable

    * Finance minister says agrees with IMF that ‘haircut’ needed

    * Schaeuble says cannot agree to such a step (Adds detail, background)

    By John O’Donnell and Balazs Koranyi

    FRANKFURT, July 9 (Reuters) – Germany’s finance minister conceded for the first time on Thursday that a write-off of some of Europe’s loans to Greece might be needed to get the country’s debt to a manageable level, but in the same breath ruled out such a step.

    Presenting a paradox that is set to bog down last-ditch efforts to bail out Greece, Wolfgang Schaeuble said that European rules meant that writing off some loans to Greece was not doable, however desirable it might be for Athens’ finances.

    The comments by Schaeuble appeared to suggest that he does not believe Greece’s financial problems can be solved within the euro zone and could weigh on negotiations as they enter a crucial phase.

    “Debt sustainability is not feasible without a haircut and I think the IMF is correct in saying that,” Wolfgang Schaeuble told a conference in Frankfurt, before adding: “There cannot be a haircut because it would infringe the system of the European Union.”

    Greece’s leftist government led by Prime Minister Alexis Tsipras has put debt reduction at the heart of its negotiations with the euro zone for further finance in return for reforms.

    But it faces stiff resistance not only from Germany but other countries who have stuck to the medicine of ‘austerity’ or spending cuts to heal their public finances.

    Speaking at a conference held by the Bundesbank, whose president had earlier said that Greece’s cash-strapped lenders should not get any extra central bank support, Schaeuble delivered a similarly tough message.

    He said that a reprofiling of debt was another possibility “if you cannot do a haircut” but scope to do so was limited after an earlier big restructuring of Greece’s debt mountain.

    “I think the leeway we have … is very low,” he said, adding that he was ‘sceptical’ that much could be done.

    Ok, so Schauble agrees with the IMF that Greece need substantial debt relief, but insists it can’t happen because, “it would infringe the system of the European Union.”:


    The comments by Schaeuble appeared to suggest that he does not believe Greece’s financial problems can be solved within the euro zone and could weigh on negotiations as they enter a crucial phase.

    Debt sustainability is not feasible without a haircut and I think the IMF is correct in saying that,” Wolfgang Schaeuble told a conference in Frankfurt, before adding: “There cannot be a haircut because it would infringe the system of the European Union.

    Wow. But that at least leaves the debt “reprofiling” (like extending maturities and lowering rates) on the table. Except, of course, that Schaeuble ruled that out too. At least anything meaningful:


    He said that a reprofiling of debt was another possibility “if you cannot do a haircut” but scope to do so was limited after an earlier big restructuring of Greece’s debt mountain.

    “I think the leeway we have … is very low,” he said, adding that he was ‘sceptical’ that much could be done.

    So, back in July, the message from Wolfgang Schaeuble was that he agreed that the current course was doomed to failure and also that it’s the only option if Greece remains in the eurozone. Debt reprofiling is an option, but only a limited option. And based on Merkel’s language, it sounds like Schaeuble’s vision for Greece’s options going forward are what’s going to dominate the discussions between the eurozone and the IMF.

    And, no, Schaeuble hasn’t changed his mind in the last month:

    Reuters
    Germany’s Schaeuble says scope for Greek debt relief limited

    BERLIN
    Sat Aug 15, 2015 5:21am EDT

    Aug 15 German Finance Minister Wolfgang Schaeuble said in an interview with Deutsche Welle published on Saturday that there was some room to extend maturities on Greek debt but that this room was limited.

    “Outright debt forgiveness doesn’t work at all under European law,” Schaeuble said. “But we do have a certain amount of room to extend maturities further. This room is not very big.”

    The International Monetary Fund (IMF) has called for “significant debt relief” for Greece, describing this as a condition for its participation in a third bailout for Greece that was approved by euro zone finance ministers late on Friday.

    Germany is very keen to keep the IMF on board but has repeatedly ruled out a writedown of the face value of Greece’s debt through a so-called “haircut”.

    “Outright debt forgiveness doesn’t work at all under European law…But we do have a certain amount of room to extend maturities further. This room is not very big.

    That’s Berlin’s bargain position going into the next phase of the latest iteration of the the Greek “bailout” farce: No debt haircut, and maybe some limited debt reprofiling, even though Wolfgang Schaeuble himself has agreed with the IMF that a “haircut” is necessary. And endless austerity.

    So, with all that in mind, the New York Times has an interesting piece covering the IMF’s role in Greek debt negotiations from 2010 up to the present. It’s as depressing as one might expect a piece on the IMF’s role in Greek debt negotiations from 2010 up to the present, which means it’s not quite as depressing as the role of the EU governments’ roles in the Greek debt crisis negotiations, but still super depressing:

    The New York Times
    The Greek Debt Deal’s Missing Piece

    By LANDON THOMAS Jr.
    AUG. 15, 2015

    At long last, European creditor nations and Greece have reached an agreement on a third bailout in five years.

    The bailout, which was approved by Greece’s Parliament on Friday, included familiar details: In return for an infusion of 86 billion euros, or $95 billion, Greece has promised to increase taxes, cut spending and enact measures to make its economy function more efficiently.

    But there was one glaring omission. As it stands, none of that new money flowing into Greece will come from the agency that has, until now, played a crucial role in virtually every bailout, in Greece and elsewhere around the world: the International Monetary Fund.

    That is because the I.M.F. says that Greece was simply incapable of repaying its staggering debt. Yet the accord reached last week makes no effort to reduce that burden. If you agree with the I.M.F.’s reasoning, you might have to conclude that despite all of the seemingly ironclad provisions of the agreement imposed by eurozone creditors, Greece will be no more able to honor the deal or to repay its new loans than it has been in other bailouts.

    “I remain firmly of the view that Greece’s debt has become unsustainable and that Greece cannot restore debt sustainability solely through actions on its own,” the I.M.F.’s chief, Christine Lagarde, said on Friday, following the accord’s approval this week.

    The Greek debt drama has had its share of twists and turns. Alliances have shifted, rivalries have deepened, and the back-room maneuverings have been appropriately Byzantine.

    But the I.M.F. shift from being Greece’s most persistent scold to its main advocate for a break on its debt has been among the most intriguing developments so far.

    Clashing Assessments

    In late June, representatives of European countries and the I.M.F. gathered at a private meeting at the European Union’s headquarters in Brussels. The officials were racing against time to devise a plan to keep the country in the eurozone. But the dispute between Greece’s two largest lenders was about to boil over.

    Poul M. Thomsen, the Danish fund official who served as the I.M.F. point person in the Greek talks, had been negotiating around the clock, and his voice was hoarse. Since early in the spring, he had been arguing that while Greece needed to follow through on tough economic measures, its debt was out of control. Europe, however, insisted that the Greek government had only to enact tough austerity measures to set itself on a prudent financial path.

    Now the Europeans wanted to highlight their own, more sanguine view of Greece’s debt prospects at a crucial meeting of the creditor countries’ finance ministers the next day. And in doing so they took the I.M.F.’s conclusion — that Greece could no longer repay its debt and that Europe might have to face losses on its exposure there — and presented it, in one throwaway sentence, as a long-shot scenario.

    For the I.M.F. it was a breaking point. Not only were officials frustrated that Europe was not accurately reflecting their view, but they also wanted to make sure that their non-European shareholders, many of whom had become very critical of the fund’s aggressive lending in Greece, got the full picture of how their analysis had changed. So, in a highly unorthodox move, they decided to make their disagreement public. They released their full analysis — a 23-page document — a week later.

    Since then the fund has been adamant: Europe must provide significant debt relief in order for the I.M.F. to provide cash toward the next Greek bailout.

    A growing number of economists agree that Greece needs more than another dose of austerity policies to recover. But they are also asking why it took so long for the fund to reach that conclusion.

    “I applaud the fund for releasing the report, but at the same time it was too late,” said Gabriel Sterne, an economist at Oxford Economics in London who has closely studied the I.M.F.’s role in Greece. “For right or for wrong, they are the only honest broker here so they really should have gotten this out sooner.”

    No More Argentinas

    Founded in 1944 as part of a broad mandate to ensure global financial stability after the end of World War II, the I.M.F. for many years primarily lent money to developing economies — largely in Latin America and Asia — that experienced a financial crisis.

    But after the 2008 financial crisis, the I.M.F. turned its attention to Europe. An astonishing 61 percent of the I.M.F.’s loan book is now tied up in Ireland, Portugal and, of course, Greece.

    The standard prescription in a crisis is a dollop of loans in return for belt-tightening measures.

    Arguably, then, the I.M.F.’s most critical task is figuring out whether or not a country can pay back its loans. That calculation will determine how much the fund pushes pure austerity policies or whether it will also impose losses on lenders to return the economy to health.

    As an emergency creditor — the world’s subprime lender, if you will — the I.M.F. has some failures. Before Greece, the fund’s biggest debacle had been Argentina. The fund lent billions of dollars to the country just before it defaulted in 2001, leading to an economic tailspin. It took years for Argentina to come out of it.

    To guard against falling into a similar money pit, the fund put in place a “no more Argentinas” rule, according to the author Paul Blustein in his definitive paper on the I.M.F.’s Greek drama.

    The rule decreed that the fund would hand out money only if there was a “high probability” that the applicant could make good on the loan.

    In May 2010, Greece would be the first test of this new rule.

    From the outset, most of the fund’s senior staff concluded it was highly unlikely that Greece could pay the money back, given its voluminous debts and dysfunctional economy.

    Several top officials went so far as to push for an immediate debt “haircut” — a permanent loss to the lenders — in secret meetings with their European counterparts, according to Mr. Blustein’s recounting of those events.

    But the fund, then under the leadership of Dominique Strauss-Kahn, wanted to get back into the bailout game. Having hit a low of $9 billion in 2007, I.M.F. lending had been slowly ticking up through 2010. Mr. Strauss-Kahn, who was known to have his eye on the French presidency, was not going to miss an opportunity to play a central role in resolving the European debt crisis.

    So the I.M.F. made a last-minute adjustment to its “no more Argentinas” decree. It would approve the loan request under a new “systemic exemption.” That is, the fund could justify the loan if it would prevent a broad financial panic.

    Greece seemed to fit that exemption. The bailout request came less than two years after Lehman Brothers had failed. The global economy was still in a precarious state, and European debt markets had been rattled by Greece’s troubles. With the European Central Bank not yet ready to use its ability to print money to intervene, the fund decided to back Greece in spite of its disastrous finances.

    It was a controversial decision. The bailout was a salvation for bond investors, namely large European banks, which owned the majority of Greek debt. But the Greek people would have to pay, as the country was required to institute severe budget cuts and tax increases to make the debt numbers add up. The immediate halt in government spending had a devastating effect in an economy dependent on state largess. Unemployment soared, suicide rates jumped, and pensioners took to begging on the streets.

    The fund, nonetheless, produced optimistic reports about the outlook for Greece. (Since 2010, the fund’s growth estimates missed the mark by a cumulative 25 percent, a forecasting error of such a magnitude that the fund’s chief economist was forced to acknowledge in 2013 that the I.M.F. had underestimated the extent to which austerity policies could sink an economy.)

    By 2012, Greece would need a second bailout, and this time fund officials were able to convince their European partners that bond investors must contribute to the rescue by accepting steep losses on their investments. In addition, they extracted a commitment from Europe that it would take steps to reduce Greece’s debt in the coming years.

    With all the hoopla of the second bailout, this clause drew little notice, but for the I.M.F. it was a victory of sorts, as it gave voice to what officials had been saying internally: The time would come when Europe would have to take a hit on its Greek loans.

    The Pressure Mounts

    By mid-2014, Greece had made some progress. Excluding interest paid on its debt, its budget had reversed from a 10 percent deficit to a slight surplus.

    The government was again able to tap global markets for cash, and Greek banks raised billions of dollars in New York and London.

    That July, Rishi Goyal, a senior member of the I.M.F.’s Greek team based in Washington, hailed the achievement in a speech in Athens.

    Privately, however, fund officials were voicing doubts to their European partners over whether Greek politicians, notorious for their free-spending ways, could maintain fiscal discipline.

    In January of this year, the anti-austerity party of Alexis Tsipras came to power. By April, negotiations over debt repayment had stalled, the government was hemorrhaging cash, and the economy was at a standstill.

    On Easter Sunday, Yanis Varoufakis, who had become Greece’s finance minister, flew to Washington to meet with Mr. Thomsen and Christine Lagarde, who became the I.M.F.’s chief in 2011, and threatened to stop payment on more than a billion dollars in loans that were soon coming due.

    Relations between fund officials and the Greeks had reached their nadir. Mr. Tsipras said that the fund had “criminal responsibility” for the crisis, and Mr. Varoufakis was telling people that Mr. Thomsen’s work in Greece would go down in history as the I.M.F.’s greatest failure.

    Yet having run the numbers, the fund now accepted the central argument being made by Mr. Varoufakis: Greece was bankrupt and needed debt relief from Europe to survive.

    The fund was also feeling the pressure from the non-European members of its board who questioned the huge commitment to Greece (currently about $15 billion) relative to the small size of its economy.

    Ms. Lagarde and David Lipton, her top deputy, became more insistent, pressing European nations that economic reforms alone were not enough and that a debt restructuring would be needed as well.

    In late April, Mr. Thomsen took up the issue once more at a critical meeting of European finance ministers in Riga, Latvia.

    Two months later, Ms. Lagarde found herself at the Brussels meeting of European finance ministers, with the country’s future in the eurozone hanging in the balance.

    The Europeans were pressuring Mr. Varoufakis to agree to an austerity-loaded debt deal that he was resisting.

    I have a question for Christine, he said. Can the I.M.F. formally state in this meeting that this proposal we are being asked to sign will make the Greek debt sustainable?

    She could not. And when Jeroen Dijsselbloem, the Dutch finance minister and lead negotiator for Europe, cut off all discussion of debt relief, the die was cast.

    Back at I.M.F. headquarters in Washington, the decision was unanimous: It would go public with its assessment that Greece’s debt situation was hopeless.

    ‘Old Wine in a New Bottle’

    The 19 countries of the euro area make up the I.M.F.’s largest shareholder base, but as the world’s financial watchdog, the fund also represents 169 other nations.

    If the I.M.F. wants to be seen as an international, as opposed to a European, monetary fund, it must prove that it can speak with an independent voice. And if that means arguing that Europe, its senior partner in these talks, needs to take a loss on its loans — well, so be it.

    Many have commended the fund for going public with its views. But the release of its debt reports has not yet had any practical effect.

    The latest bailout is heavy on austerity measures like privatization of power companies and seaports, reduced pensions and tax increases in shipping and tourism, and says nothing about debt relief.

    “This is old wine in a new bottle,” said Megan E. Greene, chief economist at Manulife in Boston. “I see very little chance that the bailout will succeed — it’s too much like the other ones.”

    Would it have made a difference if the fund had officially broken with Europe in the spring, when it began to conclude that the Greek debt had become unmanageable?

    Probably not, says Susan Schadler, a former I.M.F. economist and author of a widely read paper on the fund’s Greece saga.

    But she argues that by not forcing creditors to take a loss back in 2010, the pain has been borne almost exclusively by the Greeks themselves, and not by bond investors.

    “The fund should have pushed for a restructuring then,” she said. “That, after all, is its job — to assess the risks and say whether or not the debt is sustainable.”

    Yes, now that the IMF has publicly drawn a line in the sand about how it won’t sign on to a new Greek bailout without substantial debt relief, it’s probably useful to note that such opposition appears to have made not difference whatsoever:


    Many have commended the fund for going public with its views. But the release of its debt reports has not yet had any practical effect.

    The latest bailout is heavy on austerity measures like privatization of power companies and seaports, reduced pensions and tax increases in shipping and tourism, and says nothing about debt relief.

    “This is old wine in a new bottle,” said Megan E. Greene, chief economist at Manulife in Boston. “I see very little chance that the bailout will succeed — it’s too much like the other ones.”

    And based on everything we saw above, Market’s government and part appears intent ensuring Berlin leads the EU’s pro-austerity neoliberal bloc towards ensuring that debt relief doesn’t happen even though everyone, including Wolfgang Schaeuble, basically agrees it’s necessary. Maybe some moderate debt reprofiling will be allowed at best but that’s going to be it. And, once again, it’s all up to the IMF to agree to these demands, or actually abide by its rules and walk away. And if the IMF does walk away, it’s not clear the EU won’t impose even harsher terms.
    “This is old wine in a new bottle”

    Posted by Pterrafractyl | August 16, 2015, 11:46 pm
  13. The Great Greek Fire Sale is open for business extortion!

    The Telegraph
    Greece sells airports to Germans as Bundestag prepares for day of reckoning
    Syriza carries out first set of controversial privatisations which will hand control of regional airports to German company

    By Mehreen Khan

    5:30PM BST 18 Aug 2015

    The Greek government has rowed back on a promise to halt the fire sales of the country’s strategic assets by approving the sale of its airports to a German company.

    Operating rights to 14 regional airports, including those on popular holiday destinations such as Crete, will now fall under the control of Fraport AG, the operator of Frankfurt airport.

    The €1.23bn deal represents a significant climbdown for Alexis Tsipras who had denounced attempts by the Troika to force various Greek governments to de-nationalise the country’s ports, electricity networks and airports.

    But the embattled prime minister has been forced into a number of concessions in return for an €86bn aid package to keep the country in the euro for the next three years. The deal comes as Germany’s Bundestag prepares to vote on the package on Wednesday.

    Bidding for the airports was won by the German firm in November but the process was suspended by Syriza amid claims the tender broke competition rules. Fraport will operate the airports for the next 40 years under the licence agreement.

    Former finance minister Yanis Varoufakis has attacked the sales for entrenching the country’s oligarchic elites and hurting the government’s coffers through under-priced sales.

    In a line-by-line critique of the demands, he dubbed the privatisations as “a major disaster in every conceivable way – from the prices fetched to the rate at which the privatisations that occurred were overturned by the European competition commission and the Greek Council of State”.

    The sale comes as a host of eurozone parliaments are preparing to ratify the terms of the new rescue package – Greece’s third bail-out in five years.

    Germany’s Angela Merkel is battling to fight down a rebellion in her ruling Christian Democrat party. As the eurozone’s largest creditor state, Germany holds a blocking minority vote on European Stability Mechanism loans.

    Although the package is likely to gain the necessary votes, more than 60 of Ms Merkel’s parliamentarians voted to reject new bail-out talks in July. The rebellion is set to escalate to around 100 out of her 311 MPs.

    The Chancellor has sought to convince sceptical lawmakers that Greece will be able to carry a the raft of onerous economic reforms in return for a first disbursement of €26bn due to be made by Thursday.

    Disquiet in Berlin has also grown over the position of the International Monetary Fund, which is only likely to release its own funds to Greece in October.

    Note that, in fairness, the 1.23 billion euro deal for a 40 year lease on 14 airports could have actually been a lot worse…it could have been like ALL the prior Greek privatizations deals. Yes, when first struck in November, it was the first privatization of Greek assets that actually included more than one bidder:

    Financial Times
    German group Fraport bids for Greek airport concession

    Kerin Hope – Athens, Chris Bryant-Frankfurt
    November 25, 2014 6:56 pm

    Fraport, the German airport operator, and Greece’s Copelouzos energy group have bid €1.23bn for a concession to run 14 regional Greek airports in the biggest deal since the country’s debt crisis prompted the revival of its flagging privatisation programme.

    The Greek privatisation agency named the German-Greek consortium on Tuesday as the preferred bidder to acquire a 40-year operating lease and invest €330m over the next four years in upgrading airports on popular tourist islands including Kefalonia, Mykonos, Santorini and Rhodes.

    “The price offered was very high,” said Paschalis Bouchoris, chief executive of the Hellenic Republic Asset Development Fund, the privatisation agency. “Fraport will have a strong incentive to attract more flights; they are effectively underwriting the growth of tourism in this country.”

    The airport deal marks the first large scale German investment in Greece since the crisis and was also the first privatisation deal to attract more than one binding offer.

    Fraport will hold a majority share in the consortium. Stefan Schule, its chief executive, said: “The Greek regional airports add another airport investment with dynamic development potential.”

    The consortium’s bid was significantly higher than those of Argentina’s Corporacion America holding group with Greece’s Metka, a construction company, and France’s Vinci with Ellaktor, a Greek contractor.

    HRADF has struggled to attract international bidders for infrastructure and utilities following delays and legal problems with several tenders. It has signed deals worth €5.4bn in the past four years compared with a target of €15bn.

    The purchase price of €1.2bn is due at the time of closing, which is anticipated to be in autumn 2015. In total, the airports served 19.1m passengers last year. Some €1.4bn in investment is envisaged over the duration of the concession

    Ok, so according to reports, the price Greece got for this airport deal was surprisingly high, with the winning bid coming in significantly higher than two competing bids. And while that outcome was positively surprising given the fact that prior privatizations have only had a single bidder (and raised far less than projected), don’t forget that the price paid for the lease was mostly considered newsworthy because it wasn’t a complete fraud like the rest of the failed Greek privatizations to date that only included a single bidder.

    So yes, the leasing of 14 Greek airports is indeed an event worth celebrating: In this once instance, the troika’s schemes for Greece weren’t a complete failure. Sure, Greece is still forced to sell itself off like an obedient little vassal state, so it’s an extension of the profound moral failure of Europe’s leadership, but it’s not as much of a moral failure as all of the previous privatizations since more than a single bidder was found and the leases weren’t sold for a complete pittance. The troika must be very proud of itself today.

    Posted by Pterrafractyl | August 18, 2015, 1:52 pm
  14. The state-controlled German firm that bought the 40-year leases of 14 Greek airports, Fraport, just threw a bit of cold water on the Great Greek fire sale: Fraport now wants to renegotiate a better deal because it’s not as confident about the Greek economy as it was last year:

    Ekathimerini
    Gov’t hits back after German firm seeks more guarantees for airport deal
    BUSINESS 19.08.2015 : 13:49

    In the wake of reports that German firm Fraport has sought additional guarantees before undertaking the operation of 14 Greek regional airports, a Greek government official said on Wednesday that any renegotiation of the deal must be comprehensive and not focus exclusively on the issues raised by the firm.

    The completion of the concession of 14 regional airports, without any changes to the terms agreed with the previous government, was a condition of the agreement of the eurozone leaders’ summit of July 12, the Greek official said. The government has “honoured absolutely” the terms that were agreed to and on August 18 a decision confirming the government’s intention to move forward with the deal was published in the Government Gazette, he said.

    If the company leading the consortium wants to renegotiate the contract “the renegotiation should not be limited to the Issues raised by the firm but should be comprehensive,” the Greek official said.

    Germany’s Fraport and Greek energy firm Copelouzos had agreed with the Greek privatiation agency last year that they would run the 14 airports around the country.

    However, Kathimerini understands that the consortium is asking for more guarantees from the Greek government following the uncertainty of the last few months. The group is also facing greater financing costs due to the higher country risk associated with Greece.

    This has raised doubts about whether Greece will able to reach its bailout target of receiving 1.2 billion euros from the agreement by the end of the year.

    “The Greek government’s decision is not tantamount to the conclusion of a contract but rather offers a basis for the resumption of negotiations,” Joerg Machacek, a Fraport spokesman, told Bloomberg on Tuesday. “We are building up from where we left off.”

    Well what a fun little deflationary death-spiral: The worse Greece’s economy gets over the next few years while all these assets are getting sold off, the less Greece receives for those assets. Wow, bidders must be lining up to participate in this deal! Or, at least, thinking about lining up in a few years…

    Posted by Pterrafractyl | August 20, 2015, 10:32 am
  15. Researchers studying ancient Greece burial grounds recently made a rather startling report: some ancients Greeks had clearly buried their dead in a manner that you would only do if you feared the walking dead:

    Pittsburgh Post_Gazette
    Ancient Greeks were wary of zombies, Pitt archaeologist finds
    July 28, 2015 12:00 AM

    By Gabe Rosenberg / Pittsburgh Post-Gazette

    Sometime between 500 B.C. and 200 B.C., residents of the Greek colony of Kamarina in Sicily dug two graves for two bodies. They pinned down each body with large rocks or pottery; if the bodies awoke from the dead, they could not escape.

    Reanimated corpses did not, to the best of anyone’s knowledge, ravage the Greek Empire then, but ancient Greeks certainly believed they could. Instances of both necrophobia (fear of the dead) and necromancy (the practice of communicating with the dead) are common in ancient Greek culture, and are the focus of new research by Carrie Weaver, a lecturer and recent Kenneth P. Dietrich School of Arts and Sciences Postdoctoral Fellow at the University of Pittsburgh.

    The zombies of ancient Greece would put the zombies of American pop culture to shame — if only because they were really, truly feared..

    “Greeks imagined scenarios in which reanimated corpses rose from their graves, prowled the streets and stalked unsuspecting victims, often to exact retribution to them in life,” Ms. Weaver wrote in an article titled “Walking Dead and Vengeful Spirits,” published in the summer 2015 issue of Popular Archaeology magazine.

    In the article, Ms. Weaver analyzed 258 burials and skeletons from the Passo Marinaro necropolis in Kamarina, which were excavated in the 1980s by Italian archaeologist Giovanni Di Stefano, but never analyzed. Kamarina was colonized in 598 B.C., part of an expansion of the Greek Empire between the eighth and sixth centuries B.C. that reached into southern Italy.

    Ms. Weaver, a classical archaeologist who specializes in human osteology (the study of bones) and funerary archaeology, was working in Sicily when she found these skeletons had been left unexamined in a museum. Of those burials, two in particular stood out.

    “Any time that a body is buried differently from the rest of the members of the cemetery, it’s termed a deviant burial,” Ms. Weaver said. “When anyone studies burials, you’re looking for those red flags — there are certain causes, and sometimes necrophobia is one of them.”

    In one tomb, Ms. Weaver found an adult of indeterminate sex whose head and feet were completely covered by heavy ceramic pieces; in another, she found a child between the ages of 8 and 13 with five large stones placed on top of it.

    In researching the explanation for these deviant burials, Ms. Weaver found that ancient Greek society’s belief in the supernatural extended to convictions that certain individuals were predisposed, predestined or compelled to become “revenants,” or the undead (from the Latin “revenans,” or “returning”).

    Ms. Weaver said that bioarchaeologist Anastasia Tsaliki found examples of similar activities around the Greek world and across multiple centuries, including a grave site in Attica where a woman was cut in half, buried with each half placed in parallel and then sealed in.

    Around the Kamarina cemetery, Ms. Weaver also cataloged 11 curse tablets — known as “katadesmoi” — that were commissioned by mediums (goetes) and requested the intervention of spirits. Placing the tablets in a grave under the cover of night and reciting their inscriptions, ancient Greeks believed, would recruit spirits to remedy an injustice like theft or murder, or improve one’s life in business or love.

    “These ideas were mainstream, and not rooted in folklore or fantasy, because the cultural and religious foundations of the ancient Greeks led them to believe that death was not necessarily a permanent state,” Ms. Weaver wrote.

    “Around the Kamarina cemetery, Ms. Weaver also cataloged 11 curse tablets — known as “katadesmoi” — that were commissioned by mediums (goetes) and requested the intervention of spirits. Placing the tablets in a grave under the cover of night and reciting their inscriptions, ancient Greeks believed, would recruit spirits to remedy an injustice like theft or murder, or improve one’s life in business or love.”
    Yikes. Let’s hope there haven’t bee too many curse tablets unearthed near an ancient Greek zombie cemetery. Injustice curse tablets aren’t necessarily the kinds of things you want someone to just stumble upon without understanding now to use them when the troika’s running the place. Curse tablets and troikan justice black holes are a dangerous combo:

    Justice Now
    Greece is for sale – and everything must go
    Nick Dearden
    Nick Dearden, photo by Genevieve Stevenson

    19 August 2015

    I’ve just had sight of the latest privatisation plan for Greece. It’s been issued by something called the Hellenic Republic Asset Development Fund – the vehicle supervised by the European institutions, which has been tasked with selling off an eye-watering €50 billion of Greece’s ‘valuable assets’.

    The fund was a real sticking point because the European institutions wanted to move it to Luxembourg, where they could keep a better eye on it. Anyhow, it’s still in Athens, and this document, dated 30 July, details the goodies on sale to international investors who fancy buying up some of the country.

    We’ve attached it to this blog to give a flavour of what’s up for grabs at the moment. Fourteen regional airports, flying into top tourist hubs, have already gone to a German company, but don’t panic because stock in Athens airport is still on the table, as well as Athens’ old airport which is up for a 99 year lease for redevelopment as a tourism and business centre.

    Holdings in Thessaloniki and Athens water are both on sale – though public protest has ensured that 50% plus 1 share remains in state hands. Nonetheless, the sale will mean that market logic will dictate the future of these water and sewerage monopolies. Finally there are pockets of land, including tourist and sports developments, throughout Greece.

    A second document, also attached, details the short-term work programme of various government ministers, detailing actions they must take in order to add value to these assets. This includes introducing toll booths on roads to licensing casino rights to declaring sites of archaeological interest. The document begs the question as to why government ministers are even needed, it would surely be easier to cut them out of the equation altogether and let EU institutions directly administer the country.

    Why does this matter? First because makes no sense to sell off valuable assets in the middle of Europe’s worst depression in 70 years. Those industries could generate revenues to help the Greek government rebuild the economy. In fact, the vast majority of the funds raised will go back to the creditors in debt repayments, and to the recapitalisation of Greek banks.

    So the privatisations aren’t to do with helping Greece. The beneficiaries are corporations from around the world, though eyebrows are particularly being raised at the number of European companies – from German airport operators and phone companies to French railways – who are getting their hands on Greece’s economy. Not to mention the European investment banks and legal firms who are making a fast buck along the way. The self-interest of European governments in forcing these policies on Greece leaves a particularly unpleasant flavour.

    Most important is the inequality this will entrench in Greek society for decades to come. Of course the fact that the state currently holds these assets is no guarantee of democracy. Clientelism is rife in Greece. But the answer is transparency and democracy, just as German citizens are currently trying to take back energy companies into collective ownership because they see this as a prerequisite for fair pricing and supporting renewable energy.

    What won’t help is flogging off monopolies to private corporations who have no interest in Greece’s people. Workers will be sacked and their conditions made worse, while the elite of Europe profits. Greece’s government will have lost the ability to make its society function in the interests of ordinary people.

    But then, I suspect that’s the point.

    A second document, also attached, details the short-term work programme of various government ministers, detailing actions they must take in order to add value to these assets. This includes introducing toll booths on roads to licensing casino rights to declaring sites of archaeological interest. The document begs the question as to why government ministers are even needed, it would surely be easier to cut them out of the equation altogether and let EU institutions directly administer the country.”
    Uh oh. Based on the Hellenic Republic Asset Development Fund’s privatization report, it sounds like sites of archaeological interest are to be on the auction block and it’s very unclear how Greece is going to avoid going through with it now that the troikan has basically assumed control.

    And note that it was the the Hellenikon coastal front archaeological site of interest that specifically listed in the report and Hellenikon has an area slated for major commercial development. And if this article from 2011 on developer ambitions in Hellenikon are any indication of what to expect for Hellenikon’s archaeological sites, we better hope the zombies are fully decayed and no longer a threat. Because those zombie ruins are probably going to be disturbed:

    Reuters
    Special report: A big fat Greek real estate sale

    ATHENS | By Dina Kyriakidou

    Fri May 6, 2011 4:16am EDT

    Would you do a property deal with Greece? For a country that hopes to escape bankruptcy by shifting billions of euros worth of prime real estate, Athens’ sales pitch is far from reassuring.

    Take its attempts with the old Hellenikon airport in Athens. The airport closed in 2001, leaving 170 acres of coastal land that successive governments have tried to turn into something that could make money. A decade on, plans to raise 7 billion euros ($10 billion) by partnering with Qatar to build a financial district along the lines of London’s Canary Wharf remain stuck on the drawing board.

    The old airport is a poignant symbol of hope unrealized. An old Boeing 747-200 sits rusting among the weeds, abandoned airport equipment litters the parking lot, and once-busy terminals stand empty only a few hundred meters from the sparkling Aegean Sea, the wind howling through the broken doors and windows.

    One year after the European Union and the IMF bailed Athens out to the tune of 110 billion euros, financial markets are asking not if, but when, Greece will go ahead with the default the bailout was supposed to prevent. Its debt is already rated junk by all three major agencies — below that of Turkey and Egypt — with further downgrades in sight. Greece insists a restructuring would be a major mistake. Pivotal to its effort to avert what Brussels officials prefer to call a rescheduling is an ambitious plan to raise 50 billion euros by 2015, the bulk of it from real estate. It wants to sell off or lease everything from the old airport to tourist sites, from government utilities to the decaying remnants of the 2004 Olympic games.

    Privatizations alone will not save Greece from bankruptcy: it will need to tighten its budget belt even more than it already has. But without them, Greece can forget about avoiding default. “I think that without this, it will be very difficult to avoid a restructuring,” said Diego Iscaro of IHS Global Insight. “If we want to look at the optimistic scenario, to avoid restructuring this will be a prerequisite, a must.”

    Some analysts say 50 billion euros is much too ambitious a target, and would consider even 20 billion good news. Even that would hardly make a dent. Citigroup said in an April report that even the rosiest scenario — under which Greece managed to raise the 5.5-7.5 billion euros it targets for 2012 — would still not fill a 27 billion euro funding gap that Greece will need to fill in bond markets next year. And according to IMF estimates, 50 billion euros of privatization proceeds by 2015 would only reduce debt to 134 percent of GDP: a level many economists still consider too high.

    Fellow members of the eurozone want Athens to begin the big selloff as soon as possible and have demanded that the first 15 billion be raised by 2013. Greek think-tanks and other experts estimate Greece is sitting on some 300 billion euros worth of state property — almost as much as the country’s entire debt. “How could Greece ask its partners for cash and not take advantage of its own holdings?” asked one western official in March, requesting anonymity so he could speak more freely about the matter. “There was a lot of pressure on Athens to deliver a game plan.”

    So far, though, enacting that game plan has been slow. Like a home-owner who can’t afford the mortgage, Greece has, extremely reluctantly, agreed to part with some assets. But it’s still struggling to work out what it owns, let alone what exactly it’s going to offer or how it’s going to package it. And now the building’s other tenants — mayor Kortzidis and millions of other Greeks opposed to any selloff — are rebelling and refusing to leave. Even if Athens could find takers, its plans risk being upset from within.

    Don’t expect Europe to cut Athens any more slack. A Greek default would trigger further problems in Ireland, Portugal and even Spain, and hurt at least politically in Berlin, Paris and other capitals. Berlin hopes Greece’s privatization program will convince resentful voters in Germany that the Greeks are sharing the costs of the bailout.

    “When you have so many people talking about the need for Greece to reschedule its debt, and so many people saying that a rescheduling is unnecessary, there’s only one thing you can conclude — that it’s going to happen at some point, it’s just difficult to say when,” said a euro zone source in Brussels who spoke anonymously because they are not authorized to talk publicly about Greece’s structural program.

    ANCIENT WRANGLE

    Greece doesn’t have a lot of time. It promised its international lenders in February it would produce a comprehensive list of what it owns by June. Once it determined which state entity owned what property, it said, it would decide how to proceed.

    With a month to go, those plans seem absurdly optimistic. “Forget about trying to list everything. There isn’t time,” said one property expert who sits on one of the seven bank-led committees that have answered the government’s call for expressions of interest in identifying “pieces of property that can be easily and quickly exploited.” The committees haven’t yet been assigned their tasks, let alone having any idea how they are supposed to work, he said.

    In that, the plans are following a familiar path in Greece. From the building boom that created modern Athens to the tourist developments that have turned sleepy Aegean islands into the country’s biggest money-makers, property development has often been anarchic.

    The tourist explosion of the 1960s turned sandy coastlines into prime suburbs, but also spurred an ugly rash of cheap developments that flouted both zoning rules and aesthetics. The absence of any land registry until a few years ago, and a widespread and often blatant disregard for building restrictions, have rendered some state-owned properties unsellable.

    ‘WE MUST CHANGE’

    But there’s a problem with that: corruption helps grease the slow wheels of bureaucracy.

    Red tape can delay projects for years, said Yannis Perrotis, managing director of CB Richard Ellis-Atria and part of a committee set up in 2003 by the then-socialist government to target one billion euros in state property development. That plan was interrupted when the conservative New Democracy party came to power in 2004, and then again when the Vatopedi monastery scandal broke.

    While small local developers can virtually raise buildings anywhere, for a major foreign investor red tape is a disincentive. “Many foreigners have had very bad experiences going through unimaginable troubles from Greek bureaucracy,” said Karytinos.

    Even if the problems of corruption and bureaucracy are dealt with, things can get tangled quickly for other reasons.

    The airport at Hellenikon is exhibit A. The government hopes bulldozers will start work there for the project with Qatar — which it says was attracted by the unique location of the site — as early as the first quarter of 2012. That would give Greece a much-needed psychological boost and give a signal to investors that Greece can work.

    “Hellenikon will add value, create jobs and motivate the international business community. It is a womb that will bear many children,” said Harris Pamboukis, State Minister in charge of major projects, in March.

    But the project’s opponents, led by mayor Kortzidis, are determined to stop it. The soft-spoken leftist admits that financially strapped local municipalities cannot afford to maintain the huge public park he is fighting for, but insists they will fight all the same. His town hall in the southwestern Athens suburb of Argyroupoli is a picture of neglect, with peeling paint and littered steps.

    “Just because we can’t take care of a square doesn’t mean we have to hand it over to private interests. We must change, we must do things better ourselves,” said Kortzidis.

    Greece has a long history of protesters blocking projects. Neighbors held up the construction of the new Acropolis Museum for more than a decade. This time, the government says it is determined to avoid delays.

    “We will clash with anyone who has an agenda of doing nothing,” said Pamboukis, the minister. “The only way to stop a project is through the law. The government will be very tough on illegal actions which are often politically motivated.”

    Qatar’s interest in Hellenikon shows the demand is there, he said. “Foreign investors are interested in Hellenikon because it is rare, and rare is desirable. It will unblock things and inspire others and that is why the prime minister is urging us to go faster.”

    Well, sort of. Prime Minister George Papandreou tried to calm public disquiet by telling parliament in February that “not an inch of Greek land will be sold”. That added to the confusion — it seems to mean that only buildings would be sold, but land would be leased or parceled out using a more complex instrument, such as a holding company selling shares to investors. In the current depressed international economy, such deals might be hard to sell.

    Apart from Qatar, demand for projects may come from China — its Cosco Pacific signed a 3.4 billion euro concession to run the port of Piraeus in 2008 — Russia or Japan. “No one else has the money,” said one euro zone finance official, who discounted the prospect of a European buyer.

    But potential buyers are wary. A Qatari consortium walked away from a 3.5 billion euro energy project in western Greece in October, a setback for Greek hopes to lure up to $5 billion in investment from the cash-rich Arab emirate. Government officials said at the time the two Qatari companies involved, Qatar Petroleum and the Qatar Investment Authority, could not agree with their Greek partners on the viability of the plan.

    EXPENSIVE ODYSSEY

    Advisers to the government have so far issued a list of 20 initial potential assets to sell, including land on the island of Rhodes which might be turned into a golf course, and an area next to the spectacular Rio-Antirio bridge near the western port city of Patras that could be used for tourism or business development.

    How much might Greece really own? A first glimpse came in a report last November by the ISTAME think tank, which put the value of property owned directly by the state at 272 billion euros. This did not include tourist assets such as marinas, camping sites and spas, or Olympic Games venues that belong to two different state organizations, and ISTAME admitted its figure may be way off.

    “Commercial value can certainly be more but it will hinge on how one exploits it,” said ISTAME President, Elias Mosialos, a socialist MP. “It depends on how it can be used, if it has legal or infringement issues, and if it can be developed.”

    Greek officials and bankers started to bounce the 300 billion euro figure off investors in London and New York during trips in late 2010. With the figures in the open, Europe and the IMF pushed harder and after an inspection visit in February an initial government target of 1 billion euros in privatization revenues in 2011 was revised dramatically upwards, to the 2-3 billion this year and 15 billion by 2013.

    Much rides on Hellenikon. Clinching a deal with Qatar and smoothly launching the project will offer foreign investors concrete proof that things in Greece can change. But that will have to be followed by an overhaul of the property and development laws. “We must offer projects that are ready to go, if possible with permits obtained to avoid such problems in the future,” NBG’s Karytinos said.

    This makes a no-go of sites redolent with historic appeal that draw millions of tourists every year. They are often so entangled in archaeological, environmental and legal restrictions that from a property developer’s point of view there’s nothing to be done with them. That rules out landmarks like the Acropolis, even though Germany’s media have suggested that Greece sell it off to pay down its debts.

    “A monument may be priceless but it has no real estate value because we are looking for development,” Karytinos said. “We must look at what we have and how best to take advantage of it without getting stuck in Greece’s legal jumble.”

    Can Greece do it? Pamboukis said the effort will combine the experience of the public sector with the international view and dynamism of the private sector.

    “Imagine it as a Greek Odyssey,” he said. “Odysseus reached Ithaca following an idea. He didn’t have a map but he made it home.”

    It took Odysseus a decade.

    “Some analysts say 50 billion euros is much too ambitious a target, and would consider even 20 billion good news. Even that would hardly make a dent”
    And that was 2011. And here we are in 2015 with a new troika mandated 50 billion euro crash privatization program, except this time Greece has to execute the program under the far harsher troikan oversight system. So long any archaeological site that happens to be nearby any rare real estate!


    Qatar’s interest in Hellenikon shows the demand is there, he said. “Foreign investors are interested in Hellenikon because it is rare, and rare is desirable. It will unblock things and inspire others and that is why the prime minister is urging us to go faster.”

    Yes, it’s the rare assets that foreign investors are the most interested in. But unfortunately for archaeological site lovers (and people that don’t support disturbing likely zombie burial spots), it sounds like a number of those rare assets include the real estate assets that the archaeological sites might be sitting on or near. Ad the regulations protecting those sites were part of what Greece’s creditors found so onerous:


    Much rides on Hellenikon. Clinching a deal with Qatar and smoothly launching the project will offer foreign investors concrete proof that things in Greece can change. But that will have to be followed by an overhaul of the property and development laws. “We must offer projects that are ready to go, if possible with permits obtained to avoid such problems in the future,” NBG’s Karytinos said.

    This makes a no-go of sites redolent with historic appeal that draw millions of tourists every year. They are often so entangled in archaeological, environmental and legal restrictions that from a property developer’s point of view there’s nothing to be done with them. That rules out landmarks like the Acropolis, even though Germany’s media have suggested that Greece sell it off to pay down its debts.

    “A monument may be priceless but it has no real estate value because we are looking for development,” Karytinos said. “We must look at what we have and how best to take advantage of it without getting stuck in Greece’s legal jumble.”

    “A monument may be priceless but it has no real estate value because we are looking for development…We must look at what we have and how best to take advantage of it without getting stuck in Greece’s legal jumble.”
    Fear the Walking Dead.

    Posted by Pterrafractyl | August 23, 2015, 11:47 pm
  16. With Greece’s elections just getting underway, the austerity-weary populace is facing a historic decision: stick with the guy that shares your opposition to sadistic Troikan dictates but capitulated in the face of a ‘Grexit’ that could have plunged the country into uncharted territory and even more sadism, or vote for the guy that has consistently supported austerity the whole time. While this probably shouldn’t be all that hard a decision, if still quite embittering, it’s apparently quite hard:

    The Associated Press
    Greece: Left-wing leader Tsipras says election will defeat country’s corrupt elite

    By Derek Gatopoulos, September 18, 2015

    ATHENS, Greece – Left-wing leader Alexis Tsipras told thousands of supporters at his final campaign rally Friday that Sunday’s general election was an opportunity for them to bury Greece’s corrupt political elite who sank the country into a years-long financial crisis.

    Speaking in Athens’ main Syntagma Square, the charismatic 41-year-old former prime minister urged voters to seize a historic opportunity.

    “The choice you face is to turn back or to keep fighting on together. Turning back would mean to return to a course of 40 years that piled debts on Greeks,” he said, marking the end of a four-week campaign that attracted little public interest.

    Sunday’s election winner is likely to require the support of two smaller parties to form a coalition government, according to five opinion polls published Friday evening that suggested Tsipras made late gains and was ahead by a narrow margin.

    Tsipras has ruled out forming a grand coalition with Vangelis Meimarakis’ conservative New Democracy party — despite a commitment from both leaders to implement the new 86 billion euro ($97 billion) international bailout agreement.

    Meimarakis, 61, ran as an outsider, starting the race as caretaker leader of his party, but made gains wooing swing voters — farmers, women, and residents of his ancestral home on the island of Crete — with the message that Tsipras could not be trusted after abandoning his anti-bailout platform.

    “With all the promises he broke and damage he did … why should Mr. Tsipras be given a second chance?” he told members of a conservative women’s association in his final campaign appearance.

    Tsipras resigned as prime minister and called the early election last month after reaching an agreement with eurozone creditors for a third bailout for Greece — a move that triggered a split within his party and saw his huge lead in opinion polls evaporate.

    Under Greece’s electoral system, the top party receives a 50-seat bonus in the 300-member parliament. The leading three parties each have three days to try to form a coalition, in successive rounds of consultations, if the vote produces a hung parliament.

    Softening earlier objections, Tsipras has indicated that he could work with the socialist PASOK party and the centrist Potami parties as possible partners.

    So it sounds like Alexis Tsipras has a slight edge going into the elections, but it’s basically too close to call at this point and very possible that the right-wing pro-austerity New Democracy will lead the next Greek government although, as the article below points out, New Democracy is really the right-wing pro-even-more-austerity-than-has-already-been-agreed-to party. And as the article also points out, we already basically know who the winner is going to be: the Troika:

    The Wall Street Journal
    Greece’s Bailout Is Working—Too Well
    As mainstream parties unite behind the rescue deal, opposition becomes the preserve of the fringe.

    By Joseph C. Sternberg
    Sept. 17, 2015 3:18 p.m. ET

    Athens

    The quiet campaign ahead of Sunday’s parliamentary election here is a sign that the scheme hatched by Greece’s creditors is working. The main question now is whether it will work too well.

    In August, recall, those creditors extended Athens another €86 billion ($96.97 billion) in bailout funds, tied to demands for reforms no one seriously expected Greece to deliver. The real game was to buy voters a few more years to reconcile themselves to the strictures that euro membership places on their politics.

    Sure enough, this latest campaign has revolved around the major parties’ promises to keep Greece in the common currency by implementing the bailout deal more or less in its entirety. The traumas of this year—acrimonious negotiations with creditors, capital controls, very nearly plunging headlong out of the euro—seem to have triggered a realignment of Greek politics that would cheer Germany’s Chancellor Angela Merkel and other eurozone leaders.

    To start, the radical left-wing party Syriza, whose election victory in January sparked this mess, is revamping itself. Its leader, Alexis Tsipras, has purged the party of its most radical leftists. That group, roughly one-third of Syriza’s members of parliament, have formed their own Popular Unity party. It’s more honestly anti-euro than Syriza ever was, and as a result its support is sinking fast. It may not win a single seat.

    The remaining new-look Syriza is now trying to position itself as a more respectable party of the left, pledged to abide by the deal Mr. Tsipras struck. Syriza could do so with a surprisingly revived Pasok, the old socialist party that was badly discredited as the ruling party that signed Greece’s first two bailouts, in 2010 and 2012. Under its new leader, Fofi Gennimata, Pasok is polling between 5% and 6%, compared to the 4.7% it won in January. Mr. Tsipras has signaled he would be open to a coalition with Pasok. A socialist old guard with governing experience could help temper Mr. Tsipras’s more radical urges.

    Another development creditors can cheer is that Greece has a center-right again. The New Democracy party is back, after looking like a spent force when it was voted out of office in the January election. Its hapless former leader, Antonis Samaras, stepped down this summer, and most observers assumed the party would need a longer spell to stage a comeback.

    Instead, it has pulled nearly even with Syriza in most polls, at around 25% support each, under a caretaker leader who never expected to become prime minister. Evangelos Meimarakis, a former speaker of parliament, is an old-style politician with a reputation for evenhandedness and a penchant for earthy slang on the campaign trail. He scores Mr. Tsipras for incompetence and promises to be a more reliable executor of the bailout. New Democracy might be able to form a government, perhaps in coalition with the small Potami party of free-market liberals and social democrats.

    It looks an awful lot like Mrs. Merkel’s dream of a Greek election: Both major parties promising to implement (most of) August’s bailout deal, with the voters going along.

    Yet this success could come at a high cost, as other trends in this campaign warn. The problem is that thanks to the bailout’s laundry list of specific and largely inflexible conditions, the major fault-line in Greek politics now isn’t over how best to transform Greece into a competitive modern economy, but over whether to stay in the euro at all. The effect is to empower the fringe.

    That helps explain why the neo-Nazi Golden Dawn party’s support has grown. The party is now garnering around 7% compared to the 6.3% it won in January’s election, and it typically outperforms its poll numbers. With creditors having neutered Syriza, Golden Dawn is the only major opposition party left to truly oppose anything. If it comes in third, it will be the largest party in Parliament standing against the Syriza-New Democracy-Pasok-Potami consensus.

    On the other side, the danger is that such a strict bailout will stifle debate about bigger and better supply-side reforms. The bailout agreement is deeply flawed, relying heavily on growth-killing tax increases. Policy reforms and privatizations, as bold as they sound, are limited to whatever Syriza’s leftists and social-democratic European politicians could agree on.

    Mr. Meimarakis and some elements in New Democracy, and most of Potami, understand this. Mr. Meimarakis has argued belatedly that Greece needs to exceed the reform targets to return to growth. Options could include more aggressive privatizations, liberalization of education or product markets omitted from the deal, or the like. But large swathes of his party remain unconvinced, and it’s hard to see how the public can be brought along when their main experience of “reform” will soon be the crushing tax increases mandated by the bailout.

    This sets up an odd asymmetry. Any Greek reformers who want to oppose the government by offering a different pro-euro, supply-side program that would trade more thorough liberalization in exchange for leeway to implement a pro-growth tax cut will require creditors’ permission. They may not get it. Meanwhile, Golden Dawn, the Greek Communist Party and others don’t need anyone’s permission at all to keep opposing the euro.

    “Mr. Meimarakis has argued belatedly that Greece needs to exceed the reform targets to return to growth. Options could include more aggressive privatizations, liberalization of education or product markets omitted from the deal, or the like.”
    And that’s the guy that just might become Greece’s new prime minister.

    So as we can see and as the (pro-austerity) author points out, the Troika’s scheme is more or less working as planned, but is it possible that it’s working too well by imposing such an inflexible austerity package that the political debate in Greece has been effectively neutered, empowering groups like the Golden Dawn?


    Yet this success could come at a high cost, as other trends in this campaign warn. The problem is that thanks to the bailout’s laundry list of specific and largely inflexible conditions, the major fault-line in Greek politics now isn’t over how best to transform Greece into a competitive modern economy, but over whether to stay in the euro at all. The effect is to empower the fringe.

    That helps explain why the neo-Nazi Golden Dawn party’s support has grown. The party is now garnering around 7% compared to the 6.3% it won in January’s election, and it typically outperforms its poll numbers. With creditors having neutered Syriza, Golden Dawn is the only major opposition party left to truly oppose anything. If it comes in third, it will be the largest party in Parliament standing against the Syriza-New Democracy-Pasok-Potami consensus.

    This sets up an odd asymmetry. Any Greek reformers who want to oppose the government by offering a different pro-euro, supply-side program that would trade more thorough liberalization in exchange for leeway to implement a pro-growth tax cut will require creditors’ permission. They may not get it. Meanwhile, Golden Dawn, the Greek Communist Party and others don’t need anyone’s permission at all to keep opposing the euro.

    “With creditors having neutered Syriza, Golden Dawn is the only major opposition party left to truly oppose anything.”
    Thanks again, Troika.

    So that’s the situation heading into Greece’s latest round of elections: it’s a choice between the party that unsuccessfully opposed the Troikan dictates or the guy that embraces them and wants more. And it’s too close to call.

    Who’s going to win? We’ll see Oh, that’s right, the Troika:

    The Guardian
    Eurozone’s enforcer ready to keep Greece’s new leader in line

    Dutch economist Maarten Verwey has unprecedented powers as his taskforce oversees the implementation of Greece’s cash-for-reforms rescue package

    Jon Henley in Athens
    Friday 18 September 2015 11.46 EDT

    Whoever ends up moving into Maximos Mansion, the official Athens residence of Greece’s prime ministers, after Sunday’s election, they will not, in any meaningful sense, be running the country.

    That honour might be said to go instead to a besuited Dutch economist in Brussels with the imposing title of director-general in the secretariat-general of the European commission in charge of the Structural Reform Support Service.

    Maarten Verwey, a senior civil servant at the Dutch finance ministry who joined the commission in 2011 and led its Cyprus assistance programme, heads what amounts to an EU taskforce for Greece, Greek media have said.

    His powers are unprecedented. And if few voters on the streets of Athens have heard his name, many understand that how they cast their ballot in the elections will make little difference to what happens next.

    “It’s a done deal,” said Christos Sotirakis, 43, a bank employee. “It doesn’t matter who wins, we know what they’ll be doing. More taxes, more cuts, more austerity. Every party signed up to it. There’s no real point voting.”

    Anti-austerity Syriza leader and outgoing premier Alexis Tsipras, who resigned this summer after accepting punishing new bailout terms to ward off bankruptcy and keep Greece in the euro, and Vangelis Meimarakis, of the centre-right New Democracy, are tied in the polls.

    But under the draconian conditions of Greece’s third cash-for-reforms rescue package, Athens effectively surrendered control over great swaths of economic and social policymaking to its eurozone lenders.

    The memorandum of understanding detailing the three-year, €86bn (£63bn) deal requires the government “to consult and agree with the European Commission, European Central Bank and International Monetary Fund on all relevant actions … before these are finalised and legally adopted.”

    In exchange for the bailout funds, Greece, which needs to repay about €1.3bn in loans this December and another €6bn in 2016, has pledged to radically overhaul its economy and make far-reaching changes to the health, welfare, pensions and taxation systems.

    Some 120 pieces of legislation must be passed this year – with future bailout payments dependent on satisfactory quarterly progress reviews. “There will be no further transfer of funds to Greece unless Greece starts changing basic patterns of the way the pension system works, taxation is enforced, and so on,” said Dimitri Sotiropoulos, a political scientist at the University of Athens.

    According to the financial weekly Agora, Verwey’s 20-strong staff “will essentially write the legislation for almost all areas of government policy, from corporate income tax and labour market policy to the health and welfare system … and prepare interim reports during the evaluation of the economy”.

    A previous Greek task force was disbanded after the former Syriza government refused flatly to cooperate with it. This time, Agora said Verwey would have “a direct line of communication with the prime minister’s office”, as requested by the commission president, Jean-Claude Juncker.

    “There’s a lot more pain to come, we know that,” said Effie Michaelides, a civil servant, who backed Syriza “with all my heart” in the party’s January election win but now is not sure if she will vote at all. “We must obey orders from Brussels, or there’s no more money. It’s blackmail, really.”

    Even before it is formed, the new government is committed to meeting a series of tough targets, including turning round a projected primary deficit of 1.5% to one of just 0.25% by the end of the financial year, and reaching a 3.5% primary surplus in the medium term.

    It must improve tax compliance and “public financial management”, as well as raise more money through measures as disparate as abolishing tax breaks for farmers, increasing VAT and centralising health procurement. Changes to pensions are expected to save 1% of GDP by 2016, and benefit reforms 0.5%.

    Labour market laws must be overhauled, consumer markets including energy deregulated, and restricted professions such as notaries, actuaries and bailiffs opened up. To “modernise the state and public administration”, the judiciary will be reformed, civil service perks slashed, and the bureaucracy “depoliticised”.

    As part of a highly specific and at times frankly odd “toolkit” seen by some as a free-market bonanza for multinational businesses, ownership rules for Greek pharmacies, marketing laws for milk and the regulations governing who can call themselves a baker.

    Despite campaign pledges from both leading parties that, if elected, they will try to cushion the blow, the measures add amount to a daunting legislative programme from which Greece’s new prime minister – whatever his name – will find it difficult, if not impossible, to deviate.

    “This time, we all need to realise that we are serious and for real,” commission president Juncker reminded Athens earlier this month. “We require respect of the arrangements and agreements that have been reached. If they are not respected, the reaction of the European Union and the eurozone will be different.”

    Yannis Stathopoulos, a waiter, said he would definitely not be voting. “I’ve given up,” he said. “Did we really invent democracy?”

    “This time, we all need to realise that we are serious and for real….We require respect of the arrangements and agreements that have been reached. If they are not respected, the reaction of the European Union and the eurozone will be different.”

    Posted by Pterrafractyl | September 19, 2015, 6:39 pm
  17. Greece’s election results are in: Syriza won by a larger than expected margin and will likely form a government with its existing coalition partners, the nationalist Independent Greeks. Also, Golden Dawn came in third, with 7 percent of the vote. Voter turnout was at 56 percent compared to 63 percent for January’s elections that swept Syriza into power.

    The implication of this outcome are somewhat unclear since the new government’s policies aren’t really in question after the Troika basically took control of the government as part of the bailout conditions, but the degree to which the Troika will have to actually ‘put its foot down’ and somehow force a policy shift will depend the likelihood of the Greek government passing laws that don’t fit the Troika’s plans. So, FWIW, the Greek people appear to have elected a government that will grudgingly, as opposed to enthusiastically, implement the austerity package, which could result in more showdowns with the Troika’s new enforcer than would have taken place had New Democracy won and that’s actually really important in terms of Europe’s ongoing struggle with how it’s going to muddle down the path towards and “ever closer union”. It’s not much in terms of there being a meaningful impact to these elections, but in the eurozone, when it comes to democracy and member states that find themselves in a structural economic crisis that requires financial assistance, beggars can’t be choosers:

    Reuters
    UPDATE 8-Greek leftist Tsipras returns in unexpectedly clear election win

    * Tsipras claims mandate for full four-year term

    * New Democracy leader concedes defeat

    * Victory margin unexpectedly decisive (Updates vote count)

    By Renee Maltezou and Karolina Tagaris
    Mon Sep 21, 2015 1:15am EDT

    ATHENS, Sept 21 (Reuters) – Greek leftist Alexis Tsipras stormed back into office with an unexpectedly decisive election victory on Sunday, claiming a clear mandate to steer Greece’s battered economy to recovery.

    The vote ensured Europe’s most outspoken leftist leader would remain Greece’s dominant political figure, despite having been abandoned by party radicals last month after he caved in to demands for austerity to win a bailout from the euro zone.

    In a victory speech to cheering crowds in a central Athens square, he promised a new phase of stability in a country that has held five general elections in six years, saying his mandate would now see him through a full term.

    “Today in Europe, Greece and the Greek people are synonymous with resistance and dignity. This struggle will be continued together for a full four years,” he said.

    He made no specific reference to the 86 billion euro ($97 billion) bailout, but Syriza campaigned on a pledge to implement it, while promising also to introduce measures to protect vulnerable groups from some aspects of the deal.

    “We have difficulties ahead of us but we also have a solid ground, we know where we can step, we have a prospect. Recovery from the crisis can’t come magically, but it can come through tough work,” he said.

    Tsipras’s first task after forming a government will be to persuade European Union lenders that enough agreed steps have been made to ensure the next payment. The bailout programme is due for a review next month.

    Jeroen Dijsselbloem, the Dutch head of the Eurogroup of finance ministers that use the single currency, said he looked forward to the swift formation of a new Greek government with a mandate to implement the bailout.

    “Ready to work closely with the Greek authorities and to continue accompanying Greece in its ambitious reform efforts,” Dijsselbloem tweeted.

    Tsipras will also need to grapple with Greece’s central role in Europe’s refugee crisis, as the main entry point for tens of thousands of migrants who arrive by sea and trek up the Balkan peninsula to richer EU countries further north. He meets EU colleagues at an emergency summit over the crisis on Wednesday.

    In a near repeat of January’s general election, his Syriza party fell just shy of an outright majority but will form a coalition with his former partners, the small rightwing Independent Greeks party.

    With 99.5 percent of votes counted, Syriza had claimed 35.5 percent of the vote, easily seeing off the main conservative challengers New Democracy on 28.1 percent.

    Third place in the election again went to Golden Dawn, a far right party with a swastika-like symbol, with 7 percent of the vote.

    WEARINESS

    Tsipras resigned and called the election last month when his party split over his reversal on the bailout, which he had accepted despite having won an overwhelming referendum mandate in July to reject similar terms.

    Many Greeks expressed weariness with politics during the campaign, tired of voting and frightened by the prospect of still more uncertainty that would worsen one of the worst depressions to hit an industrialised country in modern times.

    “I voted, but with a heavy heart,” said Despina Biri, 29.

    Sunday’s ballot was the third national vote this year, including the referendum. Turnout was 56.5 percent compared with 63 percent in January’s election.

    Some voters said they backed Syriza because Tsipras needed time to finish the job he began.

    “They were … the ones who signed the bailout so they have to implement it,” said Fani Arvanitidi, 70.

    The firebrand leftist fought hard for Greece to be let off harsh austerity rules imposed by international creditors, only to back down after Greece’s banks were shut and the country was pushed to the wall.

    More than two dozen of his lawmakers abandoned him last month, many saying he had betrayed his principles. He argued that his tough negotiating stance had softened the blow of austerity and had helped persuade creditors to agree a restructuring of Greek debt.

    His centre-right opponents argued that his erratic leadership had worsened the economic crisis, throttling a recovery that had just begun before he took power.

    But with Tsipras and his main opponents now all committed to the bailout, the deep divisions that had polarised Greece and given rise to volatile politics appear less extreme for now.

    Apart from Golden Dawn and the communist KKE party, the major parties in the new parliament have now all accepted the cash-for-reforms deal to keep Greece in the euro zone.

    “After years of almost unprecedented crisis, the vast majority of Greeks are endorsing parties that are promising to keep the country in the euro even if that implies thorough and painful reforms,” Holger Schmieding, chief economist at Germany’s Berenberg bank said.

    For former allies still opposed to EU-imposed austerity, however, Tsipras is a turncoat.

    Yanis Varoufakis, the outspoken former finance minister who infuriated EU officials with his refusal to accept their proposals, called the election “the ‘legalisation’ of the capitulation that followed the signing of the dead end, humiliating and irrational” bailout.

    The new government will also need to respond to Greece’s central role in Europe’s migration crisis, which could intensify as countries further along the land route north across the Balkans shut down their frontiers.

    In a painful reminder of that crisis, 13 migrants died in Turkish waters on Sunday when a boat carrying 46 people en route to Greece collided with a dry cargo vessel and capsized, a Turkish coast guard source said.

    Given that the Greek people appear to overwhelmingly still want to remain in the euro, even in the face of unrelenting austerity, it was basically inevitable that one of the major parties that backed the “bailout” was going to come in first so it seems pretty clear that a Syriza victory was by far the best outcome if a pro-bailout party was going to win. As the the most anti-bailout of the pro-bailout parties, Syriza is just a better choice if Greece is going to stick with parties that are dedicated to keeping it in the euro. At least when Syriza gets reelected the democratically sent mandate that the electorate sent is something along the lines of “OK, we agree to the psycho ‘bailout’ rules because we’re focused on the long-term value of being part of a united Europe, but these terms are BS” and, while still a sucky message to being forced to send, it’s a lot better than the general acceptance of the pro-austerity ideology that would have been the mandate to emerge from a New Democracy win. At least the Troika can’t claim a popular mandate and that’s going to be critical in the months and years ahead.

    But this also highlights a key danger ahead: Given the bailout conditions, where Dutch economist Maarten Verwey has been granted unprecedented to shape Greece’s laws and enforce the Troika’s will, the whole political legitimacy of Greece’s democracy is at stake and while Golden Dawn might only be getting 7 percent support so far, that’s a much higher percentage of the “screw the euro” vote. So the Greek political scene has been reoriented where nearly all of the major parties have, either enthusiastically or grudgingly, accepted the bailout terms that 62 percent of Greek voters rejected back in July, and fascist “populists” like Golden Dawn are now getting most of the votes of the remaining “reject the bailout” vote. And the Troika’s enforcer is about to start enforcing.

    Democracy is a lot scarier and more complicated when it doesn’t matter.

    Posted by Pterrafractyl | September 20, 2015, 10:49 pm
  18. While it might seem like the Greece economic crisis has shifted into a new equilibrium in recent months following the July agreement between Greece and the Troika and the subsequent snap elections recently won by Syriza. But as the article below reminds us, the Troika has yet to determine if Greece is going to get any debt relief:

    Irish Times
    Debt relief next big issue as Syriza shifts positions
    Significant challenges remain as the Greek government settles into its new term

    Suzanne Lynch

    Thu, Oct 1, 2015, 01:00

    Greek finance minister Euclid Tsakalotos will meet his euro zone counterparts next Monday for the first time since his country’s September 20th general election. The current state of play regarding the Greek bailout is expected to feature at the scheduled Eurogroup meeting in Luxembourg, as finance ministers turn their minds to the next bailout review originally scheduled for October, but now expected to take place in November.

    The last few months have seen the Greek bailout crisis slip away from international attention, as the world’s eyes focused on the refugee crisis. But the issue has not gone away.

    Ten days ago Greek voters went to the polls in their fifth general election in six years. Despite polls indicating a surge in support for the centre-right New Democracy, Syriza won 35 per cent of the vote, slightly lower than its victory in January, but decisive nonetheless. The election of a new coalition between Syriza and the Independent Greeks – effectively a return of the political status quo – has reassured markets. Moody’s this week revised upwards its outlook on Greek sovereign debt to “stable”.

    In the short-term the focus will be on the government’s implementation of the terms of the bailout agreement. In a sign that Tsipras’s government is prepared to comply with creditors’ demands, on Monday the government announced that it will abolish the contentious reduced VAT rate which applies to six of the islands, with more islands entering the scheme in 2016 and 2017. The finance ministry described the move as a “political necessity, not a choice” but the concession on VAT– a key issue during the bailout crisis – illustrates how far Syriza has shifted from many of its original positions.

    Further reductions to pensions will be even tougher to implement, though there may be room for compromise for the government. Similarly, Greece faces pressure to accelerate the pace of privatisations, though the ongoing dispute between energy minister Panos Skourletis and a Canadian mining company about mining rights does not bode well for progress on the privatisation agenda.

    The situation of the banks is also a serious concern. With capital controls still in place, the Greek banking system remains in a precarious position. Deposits are down about 25 per cent since the beginning of the year, while the market value of the four big banks is 70 per cent lower than in January when Syriza came to power. The ECB is currently undertaking an asset quality review and stress tests of the banks, but fears that the capital shortfall revealed by the tests could be larger than anticipated sent bank stocks sharply lower earlier this week.

    Bailout review
    With about €25 billion of the €86 billion loan package for Greece earmarked for the banks, the health of the sector is bound up with the bailout review. While new “bail-in” rules agreed in the wake of the financial crisis demand that shareholders and depositors should bear some of the loss in the event of a bailout, the rules do not kick in until January 1st. Instead, the recapitalisation is likely to come from a €10 billion ESM fund, topped up by an extra €15 billion in bailout loans.

    While the results of the bank stress tests are likely to occupy minds before the first bailout review, the next issue on the agenda will be debt relief. The finance minister said this week that he expects to open negotiations on debt relief by the end of the year.

    At the very least, debt restructuring will be on the cards, but there is significant support for a debt writedown, including from the centre-left Socialist and Democratic group in the European Parliament. The shape of such a deal is likely to be the next big political battle of the Greek crisis.

    “At the very least, debt restructuring will be on the cards, but there is significant support for a debt writedown, including from the centre-left Socialist and Democratic group in the European Parliament. The shape of such a deal is likely to be the next big political battle of the Greek crisis.”

    As we can see, there’s no shortage of uncertainty over what comes next for Greece, especially when it comes to the question of whether or not Greece receives the debt relief that it needs. But at least it sounds like there’s significant support within the EU for some sort of major debt relief. Of course, this being the EU we’re talking about, significant support within the EU for some sort of debt major debt relief probably isn’t going to be significant enough:

    Financial Times
    Greece should not expect big debt writedown, says Klaus Regling

    Peter Spiegel in Brussels
    October 1, 2015 3:29 pm

    The head of the eurozone’s €500bn bailout fund has played down expectations that Greece will be granted large-scale debt relief, saying it is not necessary to revive the country’s economy and is unlikely to be accepted by European creditors.

    Klaus Regling, managing director of the European Stability Mechanism, said Greece was already benefiting from generous loan terms that were the most concessionary “in world history”.

    Following the re-election last month of prime minister Alexis Tsipras, he added, the parties appear to be narrowing their differences as they prepare to resume negotiations over possible debt relief later this year.

    “I think now there’s a big convergence,” Mr Regling said in an interview. “The Greek government realises there will be no nominal [debt] haircut — and for good reasons. The Greek government should sell what has happened already — and what might have been — very positively to their electorate, to the Greek population, because the benefits are there in any case.”

    As part of the July deal, eurozone creditors agreed to reopen debt talks as part of the programme’s first quarterly review, expected to begin next month. Mr Regling, whose ESM will hold more than 60 per cent of Greek debt at the end of the new €86bn rescue programme, could play a central role in those negotiations.

    Even though Mr Regling agrees the July deal will lead to some form of debt relief for Greece, he has repeatedly rejected the need for large-scale writedowns — a view that has given cover to Berlin and other northern countries who have resisted such restructurings.

    Mr Regling’s argument is that Greece’s debt should be measured by what Athens currently has to pay on an annual basis rather than the overall stock of debt. He insists private investors — who must ultimately replace bailout lending — care more about such “debt flows” than the overall debt levels, which remain the highest in the eurozone and are still rising.

    Both the International Monetary Fund — a key proponent of debt relief for Greece — and Athens have accepted there will not be “haircuts”, or full writedowns, of the country’s existing bailout loans. But the IMF, in particular, has pushed for decades-long extensions of repayment schedules with long “grace periods” where Athens would be free of even interest payments.

    In July, the IMF warned that Greece needed “debt relief on a scale that would need to go well beyond what has been under consideration to date — and what has been proposed by the ESM.” The demand prompted questions about whether the IMF will ultimately commit to a third rescue programme, something considered essential for Berlin to win approval for bailout payments in the Bundestag.

    “It seems to me a little on the long side,” Mr Regling said, referring to an IMF analysis suggesting Greece needs maturity extensions with grace periods of 30 years.

    “One can look at that, but it seems to be unnecessary to be that long-term,” he said. “And many variables change all the time — including the assumptions about growth, which of course is a function of how quickly reform programmes are implemented. Some of this is probably already outdated again.”

    Despite the differences, Mr Regling believed the IMF had gradually moved towards his view of the importance of Greece’s low annual debt payments. Meanwhile, he interpreted recent comments from Mr Tsipras as indicating he was not in the mood for a replay of the brinkmanship that preceded the bailout, in which Greece nearly crashed out of the eurozone.

    “Klaus Regling, managing director of the European Stability Mechanism, said Greece was already benefiting from generous loan terms that were the most concessionary “in world history”.
    Greece’s terms have been the most concessionary terms “in world history”. Wow, he actually said that.

    So we’ll see what, if any, actual debt relief takes place given that the head of the European Stability Mechanism is warning that Greece’s European creditors aren’t going to be open to a debt write down and appears to have the the impression that Greece is already on track to pay down its debts after the most generous bailout “in world history”.

    But this also raises the question how Greece’s non-European creditors (the IMF) are going to respond to the head of the ESM shooting down an idea that the IMF had previous declared a requirement for their further participation:


    Both the International Monetary Fund — a key proponent of debt relief for Greece — and Athens have accepted there will not be “haircuts”, or full writedowns, of the country’s existing bailout loans. But the IMF, in particular, has pushed for decades-long extensions of repayment schedules with long “grace periods” where Athens would be free of even interest payments.

    In July, the IMF warned that Greece needed “debt relief on a scale that would need to go well beyond what has been under consideration to date — and what has been proposed by the ESM.” The demand prompted questions about whether the IMF will ultimately commit to a third rescue programme, something considered essential for Berlin to win approval for bailout payments in the Bundestag.

    “The demand prompted questions about whether the IMF will ultimately commit to a third rescue programme, something considered essential for Berlin to win approval for bailout payments in the Bundestag.”

    So it’s looking like the question of significant debt relief for Greece is back on the agenda for Greece, and if the IMF doesn’t sign on to the “bailout” terms championed by Europe’s austerity-faction, it’s not even clear Germany’s Bundestag will approval any money for the 86 billion euro package at all.

    What the IMF decides to do remains to be seen, but you probably shouldn’t be too surprised if you end up disappointed, based on what we’ve seen already:

    The Telegraph
    IMF’s botched involvement in Greece attacked by former watchdog chief
    Fund must ease off on austerity and push for debt write-offs to heed lessons of failure in Greece, warns ex-director of the IMF’s evaluation office

    By Mehreen Khan

    11:00PM BST 01 Oct 2015

    The International Monetary Fund has come under fire for failing in its duty of care towards Greece by pushing self-defeating austerity measures on the battered economy.

    The Washington-based fund was told it should have eased up on the spending cuts and tax hikes, pushed for an earlier debt restructuring and paid more “attention” to the political costs of its punishing policies during its five-year involvement in Greece.

    The recommendations came from a former deputy director of IMF’s Independent Evaluation Office (IEO) David Goldsbrough..The IEO is an independent watchdog tasked with scrutinising the fund’s activities. Mr Goldsbrough worked at the body until 2006.

    His suggestions are set to embolden critics of the IMF’s handling of the Greek crisis. They follow previous admissions from the fund that it has over-stated the benefits of imposing excessive austerity on successive Greek governments.

    The suggestions from the former watchdog chief come as reports suggest the IMF is still poised to pull out of Greece’s third international rescue in five years over the sensitive issue of debt relief.

    The fund is pushing for a restructuring of at least €100bn of Greece’s debt pile, according to a report in Germany’s Rheinische Post.

    Such bold measures to extend maturities and reduce interest payments are set to be rejected by its European partners, who are unwilling to impose massive lossess on their taxpayers. The head of Greece’s largest creditor – Klaus Regling of the European Stability Mechanism – told the Financial Times that such radical restructuring was “unnecessary”.

    This intransigence could now see the IMF withdraw its involvement when its programme ends in March 2016.

    In addition to his findings on Greece, Mr Goldsbrough urged the IMF to question its involvement in many bail-out countries for the sake of the institution’s credibility.

    “Few reports probe more fundamental questions – either about alternative policy strategies or the broader rationale for IMF engagement,” said the report.

    Accounts from 2010 show the IMF was railroaded into a Greek rescue programme on the insistence of European authorities, vetoing the objections of its own board members from the developing world.

    The IMF is prevented from lending to bankrupt nations by its own rules. But it deployed an “exceptional circumstances” justification to provide part of a €110bn loan package to Athens five years ago.

    Greece has since become the first ever developed nation to default on the IMF in its 70-year history.

    Despite privately urging haircuts for private sector creditors in 2010, the IMF was ignored for fear of triggering a “Lehman” moment in Europe, by then European Central Bank chief Jean-Claude Trichet. Greece later underwent the biggest debt restructuring in history in 2012.

    The findings of the fund’s research division have largely discredited the notion that harsh austerity will bring debtor nations back to health. However, this stance has been at odds with its negotiators during Greece’s new bail-out talks where officials have continued to demand deep pension reforms and spending cuts for Greece.

    “The findings of the fund’s research division have largely discredited the notion that harsh austerity will bring debtor nations back to health. However, this stance has been at odds with its negotiators during Greece’s new bail-out talks where officials have continued to demand deep pension reforms and spending cuts for Greece.”

    Posted by Pterrafractyl | October 1, 2015, 9:13 pm
  19. Alexis Tsipras is layout out the new Greek budget on Monday. It’s less about revealing the government’s thinking on how to solve Greece’s depression and more about explaining how the Troika’s “reform” agenda is about to be swift implementation since, as the article below points out, European authorities are pushing Greece to implement 48 austerity “milestones” by mid-October in order to secure the next tranche from its bailout. But that’s not the only message Tsipras has for the Greek people. He also appears to be indicating that, should Greece stick to the Troika’s demands, a renegotiation of the “bailout” terms could then commence. So he appears to be suggesting the Troika train that just successfully railroaded the Greek popular revolt into a state of democratically endorsed capitulation involves a light at the end of the tunnel that isn’t another train:

    Bloomberg Business
    Tsipras Will Walk Tightrope With Unveiling of New Greek Budget

    Greek leader set to detail policy plans for new term in office
    Parliament debate concludes Wednesday with vote of confidence

    Nikos Chrysoloras
    October 4, 2015 — 8:33 AM CDT

    Greek Prime Minister Alexis Tsipras will unveil his government’s policy plans for its new term in office on Monday, including a draft budget for 2016, as he tries to win back the trust of the country’s European partners.

    In a three-day-long parliamentary debate set to conclude with a vote of confidence on Wednesday, the 41-year-old leader will seek to strike a balance between complying with creditors’ demands and fulfilling his election-campaign promises for a “parallel program” to alleviate the impact of austerity. European leaders are pushing Greece for deep spending cuts and economic overhauls.

    “Comrades, we have an important and difficult task ahead: to implement the agreement of July 12,” Tsipras told lawmakers of his Syriza party on Saturday, referring to the bailout deal he struck in the summer. “At the same time, we have to negotiate on the issues that are still open, which we fought to keep open, to hold the ground we gained.”

    Tsipras is trying to contain the economic fallout from the six months of wrangling with creditors that preceded the July deal. The government’s priority is restoring collective bargaining in labor markets and tackling the issue of non-performing loans while protecting primary residences from foreclosures, he told lawmakers on Saturday.

    48 Milestones

    European authorities, meanwhile, are pushing Greece to implement 48 “milestones” by mid-October in order to secure the next tranche from its bailout, according to a document obtained by Bloomberg News on Friday. They include amending laws on household insolvency and early retirement in the public sector.

    Circulated among the so-called Euro Working Group of finance ministry officials, the milestones include bills that parliament passed in August, but that haven’t gotten the ministerial and presidential decrees needed for full implementation.

    Tsipras said there’s still room for negotiation with creditors on “equivalent measures” for some parts of the austerity program, including opening up the electricity market and a new round of pension cuts. Both are among the dozens of conditions included in Greece’s bailout agreement with euro area member states for unlocking emergency loans.

    At stake if Greece doesn’t comply and its creditors freeze disbursements is the country’s ability to service its debt and recapitalize its battered financial system before the end of the year. Greek bonds were among the worst-performing of all sovereign securities tracked by Bloomberg’s World Bond Indexes for the past year.

    The former firebrand opponent of bailouts was catapulted to power in January on a promise to end austerity, only to capitulate to creditors’ demands after a cap on emergency assistance from the ECB and the freezing of aid from the euro area brought the country’s financial system to the brink of collapse. His choice to compromise and adhere to austerity measures triggered a mutiny in his party, thus leading Europe’s most indebted state to new elections, which Tsipras won again.

    “The Greek people rewarded the difficult fight we put up,” Tsipras told lawmakers on Saturday. “The people also rewarded the difficult choice we made to reach a compromise,” he said, adding that a discussion on easing Greece’s public debt burden will begin before the end of the year.

    “The Greek people rewarded the difficult fight we put up…The people also rewarded the difficult choice we made to reach a compromise,” he said, adding that a discussion on easing Greece’s public debt burden will begin before the end of the year.
    Yes, a discussion on easing Greece’s public debt burden will presumably begin before the end of the year. And the austerity is going to be up for negotiation too, with the option of swapping out policies for “equivalent measures” on areas like privatizations and pension cuts. At least, that’s the plan:


    European authorities, meanwhile, are pushing Greece to implement 48 “milestones” by mid-October in order to secure the next tranche from its bailout, according to a document obtained by Bloomberg News on Friday. They include amending laws on household insolvency and early retirement in the public sector.

    Circulated among the so-called Euro Working Group of finance ministry officials, the milestones include bills that parliament passed in August, but that haven’t gotten the ministerial and presidential decrees needed for full implementation.

    Tsipras said there’s still room for negotiation with creditors on “equivalent measures” for some parts of the austerity program, including opening up the electricity market and a new round of pension cuts. Both are among the dozens of conditions included in Greece’s bailout agreement with euro area member states for unlocking emergency loans.

    At stake if Greece doesn’t comply and its creditors freeze disbursements is the country’s ability to service its debt and recapitalize its battered financial system before the end of the year. Greek bonds were among the worst-performing of all sovereign securities tracked by Bloomberg’s World Bond Indexes for the past year.

    So we’ll see how successful the process of swiftly implementing some of the Troika’s “48 milestones” in the hopes that the rest can be renegotiated goes. And we’ll also see how the calls for open debt relief negotiations goes too which is going to be especially interesting given the signals the intra-Troikan showdown between the IMF and its European partners that’s already underway. But we’ll see how that goes. And perhaps soon, since reopening those debt relief talks soon is the sugar that Tsipras is using to mask the taste of a very bitter pill:

    Reuters
    Greece must stick to program to exit bailout: PM
    ATHENS

    By Renee Maltezou

    Sat Oct 3, 2015 7:26pm EDT

    Greece must implement its bailout program fast to achieve its main aim of regaining access to market financing and escaping international supervision, re-elected leftist Prime Minister Alexis Tsipras said on Saturday.

    Speaking to lawmakers of his Syriza party on the day a new parliament was sworn in, the premier said he aimed to complete the first review of a 86 billion euro bailout agreed in August as soon as possible so Athens could open negotiations with its euro zone partners on debt relief.

    To achieve that, Greece is required to enact a swathe of reforms of taxation, pensions, healthcare, the financial sector and public services by Nov. 15 to unlock the next tranche of aid and receive help in recapitalizing its stricken banks.

    “Implementing the bailout is not going to be easy. But we are obliged to make these decisions although we don’t like them,” Tsipras said. “It’s necessary, in order to exit this system of surveillance and immediately start the discussion on the debt issue.

    “Our main target is to exit this system of supervision, and regain market access. But a necessary condition for that is to return to growth,” he added.

    DEBT RELIEF DEBATE

    European Union officials have cautioned Greece against expecting massive relief on its debt when talks get under away after the completion of the first bailout review by EU, European Central Bank and International Monetary Fund monitors.

    Klaus Regling, head of the euro zone’s bailout fund, told the Financial Times last week that Greece did not need large-scale debt relief and had already received the most concessionary loan terms “in world history”.

    EU sources have told Reuters the bloc could reach a consensus on capping Greece’s annual gross borrowing costs at 15 percent of its economic output, by extending loan maturities and repayment grace periods as necessary.

    An IMF source said the Fund believed Greece needed easier terms closer to the 10 percent annual gross borrowing cost it aims to achieve for developing countries.

    The IMF has made Greek compliance with the bailout program and adequate euro zone debt relief conditions for its continued involvement in Greece, which Germany insists is necessary to satisfy its parliament.

    Berlin, the euro zone’s leading economy with the largest exposure to Greece, has ruled out any “haircut” but agreed to consider longer maturities and grace periods.

    Compare and contrast:

    “Implementing the bailout is not going to be easy. But we are obliged to make these decisions although we don’t like them,” Tsipras said. “It’s necessary, in order to exit this system of surveillance and immediately start the discussion on the debt issue

    EU sources have told Reuters the bloc could reach a consensus on capping Greece’s annual gross borrowing costs at 15 percent of its economic output, by extending loan maturities and repayment grace periods as necessary.

    An IMF source said the Fund believed Greece needed easier terms closer to the 10 percent annual gross borrowing cost it aims to achieve for developing countries.

    The IMF has made Greek compliance with the bailout program and adequate euro zone debt relief conditions for its continued involvement in Greece, which Germany insists is necessary to satisfy its parliament.

    Berlin, the euro zone’s leading economy with the largest exposure to Greece, has ruled out any “haircut” but agreed to consider longer maturities and grace periods.

    So it sounds like cutting Greece’s annual debt replayment expenditures and extending the repayment schedules is probably the debt relief compromise we should expect from any sort of upcoming debt relief talks, which means this is probalby a good time to reminds ourselves that the room for extending the Greek debt repayment schedules is probably “not very big”:

    Sat Aug 15, 2015 5:19am EDT
    Related: Bonds, Markets
    Germany’s Schaeuble says scope for Greek debt relief limited
    BERLIN

    Aug 15 German Finance Minister Wolfgang Schaeuble said in an interview with Deutsche Welle published on Saturday that there was some room to extend maturities on Greek debt but that this room was limited.

    “Outright debt forgiveness doesn’t work at all under European law,” Schaeuble said. “But we do have a certain amount of room to extend maturities further. This room is not very big.”

    The International Monetary Fund (IMF) has called for “significant debt relief” for Greece, describing this as a condition for its participation in a third bailout for Greece that was approved by euro zone finance ministers late on Friday.

    Germany is very keen to keep the IMF on board but has repeatedly ruled out a writedown of the face value of Greece’s debt through a so-called “haircut”.

    “Outright debt forgiveness doesn’t work at all under European law, But we do have a certain amount of room to extend maturities further. This room is not very big.”
    That’s some bitter sugar. And note that when Wolfgang Schaeuble says, “Outright debt forgiveness doesn’t work at all under European law”, :

    Reuters
    Legal grey areas give scope for Greek debt relief if Europe wants it
    * Lawyers see legal scope for Greek debt relief

    * Outcome depends on political will

    * Germany’s Schaeuble sees little leeway to reprofile Greek debt

    * Tough German position limits possibilities for negotiation

    By Paul Carrel
    Thu Jul 9, 2015 12:44pm EDT

    BERLIN, July 9 (Reuters) – German Chancellor Angela Merkel has ruled out a “classic haircut” on Europe’s loans to Greece, but European law leaves sufficient wiggle room to work out other forms of debt restructuring if the political will is there.

    Merkel is trapped between fierce domestic opposition to going soft on Athens, and growing international pressure to grant Greece debt restructuring if it delivers convincing reforms in a deal to keep the country in the euro zone.

    The international pressure may be becoming overwhelming, with Germany’s closest ally France determined to do all its can to prevent a ‘Grexit’ and the International Monetary Fund (IMF) and United States pressing for debt relief as part of a deal.

    “When a government really is determined to have its way, and political correctness is on its side and there is international pressure, they will always bend the rules,” said Gunnar Beck, a specialist on EU law at the SOAS, University of London.

    Merkel has said a debt haircut, or writedown, for Greece would be illegal – a position that may raise concerns for advocates of such a move given previous legal challenges in Germany to European Central Bank policy measures.

    However, the ECB has won backing from Europe’s top court and constitutional experts believe that with Greece a way could be found to execute a debt haircut, or a rescheduling that would amount to the same thing by easing Athens’ repayment burden.

    The legal restrictions centre around the so-called “no bailout clause” in the Lisbon Treaty, which stipulates: “The Union shall not be liable for or assume the commitments of central governments”.

    This makes it illegal for one member country to assume the debts of another.

    But Greece owes debts to numerous creditors, with different legal positions. The creditors include the IMF, the ECB and Europe’s twin bailout funds – the European Financial Stability Fund (EFSF) and the European Stability Mechanism (ESM).

    A haircut, or even a rescheduling, of the roughly 18 billion euros of Greek bonds held by the ECB appears a non-starter, as this would breach a ban on state financing by the central bank.

    But legal experts say the ESM, which has so far lent Athens 141.8 billion euros ($156.52 billion), is a separate case.

    “There is no legal limit to releasing Greece from part of its debts held by the ESM,” said Kai Schaffelhuber, partner at Allen & Overy law firm in Frankfurt, distinguishing the ESM from the ‘Union’ mentioned in the Lisbon Treaty.

    “(In the case of the ESM) it is not the Union that assumes the debt, but the ESM is a separate international organisation …. different from the Union.”

    LIMITED LEEWAY

    Europe’s legal set-up therefore gives government leaders sufficient space to strike a debt restructuring of some kind for Greece if they want to. The issue is how far they go with any reprofiling as part of a potential deal with Greece.

    German Finance Minister Wolfgang Schaeuble said on Thursday the IMF was correct in saying Greece’s debt was not sustainable without a haircut, but he added: “I think the leeway we have … is very low.”

    By talking tough, the German government is taking a hard negotiating stance, keenly aware of the domestic opposition in Germany to writing off Greek debts. But it is leaving the door open to negotiations – if not by much.

    This means Berlin is reducing the scope for any restructuring deal as any agreement that went too far would leave Merkel and Schaeuble unable to sell it at home, or risk legal challenges.

    One key may be to ease the debt burden by “reprofiling” loans, so they are paid off over a longer period, but without reducing the nominal value of what is eventually repaid – the latter would amount to the “classic” haircut Merkel ruled out.

    “The legal issue is sufficiently vague that the politicians probably do have scope to come up with a solution involving pretty significant maturity extensions without running a material risk of invalidation by the courts,” said Ian Clark, a partner at White and Case in London who advised on a 2012 restructuring of Greek debt to private investors.

    “But the more extreme the solution, the bigger that risk is going to be,” he added.

    While debt relief may not be a political option, as we just saw, it’s still an option:


    A haircut, or even a rescheduling, of the roughly 18 billion euros of Greek bonds held by the ECB appears a non-starter, as this would breach a ban on state financing by the central bank.

    But legal experts say the ESM, which has so far lent Athens 141.8 billion euros ($156.52 billion), is a separate case.

    “There is no legal limit to releasing Greece from part of its debts held by the ESM,” said Kai Schaffelhuber, partner at Allen & Overy law firm in Frankfurt, distinguishing the ESM from the ‘Union’ mentioned in the Lisbon Treaty.

    “(In the case of the ESM) it is not the Union that assumes the debt, but the ESM is a separate international organisation …. different from the Union.”

    Yes, Greece’s 141.8 billion euros that it owes to the ESM could indeed be legally written off if the austerity-faction was actually interested in that, despite what Schaueble or Merkel might say. Of course, since Klause Regling, the head of the ESM, recently said that Greece shouldn’t expect any significant debt relief (and it wasn’t really necessary and Greece had already gotten the best bailout terms in history), we still probably shouldn’t expect Greece to receive any significant debt relief in its upcoming talks…assuming Greece implements enough of the Troika’s “48 milestones” to please the Troika enough to start the talks in the first place. But it’s still going to be important to keep in mind that the 141.8 billion in Greek debt held by the ESM could be written off. Sure, it’s possible, and maybe likely, that some sort of debt “reprofiling” does actually take place, where the interest is lowered and the debt repayment schedules are extended. And debt reprofiling is certainly better than nothing. But as the IMF’s has been vocally indicating, anything less than “significant” debt reduction for Greece, in some form or another, might be better than nothing but still a lot worse than what’s actually needed to get Greece on any sort of sustainable track which could force the IMF to end its participation in the Troika.

    That’s all part of the fun that Greece gets to look forward to following the imposition/implementation of a large chunk of the “48 milestones” over the next few weeks. On some level, seeing the Troika actually take up the issue of further Greek debt relief is going to be a relief regardless of how the negotiations turn out because at least we’ll have some sort of resolution on the matter. On another level, it’s probably not going to be much of a relief.

    Posted by Pterrafractyl | October 4, 2015, 9:53 pm
  20. Olivier Blanchard, the former chief economist at the IMF who left the institution a couple of weeks ago – and someone who has been far more right about the destructive effects of austerity than nearly all of his policy-making peers who have been mishandling the eurozone crisis from the beginning – just issued a remarkable stark assessment of the eurozone’s prospects for ever becoming a functional union.

    It’s stark, in part, because Blanchard doesn’t seem to think eurozone could effectively harmonize and close the gap between the high “productivity” (i.e. profits) member states like Germany and the lower “productivity” member states like Greece at all realistically. And he appears to think that an endless cycle of “belt-tightening”, which doesn’t actually close the “productivity” gap and just leads to more austerity, is what we should expect as long as countries like Greece can’t devalue their currencies.

    And in Blanchard’s view, this requirement for individuals states to be able to devalue their currencies to achieve meaningful parity in “competitiveness” is still the case even if the eurozone really is transformed into a “United States of Europe”-style fiscal union, where fiscal transfers from the rich to the poor states becomes just a routine things like in the US. Even if that happens, the eurozone is stilled doomed to cycles of “the periphery” economies and “the core” economies ending up in a scenario where “the periphery” is forced to undergo another round of austerity for the sake of increasing “competitiveness”. That’s how out of whack the eurozone’s economies are with respect to their ability to operate under a common monetary regime. In other words, the ability to devalue individual member state currencies, which isn’t possible in a currency union, is required to avoid turning the eurozone into an automatic systemic crisis machine. It’s sort of a “damned if you do, damned if you don’t, damned no matter what you try to do under the current system” kind of assessment of the eurozone’s past, present, and future:

    The Telegraph
    Fiscal union will never fix a dysfunctional eurozone, warns ex-IMF chief Blanchard
    Deeper integration and EU superstate will be no “panacea” for ills of the eurozone says Olivier Blanchard

    By Mehreen Khan

    10:00 PM BST 10 Oct 2015

    The euro will be consigned to a permanent state of malaise as deeper integration will bring no prosperity to the crisis-hit bloc, according to the former chief economist of the International Monetary Fund.

    In a stark warning, Olivier Blanchard – who spent eight years firefighting the worst global financial crisis in history – said transferring sovereignty from member states to Brussels would be no “panacea” for the ills of the euro.

    The comments – from one of the foremost western economists of the last decade – pour cold water on grandiose visions for an “EU superstate” being hailed as the next step towards integration in the currency bloc.

    Following this summer’s turmoil in Greece, leaders from France’s Francois Hollande, the European Commission’s Jean-Claude Juncker, and European Central Bank chief Mario Draghi, have spearheaded the drive to create new supra-national institutions such as a eurozone treasury and parliament.

    The plans are seen as essential in finally “completing" economic and monetary union 15 years after its inception..

    But Mr Blanchard, who departed the IMF two weeks ago, said radical visions for a full-blown “fiscal union” would not solve fundamental tensions at the heart of the euro.

    “[Fiscal union] is not a panacea”, Mr Blanchard told The Telegraph. “It should be done, but we should not think once it is done, the euro will work perfectly, and things will be forever fine.”

    Although pooling common funds, giving Brussels tax and spending powers, and creating a banking union were “essential” reforms, they would still not make the “euro function smoothly even in the best of cases”, said the Frenchman.

    Any mechanism to transfer funds from strong to weak nations – which has been fiercely resisted by Germany – would only mask the fundamental competitiveness problems that will always plague struggling member states, he said.

    “Fiscal transfers will help you go through the tough spot, but at the same time, it will decrease the urge to do the required competitiveness adjustment.”

    The creation of a "United States of Europe" has been seen as a necessary step to insulate the eurozone from the financial contagion that bought it to its knees after 2010.

    It is a view shared by Mr Blanchard’s successor at the IMF, American Maurice Obstfeld, who has championed deeper eurozone integration as the best way to plug the institutional gaps in EMU.

    Mr Blanchard, however, said no institutional fixes would bring back prosperity back to the single currency.

    Without the power to devalue their currencies, peripheral economies would forever be forced to endure “tough adjustment”, such as slashing their wages, to keep up with stronger member states, he said.

    In this vein, Mr Blanchard dismissed any talk of a growth “miracle” in Spain – which has been hailed as a poster child for Brussels’ austerity diktats. He added he was “surprised” that sluggish eurozone economies were not doing better in the face of a cocktail of favourable economic conditions.

    “When people talk about the Spanish miracle, I react. When you have 23pc unemployment and 3pc growth, I don’t call this a miracle yet.”

    “I thought that the zero interest rate, the decrease in the price of oil, the depreciation of the euro, the pause in fiscal consolidation, would help more than they have”, he said.

    In a sign of the deep structural problems that still beset monetary union, growth in the eurozone is only expected to reach 1.5pc this year, according to the IMF’s forecasts – far below the 2.3pc average growth of the pre-crisis era.

    Britain and the US are expected to expand by 2.5pc and 2.6pc this year respectively.

    Mr Blanchard, 66, rose to prominence in the UK after he warned Chancellor George Osborne was “playing with fire” with the British recovery in 2013.

    For all his misgivings about the single currency, Mr Blanchard said the EU as a whole remained a “fundamentally good construction”.

    “It requires compromises, and sometimes countries don’t get exactly what they want. But the benefits exceed the costs – the European Union is more than Brussels.”

    During his reign as chief economist, the IMF came under severe criticism over its handling of the Greek debt crisis. The Fund has yet to formally commit itself to a new €86bn bail-out as they push the likes of Germany to relent to significant debt relief for the battered economy.

    Mr Blanchard maintained that IMF calculations show “some decrease in debt, whether through haircuts or long rescheduling, is absolutely needed”.

    Should the Fund fail to gain guarantees that Greek debt is sustainable, it is poised to withdraw its involvement altogether.

    During his final months as chief economist, Mr Blanchard made two personal interventions in blog posts which called for mass debt relief at the height of Greece’s woes. He said he was motivated to do so because the IMF’s position on Greece was being “misrepresented”.

    But European creditors are set to ignore the Fund’s recommendations for repayment extensions of up to 40 years. They will instead propose to “cap” the amount the government pays to reduce its debt to 15pc of GDP a year.

    “[Fiscal union] is not a panacea…It should be done, but we should not think once it is done, the euro will work perfectly, and things will be forever fine.”

    And, again, note the paradox of the eurozone, even if it becomes a “United States of Europe” fiscal union following another wave of pooled sovereignty and funds:


    But Mr Blanchard, who departed the IMF two weeks ago, said radical visions for a full-blown “fiscal union” would not solve fundamental tensions at the heart of the euro.

    “[Fiscal union] is not a panacea”, Mr Blanchard told The Telegraph. “It should be done, but we should not think once it is done, the euro will work perfectly, and things will be forever fine.”

    Although pooling common funds, giving Brussels tax and spending powers, and creating a banking union were “essential” reforms, they would still not make the “euro function smoothly even in the best of cases”, said the Frenchman.

    Any mechanism to transfer funds from strong to weak nations – which has been fiercely resisted by Germany – would only mask the fundamental competitiveness problems that will always plague struggling member states, he said.

    “Fiscal transfers will help you go through the tough spot, but at the same time, it will decrease the urge to do the required competitiveness adjustment.”

    And keep in mind that, when Blanchard points out that “Fiscal transfers will help you go through the tough spot, but at the same time, it will decrease the urge to do the required competitiveness adjustment,” the “required competitiveness adjustment” is basically impossible without a currency depreciation when it’s the peripheral economies being forced to harmonize with global export powerhouses like Germany:


    Without the power to devalue their currencies, peripheral economies would forever be forced to endure “tough adjustment”, such as slashing their wages, to keep up with stronger member states, he said.

    It’s all quite a conundrum.

    And when you read:


    During his final months as chief economist, Mr Blanchard made two personal interventions in blog posts which called for mass debt relief at the height of Greece’s woes. He said he was motivated to do so because the IMF’s position on Greece was being “misrepresented”.

    But European creditors are set to ignore the Fund’s recommendations for repayment extensions of up to 40 years. They will instead propose to “cap” the amount the government pays to reduce its debt to 15pc of GDP a year.

    keep in mind that, while it does look like Greece’s “European creditors” (or at least the eurozone governments’ finance ministers) agree that capping Greece’s annual debt servicing costs at 15 percent of GDP for the next 50 year so or preferable to the kind of debt relief Blanchard argues Greece needs, ECB may not have gotten the memo. Any memo. Either the memo from Greece’s “European creditors” about how debt relief, other than capping annual debt payment expenditures 15 percent of GDP a year, is off the table. Or the memo from the IMF about how austerity doesn’t actually help. The ECB didn’t get either of those memos:

    Reuters
    UPDATE 1-ECB’s Draghi urges Greece to stick to bailout for bank recap, debt relief

    Sat Oct 10, 2015 10:21pm IST

    Oct 10 (Reuters) – European Central Bank Governor Mario Draghi urged Greece on Saturday to stick to its latest bailout to pave the way for bank recapitalisation and talks on debt relief.

    In an interview with Sunday’s edition of Kathimerini newspaper, Draghi said the second tranche of funds set aside for Greek banks’ recapitalisation, worth 15 billion euros, would be disbursed after the first review by lenders and no later than Nov. 15.

    Greek Prime Minister Alexis Tsipras has said he hopes the first review, expected to begin at the end of the month, will be completed by mid-November.

    Greece’s EU/IMF lenders have said the country’s top four banks will need between 10-25 billion euros ($11-$28 bln) to shore up their capital base. Private sector participation in the recapitalisation was “desirable” to minimise the use of public money, Draghi told Kathimerini.

    “Private investors will certainly be more willing to commit funds to the Greek banking sector if they can be assured of successful programme implementation,” Draghi said.

    “Rapid progress towards the conclusion of the first review will contribute to this and is therefore in everyone’s interest.”

    “We are talking about a series of positive steps, including structural reforms, which are required for Greece to resume a path of sustainable growth,” Draghi said.

    He said there would have to be an element of debt relief – the European Commission forecast in May that Greek debt would reach more than 180 percent of its gross domestic product this year – but the government had to implement promised reformed.

    “Ownership (of the bailout) and compliance will give credibility to debt relief, especially given the economic developments of the last 10 to 12 months,” he said.

    Yes, according to ECB chief Mario Draghi, debt relief is required for Greece, but first Greece needed to implement its promised reforms:


    He said there would have to be an element of debt relief – the European Commission forecast in May that Greek debt would reach more than 180 percent of its gross domestic product this year – but the government had to implement promised reformed.

    And that “debt-relief for structural reforms” implied trade-off Draghi is offering Greece is, again, in direct conflict with what the rest of Greece’s “European creditors” are promising…unless the ECB is counting a 15 of GDP annual debt services cap as “debt relief” (which is sort of is, but just not remotely what is required). Either way, it’s all a reminder of paradoxes like the need to allow for currency devaluations in order to hold the currency union together pale in comparison to a situation where the right hand doesn’t know what the left hand is doing but both hands seem intent on instructing you on the best methods for strangling yourself.

    Posted by Pterrafractyl | October 11, 2015, 10:23 pm
  21. It looks like we’re seeing a new component to the EU’s ever-evolving strategy for dealing with the refugee crisis emerge: have Germany pay Greece to patrol its borders (and maybe keep more refugees):

    The Guardian
    Germany ready to give Greece financial aid to tackle refugee crisis

    Berlin acknowledges Greek economy too weak to cope with influx and is willing to give support in return for more robust border controls

    Kate Connolly in Berlin and Helena Smith in Athens

    Friday 16 October 2015 13.48 EDT

    Germany is willing to give Greece financial backing to deal with the unprecedented refugee crisis on its own soil instead of exporting it north towards central Europe.

    With thousands of refugees pouring into Greece every day and the economy still sputtering, officials in Berlin indicated that Germany would come up with support for Athens in return for a more robust effort to control its borders in the Aegean Sea.

    Stressing that there was no connection between any support linked to refugees and the bailout deal agreed this year, as had been suggested in German media, the government admitted Greece’s economy was too delicate for it to be able to deal with the crisis on its own.

    “We want to support Greece in this, so that it is able to meet its duties as a member of the EU to protect its borders in the most effective way,” the government spokesman Steffen Seibert told journalists in Berlin.

    “We should not draw a connection [between the bailout and aid],” said Seibert. “What I can say is that it’s the conviction of the whole of Europe that we urgently need an orderly situation in the EU’s outer border regions, as well as in the Aegean between Greece and Turkey. Why? Above all, to help the people. Above all, so that the people smugglers there no longer have the say and are able to carry out their life-threatening trade.”

    A day after the EU unveiled a deal worth up to €3bn (£2.2bn) to help Turkey deal with the Syrian refugee crisis, speculation has mounted that Greece will also need aid. More than 400,000 people have poured into the country this year.

    Germany has also faced an influx of hundreds of thousands of refugees. By some estimates the total could exceed 1.5 million this year.

    An article in the respected economic publication Wirtschaftswoche quoted a government insider as saying: “Our highest priority right now is that more refugees stay in Greece.” The source went on to say: “Germany will bear the brunt of the costs of the refugee crisis – we must be realistic about that.”

    The prospect of economic aid could galvanise Athens into retaining greater numbers of refugees instead of bussing them north towards the Balkans.

    The Greek prime minister, Alexis Tsipras, told reporters in Brussels on Friday that Greece, like other frontline states, had raised the issue of the spiralling costs of dealing with the refugees and had pushed for additional financial assistance.

    Fiscal targets had to be “lightened” and economic support increased, he said, so that his government could handle the migrants with the dignity they deserved.

    Seibert said some concrete assistance had already been provided in the form of educational aid and equipment. “We will surely come up with more things we can do,” he said.

    On Thursday, Angela Merkel acknowledged that Greece’s economy was not up to dealing with the thousands of people arriving every day. The German chancellor heads to Istanbul on Sunday to talk with Turkish leaders about the porous border between the two countries.

    Greece is still suffering the ravages of years of austerity imposed by successive European bailouts. “The country feels overwhelmed,” said Merkel, adding that its economy “is not doing so well any more”. She said: “Naturally, we need to talk to Turkey about that.”

    On Friday night, Greek MPs were preparing to vote for the first time since the election on the austerity package. But the measures – 48 milestones that include jailing tax evaders, expanding a much-loathed property tax and scaling back on early retirement – have raised howls of protest as Greece approaches what is likely to be its most explosive winter yet.

    So Angela Merkel acknowledges that Greece “feels overwhelmed” and it’s economy “is not doing so well any more” while Berlin wants to stress that any financial assistance for better border controls should not be linked to the Greece’s latest “bailout”:


    Stressing that there was no connection between any support linked to refugees and the bailout deal agreed this year, as had been suggested in German media, the government admitted Greece’s economy was too delicate for it to be able to deal with the crisis on its own.

    “We want to support Greece in this, so that it is able to meet its duties as a member of the EU to protect its borders in the most effective way,” the government spokesman Steffen Seibert told journalists in Berlin.

    That’s basically saying “we’ll give you money for border patrols, and maybe keeping more refugees, but don’t think this will impact the austerity mandates”. At least that’s the signal sent, which is going to be interesting to since the signal Tsipras was sending was the opposite:

    The prospect of economic aid could galvanise Athens into retaining greater numbers of refugees instead of bussing them north towards the Balkans.

    The Greek prime minister, Alexis Tsipras, told reporters in Brussels on Friday that Greece, like other frontline states, had raised the issue of the spiralling costs of dealing with the refugees and had pushed for additional financial assistance.

    Fiscal targets had to be “lightened” and economic support increased, he said, so that his government could handle the migrants with the dignity they deserved.

    On Friday night, Greek MPs were preparing to vote for the first time since the election on the austerity package. But the measures – 48 milestones that include jailing tax evaders, expanding a much-loathed property tax and scaling back on early retirement – have raised howls of protest as Greece approaches what is likely to be its most explosive winter yet.

    And note that Greece’s parliament did indeed pass the new austerity package that it was mandated by the troika to pass in order to get its next “bailout” installment. So as of now, Greece’s newly intensified austerity regime is about to get underway while we’re looking at a situation where the “prospect of economic aid could galvanise Athens into retaining greater numbers of refugees instead of bussing them north towards the Balkans”. More refugees and more austerity for Greece. It’s unclear how a simultaneous surge in austerity and desperate refugees (who, themselves, are far more desperate than even the beleaguered Greeks) is going to be accepted by the Greek people but there are at least some segments of Greek society that might not mind.

    Posted by Pterrafractyl | October 18, 2015, 10:30 pm
  22. The EU’s 28 leaders met in Brussels Sunday to hold a “mini-summit” on the refugee crisis and a possible deal with Turkey that would involve financial assistance in return for Turkey trying to stem the flow of refugees into Greece. And it appears that the hypothetical “mini-Schengen zone” idea spooked some non-“mini-Schengen zone” leaders when the “mini-Schengen” leaders, plus Greece, all held a separate mini-mini-summit before the mini-summit. As we can see, feathers were ruffled:

    EU Observer
    Merkel creates EU core group on refugees

    By Andrew Rettman

    BRUSSELS, 30. Nov, 09:29

    German leader Angela Merkel has said a core group of eight EU states is preparing to resettle refugees from Turkish camps next year.

    The eight leaders – from Austria, Belgium, Finland, Germany, Greece, Luxembourg, the Netherlands, and Sweden – held a separate meeting in Brussels on Sunday (29 November), shortly before the 28 member states met with Turkish PM Ahmet Davutoglu.

    Merkel said the idea is to “replace illegal migration with legal migration … it’s an uphill struggle, but it’s well worth the effort.”

    She noted the initial talks “didn’t come to any definitive position … we didn’t talk about any specific numbers.”

    She also said other member states can join what EU diplomats called the “coalition of the willing” in future.

    She added: “We will now begin the work [on details] in the next few days. The European Commission will then make its proposals to the EU Council on 17 December.”

    FAZ, the German daily, said the scheme will cover 400,000 people. But Dutch PM Mark Rutte echoed Merkel in saying the number remains to be agreed.

    Jean-Claude Juncker, the Commission chief, endorsed the idea, saying: “This is a meeting of those states which are prepared to take in large numbers of refugees from Turkey legally.”

    But for its part, Poland voiced disquiet.

    Beata Szydlo, its new PM, noted that the Visegrad states – the Czech Republic, Hungary, Poland, and Slovakia – also met before the EU summit to reiterate opposition to EU resettlement or relocation quotas.

    “I can’t imagine that decisions will be taken in such a format [Merkel’s mini-summit] and then imposed on other member states,” she said.

    Konrad Szymaski, Poland’s EU affairs minister, noted the group-of-eight is more or less the same set of countries which are considering the idea of a “mini-Schengen” – restricting EU free movement to an inner circle.

    “We don’t want these tensions inside the EU to be used as a pretext for suspending or restricting the Schengen area,” he said.

    The “tensions” arose after pro-refugee states outvoted the Czech Republic, Hungary, Romania, and Slovakia on quotas to redistribute 120,000 refugees.

    Some 1.5 million people have come to the EU for asylum this year.

    Turkey is hosting 2.5 million refugees. The UN says up to 8 million people are internally displaced in Syria.

    Turkey-EU deal

    The EU-Turkey summit agreed the EU will pay Ankara an “initial” sum of €3 billion to take care of refugees in return for stricter border controls with Greece.

    EU states also said they would hold twice-yearly summits with Turkey; open a new negotiating chapter (on economic policy) in EU entry talks on 14 December; prepare to open further chapters next year; and aim for Turkish visa-free travel to the EU by October 2016.

    Both the EU and Turkey played down expectations of a quick fix, however.

    Asked if he can guarantee the numbers of EU-bound refugees will go down, Davutoglu said: “I wish to say to you: ‘Yes. The number of migrants will decline.’ But we cannot say this because we don’t know what will be going on in Syria.”

    “To solve this crisis, we need a solution to the Syria conflict.”

    EU Council chief Donald Tusk said: “This is not a simple, trivial trade: money for numbers of refugees – that would be unfeasible and immoral.”

    He added: “We do not expect anybody to guard our borders for us. That can only be done by Europeans.”

    That didn’t sound like a very harmonious summit. Rather cliquish, in fact:


    The eight leaders – from Austria, Belgium, Finland, Germany, Greece, Luxembourg, the Netherlands, and Sweden – held a separate meeting in Brussels on Sunday (29 November), shortly before the 28 member states met with Turkish PM Ahmet Davutoglu.

    Merkel said the idea is to “replace illegal migration with legal migration … it’s an uphill struggle, but it’s well worth the effort.”

    She noted the initial talks “didn’t come to any definitive position … we didn’t talk about any specific numbers.”

    She also said other member states can join what EU diplomats called the “coalition of the willing” in future.

    Jean-Claude Juncker, the Commission chief, endorsed the idea, saying: “This is a meeting of those states which are prepared to take in large numbers of refugees from Turkey legally.”

    But for its part, Poland voiced disquiet.

    Beata Szydlo, its new PM, noted that the Visegrad states – the Czech Republic, Hungary, Poland, and Slovakia – also met before the EU summit to reiterate opposition to EU resettlement or relocation quotas.

    “I can’t imagine that decisions will be taken in such a format [Merkel’s mini-summit] and then imposed on other member states,” she said.

    Konrad Szymaski, Poland’s EU affairs minister, noted the group-of-eight is more or less the same set of countries which are considering the idea of a “mini-Schengen” – restricting EU free movement to an inner circle.

    “We don’t want these tensions inside the EU to be used as a pretext for suspending or restricting the Schengen area,” he said.

    So Merkel wants to create a refugee “coalition of the willing,” and that has countries like Poland wondering if that means Merkel’s coalition is going to make demands and restrict the Schengen zone to those countries that meet those demands. And based on how Merkel has operated on a variety of issues over the years, that’s entirely possible. But despite the fact that finding places for refugees is indeed a vital and urgent task, since this is Merkel and the EU we’re talking about, those demands might be urgent but also insane:

    The Guardian
    Kicking Greece out of Schengen won’t stop the refugee crisis

    Blaming Greece’s lax border controls for the influx of refugees into central Europe is an easy way for the EU to abdicate its own responsibilities

    Apostolis Fotiadis

    Wednesday 2 December 2015 11.01 EST

    Word is going around European media that EU leaders are preparing to cut off Greece from Schengen unless it accepts their plan on how to deal with the refugee crisis, and an operation by the European border agency, Frontex, to control its borders.

    If a report in the Financial Times is to be believed, several European ministers and senior officials in Brussels are frustrated with Athens’ inability to address “serious deficiencies” in its border control and refusal to accept EU offers of help. At the next EU summit, in mid-December, they plan to present Greece with the option either to accept a new EU border control regime or face restrictions to its citizens’ rights to move freely within the EU

    Let’s have a closer look at what exactly Greece is being blamed for having failed at. According to various German, Hungarian, Slovak, Polish and many other EU government officials, Greece this summer openly denied its responsibility to guard the external borders of Europe. Greece is accused of having failed to register people, to prepare checkpoints for refugees and irregular migrants at so-called hotspots on time, and to relocate as many refugees as it promised to.

    But blaming a weak Greek administration is an easy and popular way to deflect blame that may lie much closer to home. The immigration minister in Athens tells a different story: he claims that he has been waiting in vain for the Eurodac machines required for taking fingerprints; only a few of those promised ever made it to Greece. And yet, between 25 October and 25 November, out of 45,000 people who arrived in hotspot areas, 43,500 were fingerprinted – mostly by national police officers working around the clock.

    The EU has for months been dragging its feet in providing support for overworked Greek border staff. On 2 October, Frontex requested 775 border guards from EU member states and Schengen-associated countries, in large part to assist Greece and Italy in handling the record numbers of migrants at their borders. Until 20 October EU partners had contributed just 291. By mid-November, 133 had been deployed to Greek islands, and Frontex was still issuing desperate requests to EU countries to chip in more officers to help with screening and registration.

    Blaming Greece for its ineffectiveness in relocating refugees is also much easier than admitting that the entire relocation system has collapsed before really finding its feet – something the European commission president, Jean-Claude Juncker, implicitly admitted when he estimated that at the current rate the relocation of 160,000 people from Greece and Italy would be completed in around 2101. Greece has so far relocated 30 people to Luxembourg, Italy another 130 to other EU countries. Last week only one single person was relocated from Italy to Sweden. Another 150 in Greece are documented and waiting to go.

    Greece may be dragging its feet, but part of the problem is that northern and eastern EU partners have failed to offer places. Politically motivated special requests – for “non-Muslim refugees” or complete sets of families – have further complicated the process.

    For many EU officials, Greece crossed a line when it refused to let Frontex take control of its borders to the Balkans last week. In fact, this wasn’t the case: all Greece had done was to challenge the absurd terms dictated by Frontex.

    Frontex proposed an operation plan that would reproduce a policy implemented by western Balkan countries to filter arrivals at border checkpoints by nationality – something that is still illegal by European and international standards.

    It also assumes that people refused at the border will be transferred to “reception facilities” – without going into detail what this means. Does it mean that the Greek authorities would assist Frontex in filtering nationalities at their northern border and then lock up the tens of thousands who don’t have the right profile?

    In Athens, the impression is increasingly that European leaders are just looking for an excuse to turn Greece into a kind of “population filter”, of the kind that is being set up everywhere from the western Balkans to Turkey.

    Anyone who understands refugee flows and the Schengen system has to see that cutting Greece loose from the principle of free movement would not directly alleviate the refugee flows moving towards central Europe. Since refugees rarely use airlines or international ferries, the main impact of reinstated passport checks would be to keep out the tourists who are vital to the Greek economy.

    “In Athens, the impression is increasingly that European leaders are just looking for an excuse to turn Greece into a kind of “population filter”, of the kind that is being set up everywhere from the western Balkans to Turkey.”
    Everyone kick Greece! That’s the thing to do!

    So is Greece going to be given an ultimatum that it assist Frontex in implementing a “population filter” that is illegal by international and EU standards or get kicked out of Schengen? It sure sounds like it:


    Greece may be dragging its feet, but part of the problem is that northern and eastern EU partners have failed to offer places. Politically motivated special requests – for “non-Muslim refugees” or complete sets of families – have further complicated the process.

    For many EU officials, Greece crossed a line when it refused to let Frontex take control of its borders to the Balkans last week. In fact, this wasn’t the case: all Greece had done was to challenge the absurd terms dictated by Frontex.

    Frontex proposed an operation plan that would reproduce a policy implemented by western Balkan countries to filter arrivals at border checkpoints by nationality – something that is still illegal by European and international standards.

    And keep in mind that the “filter” at the Greek borders that Frontex demanded isn’t just a filter for the Balkans. It’s a filter for all the downstream refugee recipients (like “the coalition of the willing” and the “coalition of the unwilling” like Poland). But also keep in mind that it’s probably going to take a lore more than just ultimatums to Greece for the proposed refugee resettlement plan to work. So it’s going to be very interesting to see how many more ultimatums are issued between now and when some sort of collective agreement is reached.

    It will also be interesting to see which, if any, country leaves the Schengen zone first. Greece is a strong contender for that prize since blaming Greece for things outside of its control has become an EU pastime, but Greece has competition.

    Posted by Pterrafractyl | December 2, 2015, 11:56 pm
  23. With the World Economic Forum taking place in Davos this week, it’s worth keeping in mind that the meeting isn’t just about getting the wealthiest and most powerful people in the world all in one place so they can collectively fret about how much wealthier and more powerful they’ll become in coming years. There’s also a great time to conduct all sorts of mini side-meetings on a variety of topics. For instance, Alexis Tsipras is attending the conference in what is described as a “make-or-break” week for Greece in its negotiations with the Troika. Or, rather, the latest “make-or-break” week for Greece. We’ve had quite a few of those kinds of weeks in recent years. And, as should be familiar by now, it’s a negotiation where all of Greece’s creditors continue to demand massive austerity but the IMF leans towards Greek debt relief while Berlin says otherwise. So, once again, we have a “make-or-break” week that we have to hope doesn’t end in an agreement with the Troika that doesn’t break Greece’s economy and society further:

    The Huffington Post

    Inside Greece’s Make-Or-Break Week
    It’s a high-stakes Davos visit for Greek Prime Minister Alexis Tsipras.
    01/20/2016 01:41 pm ET | Updated 1 day ago

    Danae Leivada, The Huffington Post

    Every January since 1971, key figures in international politics, the business world and civic society have been meeting in the picturesque Swiss town of Davos to discuss major challenges facing the global community. Some people were surprised to learn that Greek Prime Minister Alexis Tsipras appeared on this year’s World Economic Forum guest list alongside invitees like UN Secretary General Ban-Ki Moon and pop star Bono.

    Tsipras is the first Greek prime minister to attend Davos since 2011, when George Papandreou was there to discuss his country’s emerging debt crisis. Tsipras experienced a stellar ascent into power last year, and Greek is central to debates about Europe’s future.

    This Davos visit will be a high-stakes bet for the Greek premier. Not only does he have to convince key international players involved in handling the debt crisis that his country is on the right track, he must also appeal to businessmen and get them to consider investing in Greece — despite its financial troubles.

    These are the main issues on Tsipras’ plate:

    The Bailout Agreement

    Greece agreed to a bailout agreement over the summer, securing international funds in exchange for instituting sweeping reforms, including the restructuring of the social welfare system, cutting pension costs, privatizing a number of state assets and fighting tax evasion. Many Greek people have condemned these austerity measures, which have led to protests and strikes by groups as diverse as farmers, lawyers, doctors and seamen. Teams of experts from several European institutions are currently in Greece to assess its government’s progress in the reforms.

    Tsipras plans to meet with several world leaders in Davos, including German Vice Chancellor Sigmar Gabriel and European Central Bank President Mario Draghi. The prime minister’s goal is to convince them that his government is on the right track when it comes to implementing the reforms. At the same time, he needs to speed up the European experts’ evaluation so the Greek government can resume its negotiations over debt relief and return some normalcy to the Greek economy.

    In a meeting on the sidelines of the conference on Wednesday, U.S. Vice President Joe Biden told Tsipras that the U.S. will help push for a quick end to the evaluation, a source close to the talks HuffPost Greece.

    Restructuring The Debt

    Tsipras is also scheduled to meet with Christine Lagarde, the head of the International Monetary Fund — one of Greece’s creditors. Tsipras and Lagarde haven’t met face-to-face since the summer’s turbulent negotiations. In Davos, they are expected to discuss the terms and conditions under which the IMF will continue to participate in the Greek bailout program, Greece’s progress in the reforms — especially when it comes to social issues such as pensions and the restructuring of the social insurance system — and possible ways to restructure the Greek debt.

    Greece has been eager to secure a debt relief from its creditors after its third bailout agreement in July, arguing that the country won’t be able to revive its economy without relief from the crippling payments. European countries participating in the agreement have been resisting writing off the debts and have said that doing so would give Greece special treatment. The IMF, however, has echoed Greece’s assessment that the country’s debt is not sustainable and should be eased.

    The Schäuble Meeting

    On Thursday, Tsipras is supposed to take part in a panel discussing the future of Europe. Also invited is German Finance Minister Wolfgang Schäuble, one of Greece’s fiercest adversaries during the bailout negotiations last year.

    The meeting is expected to spark some fireworks. Schäuble has been known as a tough negotiator who repeatedly pressed for Greece’s exit from the eurozone and has been one of the most prominent austerity policy proponents.

    The Refugee Crisis

    Finally, Tsipras needs to address the refugee crisis. Hundreds of thousands of refugees and migrants have arrived on Greece’s eastern Aegean islands in the past year, overwhelming both local and national authorities. Aid agencies operating in the area have warned that refugees’ living conditions on the islands are often harsh and that the Aegean crossing from Turkey, the departure point for most refugees, has become increasingly dangerous amid winter conditions.

    “Greece has been eager to secure a debt relief from its creditors after its third bailout agreement in July, arguing that the country won’t be able to revive its economy without relief from the crippling payments. European countries participating in the agreement have been resisting writing off the debts and have said that doing so would give Greece special treatment. The IMF, however, has echoed Greece’s assessment that the country’s debt is not sustainable and should be eased.”
    To relieve Greek debt (to sustainable levels) as the IMF has called for or not to relieve Greek debt (and just assume that austerity is all that is required) as Berlin demands? That is the question. Still. The wisdom of the austerity package isn’t really in question for Troika. But now that Greece has been forced to embrace a new round of deep austerity in exchange for the latest “bailout”, it’s a question that’s getting harder for the Troika to avoid answering the question of what to do about the need for Greek debt relief. But not too hard to avoid, since we once again have the IMF demanding Greek debt relief while Wolfgang Schaeuble scoffs:

    The Guardian
    IMF demands EU debt relief for Greece before new bailout

    In talks with Tsipras about struggling economy, Lagarde sets out fresh conditions for further financial aid

    Larry Elliott, Graeme Wearden and Jill Treanor in Davos

    Thursday 21 January 2016 14.27 EST

    The European Union will need to provide significant debt relief for Greece if it is to persuade the International Monetary Fund to put its financial clout behind the country’s third bailout package, the Washington-based organisation has said.

    After what was described as a cordial meeting between the IMF’s managing director, Christine Lagarde, and the Greek prime minister, Alexis Tsipras, on the sidelines of the World Economic Forum in Davos, the fund said it was only prepared to support the recession-ravaged eurozone country on a strings-attached basis.

    It said Greece had to be prepared to implement a tough package of economic reform and the country’s eurozone partners had to be willing to write down Greece’s debts.

    The IMF took part in the first two Greek bailouts but is concerned that, at 175% of GDP, Greece’s debts are too burdensome and will prevent a lasting recovery. Lagarde told Tsipras the IMF regarded reform of Greece’s pension system, which accounts for 10% of GDP, as vital.

    The IMF said of the talks: “The managing director reiterated that the IMF stands ready to continue to support Greece in achieving robust economic growth and sustainable public finances through a credible and comprehensive medium-term economic programme.

    “Such a programme would require strong economic policies, not least pension reforms as well as significant debt relief from Greece’s European partners to ensure that debt is on a sustainable downward trajectory.”

    The Greek government said the talks had been sincere.

    Earlier in the day, Tsipras told Davos he was committed to reforming the Greek economy, which lost 25% of its GDP through austerity programmes which sent jobless rates to twice the eurozone average. But he criticised Europe’s insistence on lowering budget deficits, saying: “We must all understand that, next to balanced budgets, we must also have growth … We need to be more realistic, and show more solidarity too.”

    The German finance minister, Wolfgang Schäuble, appeared unimpressed by Tsipras’s call for greater solidarity, and suggested he needed to deliver on the promises made to creditors. “My advice is, if we want to make Europe stronger we should implement what we agreed to implement. We can simply say, ‘implementation, stupid’,” Schäuble said, in a dig at the Greek leader echoing the catchphrase from Bill Clinton’s 1992 US election campaign.

    The scale of the challenge facing Tsipras was clear in Athens on Thursday. As he rubbed shoulders with fellow world leaders in the Swiss ski resort, thousands of protesters marched through the Greek capital to oppose pension reforms. Many were professionals, such as doctors and engineers, adding their voices to existing protests by farmers and fishermen.

    “The German finance minister, Wolfgang Schäuble, appeared unimpressed by Tsipras’s call for greater solidarity, and suggested he needed to deliver on the promises made to creditors. “My advice is, if we want to make Europe stronger we should implement what we agreed to implement. We can simply say, ‘implementation, stupid’,” Schäuble said, in a dig at the Greek leader echoing the catchphrase from Bill Clinton’s 1992 US election campaign.”
    European solidarity, in the eyes of Wolfgang Schaeuble, is apparently to simply “implement what we agreed to implement” regardless of circumstance. At least one eurozone finance minister neglected to make a “don’t be such a psycho” New Years resolution this year. It’s too bad.

    So is Greece going to get the solidarity and support it needs or will it be indefinitely trapped in a eurozone that can’t bring itself to let Greece go? Well, there is one distinct possibility that could free Greece from its eurozone predicament, although it definitely wouldn’t involve an outpouring of charity or European solidarity.

    Posted by Pterrafractyl | January 21, 2016, 10:14 pm
  24. Part of what has made Greece’s struggles with the eurozone so ominous is that the Greeks haven’t just forced to capitulate in the face of an unyielding Troika. Greece been forced to capitulate in the face of an unyielding insane Troika. The fact that the Troikan vision for Greek “reform” refused to acknowledge systemic problems with the structure of the eurozone and economic realities meant that Greece was basically being asked to capitulate to an unworkable model that would trap Greece in a state of permanent poverty. It’s hard not to feel despair when permanent poverty is basically the only deal being offered. But it’s even worse when permanent poverty is what’s being offered but it’s being sold to you as a path to prosperity and that’s exactly what the Greek people have been asked to repeatedly swallow: deadly, disingenuous hopeless hope.

    Given that despair-inducing state of affairs, one of the big questions following the capitulation of the Greek government in last year’s anti-austerity showdown with the Troika was whether or not the government’s capitulation would translate into a general public capitulation or whether the ongoing negotiations with the Troika just might lead to another ‘Grexit’ showdown. Well, with the Troika continuing to demand deep cuts to public pensions, one of the primary sources of public demands that’s not just keeping many out of poverty but also propping up what remains of the economy, another ‘Grexit’ showdown just might be around the corner. Despair is a great showdown catalyst, and if there’s one thing we can expect the Troika to accomplish during the ongoing battle over pension reforms, it’s the grand accomplishment of inducing the kind of despair that can put a ‘Grexit’ back on the table:

    Bloomberg View
    Don’t Let Greek Pensions Threaten the Euro

    By Editorial Board
    Feb 2, 2016 2:00 AM EST

    Greece is a small country, but for much of 2015 its problems were big enough to threaten the survival of the euro system. A year after Alexis Tsipras took charge as prime minister, the government seems committed to meeting the obligations demanded by its creditors in return for further aid. Neither side should allow the remaining sticking point — pension reform — to jeopardize the euro again.

    The Greek economy is still in intensive care, and the unemployment rate is stubbornly high, but the situation is improving. The economy is expected to shrink by only 0.7 percent this year, and 2017 could see growth of 1.9 percent. The nation’s credit rating has been upgraded.

    But the domestic political situation remains fragile. After defections, the parliamentary majority of Tsipras’s Syriza Party has all but vanished. Avoiding a rerun of the earlier drama requires a double success — not just steady commitment on Greece’s side but also greater flexibility from its European partners. And the real test will come when Tsipras tries to get parliament to approve much-needed reforms of the pension system.

    If this isn’t cautiously handled, a new political crisis is not just possible but probable. Keeping pressure on Greece to persist with needed reforms is vital, and pension reform and privatizations are undoubtedly necessary. But the EU can improve the chances of success by being a little more willing to bend than before.

    On privatization, for instance, the sale of airports, ports and other assets agreed so far will deliver proceeds of about 1.5 billion euros this year; a reluctance to indulge in what the government still calls “fire sales” may mean the official budget target is missed. For sure, creditors should demand progress, and good-faith efforts to keep the earlier promises. But the direction and durability of reform matter more than the pace. Insisting on change that’s faster than the government can deliver, or on sales that grossly undervalue the assets in question, serves no purpose.

    On pension reform, Greece and its creditors disagree on where to find savings. Should it be mainly from higher contributions (taxes), as the government prefers, or mainly from lower payments to pensioners, as the creditors would like?

    Finally, the creditors have agreed to talk about new debt relief — eventually. Everybody knows that Greece’s finances can’t be repaired without debt relief, so this discussion is overdue. The details of forgiveness or other concessions needn’t be decided now, but the talks ought to start. That would give Greek voters more reason to endure the next stage of belt-tightening.

    The European Union, at great and unreasonable cost, forced Tsipras to surrender last year. If it doesn’t want a repeat of that calamitous episode, it should be gracious in victory.

    “If this isn’t cautiously handled, a new political crisis is not just possible but probable.”
    That’s what’s at stake with Greece’s current negotiations with the Troika over pensions: another political crisis. Well, the actual futures of the Greek people are at state too, hence the likelihood of a new political crisis if pensions get gutted too much.

    So will the Troika follow such words of caution to avoid a new showdown? Since this is the Troika we’re talking about, of course not:

    Ekathimerini

    Tsipras faces tightrope act after IMF chief says pension cuts unavoidable

    31.01.2016

    The government faces an extremely difficult week as labor unions increase the pressure over its plans for pension reform and representatives of the country’s creditors discuss the details of those changes and other belt-tightening measures with Greek officials.

    The social upheaval comes amid indications that Greece’s creditors are in no mood for compromise, particularly the notoriously unbending International Monetary Fund. The IMF’s managing director, Christine Lagarde, stressed to Prime Minister Alexis Tsipras during a recent meeting at the World Economic Forum in Davos that Greece’s proposal for pension reform will not be adequate, Kathimerini understands.

    Lagarde indicated in her meeting with Tsipras that merely trimming future pensions is not enough to ensure that Greece’s fragile finances remain on track. Tsipras is said to have told Lagarde that “there is no way” his government can cut the main pensions of existing retirees.

    Lagarde is not the only senior official to have serious reservations about the government’s blueprint for pension reform. German Finance Minister Wolfgang Schaeuble continues to maintain a hard line, reluctant to offer any kind of concessions to Greece as regards the implementation of its bailout program, while European Commission officials have emphasized their objections to the government’s proposals for increasing the social security contributions paid by employers, arguing that such a move would deal a further blow to the struggling business sector.

    Tsipras is likely to face a difficult balancing act in the coming days, faced with conflicting demands from unions, opposition parties and foreign auditors.

    Sources have indicated that the government is likely to give some ground on additional cuts to auxiliary pensions. But there are increasing fears that any insistence by lenders on yet another round of cuts to main pensions will destabilize Tsipras’s fragile government, which has already reneged on most of its pre-election promises and is clinging to its parliamentary majority with just three seats.

    “Lagarde is not the only senior official to have serious reservations about the government’s blueprint for pension reform. German Finance Minister Wolfgang Schaeuble continues to maintain a hard line, reluctant to offer any kind of concessions to Greece as regards the implementation of its bailout program, while European Commission officials have emphasized their objections to the government’s proposals for increasing the social security contributions paid by employers, arguing that such a move would deal a further blow to the struggling business sector.”
    As we can see, the Troika’s Bad Cop/Worse Cop routine is back. Or, rather, never left.

    So how has the Greek public responded to this latest incident of Bad Cop/Worse Cop now that the Syriza government has almost, but not entirely, submitted to the Troika’s demands. Well, as we’ve seen for the third time seen in recent months, that same anti-suicidal instinct that propelled the Syriza government into power and made last year’s standoff an inevitability is alive and well:

    AFP
    Skirmishes in Athens as general strike sweeps Greece

    By Catherine Boitard, John Hadoulis

    February 4, 2016 5:09 PM

    Athens (AFP) – Thousands marched in Greece on Thursday as a crippling general strike against pension reforms swept the country, with hooded youths lobbing firebombs at riot police in scattered skirmishes in Athens.

    Some 40,000 people joined protests in the Greek capital and another 14,000 demonstrated in Thessaloniki in the 24-hour industrial action, police said, as riot officers in Athens fired tear gas in response to Molotov cocktails.

    A journalist was taken to hospital after being beaten on the sidelines of the demonstration. Police detained two people at the end of the protest, but not in relation to this incident.

    It was the broadest protest since leftist Prime Minister Alexis Tsipras first came to power just over a year ago.

    The unrest comes as the Greek government and its creditors are meeting to review the 84 billion euro ($91.6 billion) bailout agreed in July after six months of bitter talks that nearly saw Greece exit the euro.

    Thursday’s general strike — the third in as many months — paralysed transportation, stopping train and ferry services and grounding dozens of flights.

    The pensions overhaul, a key part of Greece’s latest economic bailout, has sparked a major backlash against embattled Tsipras.

    The widespread opposition has led to the rare sight of white-collar professionals marching alongside workers.

    Lawyers, notaries, insurers and engineers have joined the protests, an action the media have dubbed the “necktie movement”.

    “They have massacred my generation. We can no longer get married or have children,” said Dina, 32, who owns a lingerie shop and was marching in Athens, referring to five years of austerity cuts under Greece’s successive economic bailouts.

    Tsipras is accused of breaking his campaign promise to eliminate austerity. “The pledges were hot air,” read black balloons carried by some protesters.

    One group marched behind a banner in Chinese opposing the imminent sale of the Piraeus port authority to Chinese shipping giant COSCO.

    Many traders shut their shops in support of the strike. Petrol stations were closed and taxis pulled off the streets. Hospitals were also operating on an emergency footing.

    Farmers also have protested at dozens of locations on national highways, intermittently blocking traffic with tractors. On Tuesday, they blocked freight trucks from travelling into Bulgaria and Turkey, causing long lines at the borders.

    – Pension reform ‘not viable’ –

    The strikers are furious at government plans to lower the maximum pension to 2,300 euros ($2,500) per month from 2,700 euros currently and introduce a new minimum guaranteed basic pension of 384 euros.

    “It’s true that the pension system requires reform but this reform cannot make it viable,” lawyer Thomas Karachristos told AFP.

    In his case, Karachristos says next year he will be paying 88 percent of his salary in taxes and pension contributions.

    Tsipras’s leftist administration also wants to merge pension funds and increase social security contributions by both employers and staff.

    Critics say the new system penalises those who dutifully pay their pension contributions over a lifetime of work and will encourage undeclared labour practices.

    – ‘Difficult negotiations’ –

    But Greece must save 1.8 billion euros from state spending on pensions under a three-year bailout agreed with the European Union in July.

    The Tsipras government has warned the nation’s pension system will soon collapse without the reform, which is expected to be put to a vote later this month in parliament, where the prime minister has only a razor-thin majority.

    After meeting representatives of creditor institutions — the European Commission, the European Central Bank, the International Monetary Fund and the EU’s bailout fund, the European Stability Mechanism — Labour Minister Georges Katrougalos admitted talks on the thorny issue of pension reform had been tough.

    “The negotiations have been detailed and difficult. There has been discussion of the whole of the reform project,” he said.

    Katrougalos said all areas were still open for discussion and talks would continue next week with the creditors’ technical teams.

    “They have massacred my generation. We can no longer get married or have children.”
    Yep, the Greece youth aren’t just facing decades of mass unemployment. They’re simultaneously being expected to give up any real chance of starting a family, because how is that possible when you have no job prospects and the social safety-net is getting shredded. And since gutting pensions is one of the Troika’s demands, those Greeks that are fortunate to get a public sector job are probably going to spend their retirement in poverty. Unless, of course, the economic miracle that austerity policies are supposedly able to accomplish comes to fruition and the shredding of Greece’s public sector magically turns the nation into an export powerhouse (despite its overvalued currency). But since that’s a fantasy outcome, the typical Greek fate is something closer to this:

    The strikers are furious at government plans to lower the maximum pension to 2,300 euros ($2,500) per month from 2,700 euros currently and introduce a new minimum guaranteed basic pension of 384 euros.

    “It’s true that the pension system requires reform but this reform cannot make it viable,” lawyer Thomas Karachristos told AFP.

    In his case, Karachristos says next year he will be paying 88 percent of his salary in taxes and pension contributions.

    Greek public pensions are slated for major cuts at a time when 45% of retirees are already living in poverty.

    Might we be seeing the conditions develop that could make a repeat of least year’s showdown an inevitability? Well, the Greeks are basically being told to accept that not only will they live the rest of their lives in poverty, scraping to get by, but their children probably won’t have grandchildren, it’s hard to see what’s going to prevent even more national strikes and why they won’t grow. And given that Alexis Tsipras’s government already has a razor-thin majority and can’t really survive unless it can re-embrace the role of the public champion, as opposed to Troikan enforcer, it shouldn’t be too surprising if another ‘Grexit’ showdown is in the near future. Once the Greek public feels it has nothing to lose, the Greek politicans don’t really have much to lose either.

    So whether or not the Greek government actually has plans for the return to the Drachma in the event of a possible ‘Grexit’, the growing sentiments of Greek public is making such a plan look more and more necessary. After all, things are clearly really bad now. National strikes don’t happen without national despair. But things can definitely get worse. For instance, the Troika could remain unrelenting in its demands for cuts while at the same time making petty requests like “please don’t call our demands ‘draconian’.” That’s the kind of dynamic that makes it very clear to the Greek people that they’re negotiating with madness which could make plans for reissuing a Drachma a lot more necessary:

    AFP
    No ‘draconian measures’ for Greece: IMF’s Lagarde

    Thu, Feb 4, 2016 22:18 GMT

    The International Monetary Fund does not wish to slap “draconian measures” on hard-up Greece but wants more government progress on pension reform, IMF chief Christine Lagarde said Thursday.

    Lagarde spoke as Greece was hit by a general strike that brought tens of thousands of people into the streets in protest over pension reforms, a key part of Greece’s latest economic bailout by the European Union.

    “I really don’t like it when we’re portrayed as this draconian, rigorous, terrible IMF,” Lagarde said in an online news conference.

    “We don’t want draconian measures to apply to Greece, which has already made a lot of sacrifices.”

    But she insisted that the Greek reform program has to keep on track, notably on pension reforms, a key issue in negotiations between the government and its creditors.

    According to Lagarde, the current pension system, which costs the equivalent of 10 percent of the Greek economy annually, is not sustainable and should undergo a profound overhaul.

    In Europe, the average pension ratio is 2.5 percent of gross domestic product, she noted.

    The Europeans and the IMF have contested certain parts of the reform measures proposed by Athens, sparking the general strike Thursday.

    Pension reforms were part of the conditions imposed by the IMF for it to participate in the EU bailout of Greece last July.

    The crisis lender, which joined with the European Commission and the European Central Bank in the two prior bailouts of Greece, has not decided whether to join the latest one.

    The IMF is calling for reforms by Athens and for the Europeans to ease the country’s debt burden.

    “The pension system needs to be reformed, the tax-collection system needs to be improved so that revenues come in and evasion is stopped,” Lagarde said.

    “And the debt relief by the other Europeans must accompany this process

    I really don’t like it when we’re portrayed as this draconian, rigorous, terrible IMF…We don’t want draconian measures to apply to Greece, which has already made a lot of sacrifices.”
    It’s funny how the more tone deaf the remark, the more it ends up sounding like fingers clawing a chalkboard. And these comments came during the nationwide strike. *schreeeeeeeech*

    Also note that when Lagarde asserts:


    According to Lagarde, the current pension system, which costs the equivalent of 10 percent of the Greek economy annually, is not sustainable and should undergo a profound overhaul.

    In Europe, the average pension ratio is 2.5 percent of gross domestic product, she noted.

    keep in mind that the past generosity of Greek pension system is frequently wildly exaggerated, and the relative cost of any pension system relative to national GDP is going to get exacerbated following a major financial crisis and years of economy-crushing austerity. Growing the economy is a great way to make any pension system more affordable. And yet “internal devaluation”, which centers around the planned shrinking of the domestic economy, is the only plan the Troika will allow going forward. And on top of it all, as the IMF made clear with its ongoing calls for Greek debt relief in exchange for all these ‘non-draconian’ measures, it’s still completely unclear if Greece will get any significant debt relief at all.

    Given the hopeless nature of the Troika’s leadership, it’s hard to see where exactly the Greek people are supposed to derive their hope from, although if they listen to comments reportedly made by Germany’s Finance Minister Wolfgange Schaeuble, the Greeks should have been hoping for a ‘Grexit’ all along:

    Ekathimerini
    Schaeuble’s Grexit comment provokes reaction in Athens

    04.02.2016 : 21:03

    Comments by German Finance Minister Wolfgang Schaeuble on Wednesday, which appeared to suggest Greece would have to leave the euro to recover, were taken out of context, Berlin indicated Thursday.

    Schaeuble was reported to have said during a political gathering in Hamburg that it is hard for a country to solve its economic problems without being able to devalue its currency. He is said to have added that had Greece left the euro it would have felt some sharp pain but would have avoided having to implement repeated painful measures.

    Former Finance Minister Evangelos Venizelos, currently a PASOK MP, also responded to a reference Schaeuble made to a conversation the pair had in 2011, when the German minister laid out a plan for Greece to leave the eurozone.

    According to Venizelos, Schaeuble proposed converting from euros to a new currency any deposits above 3,000 euros and imposing strict capital controls. Schaeuble is also said to have proposed humanitarian aid in the form of food, fuel and medicines.

    “Obviously I rejected the proposal straight away as it would have led to the reintroduction of a drachma that would be beset by repeated devaluations,” said Venizelos.

    Speaking to the Athens-Macedonian News Agency, a Germany Finance Ministry official insisted that Schaeuble was not advocating a Grexit now but was describing past events.

    “We are currently focusing on the implementation of the existing program,” added the official, who spoke on the condition of anonymity.

    “Schaeuble was reported to have said during a political gathering in Hamburg that it is hard for a country to solve its economic problems without being able to devalue its currency. He is said to have added that had Greece left the euro it would have felt some sharp pain but would have avoided having to implement repeated painful measures.”
    Ok, the IMF, wants the Greeks to know that it doesn’t like to hear that it’s demanding “draconian measures” because that makes Christine Lagarde feel bad, and Wolfgang Schaeuble, who continues to demands that Greece get no relief at all from its prescribed austerity treatment, is reported to have recently suggested during a political meeting that the only way Greece could truly recover is if it leaves the eurozone. And then the German Finance Ministry denies it all, asserting that Schaeuble merely meant that Greece’s past austerity woes could have been avoided…not its current woes. *scheeeeech*

    So now the Greek people find themselves in a situation where they’ve conceded almost everything the Troika demands, and all their getting in return is requests to not use words like ‘draconian’ and suggestions that they should have left the eurozone anyway. It’s hard to know what exactly to expect from all this. Will Syriza find itself forced to lead a new anti-austerity revolt or could we see another political revolution of the kind of that put Syriza into power in the first place? And could a party that promises a showdown that explicitly includes the threat to return to the Drachma get the public’s backing? We’ll see, but in the mean time one this is looking clear: teargas suppliers to Greece’s government are probably going to have a good year.

    Posted by Pterrafractyl | February 6, 2016, 7:00 pm
  25. Spain’s left-wing anti-austerity Podemos party just refused to form a coalition government with the pro-austerity Socialists. Another vote will be held on Friday, and if that one fails to form a new government the prospects of new elections in June increase significantly. And when you have new elections in an austerity-weary country in the eurozone with anti-austerity rising politcal stars, you also have to consider the possibility of a looming Greek-style showdown.

    But as Mark Wiesbrot points out below, we’re probably not going to see Spain facing off against its Austerion eurozone partners for a variety of reasons, including the fact that Spain isn’t currently operating under the Troika and has a much larger economy than Greece’s. In other words, it’s one thing for Spain to impose austerity on itself as it’s done already, but it could be quite another if, for instance, Podemos wins big and the eurozone decides mandate austerity policies anyway.

    So, the way Weisbrot sees it, the answer to the question “will there be a showdown in Spain?” is mostly likely “no”. But when you ready Weisbrot’s summary of the Greek showdown/shakedown as part of his comparison of the two situations, it’s kind of hard to avoid the question, “why don’t they want to leave the eurozone anyway?”:

    Boston Review
    Why Spain Won’t Quit the Eurozone

    Mark Weisbrot
    March 01, 2016

    The Spanish elections in December provided proof, if anyone needed it, that the fight over the economic and social future of Europe is far from over.

    For the first time in three decades, each of two major parties that had ruled Spain since its incomplete transition to democracy was unable to form a governing coalition. The incumbent right-wing Popular Party (PP)—with roots in Francisco Franco’s fascist dictatorship—remained the largest party in the parliament but saw its representation shrink by a third. The center-left Socialist Workers Party (PSOE), which had lost its majority to the PP in 2011 due to its support for austerity, fared even worse. Their defecting voters went mostly to Podemos (“We can”), a new left party, less than two years old, which grew out of the mass protests against austerity. Podemos surprised pollsters and most of the media by winning 20.7 percent of the vote, just 1.3 points behind the PSOE. The PP won 28.7 percent, and a new party called Ciudadanos (Citizens), which some have called “the Podemos of the right,” got 13.9 percent.

    The political upheaval that broke up the two-party system in Spain is part of an ongoing process that has beleaguered European governments since the world recession of 2009. GDP for the nineteen countries of the Eurozone is estimated to have grown by 1.5 percent in 2015; some may have thought that such feeble economic recovery and the capitulation of the Greek government to European demands last July marked the beginning of a solution to Europe’s economic malaise. This would still leave a host of other problems, both real and exaggerated: the migration crisis, terrorism, the UK’s proposed referendum on EU membership. But the economic problem is at the core of most of the others, and it can make them considerably more difficult to resolve. The influx of even a million immigrants into a European population of more than 503 million would not be as politically volatile if the region were not also facing long-term mass unemployment and economic insecurity.

    The economic problem faces two major obstacles to its resolution: first, the loss of national economic sovereignty and democracy, which would allow, and in some cases force, governments to change course in the face of long-term economic failure, and second, the false narratives through which the European economy is generally presented to the public, and thereby widely misunderstood.

    The loss of economic sovereignty is the main reason that the Euro area has more than twice the unemployment rate of the United States. Even if American voters had elected Mitt Romney in 2012, he would not have dared to do what Eurozone governments—especially those of the more vulnerable countries—have done, because he would have wanted to be re-elected. The countries of the Eurozone gave up control over their most important macroeconomic policies: monetary policy (including interest rates), exchange rate policy (by adopting the euro), and when they ran into trouble they discovered that their fiscal policy (taxing and spending) could also be commandeered by an alien elite.>

    Without national economic sovereignty, there is little room for democracy in economic policy making. This should have been the lesson that everyone drew from the past seven years. Eurozone nations handed their sovereignty to a group of people with a political agenda quite hostile to the interests of most Europeans—one that they would never vote for. Yanis Varoufakis, finance minister under Greek Prime Minister Alexis Tsipras from January to July last year, has noted that the Eurogroup of finance ministers—with whom he was trying to negotiate the future of Greece—was “unelected and unaccountable” and had no legal status. But the so-called “troika” that has made many of Greece’s economic decisions in the last six years of depression—the European Central Bank (ECB), European Commission, and the IMF—is not much different.

    • • •

    There is a paper trail that details the economic agenda of the troika and the Eurogroup. Article IV of the IMF’s Articles of Agreement requires that member countries have regular consultations with the IMF, and the result of these meetings is a report that describes the current state of the economy and makes policy recommendations. A look at sixty-seven of these Article IV consultations, as they are called, for the twenty-seven EU countries during the four years 2008–11 shows a strikingly consistent pattern.

    There are recommendations for reducing public sector employment and wages; cutting spending on pensions and health care; tightening eligibility for unemployment insurance, and other measures to increase labor supply; legal changes that reduce the bargaining power of labor; and other changes that would tend to increase inequality. Since these papers are a product of negotiation between finance ministry officials and IMF staff—headed by European directors—they represent an elite consensus of sorts that can be far removed from what the citizens of these countries would want or vote for. Not surprisingly, these are also the policies that have often been implemented, especially under pressure in the more vulnerable Eurozone countries, since 2010.

    The ongoing struggle is therefore much more than the usual conflict between creditors and debtors, or even creditor versus debtor nations (despite the obvious leadership of Germany on the side of austerity). In fact, Greece’s private creditors took a 50 percent reduction in the principal of their bonds in early 2012, most of which they could have avoided if the ECB had simply backed Greek bonds when they first ran into trouble in 2009. This is what a central bank is supposed to do, and what the ECB eventually did for Spanish and Italian bonds in July 2012, when ECB President Mario Draghi announced that he would do “whatever it takes” to ensure the stability of the euro. These three words put an end to the financial part of Europe’s crisis; the tipping point was evident in the yields on Spanish and Italian government bonds, which fell from unsustainable peaks of 6 and even 7 percent to about 1.6 percent today (Italian 10-year bonds).

    The question that went unasked is: Why didn’t the ECB do this two years earlier, and thereby avoid the repeated crises of 2011 and 2012? The answer can be found in the IMF Article IV papers and statements of European officials.

    A 2009 Article IV consultation with France reads, “Historical experience indicates that success­ful fiscal consolidations were often launched in the midst of eco­nomic downturns or the early stages of recovery.” In other words, European authorities saw the financial crisis as an opportunity to force Eurozone governments to accept their terms and conditions. It is important to understand this because it shows the depth of their commitment to this elite consensus for remaking Europe. They were willing to put the Eurozone through an additional two years of crisis and recession—a downturn that the United States, whose Great Recession ended in June 2009 (eighteen months after it started) didn’t experience.

    This commitment was manifest in the brutality with which the European authorities treated Greece when its voters, after more than six years of austerity-induced recession, elected the leftist Syriza party on January 25, 2015. Within nine days of Syriza’s taking office, the ECB cut off its primary and cheapest line of credit. It then restricted the amount of credit that Greek banks could provide to the government, something that it had not done for the previous, conservative government. This tightened the financial noose around Greece’s neck and contributed to the capital flight that helped push the Greek economy back into recession. Between December 2014 and the following April, more than 24 billion euros (about 13 percent of Greek GDP) fled from Greek bank deposits.

    But this was just the beginning. It soon became clear that European authorities, led by the ECB, were pursuing a strategy of regime change in Greece. They were undermining the economy partly in the hope that the damage would erode support the government. There were divisions among the European authorities; German Finance Minister Wolfgang Schäuble most outspokenly favored pushing Greece out of the euro. But as Varoufakis confirmed with high-level European negotiators, it seemed clear that German chancellor Angela Merkel preferred to keep Greece in the euro, with Syriza out. The Obama administration appeared to be on the same page, for geopolitical reasons.

    In hindsight it is clear that there were no real negotiations taking place. Once the European authorities realized that Greece was never going to leave the euro—no matter the outcome of negotiations—they had no reason to make concessions. It was all stick and no carrot. When Prime Minister Alexis Tsipras announced that there would be a referendum on July 5 regarding the Eurogroup’s austerity package, the full fury of the overlords was unleashed. The ECB did something that no central bank has ever done to a government under its jurisdiction: it cut off enough credit to force a shutdown of the Greek banking system, creating a serious financial crisis in Greece and necessitating capital controls that are still hurting the economy today. European officials, who tried to influence the result by publicly stating that a “No” vote would mean Greece’s exit from the euro, made it clear that this assault on the financial system was meant to beat Greece into submission.

    Syriza’s re-election is evidence not only of the remarkable political skills of Tsipras, but also of the strength of the straitjacket the Greek people believed themselves to be caught in. I have argued for years that Greece would have recovered a long time ago if it had left the euro rather than signing the first IMF agreement in 2010, which set them on a downward spiral that would erase 25 percent of the Greek economy and push a quarter of the labor force and the majority of Greek youth into unemployment. Many economists share this view. Former IMF economist Arvind Subramanian even wrote in 2012 that Greece might recover so successfully outside the euro that most other Eurozone countries would also want to leave.

    None of the financial crises and recessions associated with devaluations over the past two decades, some of them quite severe, comes close to the prolonged depression that Greece has suffered. And the country is by no means out of the woods: its economy is projected to return to growth in 2017 after shrinking this year, but IMF forecasts for Greece have been over-optimistic almost every year since 2010, and the country’s unsustainable debt makes further crises quite likely.

    • • •

    Where does this leave Spain? The right-wing narrative is that the country is recovering thanks to the government’s policies, and voters should not derail the progress by causing political instability—that is, by voting for a left alternative. A somewhat more widely believed narrative draws a simple lesson from Greece: challenging European authorities is self-defeating, and there are no alternatives to the current economic program and mass unemployment.

    These narratives are wrong. While the Spanish economy grew by 3.2 percent in 2015, little if any of this growth was due to the success of the government’s austerity policies. The government has pursued a policy of “internal devaluation”: since Spain cannot directly devalue the euro, it can make it effectively cheaper by lowering Spain’s internal prices and wages. This is done through policies that cause increased unemployment and recession, in the hope that exports will revive the economy. However, most of the recent growth has come not from net exports but from the government’s lightening up on budget austerity as well as from falling oil prices (which gives consumers more money to spend) and the ECB’s quantitative easing (which lowers interest rates).

    Spain is the fourth largest economy in the Eurozone. It is not operating under an IMF or European loan agreement that obligates it to sabotage its own economy. It would be significantly riskier, both financially and politically, for the ECB to try to shut down Spain’s banking system, as it did in Greece. And there are paths to full employment and social progress that a determined Spanish government can embark upon even while remaining in the euro. Some of these can be seen in Podemos’s economic program.

    For these reasons Podemos has made it clear that it will pursue its economic program within the Eurozone. This makes sense, given the serious political difficulties at present for any government that even proposes to leave the euro. Nevertheless, from a purely economic point of view, leaving the euro would be the faster path to full employment and a return to rising living standards for the majority.

    Europe’s neoliberal leadership is offering a dismal future, especially for Europe’s youth. In Spain, a fifth of the labor force is unemployed, including half of young people, and 60 percent of the unemployed are out of work for more than a year. The IMF estimates that unemployment will still be 16-17 percent when Spain reaches its potential output several years from now. In other words, this is as good as it is going to get. Even for the whole Eurozone, unemployment is forecast at more than 9 percent in 2020, when the economy is projected to be at its full potential output.

    European authorities are trying to create a new image of mass unemployment, a reduced welfare state, and a worsening income distribution as the new normal for Europe, just as stagnant wages and sharply rising inequality became the norm in the post-1980 U.S. economy. In their narrative, the electoral gains of right-wing, anti-immigrant, and racist parties are due to “anti-European” sentiment; in this one term they lump valid criticisms—from across the political spectrum—of their neoliberal straitjacket. But it is their own policies and the resulting damage that has moved, for example, French workers to vote for the National Front.

    There is no economic reason for Europeans to surrender to a political agenda that has already subjected them to long-term economic failure. But to reject such a program, they will need progressive governments that are strong enough to implement practical alternatives at the national level. It will be a race against time to see if these efforts can succeed before more structural damage is done.

    “European authorities are trying to create a new image of mass unemployment, a reduced welfare state, and a worsening income distribution as the new normal for Europe, just as stagnant wages and sharply rising inequality became the norm in the post-1980 U.S. economy.”
    Yep, Europe’s elites have a Reagan Revolution in mind and they’re not going allow pesky obstacles like democracy or honesty to get in the way:


    The economic problem faces two major obstacles to its resolution: first, the loss of national economic sovereignty and democracy, which would allow, and in some cases force, governments to change course in the face of long-term economic failure, and second, the false narratives through which the European economy is generally presented to the public, and thereby widely misunderstood.

    Democracy and public accountability: the two big obstacles to the eurozone’s envisioned future. Wonderful.

    So while it’s unclear what’s going to actually happen in Spain in the short-run, the long-run vision is pretty clear and it’s the kind of vision that should have one running for the exits, which raises the question, “why aren’t more people clamoring to get out?” The answer is probably that the public sees, or imagines, some sort of light at the end of the tunnel. At least hopefully.

    But as we’ve already seen, the eurozone managed to dig itself a long tunnel with no end in sight, and the length of that tunnel is increasingly clear as the eurozone economies continue to stall and stagnate. It’s kind of hard to be optimistic about the future when youth unemployment is over 60 percent. At the same time, while there’s no guarantee that leaving the eurozone is a wise long-term decision, it’s guarantee hurt viciously in the short-run, and that’s the kind of situation that makes deciding what to do next rather difficult. So while it’s possible that the eurozone public’s dedication to keeping the eurozone intact after everything its experienced is due to some sort of enduring optimism that the light at the end of the tunnel is just around the corner, it’s also worth keeping in mind that the incredible dedication to the eurozone is indeed due to the public ‘seeing the light’, just not very optimistically.

    Posted by Pterrafractyl | March 2, 2016, 9:19 pm
  26. When future generations look back on the array of incredible missed opportunities for the global community in the late 20th and early 21st centuries, when avoidable poverty and underinvestment in the common good ended created a socioeconomically gutted the middle-class and surging levels of developed-world poverty, they should probably take a look at articles like this:

    The Guardian

    Why the global economy may need to get worse before it gets better

    Until governments act collectively to bolster growth, lasting recovery from the 2008-09 recession will remain elusive

    Larry Elliott in Paris

    Wednesday 1 June 2016 07.48 EDT

    A wind of change is howling through the world’s economic institutions. Last week it was the International Monetary Fund saying austerity could do more harm than good and that neoliberalism was not all it was cracked up to be. This week it is the turn of the Organisation for Economic Cooperation and Development to challenge the orthodoxy.

    The OECD says governments around the world should consider banding together to spend more on public works, something it deems necessary because lasting recovery from the deep recession of 2008-09 remains elusive.

    There is, of course, a word to describe action by the state to boost demand when private-sector activity is weak, and that word is Keynesianism. It was not a word that was used much in the three decades when neoliberalism reigned triumphant.

    But times change and after five years in which its forecasts have proved persistently overoptimistic, the OECD is becoming increasingly fretful. It is concerned that weak growth will feed on itself. It is worried that central banks are being asked to do too much with low interest and quantitative easing. It fears that any one of a number of risks – a hard landing in China, a financial crisis in emerging markets or, most pressingly, Brexit, could lead to activity stalling altogether. It wants something done to break the cycle of low productivity, low wage growth and low investment.

    What the OECD wants is for the one-legged stool of hyperactive monetary policy to be replaced by a three-legged stool in which central banks get some support from fiscal policy and from structural reform.

    In an analysis that would have been given the wholehearted support of Keynes, the thinktank says extra spending on infrastructure would pay off in terms of higher growth and lower debt. Governments, in other words, should stop obsessing about cutting their way back to financial health and consider growing their way out of the red instead.

    Analysis by the OECD shows that the impact in the first year of a 0.5% of GDP increase in public investment by all rich OECD economies would be to boost world growth by 0.4 points. In the US, there would be a 0.7-point improvement; in the EU and the UK a 0.6 point pick-up. The public debt stock in the US would fall by 0.7 points, with smaller decreases of 0.4 points and 0.3 points in the eurozone and the UK respectively.

    The OECD also notes that there is a significant dividend of about 0.2 percentage points of GDP for countries acting collectively rather than going it alone.

    In recent years, the OECD adds, the pace of structural reform has slowed and it is not hard to see why. High unemployment, stagnant productivity and nugatory increases in real wages have led voters to be resistant to change – and in many countries openly hostile to their governments. Stronger, more inclusive growth would make it easier to reform economies and make them more productive.

    Words, however, come cheap. Just as the IMF’s new thinking about the failings of neoliberalism is not always shared by the officials that give policy advice to countries in economic difficulties, so there is no obvious rush by OECD members to club together for a joint public investment programme. As Ángel Gurría, the OECD’s secretary general, put it: “They are talking about it but they are not doing it.”

    Things may need to get worse before the penny drops. If the OECD’s gloomy analysis is right, that moment may not be far off.

    “Words, however, come cheap. Just as the IMF’s new thinking about the failings of neoliberalism is not always shared by the officials that give policy advice to countries in economic difficulties, so there is no obvious rush by OECD members to club together for a joint public investment programme. As Ángel Gurría, the OECD’s secretary general, put it: “They are talking about it but they are not doing it.””
    So in addition to the the IMF once again making it clear that the austerity policies promoted by institutions like the IMF and OECD in recent years did more harm than good, we have the OECD basically calling into question the general neoliberal tilt of the global economy for the past few decades. It’s progress, at least in thought if not in action.

    But, as the article suggested, it’s the kind of progress in thought that apparently can’t lead to progress in action unless things get much worse. Two steps back are required to take one step forward.

    Who knows why exactly the people managing the global economy refuse to make things better unless things get dramatically worse, but it probably has something to do with a still unexplained consensus worldview amongst the developed world’s leadership that the worse things are now, they worse they need to get before things get better, and the best way to ensure all that happens is to guarantee things get WAY worse than they already are and don’t get better for a LONG time.

    It’s a mystery as to why so many powerful people would believe such incredibly damaging and heartless nonsense that’s only going to be looked back on in future generations with disdain and disbelief, but as we’re reminded with the recent IMF negotiations over Greece’s “bailout” conditions, whether or not our leaders want things to eventually get better, they really do appear to believe things MUST get much, much worse:

    The Real News Network

    Greek Leaks Expose IMF Chief Overruling Pro-Debt Relief IMF Negotiator

    Securities lawyer Dimitri Lascaris says recent leaks to the press show that IMF Chief Lagarde forced her negotiator to give up the previously stated position to insist that creditors offer debt relief to Greece

    Dimitri Lascaris
    June 5, 2016

    Recent press reports have revealed that International Monetary Fund chief Christine Lagarde forced her negotiator to renege on an agreement that would have provided debt relief to Greece.

    Eurozone finance ministers and the IMF appeared to reach a deal last week that would have cleared the way for new loans for Greece and provided a framework for future debt relief.

    “As I see this playing out, we’re going to end up with a continuation of this extraordinarily severe austerity regime with no meaningful prospect whatsoever for measures that could render Greece’s debt sustainable in the long run,” says securities lawyer Dimitri Lascaris.

    “Even if the debt is ultimately rendered sustainable decades down the road, Greece is never going to be the same given the program that’s being imposed upon it,” says Lascaris.

    A recent IMF report titled “Neoliberalism: Oversold?” says there are dubious benefits to increased growth resulting from imposing austerity measures and removing restrictions on capital movement across borders. The report also found this growth was both limited and rendered unsustainable.

    “All of this just paints a picture of complete incoherence within the IMF itself,” says Lascaris.

    Transcript———————————————–

    SHARMINI PERIES, TRNN: It’s the Real News Network. I’m Sharmini Peries coming to you from Baltimore.

    Last week we reported that the eurozone finance ministers and the International Monetary Fund patched together a deal in the early hours of Wednesday morning that clears the way for fresh loans for Greece and sets out how the country could get debt relief in the future. Well, there’s been a bit of a hiccup on that story, and with me to discuss all of this is Dimitri Lascaris. Dimitri is joining us from London, Ontario. He’s a class action securities lawyer called to practice in the state of New York and the province of Ontario. Good to have you with us, Dimitri.

    DIMITRI LASCARIS: Thank you, Sharmini.

    PERIES: So, Dimitri, what happened?

    LASCARIS: About a week ago the Eurogroup concluded a meeting with representatives of Greece and the IMF in which it announced that it was going to issue in two pieces the second tranche of the 86 billion euro bailout that was agreed to last summer after the Greek referendum. And in the announcement that was issued by the Eurogroup at the conclusion of that meeting, it expressly welcomed the decision of the IMF management to recommend to the board of the IMF later this year that the IMF participate in this bailout. And that’s important because the core creditor nations from the Eurogroup, particularly Germany, have been demanding that the IMF participate in any further bailout as a condition of the extension of further loans to Greece.

    So this was considered by many, including myself, to be capitulation on the part of the IMF, because the deal itself did not make any hard commitment to debt relief for Greece, and the IMF had been saying in the days leading up to the meeting that dramatic debt relief was a precondition to its further participation in this bailout. However, after we spoke about it, some leaks occurred to the press which painted a somewhat different picture. One of the things that became apparent through this series of leaks is that the IMF at the meeting had been represented by the IMF’s department, the director of its European department, Poul Thomsen, a Dane, who has taken the lead in expressing the IMF’s insistence that there be dramatic debt relief for Greece in order to render its debts sustainable. And Christine Lagarde, the executive director of the IMF, the most powerful individual within the IMF management, herself was not present. She was on a trip for some reason to Kazakhstan at the time.

    And the press release, the leaks to the press were to the effect that Poul Thomsen himself was not prepared to proceed with the recommendation of the IMF board that it participate in the bailout without a commitment to dramatic debt relief, but that he was overruled by Ms. Lagarde in a ten-minute telephone conversation that took place in the hallway, and the reports were that Mr. Thomsen was quite frustrated by having been overruled in that regard.

    So a senior IMF official, around the time that these leaks occurred, told the press that in fact the IMF management was not yet determined to recommend to the board that the IMF participate in the bailout, and that later this year there were going to have to be further talks and debt relief for Greece, and whether or not the recommendation would be made would depend upon the outcome of those talks, and particularly the satisfaction of the IMF’s demand that there be a concrete plan put in place and a meaningful commitment put in place for debt relief for Greece.

    So as a result of all of this, now there are noises coming out of the Eurogroup to the effect that perhaps maybe we don’t need the IMF after all. And whatever, however you slice all of this up, Sharmini, it doesn’t bode well for Greece, because if in fact the leadership of the IMF, Ms. Lagarde, is prepared to overrule people like Poul Thomsen in order to keep the IMF in the deal despite the absence of debt relief, then of course, then we’re less likely to see meaningful debt relief for Greece. By the same token, if the IMF is excluded, ultimately, from this bailout, then the one creditor–there are three creditors in the troika, the IMF, the European Commission, and the ECB–the one creditor that has actually been insisting on debt relief will be gone from the scene.

    So who’s going to be, who’s going to provide the impetus for debt relief for Greece, if that happens? Either way it doesn’t look good. You know, as I see this playing out, we’re going to end up with a continuation of this, this extraordinarily severe austerity regime with no prospect, no meaningful prospect whatsoever, for measures that are going to render Greece’s debt sustainable in the long run.

    PERIES: Dimitri, even what the IMF was putting on the table in terms of debt relief for discussion was in the long run, and Michael Hudson said this was all smoke and mirrors. Your thoughts on that?

    LASCARIS: Really what Greece needs, and this is what the IMF was saying at the outset months ago, is a massive reduction in the face amount of the debt, a debt writedown. So on that point it clearly has capitulated, and it clearly has expressed a willingness to participate in the bailout in the absence of a writedown. What it proposed as an alternative in a debt sustainability analysis that was issued just days before the last Eurogroup meeting, was a series of measures which included a debt holiday over a period of some 20 years, a capping of the interest rate to 1.5 percent, and an extension of maturities.

    And I think Michael Hudson is quite right that there is a real question about whether in the very long run those measures will render Greece’s debt sustainable. But even putting all of that aside, in the short-term what the IMF itself, along with the other creditors, continues to demand, even though the IMF has explicitly acknowledged that it’s a complete pipe dream, is that Greece achieve a primary budget surplus of 3.5 percent. And that will–no country has managed to do that on a sustained basis, or very few countries have managed to do that on a sustained basis. A country in Greece’s condition is almost certainly not going to achieve a primary surplus of that magnitude, and simply trying to do so, as the government is at the insistence of its creditors, is going to inflict far more pain on the economy of Greece.

    And even if in 20 or 30 years Greece’s debt is rendered sustainable, because of the austerity measures and the demand that it continued to impose further austerity to achieve this primary budget surplus, the Greek economy, I think, is unlikely to ever recover. And that, and so, as I say, even if the debt is ultimately rendered sustainable decades down the road, Greece is never going to be the same given the program that’s being imposed upon it.

    PERIES: And also in the immediate future, whatever growth the economy realizes is going to go to servicing the debt. So it’s just a no-win situation for Greece.

    LASCARIS: That’s right. And against this backdrop, after you and I had our last discussion about the developments within the Eurogroup, the IMF staff issued a report, not specifically relating to Greece, but relating to the question of neoliberalism generally. And the report was entitled Has Neoliberalism–I’m paraphrasing–Has Neoliberalism Been Oversold? And this report from three members of the research staff of the IMF, remarkably, acknowledged that that’s exactly what’s happened, that neoliberalism has been oversold.

    Neoliberalism, as it defines, as defined by the research staff, involves, essentially, two components. One is deregulation, and the other is austerity. And the IMF staff acknowledged quite candidly in this report that austerity actually has the opposite effect in many cases of that which is sought. What is sought is to enhance growth, but in fact it causes economic contraction. And deregulation, it noted, also results in financial crises and in an increase in inequality which itself has a dampening effect on growth.

    And so even as the IMF research staff, I mean, this is a most remarkable situation, is acknowledging for the first time the failures of neoliberalism, and that it doesn’t achieve its own goals, it continues to insist, the management of the IMF, the leadership of the IMF continues to insist that countries like Greece engage in extraordinarily rapid and extreme deregulation, and extraordinarily severe austerity. All of this just paints a picture of complete incoherence within the IMF itself.

    PERIES: Dimitri, I wonder whether Lagarde’s going to dress them down in a phone call soon, because I don’t know whether she’s aware that this report has been released.

    LASCARIS: Well, historically the IMF staff have been somewhat more progressive than the leadership of the IMF. And to their credit, from time to time they, they do exhibit a degree of intellectual integrity and independence that you don’t see from the leadership of the IMF. But I suspect that Ms. Lagarde is not going to be particularly happy with the release of that research paper.

    “And so even as the IMF research staff, I mean, this is a most remarkable situation, is acknowledging for the first time the failures of neoliberalism, and that it doesn’t achieve its own goals, it continues to insist, the management of the IMF, the leadership of the IMF continues to insist that countries like Greece engage in extraordinarily rapid and extreme deregulation, and extraordinarily severe austerity. All of this just paints a picture of complete incoherence within the IMF itself.”
    Yes, it does all appear to be quite incoherent. Or malevolent. It’s all one big mystery. But as the article below makes clear, it’s not a mystery over how it is that the IMF fell in line and backed a policy that the IMF itself thinks is doing more harm than good. It’s a mystery of how the IMF’s leadership continues to endorse austerity and neoliberalism even after its researcher points in the opposite direction:

    AFP

    IMF says not recanting on neoliberalism, austerity

    June 3, 2016 8:42 pm

    WASHINGTON, D.C.: The International Monetary Fund’s (IMF) top economist said on Thursday that the global crisis lender is not abandoning its much-criticized neoliberal approach to boosting economic growth.

    Responding to an article by three other IMF economists that sparked widespread reports that the Fund was pulling back from a pro-markets, pro-austerity and slim-government agenda, Maurice Obstfeld said the article was “widely misinterpreted.”

    Publication of the article last week by the IMF itself “does not signify a major change in the Fund’s approach,” Obstfeld said in an interview released on the Fund’s website.

    He said the IMF has engaged in a reassessment of its economic and financial policy approach in the wake of the global financial crisis.

    Nevertheless, he said, “that process has not fundamentally changed the core of our approach, which is based on open and competitive markets, robust macro policy frameworks, financial stability, and strong institutions.”

    In their article the three economists focused on the IMF’s insistence on austerity—tough spending cuts and other measures that can hurt incomes—for financially troubled governments seeking a bailout from the Fund.

    “Instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardizing durable expansion,” they said.

    “Increased inequality in turn hurts the level and sustainability of growth.”

    “Publication of the article last week by the IMF itself “does not signify a major change in the Fund’s approach,” Obstfeld said in an interview released on the Fund’s website.”
    Yes, IMF’s research on the harms caused by austerity and neoliberalism didn’t signify a major change in the Fund’s approach. And yet, as we saw with the negotiations over Greece, the IMF did agree to a rather major change in the Fund’s approach since it completely capitulated on the issue of debt relief that had been its line in the sand for months.

    So the IMF is indeed open to major changes in the Fund’s approach. Just as long as the changes are for the worse. Two steps back, no steps forward. If it’s the wrong thing to do, it the right thing to do. No research required.

    Posted by Pterrafractyl | June 9, 2016, 10:03 pm
  27. With Spain and Portugal recently winning reprieves from getting fined by Brussels after missing their deficit targets and the UK now set to leave the EU entirely, one might be tempted to assume that Greece, having capitulated almost entirely to the Troika’s vicious austerity and ongoing privatization demands (COSCO just completed a deal to acquire a 67 percent stake in Greece’s largest port), would be due for a brief reprieve of its own. You know, as an act of solidarity and all that. LOL:

    Ekathimerini

    Gov’t, creditors already at odds over budget

    12.08.2016

    Negotiations have not yet started between the government and the country’s creditors but there are already several serious points of contention, with the creditors foreseeing a significant budget deficit for next year, Kathimerini understands.

    One issue that has divided the two sides relates to the primary surplus targets for the coming years, which Athens wants to scale back.

    Creditors also object to plans by the Greek government to introduce a so-called Social Solidarity Income for poorer Greeks, predicting that such a move would blow a hole of around 900 million euros in the national budget for 2017.

    The Greek Finance Ministry plans to fund the Social Solidarity Income through cuts to the Defense Ministry’s budget worth around 250 million euros as well as broader cutbacks across the public sector.

    But foreign auditors are reportedly unconvinced that such an overhaul could raise the necessary budget savings. According to sources, representatives of the country’s creditors are calling on the government to scale back a series of benefits and tax breaks that burden the budget by an estimated 950 million euros annually.

    The creditors’ opposition to the government’s plans to introduce social welfare benefits – in an effort to counterbalance the austerity it has been obliged to enforce over the past year – is expected to hamper efforts to sign off on an midterm program later this year.

    Apparently anticipating this, Finance Minister Euclid Tsakalotos said recently that the final version of the government’s midterm program will be submitted to Parliament after the second review of Greece’s bailout.

    The completion of that review, which includes 15 so-called prior actions, will lead to the release of 2.8 billion euros in rescue loans. One of the 15 prior actions is the creation of a five-member supervisory panel to oversee a new privatization fund.

    This panel is to comprise three Greek government representatives as well as a French and a Spanish official from the side of the creditors, Kathimerini understands.

    But there seems to be less convergence on the remaining commitments, which include measures to introduce greater flexibility to the labor market and regulate the market for nonperforming bank loans.

    “The creditors’ opposition to the government’s plans to introduce social welfare benefits – in an effort to counterbalance the austerity it has been obliged to enforce over the past year – is expected to hamper efforts to sign off on an midterm program later this year.”

    Yes, the Troika’s opposition to the proposed Social Solidarity Income program for poor Greeks is expected to hamper efforts to get the Troika to sign off on a midterm bailout program later this year. It also seems like the Troika’s opposition to the Social Solidarity Income program poses a bit of a hurdle to addressing the massive deficit in any sense of anything resembling EU solidarity, which is quite possibly the most valuable currency in the EU right now, although that’s probably not going to be a big factor in the Troika’s decision-making. The solidarity deficit won a permanent Troikan reprieve a long time ago.

    Posted by Pterrafractyl | August 21, 2016, 10:30 pm
  28. Here’s an article about the general sense of disillusionment and the breakdown of social solidarity taking hold across Greek society as austerity continues to erode lives and futures. It’s the kind of article where you just have to hope the author was being overly cynical and despairing when writing it because otherwise it’s hard to be optimistic about how Greece’s battle with cynicism and despair is going:

    CNBC.com

    ‘Nobody believes in anything anymore’: Why Greece’s economic crisis is not over

    Holly Ellyatt Monday, 22 Aug 2016 | 1:06 AM ET

    With Europe facing pressing crises including the refugee crisis, economic slowdown and political disintegration following the Brexit vote, it’s easy to forget that Greece’s political and economic crisis dominated headlines last summer.

    One year on and a third bailout worth 86 billion euros ($96.1 billion) later, arrived at after tortuous negotiations between Greece and its lenders, and the situation in Greece is a game of two halves with many Greeks suffering – and some trying to make something out of a bad situation.

    Greece’s government has been forced to make widespread spending cuts over the course of its three separate bailout programs, making life harder for most Greeks of ordinary means. The cuts have affected all ages with unemployment rising to the highest level in Europe.

    A survey by independent analysis firm DiaNEOsis in June revealed that many Greeks were facing an increasing struggle to get by. Extreme poverty in the Greek population (of 11 million people) had risen from 2.2 percent in 2009, to 15 percent in 2015, the public opinion survey of 1,300 people showed, with 1.6 million people now living below in extreme poverty.

    One resident of the northern Greek city of Thessaloniki, Evangelos Kyrimlis, told CNBC that the Greece’s crisis had taken its toll on society, both at a local and national level.

    “Disillusionment is the first big thing that’s going on,” he noted. “Nobody believes in anything anymore.”

    “The second big thing is withdrawal. People have retreated to their families and fight only for the family survival. Society has been fragmented,” he said. Kyrimlis works for his partner’s family firm, having returned to Greece after working for an engineering consultancy in London.

    Returning to Greece in the midst of the country’s financial breakdown, he said he now noted an increase in animosity between people, saying there was a “widespread hatred not directed to anyone in particular, it’s like all against all.”

    Economy ‘like a 60-year-old’

    The leftwing Syriza government was elected last January on an anti-austerity manifesto but after months of horse-trading with its European neighbors and lenders over getting more financial aid, Syriza leader and Prime Minister Alexis Tsipras was forced to concede defeat and sign up to a third bailout last summer, despite the majority of Greeks voting “no” to more austerity.

    Tsipras’ hesitation over a third bailout (and, no doubt, his angry denunciations of lenders) actually made the situation worse as lenders imposed heavier reform and spending cut demands on Greece amid concerns from many euro zone countries – wary of rising anger from taxpayers over yet another Greek “rescue” – that it was not going to abide by its bailout conditions.

    As well as cutting public spending in key sectors (such as defense) significantly, lenders have demanded that Greece reach a primary budget surplus (when government revenues are higher than spending, excluding Greece’s debt interest payments) target of 3.5 percent by 2018 – with the idea that the surplus is used to reduce Greece debt.

    Lenders also demanded an overhaul of the taxation system and widespread labor market and pension reform, reversing previously generous public sector pensions and raising the retirement age.

    Now largely beholden to lenders and heavily indebted, Greece’s debt to GDP is over a whopping 180 percent – making it one of the most indebted nations in the world. It has made the question of Greek debt a divisive issue for lenders.

    So much so that a participant in Greece’s two previous bailouts, the International Monetary Fund (IMF), is still undecided over whether to participate in the latest aid program. In particular, the IMF is at odds with other lenders over the demands on Greece (such as the high primary budget surplus target) and it has called on Brussels to reduce Greece’s debt load to a sustainable level.

    Meanwhile, unemployment remains around 23.3 percent at the last count in April (the highest in the European Union) and the economy is crawling out of recession, trying to raise investment and growth.

    Still, there is reason to hope. Last Friday, Greece reported a surprise 0.3 percent increase in gross domestic product (GDP) in the second quarter, far surpassing expectations for a contraction of 0.2 percent. It also revised its first quarter figures, reporting a 0.1 percent decline rather than the previously reported 0.5 percent fall. Still, on an year-by-year basis the economy is contracting, by 0.7 percent in the second quarter compared to the same period last year.

    Kyrimlis noted that the Greek economy was “like a 60 year old man – it keeps walking but you know it won’t run…plus there is huge hatred from people in the private sector towards state employees,” he said, alluding to the perception that public sector workers have been treated too generously by the state.

    “In small cities you walk and you see people over 60 and below 20,” Kyrimlis noted. “It seems like my generation has vanished…indeed 400,000 have left Greece since 2007 (and these were) the brightest people” he noted.

    “Returning to Greece in the midst of the country’s financial breakdown, he said he now noted an increase in animosity between people, saying there was a “widespread hatred not directed to anyone in particular, it’s like all against all.””

    It looks like we can add one more item to list of austerity’s accomplishments: Now Greece hates itself.

    This is presumably seen by the Austerians as a positive development. Presumably.

    Posted by Pterrafractyl | August 28, 2016, 10:39 pm
  29. You know how the Bundesbank issued a report calling for the European Stability Mechanism (ESM) bailout fund to become the new solo-Troika for future EU financial crises. Well, here’s a preview of what that would look like. It look be a lot like the current Troika since insane austerity demands will still be the rule of the day, but instead of the sad “good cop”/”bad cop” routine we current get between the IMF and the European Commission it’s going to be 100 percent bad cop:

    Greek Reporter

    ESM Chief Puts Greece’s Hopes on Low Primary Surpluses on Hold

    By Philip Chrysopoulos –
    Sep 3, 2016

    European Stability Mechanism President Klaus Regling sent a clear message to Greece that it should not expect lower primary surplus targets than those set by creditors.

    Athens has been trying to convince its lenders that the targeted 3.5% primary surplus for 2018 is too high and it would affect crisis-stricken Greeks.

    “The agreement does not change,” said the ESM chief in an interview with Greek newspaper Ta Nea. “The target of 3.5% has been agreed by the Prime Minister in July (2015). The agreement is very clear. I see there is no tendency (among creditors) to give up this deal and I do not believe that it is in Greece’s interest to challenge last year’s agreement,” Regling said.

    Regarding measures for Greece’s debt relief, Regling said that even though the International Monetary Fund would like to see action taken now, “there is good reason to do it later, because then we can be more certain about the real needs of Greece.”

    On the bailout program reforms, Regling said that it is annoying that some ministers dispute the privatization program, commenting that this shows that not all government members take full ownership of the program. At least, he said, the negative comments on privatizations do not come from the finance minister or the prime minister.

    The ESM head stressed that Greece will not need a new bailout program, provided that the government will fully implement the existing one. He added that by the end of the program, the country should be able to borrow from the markets because it will no longer be financed by its European partners.

    “The ESM head stressed that Greece will not need a new bailout program, provided that the government will fully implement the existing one. He added that by the end of the program, the country should be able to borrow from the markets because it will no longer be financed by its European partners.”

    LOL! Yes, what a nice statement from the ESM to Greece about its confidence in the “bailout” program’s odds of success: we’re confident that this “bailout” of Greece, which has destroyed Greece’s economy and society for at least the next generation, will be all the help Greece needs to turn its economy. Or, at least it had better be adequate because there’s going to be no more help once the program runs its course. What an optimistic message.

    And then there was the “I find all this resistance to privatization fire sales really annoying” message from the ESM’s chief. That’s also something we get to look forward to in Europe’s financial crisis future:


    On the bailout program reforms, Regling said that it is annoying that some ministers dispute the privatization program, commenting that this shows that not all government members take full ownership of the program. At least, he said, the negative comments on privatizations do not come from the finance minister or the prime minister.

    Isn’t having the EU’s “bailout” fund running European nations going to be fun?

    But the ESM’s message to Greece wasn’t all stick. There was a carrot. A sadomasochistic carrot: Greece can even get additional help almost immediately. All it need to do is beat itself with the austerity stick much more aggressively and implement every last reform we demand immediately. Especially the national privatization fire sale that those ministers keep whining about:

    Reuters

    Greece may win short-term debt relief soon if it implements reforms: EU bailout fund

    Sat Sep 3, 2016 9:06am BST

    Greece could secure short-term debt relief measures “very soon” if it implements remaining reforms agreed under its bailout program, the head of the euro zone’s bailout fund, the European Stability Mechanism (ESM), said on Saturday.

    Under a deal signed last year with euro zone countries, the European Central Bank and the International Monetary Fund, the ESM will provide financial assistance of up to 86 billion euros to Greece by 2018 in return for the agreed reforms.

    The parties also agreed that debt relief would be granted in tranches, including short-term measures to extend Greece’s debt, and that there would be a further reduction after 2018 including interest deferrals and interest rate caps.

    “We have been working on them (short-term debt relief measures) and they could be implemented very soon,” ESM chief Klaus Regling told Ta Nea newspaper in an interview.

    “We hope that the government implements remaining prior actions very soon,” he said, referring to plans to set up a new privatization fund and to push ahead with specific state asset divestments.

    After its bailout program ends in 2018, Regling said Greece would be offered longer-term measures, which would help to reduce its debt pile, currently about 176 percent of its gross domestic product.

    The IMF, which has not contributed so far to Greece’s third bailout, would like to see those measures implemented sooner before it will participate in the program.

    “I know that the IMF would prefer that those decisions be taken sooner, but there is a serious reason for us to do it later because we will be more certain about Greece’s real (financing) needs by then,” Regling said.

    Under the bailout, Greece has also committed to attaining a primary budget surplus – excluding debt servicing costs – of 3.5 percent of economic output by 2018.

    The IMF has said this target is not realistic and has pushed for softer fiscal goals. But Regling said this target could not change since it was a core element of the bailout deal.

    “The IMF has said this target is not realistic and has pushed for softer fiscal goals. But Regling said this target could not change since it was a core element of the bailout deal.”

    What a productive debate: the IMF, laughably playing the role of the “good cop”, notes that the Greek “bailout” demands are unrealistic. The ESM counters that they couldn’t change the conditions because it’s those conditions are a core element of “bailout” deal. The reason for keeping the unrealistic demands is that the unrealistic demands are core demands. That’s where we’re at.

    Oh, but there was one more message from the ESM to Greece: If it doesn’t hurry up with implement those unrealistic core demands, especially the state asset fire sales, no more “help” from the “bailout” fund:

    Reuters

    EU will not release more bailout money for Greece this month: paper

    Sun Sep 4, 2016 3:09pm EDT

    The euro zone will not release additional bailout money for Greece at a meeting in Bratislava this month, Germany’s Handelsblatt Global reported on Sunday, citing European Union diplomats.

    The online edition of the German business daily quoted the diplomats as saying that Athens had only implemented two of 15 political reforms that are conditions for the bailout money. Above all, they said, Greece had been slow to privatize state assets.

    Under a deal signed last year with euro zone countries, the European Central Bank and the International Monetary Fund, the ESM will provide financial assistance of up to 86 billion euros to Greece by 2018 in return for the agreed reforms.

    The debt relief is due to be granted in tranches, including short-term measures to extend Greece’s debt, with a further reduction due after 2018 including interest deferrals and interest rate caps.

    The comments came just days after the head of the euro zone’s bailout fund, the European Stability Mechanism (ESM) on Saturday said Greece could secure short-term debt relief measures “very soon” if it implements remaining reforms agreed under its bailout program.

    “The online edition of the German business daily quoted the diplomats as saying that Athens had only implemented two of 15 political reforms that are conditions for the bailout money. Above all, they said, Greece had been slow to privatize state assets.

    So imagine all of the above, but without the IMF’s hapless protestations. The carrot is the stick. No whining. That’s the NextGen Troika. Greece is just ahead of its time.

    Posted by Pterrafractyl | September 4, 2016, 10:39 pm
  30. There was some potentially big news on Greece’s “bailout” and the negotiations between Greece and its creditors. But first, here’s just a quick and reminder that German Finance Minister Wolfgang Schaeuble is still a total psycho:

    Reuters

    Greece needs reforms, not debt relief – Germany’s Schaeuble

    Sat Dec 3, 2016 | 6:00pm EST

    Dec 4 Structural reforms rather than debt relief will help Greece to achieve sustainable growth and stay in the euro zone because rates and repayment are putting hardly any burden on its budget, Gerany’s finance minister was quoted as saying on Sunday.

    Euro zone finance ministers will meet in Brussels on Monday to discuss short-term measures to lighten Greece’s debt burden and to assess Athens’ progress in reforms required within its third bailout programme.

    Asked in an interview by Bild am Sonntag newspaper whether it might be time to tell German voters that a debt cut for Greece was inevitable, Finance Minister Wolfgang Schaeuble said: “That would not help Greece.”

    “Athens must finally implement the needed reforms. If Greece wants to stay in the euro, there is no way around it – in fact completely regardless of the debt level,” Schaeuble said.

    Schaeuble, a senior member of Chancellor Angela Merkel’s conservatives, said the Greek budget was hardly burdened by interest rates and debt repayment because its euro zone partners had already relieved Athens from such duties for a long time.

    Germany is heading into an election year in 2017 and Merkel’s conservatives are getting ready to campaign in an increasingly fractured political landscape, in which the far-right Alternative for Germany (AfD) is likely to enter the national parliament for the first time.

    The AfD is benefitting from a popular backlash over Merkel’s decision last year to open Germany’s borders to more than one million migrants, many of them Muslims fleeing from war zones in the Middle East, Asia and Africa.

    The anti-immigrant AfD is also strictly against the euro zone’s current policy of bailing out struggling member states under the condition of structural reforms.

    Greece’s official creditors – the European Stability Mechanism (ESM), the ECB and the IMF – are assessing Athens’ delivery on reforms and fiscal targets set in its bailout programme of up to 86 billion euros ($92 billion) agreed last summer, the third aid package for Greece since 2010.

    The main sticking point in talks with lenders are unpopular labour reforms, including collective bargaining, a mechanism to set the minimum wage and giving companies more freedom to lay off workers.

    “Schaeuble, a senior member of Chancellor Angela Merkel’s conservatives, said the Greek budget was hardly burdened by interest rates and debt repayment because its euro zone partners had already relieved Athens from such duties for a long time.”

    LOL! Hey, it turns out replaying the principle on your debt is “hardly a burden” when interest rates are low. And sure, that would be true if you were paying zero percent interest on your debt and no repayment schedule so you could defer paying the principle forever. In that scenario you could just wait a century for inflation to erode the value of the debt and pay it all back for a fraction of the present value. But as Schaeuble no doubt realizes Greece’s creditors are demanding that Greece run a 3.5 percent primary surplus for years to come.

    In fact, that was one of the sticking points on a tentative agreement between the eurozone’s finance ministers over how to proceed next with Greece. As the article below notes, The eurozone’s finance minister appear to agree upon short-term debt relief (locking in interest rates) and are also in agreement that Greece needs to run a 3.5 percent surplus for “the medium-term” starting in 2018, but can’t agreement on whether the “medium-term” means 3 or 10 years. And the IMF doesn’t agree that Greece actually can achieve a 3.5 primary surplus at all over the medium-term and is calling for one of two solutions to make the debt-repayment numbers work: giving Greece more debt-relief (a good idea) or imposing more austerity on Greece (a deplorable idea).

    So, at this point, the IMF may or may not agree to go along with the eurozone’s brutal debt-repayment schedule. It depends on whether or not the eurozone states agree to make Greece’s “bailout” plan less severe…or more severe.

    So while Wolfgang Schaeuble may not feel that Greece’s debt repayment is any sort of burden and opposes any debt relief at all, even after 2018, it’s worth keeping in mind that Greece is still expected to run 3.5 percent surpluses to pay back that debt for “the medium-term”. A “medium-term” that has yet to be defined and it just one of the many austerity measures that Greece’s creditors are still arguing over. Also, the IMF actually believes these 3.5 percent surplus are unrealistic and the only way to make them more realistic is for major debt relief, which Germany opposes, or more austerity.

    That’s all part of the context that underscores the unfortunate reality that Wolfgang Schaeuble’s euro zone partners may not be quite as psycho as he is but are still quite psycho

    Reuters

    Euro zone grants Greece short-term debt relief; no deal with IMF

    By Francesco Guarascio and Alastair Macdonald | BRUSSELS
    Mon Dec 5, 2016 | 3:49pm EST

    Euro zone finance ministers agreed on Monday some debt relief for Greece but were divided on reforms it must undertake to reach fiscal targets, leaving it unclear if the International Monetary Fund will join the Greek bailout program.

    The 19 ministers of the currency bloc gathered in Brussels to discuss how far Greece has advanced with reforms needed for the release of the next tranches of loans in the up-to 86 billion euros ($92 billion) rescue program.

    They also wanted to convince the IMF to participate in the plan, the third one for Greece since 2010. The IMF says it can only do so if this will be the last bailout for Athens, and that would entail either debt relief or more reforms by Greece.

    Ministers agreed to grant Greece short-term debt relief measures, to be applied before 2018, that could reduce the country’s debt to gross domestic product ratio by around 20 percentage points in 2060.

    But they did not agree with Athens how to implement various reforms, in particular an overhaul of labor market rules that would make it easier to fire workers.

    Greek Finance Minister Euclid Tsakalotos said on leaving the meeting that calls for reforms had to take into account the political situation in the country, where Prime Minister Alexis Tsipras is increasingly unpopular after applying a range of austerity measures agreed with EU creditors.

    The ministers also left open for now how long after 2018 they want Greece to maintain a primary fiscal surplus of 3.5 percent, a factor considered crucial by the IMF.

    “We agreed the primary surplus (which excludes debt-servicing payments) goes up to 3.5 percent of GDP in 2018 and beyond for the medium term,” the chairman of the meeting, Jeroen Dijsselbloem, told a news conference.

    But he said ministers’ views on the length of “medium term” ranged from three to 10 years, and they would seek a compromise on that only in 2018.

    Talks to more substantially reduce Greek debt – at about 180 percent of GDP the highest in the euro zone – through an extension of maturities would not be held until 2018 either.

    WINNING OVER THE IMF

    The IMF believes that with the current set of reforms agreed with Athens, Greece will only reach a primary surplus of 1.5 percent of GDP in 2018 and, in consequence, the euro zone should grant Athens relief or demand more reforms.

    Germany, which wants the IMF on board for political reasons and holds national elections in late 2017, is set against any substantial debt relief before 2018.

    “I think for Greece it is realistic that they should carry out reforms to make themselves competitive. It’s about that, nothing more … For Greece it is a long, hard road.”, Germany’s Finance Minister Wolfgang Schaeuble told reporters before the meeting.

    Although Athens is not in immediate need of new funds, it is keen to reach an overall deal as soon as possible so that it can be included in the European Central Bank’s bond-buying program before this is overhauled in March.

    It also fears that elections in Europe in 2017 may make debt relief less likely, if no decision is reached soon.

    There is growing bailout fatigue among German voters, and Dutch elections in March might also unsettle the government there and push out finance minister Dijsselbloem, who is a key negotiator in the debt talks. .

    “The IMF believes that with the current set of reforms agreed with Athens, Greece will only reach a primary surplus of 1.5 percent of GDP in 2018 and, in consequence, the euro zone should grant Athens relief or demand more reforms.

    Yes, the proposed “bailout” for Greece is either too psycho for the IMF’s taste…or not psycho enough. The IMF is flexible on these kinds of matters. But Wolfgang Schaeuble isn’t very flexible. No debt relief ever because Greece doesn’t need it! And the rest of the eurozone finance chiefs appears to be somewhere in between the IMF’s ‘too psycho or not psycho enough’ stance and Schaeuble’s ‘psycho forever!’ position.

    It’s all a reminder that the hardest debt burden to pay back is probably going to be moral debt burden incurred by Greece’s creditors through the collective cruelty of this entire farce of a “bailout”. Although the actual fiscal debt burden is looking pretty damn hard to pay back too. Because as we were reminded last year, it’s an especially deceptive and self-destructive farce:

    The Washington Post

    Europe’s dirty little secret is Greece will never pay back its debt

    By Matt O’Brien
    July 15, 2015

    A specter is haunting Europe — the specter of Greece’s debt.

    For a long time, the fact that Greece is basically bankrupt was the truth that dared not speak its name. But now it’s become the truth that can speak its name as long as long as it doesn’t do anything else. Even German finance minister Wolfgang Schäuble has admitted that Greek “debt sustainability is not feasible without a haircut,” before less-than-helpfully concluding that “there cannot be a haircut” because it’s against the rules. And that seemed to be that — until Tuesday night.

    That’s when the International Monetary Fund became maybe the most unlikely revolutionary ever with its demand that Greece get debt relief in any bailout it’s a part of. The vague promises Europe has and continues to make aren’t enough. The IMF won’t play this game of I-give-you-money-to-give-back-to-me-so-we-can-both-pretend-you-can-pay-me-back anymore. It’s already seen how that one ends—with Greece defaulting on it, as it did last week. So the IMF doesn’t want to reduce Greece’s debt because it feels bad for Greece. It wants to reduce Greece’s debt because it wants to be repaid by Greece.

    The simple story is that Greece’s debt might have been manageable before, but it’s not anymore. In the past six months, Greece’s government has borrowed more than it was supposed to, and Greece’s economy hasn’t grown like it was supposed to—it’s actually shrunk, and probably a lot more now that its banks have been forced shut—so that Athens not only has more to pay, but is also less able to pay. That’s why the IMF now estimates that Greece’s debt-to-gross domestic product ratio will spike from 177 percent today to 200 percent in the next two years. And that’s with some pretty aggressive assumptions, too. The IMF expects Greece to run budget surpluses, excluding interest interest payments, of 3.5 percent of GDP “for the next several decades,” even though it acknowledges that “few countries have managed to do so” in the past. And it thinks Greece will “go from the lowest to among the highest in productivity growth and labor force participation rates in the euro area.” In other words, Greece’s debt is unsustainable even if you assume it runs surpluses for an almost impossibly long time and its economy grows a lot.

    So if Greece can’t cut its way out of debt and it can’t grow its way out of debt, its only option is to default its way out of debt. There are more and less painful ways of doing this. Least among them is for the two sides to work together, so both can keep getting at least some money from the other. That’s a polite default, or a restructuring. And the IMF has suggested three ways that might work. Europe can either give Greece money every year; give Greece a pass on some of what it owes; or give Greece far more time to pay what it owes, with a 30-year grace period at the start. But in any case, Europe is effectively going to have to give—notice how that word keeps popping up—Greece money. It just depends on how they want to do it.

    If history is any guide, the answer is in the least transparent way possible. That rules out cutting Greece a check every year or cutting the amount it owes. Instead, today’s 20-year bonds that it doesn’t need to pay for 10 years could become tomorrow’s 60-year bonds that it doesn’t need to pay for 30 years. And the interest rate on them might even get reduced from 0.5 to 0.2 percent. Bonds like that would be so negligible that there’s a good chance far in the future, if there really is a United States of Europe, that they’d become entirely negligible—that is, forgiven. That, after all, is the process that Europe started in 2012, when it turned a lot of Greece’s debt into the make-believe variety by postponing payments, lowering interest payments, and stretching out pay times. The IMF just wants Europe to make it even more make-believe now. And Europe probably will, because the alternatives are so much worse: either having to pay more for a bailout that doesn’t include the IMF, or having the bailout fall apart and Greece leave euro.

    But it won’t be long until Greece is back here again. It’s worth pointing out, though, that this isn’t because 177 percent of GDP of debt is by itself unsustainable. It’s not, or at least it doesn’t have to be. Countries with good financial reputations that borrow in a currency they control—like postwar Britain—can and have carried even higher debt loads. No, it’s that 177 percent of GDP of debt is unsustainable in the euro zone. Those countries can’t offset budget cuts with lower interest rates to spur lending or a cheaper currency to make workers and exports more competitive, so budget cuts that suck money out of the economy can do more harm than any savings that goes toward debt repayment. That is, after all, a pretty good description of what happened in Greece between 2009 and 2014. Its total debt only went up 6 percent during that time—partly due to its write-down in 2012—but its debt burden (or debt-to-GDP ratio) went up 40 percent. Austerity, in other words, has been self-defeating, and that’s probably not going to change. So even if Greece does everything right, there’s a good chance its debt-to-GDP ratio will keep rising even if its debt doesn’t, at which point Europe will tsk-tsk it for needing another restructuring.

    The euro is a triumph of politics over economics, but each one is short-lived. What that means is that having a single central bank set a single interest rate for 18 different countries will inevitably end in tears for some of them. Europe has been able to make up for that, though, by summoning the will to do whatever the least it needs to do at any particular moment for the common currency to stick together. But the problem is that each bailout makes the politics of the next one harder at the same time that the economics don’t get much easier. It’s enough to keep the euro from breaking apart, but not enough to fix it.

    And that’s the best way to think about the IMF’s plans for Greece’s debt. Two of them (a haircut or restructuring) would solve the crisis for now, and the other (annual transfers) would solve it for good. But Europe will probably only be able to bring itself to do the one that will help the least, because voters don’t want it to do any more than that. And it’s hard to see how that would change. Well, unless bailout fatigue sets in, and people want even less than the least.

    If history is any guide, the answer is in the least transparent way possible. That rules out cutting Greece a check every year or cutting the amount it owes. Instead, today’s 20-year bonds that it doesn’t need to pay for 10 years could become tomorrow’s 60-year bonds that it doesn’t need to pay for 30 years. And the interest rate on them might even get reduced from 0.5 to 0.2 percent. Bonds like that would be so negligible that there’s a good chance far in the future, if there really is a United States of Europe, that they’d become entirely negligible—that is, forgiven. That, after all, is the process that Europe started in 2012, when it turned a lot of Greece’s debt into the make-believe variety by postponing payments, lowering interest payments, and stretching out pay times. The IMF just wants Europe to make it even more make-believe now. And Europe probably will, because the alternatives are so much worse: either having to pay more for a bailout that doesn’t include the IMF, or having the bailout fall apart and Greece leave euro.”

    Yes, if history is any guide, the long-term solution is probably a long-term sequence of short-term solutions involving debt-reprofiling and interest rate meddling because those are the only political acceptable solutions at any given moment. Except, of course, that’s not really a solution since it comes with an austerity price tag that’s also part of any long-term solution:


    But it won’t be long until Greece is back here again. It’s worth pointing out, though, that this isn’t because 177 percent of GDP of debt is by itself unsustainable. It’s not, or at least it doesn’t have to be. Countries with good financial reputations that borrow in a currency they control—like postwar Britain—can and have carried even higher debt loads. No, it’s that 177 percent of GDP of debt is unsustainable in the euro zone. Those countries can’t offset budget cuts with lower interest rates to spur lending or a cheaper currency to make workers and exports more competitive, so budget cuts that suck money out of the economy can do more harm than any savings that goes toward debt repayment. That is, after all, a pretty good description of what happened in Greece between 2009 and 2014. Its total debt only went up 6 percent during that time—partly due to its write-down in 2012—but its debt burden (or debt-to-GDP ratio) went up 40 percent. Austerity, in other words, has been self-defeating, and that’s probably not going to change. So even if Greece does everything right, there’s a good chance its debt-to-GDP ratio will keep rising even if its debt doesn’t, at which point Europe will tsk-tsk it for needing another restructuring.

    Yep, even if everything goes according to plan and Greece does everything demanded of it, it’s still most likely totally screwed in the long-run. Because that’s the inevitable result of austerity that puts paying back banks over real-world humanitarian needs and real investments in a populace. Don’t forget that one of the sticking points with the current “bailout” negotiations is over the imposition of significantly more austerity policies than Greece has already implemented. And if the IMF gets it way, Greece will probably have to impose even more austerity on top of that, assuming there’s any long-term debt relief at all. Also don’t forget that there’s no indication Greece’s austerity is going to be relieved during any future recessions and there’s going to be plenty of recessions over the next few decades or so during which time Greece is going to be expected to be running these surpluses. So another period of austerity-induced significant economic shrinkage shouldn’t just be seen as a possibility. It’s basically an inevitability at that point.

    So the eurozone finance ministers have agreed to short-term debt relief measures (locked in lowered rates) that will keep the farce going while the longer-term decisions on actual debt-relief are once again deferred. And the IMF may or may not participate in this next round of Greece’s “bailout”…it depends on whether or not the plan is significantly less or more insane. Either one could work. Also, Wolfgang Schaeuble is still a psycho. That’s the big update on Greece’s “bailout”.

    Posted by Pterrafractyl | December 5, 2016, 8:48 pm
  31. Here’s an interesting development to watch for in Greece’s seemingly endless trials to free itself from all its “bailouts”: The Greek government is reportedly committed to end the seemingly endless Troika austerity inspection (the “review”) and get its bonds back on the global markets by March. Why? So it can join the QE program that was just extended through 2017. Given those incentives, it will be interesting to see if the Troika ends up trying to offer that QE access in exchange for a big new austerity push in order to get a passing review score. If you’re in Greece’s position, ECB QE after returning to the bond markets is an invaluable stabilizing force and lifeline for running the government.

    It’s an especially interesting question if you consider that there’s no guarantee that the Troika can realistically make being the guaranteed 9 months of ECB QE that’s already scheduled, with continuation of QE depending on a new extension at the end of the year…after Germany’s elections in the Fall. And the elections in France and the Netherlands. If the far-right wins big in 2017 there might not be any more QE at all. It could all end in 2018. Along with the eurozone, along with the eurozone entirely. That may not be the likely outcome of 2017 but it’s way more possible than any other year since it started. Since the eurozone is Greece’s lifeline and prison it’s unclear how bad the dissolution of the eurozone would be for Greece, although probably disastrous in the immediate term. But the threat to the existence of QE or even the eurozone is a complicating factor in Greece’s decision to take on more austerity for a passed austerity “review” and a QE cushion in the bond markets.

    At the same time, it’s also quite possible we could end up with a new full blown eurozone crisis, in which case the QE would probably be extended for a while. That’s another ‘Yay-ish for Greece’ situation. At least there will be QE.

    As we can see, Greece’s cost/benefit analysis landscape can’t be easy with respect to doing what it has to do to passed its Troikan austerity review in order to return to the markets with the hope of QE bond market help for at least a few more years. There’s probably going to be QE for at least 2017, but if 2017 is a far-right “populist” wave year for Europe, politics could kill the program entirely. It’s a weird cost/benefit profile for a horrible austerity review that shouldn’t exist:

    Ekathimerini

    Gov’t set on ending review to join ECB’s QE by March

    02.01.2017 : 20:46

    Prime Minister Alexis Tsipras and his aides gathered on Monday to discuss tactics ahead of a meeting of eurozone Finance Ministry officials on January 12 when Greece’s progress in implementing reforms is to be assessed amid hopes for speedy conclusion of a dragging bailout review.

    According to a government source, the key aim in Athens is to get the bailout review back on track following a break for the holidays.

    The same source indicated that Greek officials are planning to broach the unresolved issue of the International Monetary Fund’s role in the bailout at next week’s Euro Working Group session.

    Specifically, Athens wants to push for resolution of the issue while reiterating its objection to the IMF’s demands for the legislation of additional contingency measures and for the introduction of more flexibility into the Greek labor market.

    Sources in Tsipras’s office struck a reassuring tone, claiming that the country is not under particular pressure at the moment as the economy is showing signs of a gradual recovery and there are no immediate funding needs.

    However, for Athens to remain on track with its aim to tap the bond markets this summer, Greece must secure its induction into the European Central Bank’s quantitative easing program by March.

    With a March deadline for the QE program, the government is aiming to conclude the bailout review by the end of February at the latest. Any further delay would throw Greece into a new period of upheaval and uncertainty as a number of European countries, including France, the Netherlands and Germany, have elections planned and will be focused on their own issues rather than the Greek problem.

    In comments to Sto Kokkino FM, government spokesman Dimitris Tzanakopoulos said he was confident that the bailout review will be concluded without unnecessary delays.

    With a March deadline for the QE program, the government is aiming to conclude the bailout review by the end of February at the latest. Any further delay would throw Greece into a new period of upheaval and uncertainty as a number of European countries, including France, the Netherlands and Germany, have elections planned and will be focused on their own issues rather than the Greek problem.”

    Ok, well, that definitely sounds perilous. Greece is being given a March deadline to get on the QE program, or it’s out of it for 2017 apparently. So it’s going to basically have to do whatever the Troika says if it want to climb aboard the ECB QE Train that leaves the station in March. What could possibly go wrong.

    Well, aside from another round of austerity demands that will have to be met, here’s one complication with the QE program that’s going to have to be addressed in a special way: Greece is already well in excess of the ECB QE rule of of max of 33 percent of the its own bond market due to all of the Greece debt already held by the ECB:

    Reuters

    Wary of hitting limits, ECB holds back on Portuguese, Irish bond buys – sources

    By Balazs Koranyi and John Geddie | FRANKFURT/LONDON
    Tue May 17, 2016 | 9:20am BST

    The ECB limited its sovereign debt buys of Portuguese and Irish bonds last month due to concerns about hitting its purchase caps, central banking sources said, in a move that could mean those countries stand to benefit less from the scheme.

    With almost a year left of its quantitative easing programme, the ECB is already nearing a self-imposed limit of holding a third of the countries’ debt due to the large amounts of bonds it bought under previous crisis-fighting measures.

    This became an issue when the ECB increased its monthly asset buys to 80 billion euros in April from 60 billion euros. Data shows that so far purchases have increased by more than 50 percent in most euro zone countries but only by 16 percent in Portugal and 33 percent in Ireland.

    LEFTOVERS

    The sources said the ECB was keen to keep both countries in the programme until the projected end of the scheme in March 2017, but said that the buying could still fluctuate over time and that the ECB also reviews its issuer limit every six months.

    Left over from its Securities Markets Programme, a scheme launched in 2010 to tackle an escalating debt crisis, the ECB held 9.7 billion euros of Irish debt at the start of 2016 while its Portuguese holdings stood at 12.4 billion euros. Since the start of QE, the ECB has bought 11 billion euros of Irish debt and 16.2 billion in Portugal.

    The ECB’s issuer limit also suggests that if Greece joins the programme, ECB purchases will be severely curtailed as the bank is already one of the bigger holders of Greek debt.

    The ECB has already stopped purchases in Cyprus because the country does not have the necessary credit rating and keeps sovereign buys limited in several countries, like Estonia, for liquidity reasons.

    “The ECB’s issuer limit also suggests that if Greece joins the programme, ECB purchases will be severely curtailed as the bank is already one of the bigger holders of Greek debt.”

    Is Greece’s national 33 percent QE credit card going to be considering already “maxed out”? While, logically, one would assume that this would somehow be addressed so Greece can get robust QE support since it’s exactly the country that needs it most. But given the way Greece has been treated, who knows, maybe the ECB will be like “here you go Greece, your access to the QE so you’re bonds don’t go nuts!”. And then turn around and say “and…your full. No more for now”. At this point, who knows, they just might do that.

    Hopefully Greece gets that part of the QE cleared up during the austerity-for-QE negotiations. Especially considering it was recently reported how the Troika threatened to delay the entire austerity review process after Greece decided to do a one time spending bill on the good will of schoolchildren and low-earning pensioners. Right before Christmas. And in that same report they noted that the ECB was now free to buy Greek debt in the QE program since it was below 33 percent at 26 percent of the market:

    The Financial Times
    Fast FT

    Greek bailout setback risks further ECB QE delay

    December 21, 2016

    by: Mehreen Khan

    Greece’s latest negotiating setback with its EU creditors risks further delaying the country’s inclusion into the European Central Bank’s stimulus programme, HSBC has warned.

    In the wake of unilateral plans to spend a one off €617m on the country’s low-earning pensioners and schoolchildren, the Greek government has come under fresh criticism from its bailout monitors who have shelved planned debt relief measures for the economy.

    Escalating tensions risk pushing back the timetable for Greece to pass the second phase of its bailout review – initially due next month – which will have knock on effects for its bonds’ eligibility for buying by the ECB, said Fabio Balboni, European economist at HSBC.

    Greece does not face a major credit crunch until July next year when it is due to pay back €6.2bn to its private and international creditors.

    With this deadline still more than seven months away and tensions still frosty, it will “push back the timing of Greece accessing QE, possible IMF participation, and the removal of capital controls [in the Greek economy]“, said Mr Balboni.

    But the central bank is not allowed to snap up sovereign debt of member states still undergoing a bailout review. Last month, ECB governing council member Benoît Cœuré stresses there were still a number of hurdles for Greece to pass before the central bank can intervene, including the ECB’s own debt sustainability analysis.

    As the chart below shows however, the ECB is no longer hampered by its 33 per cent issuer share limit on government bonds as its holdings of Greek debt has fallen below this threshold to 26 per cent.
    [see chart showing the ECB’s Greek bond holdings ast 26 percent of hte the total market]
    Greece’s 10-year bond yields have climbed back above 7 per cent for the first time in over six weeks in the wake of the toughened up rhetoric from its creditors in the past week.

    Mr Balboni explains the QE dilemma:

    The ECB cannot buy during programme reviews, so if the second review takes a long time, the third could start almost immediately after, as was the case following the delays to the first review. With a review about to begin, the ECB has only a small window in which to buy, and we do not expect the ECB to rush any purchases. This makes it unlikely that Greece will be able to access the markets.

    “As the chart below shows however, the ECB is no longer hampered by its 33 per cent issuer share limit on government bonds as its holdings of Greek debt has fallen below this threshold to 26 per cent.”

    Yep, Greece is QE-screwed. And screwed in general. The schoolchildren and low-earning pensioners are, of course, extra screwed.

    Posted by Pterrafractyl | January 3, 2017, 12:29 am
  32. Here’s an update on the latest developments in Greece’s negotiation with its creditors: nothing has changed, it’s still totally insane, except for Greek livelihoods which are getting worse:

    The Wall Street Journal

    Last Lifelines Crumble for Many Greek Families as New Conflict With Creditors Looms

    By Nektaria Stamouli
    Jan. 13, 2017 5:30 a.m. ET

    ATHENS—Efi Kostaki, a 48-year old cleaning lady, has been out of work for three years. Her husband, a glassware-factory worker, for two years.

    They are losing hope of finding any job at all amid Greece’s eight-year depression, where only 3.7 million people have work in a country of 11 million. The couple and their 23-year-old daughter, a waitress, got by until now only with the pension income of Mrs. Kostaki’s elderly mother.

    But her mother died three months ago, after catching an infection in one of Greece’s dilapidated public hospitals, leaving the family facing not only bereavement but penury. “I feel so exhausted,” Mrs. Kostaki says.

    The steadily fraying finances of Greek households, which for years have made ends meet because of close-knit extended families and savings, form the backdrop to a looming showdown between the Greek government and its creditors.

    The government, knowing voters’ exhaustion, is adamant that it won’t legislate a multiyear package of pension cuts and income-tax increases, which the International Monetary Fund says is the only way for Greece to hit its agreed-upon budget targets. The IMF says it can’t participate in Greece’s bailout program without such a package—or, alternatively, without large-scale debt relief from Greece’s German-led European creditors. Germany says the IMF must be involved, but that the time isn’t right for debt relief.

    The three-way conflict simmered throughout 2016. Eurozone policy makers say its resolution can’t be put off much longer. Prime Minister Alexis Tsipras is considering the option of snap elections if the creditors don’t soften their positions.

    The IMF is holding a hard line partly to put pressure on the eurozone to lighten Greece’s debt burden, say people involved in the negotiations. IMF officials have said Greece’s economy is already overtaxed.

    New taxes that came into affect on Jan. 1 are squeezing household incomes further. Economists say even-higher income taxes—in the form of lower tax-free income allowances—could add to a mountain of unpaid taxes. Greeks currently owe the state €94 billion ($99 billion), equivalent to 54% of gross domestic product, and rising, in taxes that they can’t pay. Three in four Greeks can’t pay household bills on time, according to the 2016 European Consumer Payment Report, a private-sector survey.

    Extended families often rely on grandparents’ pensions. Further cuts in that lifeline could end hopes for a return to economic growth. Unemployment remains more than double the eurozone’s average at 23%. About 74% of the jobless have been out of work for more than a year and thus receive no benefits.

    Tax increases under previous rounds of austerity have put a middle-class lifestyle beyond reach for many. “Our only goal now is survival,” says arts teacher Mimi Bonanou. Until recent years she also made a living as a practicing artist, selling her works in Greece and abroad. But increasingly heavy taxes that self-employed Greeks must pay at the start of each year, based on the state’s often-ambitious forecast of their incomes, have forced her to rely on teaching alone. Her salary has been cut by about 40%.

    She says she can no longer afford to travel to see exhibitions, once her main pastime. “My personality is no longer the same,” she says.

    Greece’s business sector continues to shrink despite government forecasts of recovery. The number of companies in Greece has fallen by 27% since 2008, when the downturn began, the national business registry shows.

    “The government, knowing voters’ exhaustion, is adamant that it won’t legislate a multiyear package of pension cuts and income-tax increases, which the International Monetary Fund says is the only way for Greece to hit its agreed-upon budget targets. The IMF says it can’t participate in Greece’s bailout program without such a package—or, alternatively, without large-scale debt relief from Greece’s German-led European creditors. Germany says the IMF must be involved, but that the time isn’t right for debt relief.”

    Yep, the IMF continues to insist that Greece either needs more pension cuts and tax increases – increases for the poor, since the tax increase they’re talking about is lowing the income-tax-free cap on income – or Greece needs major debt relief from its creditors. So Greece either needs help, or more brutal austerity. The IMF seems to be fine with either, although the IMF is claiming that they’re making these additional austerity to pressure the rest of the eurozone to agree to that major debt relief:


    The IMF is holding a hard line partly to put pressure on the eurozone to lighten Greece’s debt burden, say people involved in the negotiations. IMF officials have said Greece’s economy is already overtaxed.

    It appears that the latest game of chicken in this endless Greek tragedy is between the IMF and the rest of the Troika, primary Germany: either Greece gets much, much more austerity or major debt relief because those are the only two paths the IMF sees for Greece to achieve its debt-repayment goals on schedule. And if the IMF doesn’t see at least one of those demands met it’s going to walk from this latest ‘bailout’. And the additional austerity the IMF is calling for is so massive that it’s basically being used as ‘wake up’ call to indicate how insanely impossible it is for Greece to stick to the debt-repayment schedule without major debt relief

    So how is Germany responding to the IMF’s demands? Well, while it’s unclear if Germany will ever agree to debt relief, German Finance Minister Wolfgang Schaeuble did make a counter-offer: the impasse on the current ‘bailout’ negotiations can be resolved, which will allow Greece to participate in the ECB’s quantitative easing program, but only if Greece first implements all of the IMF’s new demands for much, much more austerity:

    The Wall Street Journal

    Greece and Creditors Fail to Make Progress on Bailout Deal
    Eurozone finance ministers met in Brussels as a possibly troublesome election season looms in Europe

    By Viktoria Dendrinou and Nektaria Stamouli
    Updated Jan. 26, 2017 4:00 p.m. ET

    BRUSSELS—Greece and its creditors failed to resolve their differences Thursday during talks held in hopes of finding a solution for the country’s deadlocked bailout before Europe’s coming election season dominates the Continent’s agenda.

    A meeting of eurozone finance ministers here didn’t reach a breakthrough that would clear the way for the conclusion of negotiations on the current review of Greece’s aid package of as much as €86 billion. But there is pressure to get a deal by February, because after that, a series of elections in the Netherlands, France, Germany and possibly Italy could distract attention and reduce governments’ interest in making any unpopular concessions on Greece.

    Greece needs billions of fresh bailout loans by July at the latest, when it has large debts to repay. Its government has been caught for months between the International Monetary Fund’s demands for more austerity and Germany’s refusal to discuss major debt relief. Greece’s unpopular government, led by the left-wing Syriza party of Prime Minister Alexis Tsipras, fears having to sign up for fiscal pain without a significant reduction of its debt burden to sweeten the deal.

    Athens wants the German-led eurozone, its main creditor, to restructure its bailout loans so the European Central Bank can include Greece in its bond-buying program, known as quantitative easing. Greece believes its long-suffering economy could benefit strongly. The ECB has indicated it won’t buy Greek bonds until doubts about Greece’s solvency have been dispelled.

    First, however, Germany wants Athens to accept the IMF’s tough policy demands. The success of current negotiations “is solely up to Greece,” German Finance Minister Wolfgang Schäuble told reporters on his way into the ministers’ meeting.

    The IMF didn’t sign up to Greece’s 2015 bailout deal. Germany, the Netherlands and other eurozone lenders want the IMF to rejoin the bailout.

    The IMF says more fiscal belt-tightening is needed in Greece—particularly in the form of pension cuts and the expansion of income taxes to more households—if Greece is to hit fiscal targets that it agreed to with the eurozone in its 2015 bailout plan. The IMF says those targets are too strict, and more austerity is bad for Greece’s economy, but if Europe won’t relax the targets, then more budget retrenchment is unavoidable.

    It says it will only join the bailout if Greece meets those overhauls and Europe agrees to restructure its loans.

    Germany insists Greece must stick to the agreed target of a “primary” budget surplus, excluding interest, of 3.5% of gross domestic product by 2018, and maintain it for years afterward.

    Mr. Tsipras is balking at the IMF’s demand that he pass the pension and tax measures into law right away, even if they take effect over several years. “There is no way we’re going to legislate even one euro more (of cuts) than what was agreed in the bailout deal,” Mr. Tsipras told Greek newspaper Efimerida ton Syntakton in an interview published on Wednesday.

    Eurozone officials say Greece can’t avoid legislating some painful measures upfront, because key European creditors won’t lend Greece more money unless the IMF is satisfied and rejoins the bailout.

    “The IMF says more fiscal belt-tightening is needed in Greece—particularly in the form of pension cuts and the expansion of income taxes to more households—if Greece is to hit fiscal targets that it agreed to with the eurozone in its 2015 bailout plan. The IMF says those targets are too strict, and more austerity is bad for Greece’s economy, but if Europe won’t relax the targets, then more budget retrenchment is unavoidable.

    Yep, the IMF tells Greece’s fellow eurozone member that more austerity is necessary if Greece is going to stick to the repayment schedule, but also that more austerity is back for Greece’s economy. And how does Germany respond?

    Athens wants the German-led eurozone, its main creditor, to restructure its bailout loans so the European Central Bank can include Greece in its bond-buying program, known as quantitative easing. Greece believes its long-suffering economy could benefit strongly. The ECB has indicated it won’t buy Greek bonds until doubts about Greece’s solvency have been dispelled.

    First, however, Germany wants Athens to accept the IMF’s tough policy demands. The success of current negotiations “is solely up to Greece,” German Finance Minister Wolfgang Schäuble told reporters on his way into the ministers’ meeting.

    “First, however, Germany wants Athens to accept the IMF’s tough policy demands”

    So Greece won’t be allowed to participate in the one eurozone program that might actually help it – the ECB’s QE program – unless Greece first implements the joke psycho-austerity proposal that the IMF was only proposing as a means of pressuring Berlin into accepting major debt relief.

    And what about that major debt relief? LOL!:

    AFP

    Eurozone pleads urgent solution to Greece debt impasse

    Alex PIGMAN
    January 26, 2017

    Brussels (AFP) – Eurozone finance ministers warned on Thursday that a “window of opportunity” was closing on bridging a split over Greece’s bailout programme, even as they failed to heal a row with the IMF over debt relief.

    The International Monetary Fund and the 19-nation single currency area are battling over how much debt relief Greece needs, and over economic targets required of Athens that the IMF says are not realistic.

    “The window of opportunity is still open, but will soon shut because there are elections coming,” said French Finance Minister Michel Sapin after unsuccessful talks on Greece with his eurozone counterparts.

    In addition by the summer “Greece faces important debt repayments, so we have to find a solution before then,” Sapin said, with bailout cash blocked until a solution is found.

    Eurogroup head Jeroen Dijsselbloem insisted that the IMF remained committed to the Greek bailout programme, but that its demands were indeed strict.

    “The IMF has been very clear and consistent on its position. They want the reform package to be credible, they want the fiscal trajectory to be feasible and economically viable and they want the debt to be sustainable,” said Dijsselbloem, who is also the Dutch finance minister.

    Powerful Germany, Greece’s biggest creditor, says that Athens is up to the task of meeting the targets without further debt relief and has called on the Greek government to deliver on reforms.

    “It’s up to the Greeks to solve the problem,” said German Finance Minister Wolfgang Schaeuble, the Eurogroup’s most influential member.

    At heart of the problem is a demand by the eurozone that Greece deliver a primary balance, or surplus on public spending before debt repayments, of 3.5 percent of GDP.

    The target is very high — and most countries do not even come close — but Germany and other eurozone hardliners are insistent that Greece reach it for several years after its current programme concludes in 2018.

    “Powerful Germany, Greece’s biggest creditor, says that Athens is up to the task of meeting the targets without further debt relief and has called on the Greek government to deliver on reforms.”

    So after the IMF made its extra-crazy austerity demands as part of some sort of of game of chicken intended to force Berlin into accepting major debt relief for Greee, Wolfgang Schaeuble responds by simply making these new IMF demands Berlin’s demand too, but with no major debt relief if Greece actually carrying through with the new extra-harsh austerity. No, the only reward for Greece will be the ability to participate in the ECB’s QE program. The same QE program Berlin is trying to kill ASAP.

    So that’s the latest Greek tragedy update: the situation is the same in that it’s still getting worse.

    Posted by Pterrafractyl | January 26, 2017, 11:44 pm
  33. Here’s a reminder that a surprising level of optimism in the ability of Greece to economically bounce back strongly from its current woes is being used as an excuse to not help it bounce back from its current woes with something like debt relief or the easing of austerity: The IMF just added a few more details to its assessment that Greece’s debt situation is unsustainable without either significantly more austerity or major debt relief. Greece’s debt-to-GDP ration will jump from the current 180 percent to 275 percent by 260 if Greece sticks to the current bailout plan and its economy performs according to the IMF’s models. The Eurogroup of eurozone finance ministers, on the other hand, responded that this was an alarmist assessment and no debt relief was necessary. Why? Because the Eurogroup apparently thinks that Greece’s economy is going to do much, much better than the IMF without any meaningful help at all. Just more austerity and “structural reform”. It’s also a reminder that unrealistic optimism can and should be a source of realistic pessimism when it’s being used to justify more austerity:

    Bloomberg Markets

    IMF Warns Eurogroup Loan Measures Not Enough for Greek Debt

    * Greek debt is highly unsustainable; measures not specific
    * Debt will jump as high as 275 percent of GDP by 2060

    by Eleni Chrepa
    and Andrew Mayeda
    January 28, 2017, 8:07 AM CST January 29, 2017, 6:00 AM CST

    Greece’s public debt and financing needs will prove “explosive” in decades to come unless Europe overhauls its bailout program to ease the load, the International Monetary Fund says in a draft report as the country seeks a fresh loan payout.

    In the IMF’s baseline scenario, Greece’s government debt will reach 275 percent of its gross domestic product by 2060, when its financing needs will represent 62 percent of GDP, the report obtained by Bloomberg says. The government estimates public debt around 180 percent of GDP at present.

    The European Union’s view of the evolution of Greek debt is “more benign” and based on “significantly more optimistic assumptions,” the IMF notes. The document also says some Greek debt proposals by euro-area finance ministers “are not specific enough to enable a full assessment” of how they would affect sustainability.

    Greece and its creditors are locked in negotiations on how the nation can close its fiscal gap, in line with the requirements of the 86 billion-euro ($92 billion) aid program agreed with the European Commission, the European Central Bank and the IMF. Failure to strike a deal would hold up the release of the next portion of bailout funding.

    Europe Responds

    Europe’s aid program for Greece is credible and backed by contingency measures to handle unforeseen events, a spokesman for the European Stability Mechanism, an EU agency that provides bailout loans to Greece, said in e-mailed statement Sunday.

    “We see no reason for an alarmistic assessment of Greece’s debt situation,” the spokesman said, adding that Europe has made clear commitments to support the country with additional debt relief after the program. The statement makes no direct reference to the IMF draft.

    IMF Proposals

    As in the past, the IMF is proposing that Europe extend grace periods and maturity dates on the loans. The document also calls for further deferral of interest payments and to lock in interest rates.

    For its part, Greece needs to tackle tax evasion and broaden its tax base, the IMF says, repeating recommendations in previous reports. It also needs to re-balance spending away from pensions and deal with bad loans that are weighing on banks.

    Greek debt is “highly unsustainable” and “even with the full implementation of policies agreed under the European Stability Mechanism program, public debt and financing needs will become explosive in the long run,” the document says. A “substantial restructuring” of European loans to Greece is required to restore debt sustainability, it says.

    The IMF agrees with Greece’s euro-area creditors on one point. Both want Greece to introduce a law triggering austerity measures if the country fails to maintain a budget surplus before interest payments of 3.5 percent of GDP. Greek Finance Minister Euclid Tsakalotos last week rejected that demand as “unacceptable.”

    The European Union’s view of the evolution of Greek debt is “more benign” and based on “significantly more optimistic assumptions,” the IMF notes. The document also says some Greek debt proposals by euro-area finance ministers “are not specific enough to enable a full assessment” of how they would affect sustainability.”

    That’s some depressing optimism right there. And it’s even more depressing when you note that the debate between the IMF and the Eurogroup isn’t over whether or not to make things easier or harder on Greece. It’s merely a debate over whether debt relief is necessary for Greece to realistically stick to a debt repayment schedule. More austerity indefinitely for Greece is something both the IMF and the Eurogroup both clearly agree on:


    The IMF agrees with Greece’s euro-area creditors on one point. Both want Greece to introduce a law triggering austerity measures if the country fails to maintain a budget surplus before interest payments of 3.5 percent of GDP. Greek Finance Minister Euclid Tsakalotos last week rejected that demand as “unacceptable.”

    Yes, the IMF is pretty confident that unless Greece gets major debt relief it’s going to require much more austerity if it’s going to stick to its debt payment schedule, a schedule that currently requires that 3.5 percent surplus for years to come. And the IMF also agrees with the Eurogroup that Greece should pass a law that automatically introduces that additional austerity it’s warning Greece will need if it can’t maintain the 3.5 percent surplus it doesn’t think Greece can achieve. So it’s also a reminder that the IMF’s showdown with the Eurogroup for getting more debt relief for Greece doubles as a showdown for getting more austerity for Greece too. It’s funny how that works.

    Posted by Pterrafractyl | January 30, 2017, 12:28 am
  34. Here’s an update on the Troikan horrible cop/deplorable cop routine between the IMF and the EU Commission: And you know how the IMF has been threatening to pull out of the Troika and not participate in the next round of the Greek ‘bailout’ unless its concerns about Greece’s ability to realistically stick to repayment schedule are somehow met? And you know how the IMF has been warning the EU that the only way Greece is going to stick to that schedule is with significant debt relief and harsh new pension cuts and raised taxes on the middle class? And you know how Greece is expected do all this while maintaining a 3.5 percent GDP surplus for the foreseeable future under the EU plan and a 1.5 percent surplus under the IMF plan?

    Well, it sounds like the IMF and the EU have come to an agreement on the set of demands they presented to Greece. And while it’s not yet completely clear what those demands are, based on what we know so far it probably doesn’t involve debt relief and almost certainly is going to involve those pension cuts/tax hikes:

    Reuters

    IMF says Greece needs to lower pensions, cut tax rates

    By David Lawder | WASHINGTON
    Tue Feb 7, 2017 | 5:32pm EST

    Greece needs to reduce the proportion of its budget spent on “unaffordably high” pensions which are paid for by high tax rates to stimulate economic growth, the International Monetary Fund said on Tuesday.

    Releasing the full staff report from its first annual review of Greece’s economic policies in nearly four years, the IMF said that Greece instead should work to broaden its tax base and reduce tax rates, while providing more targeted spending to support the poor and other essential public services.

    “We are saying that Greece needs to take some fairly difficult decisions to make its budget much more growth-friendly,” IMF European Department Director Poul Thomsen told reporters on a conference call.

    He said that too many Greek households are exempt from taxation under current policies, while spending on infrastructure, capital investment and other critical needs has been cut to very low levels in an effort to meet fiscal targets under the country’s current bailout program. Such investments and resources are needed to help modernize Greece’s economy, he added.

    Under the constraints of the Greek government’s third financial bailout since 2010 and an aging population, the country’s long-term economic growth is only expected to reach about 1.0 percent, the IMF said in the report.

    The Fund also reiterated its longstanding view that Greece’s debt is unsustainable, even if all of the Fund’s prescribed reforms are implemented, and debt relief from European lenders is required.

    It projected government debt would reach 160 percent of gross domestic product by 2030, but would “become explosive thereafter.”

    The IMF has insisted on additional debt relief and reduced fiscal targets before it participates financially in Greece’s current bailout program. Germany, which faces national elections, has resisted such moves.

    Jeroen Dijsselbloem, president of the Eurogroup of euro zone finance ministers, on Tuesday said the IMF’s view on Greek debt was too pessimistic and ruled out any further debt relief before mid-2018, when the current bailout program ends.

    At the same time, a Greek government spokesman said that Greece would not yield to “illogical” demands from the IMF for “precautionary” austerity measures.

    “Jeroen Dijsselbloem, president of the Eurogroup of euro zone finance ministers, on Tuesday said the IMF’s view on Greek debt was too pessimistic and ruled out any further debt relief before mid-2018, when the current bailout program ends.”

    The IMF wants more austerity (more austerity on top of the already-prescribed austerity schedule) and immediate debt relief commitments for Greece. Greece wants less austerity and debt relief. And the EU Comssion/Eurogroup wants the existing austerity schedule and no debt relief. At least no debt relief now and only the promise of maybe some in the future if Greece submits to whatever austerity demands are thrown at it.

    So what’s the new common IMF/EU Commission stance? While there doesn’t appear to be any mention of additional debt relief for Greece like the IMF has demanded, it does appear that they’re going to demand that extra austerity:

    Reuters

    Euro zone, IMF agree on a common stance on Greece: official

    By Jan Strupczewski | BRUSSELS
    Fri Feb 10, 2017 | 6:21am EST

    Euro zone lenders and the International Monetary Fund have reached agreed between themselves to present a common stance to Greece later on Friday in talks on reforms and the fiscal path Athens must take, euro zone officials said.

    Such a united stance would be a breakthrough because the two groups have differed for months on the size of the primary surplus Greece should reach in 2018 and maintain for years later as well as the issue of debt relief.

    Those differences have hindered efforts to unlock further funding for Greece under its latest euro zone bailout program.

    “There is agreement to present a united front to the Greeks,” a senior euro zone official said, adding that the outcome of Friday’s meeting with the Greeks was still unclear and it was unclear if Athens would accept the proposals.

    “What comes out of it, we will see,” the official said.

    Financial markets took heart from the news, however. Greece’s two-year bond yield fell almost 50 basis points to 9.55 percent. It hit the 10 percent mark on Thursday as worries about the bailout drove away buyers.

    The chairman of euro zone finance ministers, Jeroen Dijsselbloem, said in The Hague that Friday’s meeting, in which Greek Finance Minister Euclid Tsakalotos will take part, was to discuss the size of Greece’s primary surplus.

    The euro zone wants Greece to reach a primary surplus – which excludes interest repayments on debt – of 3.5 percent of gross domestic product and keep it there for many years.

    But the IMF believes that with reforms in place now Greece will reach only 1.5 percent next year and in the following years and has therefore been pushing for Athens to legislate new measures that would safeguard the agreed euro zone targets.

    Officials said the lenders would ask Greece to take 1.8 billion euros worth of new measures until 2018 and another 1.8 billion after 2018, focused on broadening the tax base and on pension cutbacks.

    The Greek government, initially elected to fight against lend-imposed austerity, is loathe to make more cuts that will hit its battered citizens.

    A united stance among euro zone governments and the IMF is a breakthrough because they have differed for months on the size of the primary surplus Greece should reach in 2018 and maintain for years later as well as the issue of debt relief.

    “Officials said the lenders would ask Greece to take 1.8 billion euros worth of new measures until 2018 and another 1.8 billion after 2018, focused on broadening the tax base and on pension cutbacks.”

    The united front is “broadening the tax base and pension cutbacks”. Oh joy. All those tax cuts and the austerity that comes with it are going to do wonders for the economy.

    So what does this mean for the prospects of finishing negotiations by March 9, in time for Greece to join the ECB’s QE program? Well, keep in mind that the united front is apparently the worst case scenario of no debt relief and extra austerity so that doesn’t exactly make a successful negotiation. And also keep in ind that
    the current austerity demands, not including the IMF’s new demands, are already so insane that the prospects of finishing the negotiations would have been low even if the IMF wasn’t involved:

    CNBC

    Greek yields spike amid creditor dispute, minister reveals pressure from IMF

    Silvia Amaro
    Friday, 10 Feb 2017 | 6:36 AM ET

    Greek lawmakers are under pressure from the International Monetary Fund to overcome the current impasse over its bailout, a Greek minister told CNBC on Friday.

    “There’s pressure from the IMF, certainly,” George Katrougalos, the Greek alternative foreign minister for EU affairs, told CNBC over the phone on Friday.

    Katrougalos told CNBC that, at the moment, most of the pressure comes from the International Monetary Fund (IMF) and not from European creditors. This could be the case because the IMF is itself under pressure to decide on whether or not it will be part of the Greek bailout program. The IMF said it would not comment on the minister’s remarks when contacted by CNBC.

    Greece is currently on a third bailout program worth 86 billion euros ($92 billion). The current impasse between Greece, the EU and the IMF over the implementation of austerity measures sent the country’s two-year bond yields rising to around 10.09 percent on Thursday, their highest level since June last year, on fears that the country could soon run out of cash and would not be able to make crucial debt repayments.

    The institution led by Christine Lagarde has decided not to join the third financial rescue for Greece until there’s evidence that Greek debt will be made sustainable. The latest bailout program, which began in 2015, has a year-and-a-half still to go.

    For some countries, such as Germany, the Netherlands and Finland, the IMF’s participation in the program is essential.

    “It’s not so much about the funds, the Europeans have enough money to lend to Greece,” an official close to the bailout talks, who asked to remain anonymous due to the sensitivity of negotiations, told CNBC earlier this week, adding that the issue is more of credibility.

    According to Katrougalos, the IMF is currently questioning both the Greek and the European fiscal estimates and wants to revisit questions that have already been fixed, including reforms on pensions.

    The same official, who is part of the negotiations, told CNBC on Friday that “there’s a lot of focus on the IMF…but even if the IMF wouldn’t exist on this planet, Greece and the EU wouldn’t be able to conclude the second bailout review.”

    Deal next week?

    Katrougalos told CNBC that “there are ongoing efforts to reach a deal next week.” If indeed European creditors recognize next week that Greece has completed all the agreed measures for the second bailout review, then this would pave the way for new disbursements.

    With fresh funds, Greece should be in condition to meet deadline payments next summer and avoid a financial collapse. But the view among creditors is that such a deal next week is “unlikely”. It all depends on Greece and whether it implements the reforms that creditors demand but, according to the official involved in the talks, there are at least between 40 to 50 measures that Greece has yet to put through to conclude the second review.

    Debt

    However, beyond the second bailout review, the Greek debt issue and the IMF’s participation are yet to be solved.

    “It’s necessary to have some debt relief,” Katrougalos said, “because we want to enter the QE (quantitative easing) of (ECB President Mario) Draghi.”

    Being eligible to be part of the European Central Bank’s QE program would “help the momentum that we have,” the minister said, referring to the recent data showing that Greece returned to economic growth in 2016. At the moment, the ECB cannot purchase Greek bonds because they do not have an investment grade rating.

    According to the latest IMF report, Greece should grow 2.7 percent in 2017, after growing 0.4 percent last year.

    Snap elections?

    Moody’s credit rating agency said Thursday that it is concerned with the current impasse between Greece and its creditors, adding that this could lead to earlier elections.

    “The European creditors also have a more optimistic view of Greece’s fiscal and macro prospects than the IMF, including that Greece will be able to maintain primary surpluses of 3.5 pecent of GDP for the coming years. The IMF, meanwhile, believes Greece can achieve a primary surplus of only 1.5 percent per year. The impasse has a number of risks for Greece. First, it puts pressure on the Greek government to deliver more measures than it had originally envisaged to conclude the second review,” Moody’s said in a note released Friday.

    “The same official, who is part of the negotiations, told CNBC on Friday that “there’s a lot of focus on the IMF…but even if the IMF wouldn’t exist on this planet, Greece and the EU wouldn’t be able to conclude the second bailout review.”

    Yeah, the new united front of extra pension cuts and tax hikes probably aren’t going to go over well. Especially with 40 to 50 addition austerity measures that still need to be completed just to meet the current demands:

    Deal next week?

    Katrougalos told CNBC that “there are ongoing efforts to reach a deal next week.” If indeed European creditors recognize next week that Greece has completed all the agreed measures for the second bailout review, then this would pave the way for new disbursements.

    With fresh funds, Greece should be in condition to meet deadline payments next summer and avoid a financial collapse. But the view among creditors is that such a deal next week is “unlikely”. It all depends on Greece and whether it implements the reforms that creditors demand but, according to the official involved in the talks, there are at least between 40 to 50 measures that Greece has yet to put through to conclude the second review.

    And, again, if this isn’t resolved soon (by March 9), Greece doesn’t get to participate in the ECB’s QE program that’s probably going to wind up soon but will at least be running through the end of 2017. And all indications are that these negotiations aren’t getting resolved soon:

    Bloomberg News

    Greek Bailout Talks Set to Drag Past February Amid Standoff

    by Nikos Chrysoloras
    February 10, 2017, 2:22 PM CST February 10, 2017, 3:05 PM CST

    * Next Eurogroup meeting to ‘take stock’ of progress in talks
    * Dijsselbloem says constructive meeting held in Brussels Friday

    Greece probably won’t complete its bailout review by the time the euro area’s finance ministers next meet, on Feb. 20, setting the stage for potentially thorny negotiations in the midst of next month’s bitter electoral campaign in the Netherlands.

    “We will take stock of the further progress of the second review during the next Eurogroup,” Dutch Finance Minister Jeroen Dijsselbloem said in a statement after a meeting with his Greek counterpart, Euclid Tsakalotos, in Brussels on Friday. “There is a clear understanding that a timely finalization of the second review is in everybody’s interest,” Dijsselbloem said after the meeting, in which representatives of creditor institutions also participated.

    Greece is locked in talks with the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund over the conditions attached to its latest bailout. During Friday’s meeting, bailout auditors asked the government to legislate additional fiscal cuts equal to about 2 percent of gross domestic product if the country fails to meet certain budget targets, a person familiar with the matter said after the talks. These contingent measures are the basis for further discussions, the person said, asking not to be named as the matter is sensitive.

    While progress was made in the meeting, unreasonable demands from the IMF make a resumption of staff-level talks difficult, a Greek government official said in a text message, asking not to be named in line with policy.

    The Greek government has been resisting calls to preemptively legislate contingent belt-tightening for 2018 and beyond, arguing that measures already in place should suffice to meet an agreed goal for a budget surplus — before interest payments — equal to 3.5 percent of GDP. Among the measures the IMF is demanding is pension cuts and a lowering of the threshold at which income tax is paid. Both are red lines the government says it’s not willing to cross.

    “Although we expect that the Greek government will implement the required measures, the risk of early elections is increasing given the rising political cost to the government and its slim majority in the parliament,” Moody’s Investors Service analyst Kathrin Muehlbronner said in a note to clients. “Early elections might bring a new and more reform-minded conservative government, but Greece’s economy would be hit again by prolonged uncertainty, after having just started to record positive growth.”

    “Greece is locked in talks with the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund over the conditions attached to its latest bailout. During Friday’s meeting, bailout auditors asked the government to legislate additional fiscal cuts equal to about 2 percent of gross domestic product if the country fails to meet certain budget targets, a person familiar with the matter said after the talks. These contingent measures are the basis for further discussions, the person said, asking not to be named as the matter is sensitive.”

    And that’s another part of the united front that was presented to Greece: if Greece’s economy doesn’t perform as well as the EU Commission is projecting – a projection the IMF says is unrealistic which is part of the basis for its demand for more debt relief – Greece has to implement fiscal cuts equal to about 2 percent of GDP. You can see why a quick resolution to the negotiations aren’t expected. At least before the Feb 20th meeting of eurozone finance ministers. But that doesn’t change the fact that Greece is going to have to complete these negotiations by early March if its going to participate in the QE program, so if there’s an expectation that Greece and the Troika won’t be completing their negotiations soon because the new austerity demands are suddenly even worse than before, that doubles as an expection of really urgent negotiations in early March.

    So there’s about to be a really urgent round of negotiations to pressure Greece into an agreement to implement an austerity plan that the IMF is pretty confident is doomed because Greece’s economy isn’t going to be strong enough to pull it off. And as part of the plan, if Greece doesn’t meet the demands the IMF doesn’t think it can meet, it’s going to get more austerity. About 2 percent of GDP in more cuts on top of the cuts the IMF declares Greece both needs and can’t endure. That’s the plan for the latest phase of the Greek ‘bailout’.

    Posted by Pterrafractyl | February 13, 2017, 12:45 am
  35. Wolfgang Münchau recently made a prediction that, if it comes to pass, could more or less determine the whether or not Greece stays in the eurozone: The way Münchau sees it, when the Trump administration sends its representative to the IMF, the IMF is probably going to leave the Greek ‘bailout’ negotiations, which will effectively end the ‘bailouts’ because of a clause Germany added that requires the IMF’s participation if Germany will also participate:

    The Financial Times

    A failure to tell the truth imperils Greece and Europe

    If the IMF pulls out, Europe will be free to mismanage the crisis on its own

    by: Wolfgang Münchau
    2/13/2017

    Failure to tell truth to power lies beneath much of what is going wrong in Europe right now. It may not be the principal cause of the Greek debt crisis, which is now on its umpteenth iteration. But it is more than a mere contributing factor.

    You notice it particularly at those moments when others speak the truth, as the staff of the International Monetary Fund have done recently. In its latest survey of the Greek economy it states that “public debt has reached 179 per cent [of gross domestic product] at end-2015, and is unsustainable”.

    Europeans are not used to such bluntness. The Germans protested. The European Commission protested. So did the Greeks. They all want to keep up the fairy tale of Greek debt sustainability for a little while longer.

    They were particularly shocked that the IMF exposed the disagreement when it wrote that “some directors had different views on the fiscal path and debt sustainability”. These were the Europeans, who are now in a minority in the fund.

    Once the Trump administration sends its representatives to the IMF board, expect the climate to become even more hostile. My expectation is that the IMF will ultimately pull out of the Greek programme, leaving the Europeans free to mismanage the ongoing Greek crisis on their own.

    A much overlooked part of the Greek bailout programme is that Germany made its participation conditional on IMF involvement. That gave the fund leverage. If the IMF now pulls out of Greece, one of two things will happen. Athens will either default on its debt this summer and be forced to quit the eurozone, or Berlin will accept debt relief just a few months before the elections. Either way, this is a fight in which someone ends up on the floor.

    “Once the Trump administration sends its representatives to the IMF board, expect the climate to become even more hostile. My expectation is that the IMF will ultimately pull out of the Greek programme, leaving the Europeans free to mismanage the ongoing Greek crisis on their own.”

    And what happens if the IMF pulls out of the ‘bailouts’? Germany pulls out too:


    A much overlooked part of the Greek bailout programme is that Germany made its participation conditional on IMF involvement. That gave the fund leverage. If the IMF now pulls out of Greece, one of two things will happen. Athens will either default on its debt this summer and be forced to quit the eurozone, or Berlin will accept debt relief just a few months before the elections. Either way, this is a fight in which someone ends up on the floor.

    That’s something to consider if either the current ‘bailout’ negotiations aren’t resolved soon and we see a repeat of the 2015 standoff. If the IMF, and maybe Germany too, leave the negotiating table, that probably ends the negotiations, along with Greece’s membership in the eurozone.

    So how likely is it that Mr. Münchau is correctly predicting that the Trump team is going to be pushing to end the IMF’s involvement in the Greek Tragedy? Well, if the following interview of Ted Malloch, the guy Trump is reportedly favoring to be EU ambassador, is any indication of what to expect when it comes to Trump’s attitude towards keeping the eurozone together, yeah, Mr. Münchau is probably correct about the IMF’s future stances towards Greece:

    Ekathimerini.com

    Ted Malloch: Greece would be better off outside the eurozone

    ALEXIS PAPACHELAS
    08.02.2017

    Donald Trump’s possible choice for US ambassador to the EU, Ted Malloch, is in favor of a Greek exit from the eurozone, which he believes is something that will happen at Athens’s request in a year or a year-and-a-half from now.

    Speaking on Skai TV’s “Istories” (stories) program late Tuesday, Malloch said that “the problem… is who will manage that transition, and how, to avoid all the chaos and all the instability.” He admitted he did not know the answer to the question.

    In the same interview, Malloch said the issue of a Greek euro exit had not been discussed with the president, the State Department or anyone at the Treasury, adding however that Trump himself about a year ago tweeted that the Greeks are wasting their time in the eurozone.

    How did you meet him?

    I met him over 20 years ago, in Florida, in Palm Beach, where he was very active, and actually he remains active in philanthropy and charitable events: golf tournaments and black-tie dinners to raise money mostly for medical causes.

    Do you think the eurozone as a whole is going to survive? What’s your own assessment?

    Well, I think certainly there will be a Europe; whether the eurozone survives, I think it’s very much a question that is on the agenda. We have had the exit of the UK, there are elections in other European countries, so I think it’s something that will be determined over the course of the next year, year-and-a-half. I think it is interesting from the perspective of Greece, why is Greece again on the brink; it seems like a deja vu; will it ever end? I think this time I would have to say that the odds are higher that Greece itself will break out of the euro.

    You said that the other day in an interview with Bloomberg, and it has created quite a stir here. I don’t know how much you know about the Greek economy but it’s definitely not self-sufficient. We have to import even basic things like food in order to survive. How do you see Greece outside the eurozone dealing with that situation?

    Well, I think it’s maybe a necessity. I mean it’s a good question, why? To put the question “why” first, not “how.” I mean, if the [International Monetary Fund] will not participate in a new bailout that does not include substantial debt relief – and that’s what they are saying – then that more or less ensures a collision course with the eurozone creditors. Now we all know that that primarily pressures Germany, which remains opposed to any such actions, so I think it suggests that Greece might have to sever ties and do Grexit and exit the euro. So, that’s the first fact.

    I think if you look at the reality, the situation is basically unfolding in a certain direction. What comes afterwards I think is a very interesting and important question; I think we have to face some facts, I mean the first one is that the harsh austerity programs have been a complete failure. I have traveled to Greece, met lots of Greek people, I have academic friends in Greece and they say that these austerity plans are really deeply hurting the Greek people and that the situation is simply unsustainable. So you might have to ask the question if what comes next could possibly be worse than what’s happening now.

    But do you think that there is any chance that the US, given the circumstances, would ever finance Greek needs in the first couple of years, because there is definitely going to be a deficit in the beginning and, as you know, we also have security requirements, the neighborhood being what it is.

    No, I think Greek-US relations are strong, could become stronger. I know some Greek economists who have even gone to leading think tanks in the US to discuss this topic and the question of dollarization; such a topic of course freaks out the Germans because they really don’t want to hear such ideas. I think what Greece badly needs, if we were to think of it economically – I am really putting in the economy side – is supply side reforms. It needs debt restructuring, it really needs debt relief, and I know people in Europe don’t want to hear that. These new plans have probably happened under the IMF or the World Bank and they need to reduce the debt overhanging and that means frankly something that people in Germany and elsewhere have not been able to accept, it means a haircut to the lenders and to the banks in Germany and probably, at least in my perspective, a return to the drachma. So the problem then is who will manage that transition, and how, to avoid all the chaos and all the instability. Very, very, major question I think on the immediate horizon.

    Your statements carry a lot of weight because, among other things, you have been rumored to be the next US ambassador to the EU. So, first of all, is that definitely going to happen? The nomination? Or is that something still in the works?

    It’s certainly in the works; it’s a decision that has been made by the president himself, I have obviously interviewed and talked to the transition team, so we are waiting on the announcement.

    And let me ask you, because it should be clear to our audience and to opinion makers here in Athens, when you express this opinion, about us going back to the drachma and so on, is it something which is sort of authorized by the Trump administration? In other words, is this a Trump position?

    Well, it’s not something that I have discussed at all with President Trump or the State Department or anyone at the Treasury, but I would remind your audience that no one less than President Trump himself about a year ago tweeted that the Greeks are wasting their time in the eurozone. So you have it directly from the person, you don’t need an intermediary. I personally think he was right. I would also say that this probably should have been instigated four years ago frankly, and probably it would have been easier or simpler to do. So I also look at the polls, and in Greece, I am actually moderately surprised to see that now the majority of the Greek citizens themselves in a recent poll said that it was wrong to join the euro in the first place. Now you can’t put it back in time, but the question is, what does it look like going forward?

    But if you look at other recent polls, the overwhelming majority of the population at this point still supports the euro, not a return to the drachma.

    Well, I guess the polling that I have seen recently suggests otherwise, maybe there is some ambivalence in polling, and maybe we shouldn’t put too much stock in any given poll.

    What do you think the US position should be on whether the IMF should remain in the Greek program? – There is a very important Executive Board meeting going on tonight [February 6] – What do you think the US official position is going to be with this new administration on that?

    Well, we will see if it changes, my sense is that over time it could change and that the US is going to basically push the IMF in the direction of the kinds of reforms I have been suggesting and a more substantial debt restructuring including debt relief.

    And if you spoke to the Greek prime minister, what kind of advice would you give him? Because one side is what you are saying about the debt relief and so on, but you are also talking about some very drastic reforms within the country. Isn’t that the case?

    Well, we’ve been through this, it seems like four or five times, so I would ask the question again as an economist, a market-based economist, how can we get growth to return to the Greek economy? That should be the goal. How can you increase private sector activity? How can you actually bring about tax reduction? How can you instigate more public-private partnerships? How can you make the Greek economy more competitive? That would be the set of questions I would be asking. They are not really politicized questions, those are economic questions, but frankly I don’t see how you do that inside the euro that’s tilted towards other players in Central Europe and Germany.

    “Well, I think it’s maybe a necessity. I mean it’s a good question, why? To put the question “why” first, not “how.” I mean, if the [International Monetary Fund] will not participate in a new bailout that does not include substantial debt relief – and that’s what they are saying – then that more or less ensures a collision course with the eurozone creditors. Now we all know that that primarily pressures Germany, which remains opposed to any such actions, so I think it suggests that Greece might have to sever ties and do Grexit and exit the euro. So, that’s the first fact.”

    Yes, Trump’s pick for EU ambassador is basically saying that he thinks Greece is going to have to exit the euro. And while he admits that he’s speaking for himself and not Donald Trump, he also notes Trump’s own words on the topic which are pretty much the same:

    And let me ask you, because it should be clear to our audience and to opinion makers here in Athens, when you express this opinion, about us going back to the drachma and so on, is it something which is sort of authorized by the Trump administration? In other words, is this a Trump position?

    Well, it’s not something that I have discussed at all with President Trump or the State Department or anyone at the Treasury, but I would remind your audience that no one less than President Trump himself about a year ago tweeted that the Greeks are wasting their time in the eurozone. So you have it directly from the person, you don’t need an intermediary. I personally think he was right. I would also say that this probably should have been instigated four years ago frankly, and probably it would have been easier or simpler to do. So I also look at the polls, and in Greece, I am actually moderately surprised to see that now the majority of the Greek citizens themselves in a recent poll said that it was wrong to join the euro in the first place. Now you can’t put it back in time, but the question is, what does it look like going forward?

    But also note that Malloch doesn’t expect that the US will actually provide Greece with financial assistance in the immediate period following a Grexit. But that doesn’t mean he isn’t predicting dollars flooding into Greece:

    But do you think that there is any chance that the US, given the circumstances, would ever finance Greek needs in the first couple of years, because there is definitely going to be a deficit in the beginning and, as you know, we also have security requirements, the neighborhood being what it is.

    No, I think Greek-US relations are strong, could become stronger. I know some Greek economists who have even gone to leading think tanks in the US to discuss this topic and the question of dollarization; such a topic of course freaks out the Germans because they really don’t want to hear such ideas. I think what Greece badly needs, if we were to think of it economically – I am really putting in the economy side – is supply side reforms. It needs debt restructuring, it really needs debt relief, and I know people in Europe don’t want to hear that. These new plans have probably happened under the IMF or the World Bank and they need to reduce the debt overhanging and that means frankly something that people in Germany and elsewhere have not been able to accept, it means a haircut to the lenders and to the banks in Germany and probably, at least in my perspective, a return to the drachma. So the problem then is who will manage that transition, and how, to avoid all the chaos and all the instability. Very, very, major question I think on the immediate horizon.

    “I know some Greek economists who have even gone to leading think tanks in the US to discuss this topic and the question of dollarization; such a topic of course freaks out the Germans because they really don’t want to hear such ideas”

    Out with euro, in with the drachma dollar? That’s what Malloch is claiming at least some Greek economists are pitching to US think tanks. And while that might seem like a far fetched scheme since swapping a euro that’s too strong for Greece’s economy for a dollar that’s even stronger probably isn’t going to help Greece reboot its economy, keep in mind that the dollarization of Greece would perhaps be useful temporarily if there’s an expectation that things are going to spiral out of control almost immediately following a ‘Grexit’ and Greece finds itself facing some sort of hyperinflation on necessary imports. But that expectation assumes that things get that bad really fast and also assumed that there’s basically no help at all from the rest of Europe (or the US), and the world just points and laughs while a post-Grexit Greece flails into economic oblivion. And who knows, maybe that’s what would really happen in the event of a Grexit given that Malloch also predicted that the US wouldn’t be providing Greece with any immediate financial assistance in the event of a Grexit and how cruel the rest of Europe has generally be towards Greece through this whole ‘bailout’ process.

    So, overall, if Mr. Malloch’s views can be interpreted as a good proxy for the Trump team’s it’s looking like the Trump administration’s policy is going to be pro-‘exit’ for the eurozone in general, and especially for Greece. But not necessarily pro-help post-‘exit’.

    Posted by Pterrafractyl | February 15, 2017, 9:20 pm
  36. Remember how The Greek government was determined to complete the ‘bailout’ review with Troika by the end of February so it could secure its participation in the ECB’s quantitative easing program that was set to be renewed in early March. Well, that obviously didn’t happen. Fortunately, at the end of February Greece’s financial minister gave a new QE-participation deadline: March 20:

    Reuters

    Greek finmin ‘optimistic’ for inclusion in ECB’s QE, if there is a deal by March 20

    Tue Feb 28, 2017 | 11:30am EST

    Greece hopes that an initial deal with its foreign creditors by March 20 will allow its bonds to be included in the European Central Bank’s bond-buying program, Finance Minister Euclid Tsakalotos said on Tuesday.

    “The truth is that I am optimistic, provided that this is wrapped up by March 20,” Tskalotos told lawmakers.

    Tsakalotos added however that the IMF’s participation in the country’s current bailout would make the procedure “relatively simple.”

    Tsakalotos also said that Athens would only agree to a comprehensive package, which would include a deal on primary surplus targets and debt relief measures for the post-bailout period.

    “Tsakalotos also said that Athens would only agree to a comprehensive package, which would include a deal on primary surplus targets and debt relief measures for the post-bailout period.”

    So if the terms of the Greek ‘bailout’ is concluded by March 20, the date of the next eurogroup meeting of eurozone finance ministers, Greece should probably be allowed into the QE program. But Greece is also sticking to the (very reasonable and humane) demand that the ‘bailout’ package must include some sort of debt-relief and an easing of the annual budget surplus targets. And this all has to be worked out in a week and a half. So is that feasible? Well, maybe, as long as one of the parties (the Greeks, the IMF, or the eurogroup) blinks. Very soon:

    AFP

    Lenders leave Athens with no deal for Greeks

    3/09/2017

    Negotiations between Greece and its creditors ended Thursday without agreement on freeing up fresh funds, a government source told AFP.

    An IMF spokesman said the talks will resume next week.

    “This phase of the discussions is over, there was good progress but there are still difficulties, which we will try to resolve between now and the meeting of eurozone finance ministers on March 20,” said the source.

    After months of impasse due to disagreement between the International Monetary Fund and the eurozone over how to end the crisis, talks between Athens and its creditors resumed last week.

    IMF spokesman Gerry Rice said negotiators made progress “on a balanced fiscal package and a number of key reforms, notably in the financial sector.”

    “Discussions will continue next week, notably on pension and labour market reforms,” he said in a statement.

    Rice told reporters earlier in the day that “differences remain in important areas,” and that it was too soon to say when an agreement could be reached.

    The Greek government source said the IMF wants the labour market further liberalised, and differences also remain over budget policy from 2019.

    The IMF has repeatedly said that Greece’s debt is not sustainable, and the country requires debt restructuring. The fund will not participate in a new loan program if it considers the debt untenable.

    But European governments, especially Germany, have resisted providing more debt relief and dispute the fund’s analysis, instead calling for more economic policy steps.

    The deadlock has spooked markets with fears of a return to the crisis two years ago when Greece nearly crashed out of the euro, the European single currency.

    Athens needs the next tranche of bailout cash to meet seven billion euros ($7.4 billion) of new debt payments in July or risk defaulting on its loans.

    The European Commission wants an agreement before a series of upcoming elections, and has been pointing to improved budgetary performance in Greece.

    Three bailout programmes have kept the country from economic collapse, but an expected return to growth has not come about, with the latest data showing the economy stalled last year, after having shrunk by 25 percent since 2008.

    “The deadlock has spooked markets with fears of a return to the crisis two years ago when Greece nearly crashed out of the euro, the European single currency.”

    Yeah, it’s a pretty spooky situation. Or, from the Greek perspective, the latest in an unending nightmare. But it sounds like progress has been made on the negotiations, except for…well, almost everything. All those sticking points (the demands for more austerity like pension cuts, the demands unyielding budget surpluses, and debt relief) still have to be worked out:


    “Discussions will continue next week, notably on pension and labour market reforms,” he said in a statement.

    Rice told reporters earlier in the day that “differences remain in important areas,” and that it was too soon to say when an agreement could be reached.

    The Greek government source said the IMF wants the labour market further liberalised, and differences also remain over budget policy from 2019.

    The IMF has repeatedly said that Greece’s debt is not sustainable, and the country requires debt restructuring. The fund will not participate in a new loan program if it considers the debt untenable.

    But European governments, especially Germany, have resisted providing more debt relief and dispute the fund’s analysis, instead calling for more economic policy steps.

    Yes, there has been progress, just not on any of the areas where progress is actually needed to allow the ‘bailout’ to move forward and Greece to join the QE program.

    As disturbing as this ongoing situation is in terms of what it’s doing to the Greek people and what it says about the nature of the people running the eurozone, also keep in mind that if the Greece basically misses out on its QE-participation window, the short-term incentives for Greece to agree to the Troika’s insane demands are suddenly going to evaporate. Yes, there’s still the July deadline that could result in a Greek default if a deal isn’t reached. But there’s a big difference between Greece and the Troika concluding the bailout negotiations in March vs July. Why? Because that would mean the Greek eurozone psychodrama is going to be an active issue throughout the Dutch and French elections and will be reaching a peak just months before the German elections. German elections where the majority of the electorate now favors a Grexit according to recent polls.

    And keep in mind that if the political constraints of these elections results in absolutely no concessions from the eurozone countries like Germany, that just adds to Greece’s incentives to have a repeat of the 2015 Troikan showdown and threaten to make a Grexit a reality. So get ready for the Greek bailout to become a political football during this year’s elections that could see the far-right win in both France and the Netherlands and, even more ominously, get ready for a possible new Greece/Troika showdown right in the middle of the summer as the German campaign season gets underway. Unless, of course, someone blinks over the next 10 days.

    Posted by Pterrafractyl | March 10, 2017, 12:13 am
  37. Huzzah! Greece and the troika came to an agreement on the never ending bailout talks. It’s not the final agreement, mind you, that will allow for the release of the second tranche of 7.5 billion euros Greece needs by July to make its next creditor payments. It’s simply an agreement on some of issues being negotiated over. In order to get the actual “bailout” funds the Troika’s inspectors still have to conduct a review of Greece to make sure it’s been a good little vassal state. But it sounds like they did at least reach a consensus on some of the outstanding issues.

    So what did they agree to? Well, Greece agreed to the latest round of pension cuts that’s been one of the main sticking points in the negotiations and also agreed to implement those cuts in 2019 right before the new round of elections. Pension cuts that might be as high as 30 percent. Higher income taxes are also part of the deal. Plus Greece agreed to maintain its unprecedented 3.5 percent annual budget surplus for “the medium term”. And while they have yet to work out exactly how long the “medium term” will be (another 3-5 years) the harsher Greece’s austerity will have to be since it’s only through austerity that it’s able to generate that 3.5 percent surplus. So basically Greece gave its eurozone creditors everything they asked for…which was a lot more austerity and a much weaker safety net.

    But the eurozone creditors did throw Greece a few bones: Greece will be allowed to spend additional money on the people most heavily impacted by the austerity. Like poor children. Yes, Greece gets to do this as long as its economy does better than is currently expected. If it does worse than expected? Sorry poor kids! It’s for your own good.

    And what about the IMF and it’s demands that Greece get substantial debt relief if the IMF will continue to participate in the bailout program? Is that happening, because don’t forget that the IMF hasn’t just been demanding substantial debt relief for Greece, it’s also been demanding extra austerity (the IMF is playing the good cop and the bad cop in this scenario, while the EU Commission is just the bad cop. Guess which cop wins). So is there going to be substantial debt relief now that Greece agreed to basically all the austerity terms demanded of it? That’s to be decided later:

    EUobserver

    Eurogroup makes ‘progress’ on Greek deal

    By Eric Maurice
    Valletta, Malta, 7. Apr, 16:24

    Eurozone finance ministers swapped Brussels’ brand new Europa building for old Valletta’s Grand Master’s Palace, but they came out on Friday (7 April) with the usual optimistic line about Greece.

    “We have achieved significant progress since the last meeting,” Eurogroup president Jeroen Dijsselbloem said at a press conference after a meeting in Malta’s capital.

    After months of delays and weeks of difficult talks, ministers endorsed an agreement between Greece and its creditors – the European Commission, the European Central Bank, the European Stability Mechanism, and the International Monetary Fund (IMF).

    But the agreement will only allow experts from the creditor institutions to go back to Athens and try to reach a so-called staff-level agreement on reforms to be made by the Greek government.

    The reforms are needed to conclude the second review of the bailout programme that was launched in 2015, and to allow the disbursement of a new tranche of financial aid.

    In order to close the review, the Eurogroup will however need to agree on additional issues – Greece’s fiscal targets for few first years following the end of the programme in 2018, and the sustainability of Greek debts.

    “We have an agreement on the overarching elements of policy in terms of size, timing and sequencing of the reforms,” Dijsselbloem said on Friday.

    Reform package

    He said that Greece and its creditors have agreed on the principle of a reform package, designed to cut spending by 2 percent of GDP.

    One percent will come from cuts in the highest pensions by 2019 and the other percent will mainly come from an increase in the income tax threshold.

    Details based on this agreement in principle will be discussed by the Greek government and the institutions’ missions when it returns to Athens, most likely next week. A reform of the labour market is also still on the table.

    To compensate for the effect of these austerity measures, the Greek government will be able to pass “expansionary measures” that would be implemented “on the assumption that the economy is doing better and the fiscal path is doing better than expected,” Dijsselbloem explained.

    Greek finance minister Euclid Tsakalotos told journalists that the measures will address social issues such as “child poverty, employment, housing, investment, or old age pensioners’ contributions to medical costs”.

    The spending-cut reforms required by creditors and the measures requested by the Greek government to help people most hit by the crisis will be tabled at the same time in the Greek parliament, and will have to be adopted before the Eurogroup closes the review.

    Helping Greece

    “This is a balanced agreement,” EU finance commissioner Pierre Moscovici said at the press conference, adding that it would “help Greece get on its feet again”.

    “The Greek people deserve the conclusion of the second review,” he said.

    What Dijsselbloem called the “final stretch” before a deal and the disbursement of the next loan is likely to be difficult.

    Greece, its eurozone partners and the IMF will have to agree on the country’s fiscal targets and future debt relief measures.

    They need to decide how many years Greece will require to reach a budget primary surplus – the budget surplus before debt payments – of 3.5 percent of GDP after 2018.

    The longer the target will be set – between three and five years, according to sources – the more Greece will have to maintain austerity measures.

    The decision also has an impact on the sustainability of the Greek debt, with the IMF insisting that it cannot stay in the bailout programme if the debt is unsustainable.

    Jigsaw puzzle

    “The whole agreement depends on all the pieces of the jigsaw puzzle,” noted Tsakalotos.

    In a statement after Friday’s Eurogroup, the Washington-based institution said that there were “good prospects for successfully concluding discussions on outstanding policy issues”.

    It added that its eurozone partners will have to come up with “satisfactory assurances on a credible strategy to restore debt sustainability” before it can decide whether or not it will stay in the programme.

    The IMF says that the fiscal targets are too difficult to reach and that measures must be taken to reduce the weigh of the debt on the Greek economy. But the staunchest opponent of that position is Germany, which at the same time says that the bailout programme can only continue with the IMF.

    “It is basically a discussion between Germany and the IMF,” an EU official told EUobserver.

    A diplomat from a member state, also implicitly referring to Germany and the IMF, noted that part of the delay in recent talks was because “some want to talk about the debt as late as possible”.

    “What Dijsselbloem called the “final stretch” before a deal and the disbursement of the next loan is likely to be difficult.”

    Yep, Greece made basically every austerity concession demanded of it and, the Troika conceded almost nothing, and that merely allows the negotiations to move on to the final stage (of this bailout tranche review) which Eurogroup president Jeroen Dijsselbloem is already warning “is likely to be difficult”. And as we should know at this point, when the Troika is warning that a negotiation is likely to be “difficult” that means a lot more austerity. At least normally that’s what it means. In this case, it’s possible that Dijsselbloem was referring to the fight between the IMF and Eurogroup over whether or not Greece will can any meaningful debt relief as “likely to be difficult.” And if that’s what Dijsselbloem meant he was likely correct. Especially given the opposition from to not only outright debt forgiveness but even just freezing the interest rate Greece pays on its debt to the Troika:

    Greek Reporter

    German Newspaper: Schaeuble Says ‘No’ to Freezing of Interest Rates for Greece

    By Philip Chrysopoulos
    Mar 29, 2017

    Germany says ‘No’ to freezing of interest rates for the Greek debt until 2040 because that would cost creditors 120 billion euros, according to German financial newspaper Handelsblatt.

    In a report regarding the issue of Greek debt relief, Handelsblatt says that German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble are against the proposal of freezing interest rates until 2040.

    The report relies on German Ministry of Finance documents in which there is an estimation that possible freezing of interest rate payments on the Greek loans would end up costing lenders 120 billion euros. Such a rate freeze would amount in fact to “extended new loans,” members of the finance ministry note in the document.

    According to the newspaper report, in April, Schaeuble will travel to Washington for the International Monetary Fund Spring Meeting. There, “behind closed doors,” the Greek crisis would be negotiated again, notes the report, and IMF Managing Director Christine Lagarde would press for Greek debt relief, to which the German finance minister will reply “No.”

    The Handelsblatt report explains the conflict between Berlin and IMF on whether and under what conditions the Fund will participate financially in the third rescue program for Greece. As noted, despite public assurances by Schaeuble that the IMF will participate, “in the background there are completely different messages. (…) The Fund shall in no way abandon its demand for further cuts in servicing the (Greek) debt, even if the German finance ministry likes to show it is so.”

    The German minister of finance agrees for debt relief measures after the completion of the current program in 2018, but not as extensive as one equaling to a new rescue package. According to the report, “the German finance ministry expects interest rates (for Greece) will reach an increase of 3.3% in 2040.”

    Respectively, the report continues, the German chancellor has expressed her position that she imagines a further extension of the loan repayment period, but not a ceiling on interest rates. However, she noted that, “before embarking on discussions about debt relief, (Greece) needs to complete the second evaluation of the program.”

    “According to the newspaper report, in April, Schaeuble will travel to Washington for the International Monetary Fund Spring Meeting. There, “behind closed doors,” the Greek crisis would be negotiated again, notes the report, and IMF Managing Director Christine Lagarde would press for Greek debt relief, to which the German finance minister will reply “No.”

    That’s the plan according to a recent Handelsblatt report: Schaeuble is going to head to Washington some time in April to hammer out the details of the terms of the second tranche the “bailout”. Presumably soon since Greek just agreed to all the austerity demands. And when the IMF demands that Greece get some substantial debt relief Schaeuble will say “No.” And also say “No” to even freezing interest rates. And Merkel will back him up on that.

    But Schaeuble does say he’s open to maybe some sort of extension on Greece’s Troikan loans that he’ll maybe negotiate in 2018 when the next bailout is being negotiated. But he still won’t agree to an interest rate cap on those loans. Just loan extensions. And they’re just talking about a rate cap until 2040. So Schaeuble’s long-term plan is for some sort of officially sanctioned national shake-down that supposed to go on for decades:


    In a report regarding the issue of Greek debt relief, Handelsblatt says that German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble are against the proposal of freezing interest rates until 2040.

    The Handelsblatt report explains the conflict between Berlin and IMF on whether and under what conditions the Fund will participate financially in the third rescue program for Greece. As noted, despite public assurances by Schaeuble that the IMF will participate, “in the background there are completely different messages. (…) The Fund shall in no way abandon its demand for further cuts in servicing the (Greek) debt, even if the German finance ministry likes to show it is so.”

    The German minister of finance agrees for debt relief measures after the completion of the current program in 2018, but not as extensive as one equaling to a new rescue package. According to the report, “the German finance ministry expects interest rates (for Greece) will reach an increase of 3.3% in 2040.”

    Respectively, the report continues, the German chancellor has expressed her position that she imagines a further extension of the loan repayment period, but not a ceiling on interest rates. However, she noted that, “before embarking on discussions about debt relief, (Greece) needs to complete the second evaluation of the program.”

    “Respectively, the report continues, the German chancellor has expressed her position that she imagines a further extension of the loan repayment period, but not a ceiling on interest rates”

    So Schaeuble is hinting at debt relief talks in 2018, but warns that it’s debt relief that is not nearly what the IMF is calling for. And Merkel says she’s open for extending the loans. But no interest rate ceiling. So it sounds like loan extensions are the awesome “debt relief” Merkel and Schaeuble are going to offer next year. So Greece can go through periodic “negotiations” like this even longer.

    It’s all a reminder that while an abundance of multilateral negotiations between member states is one of the fundamental characteristics of how the EU gets almost everything done, those negotiations don’t actually seem to involved very much negotiating. Except between Merkel and Schaeuble. So it’s worth noting that back in 2015, when asked what the difference was between Merkel and Schaeuble on Greece’s debt, Merkel replied that she’s up for no “haircut” debt forgiveness, but maybe loan extensions and/or interest rate cuts. And now she’s not even for the interest rate cuts. Just maybe the loan extension after Greece finishes agreeing to like 3-5 years of more insane austerity that’s destroying its society. So in terms of the real negotiating going on over Greece’s “bailout” terms, Schaeuble vs Merkel, Schaeuble is winning:

    Reuters

    Angela Merkel’s coalition split over Wolfgang Schaeuble’s Greece opposition
    Influential finance minister has threatened to resign if further Greece concessions made

    By Reuters

    11:33PM BST 20 Jul 2015

    German Chancellor Angela Merkel has tried to restore calm to her coalition government after tensions tied to bailout negotiations with Greece burst out into the open, laying bare resentment among the highest-ranking ministers in her cabinet.

    Her vice chancellor Sigmar Gabriel, who is also economy minister and leader of the Social Democrats (SPD), coalition partner to Merkel’s conservatives, broke ranks and criticised Finance Minister Wolfgang Schaeuble for raising the prospect of a Greek exit from the euro zone in the rescue talks.

    Schaeuble, the influential 72-year-old minister who has pressed a hard line with Greece for months, was unrepentant and even suggested that he would be prepared to step aside if Merkel objected to his negotiating tactics.

    The rare public feuding underscored the toll that months of hard-fought talks with Greece has taken on Merkel’s coalition, which has come under harsh criticism abroad for dangling the prospect of a “Grexit” as it pushed Athens to agree to a long list of economic reforms.

    The Greece saga has also stretched Merkel, Europe’s most powerful leader, to the political limit. Schaeuble’s hardline stance and deep scepticism towards Greece in the German population has pushed her towards a tough line at a time when Gabriel’s SPD and key European partners like France favoured a more conciliatory approach.

    Gabriel, in an interview with broadcaster ZDF, referred to a “huge conflict” between Schaeuble and Merkel, and criticised the finance minister, who is a member of the chancellor’s conservative party, for suggesting that Greece take a five-year “time-out” from the euro zone to address its economic problems.

    “In my opinion it wasn’t sensible to make this suggestion as a German suggestion,” said Gabriel, referring to it as a provocation to his party.

    “I’d say one should have done that differently, especially as he knew that we Social Democrats are only prepared to talk about Greece leaving the euro zone solely in the case that the Greeks want that themselves,” Gabriel said.

    Schaeuble, in an interview with weekly magazine Der Spiegel, was asked about differences of opinion with Merkel over Greece and appeared to signal that he would rather resign than be forced to defend a position he did not believe in.

    “Politicians’ responsibilities come from the offices they hold. Nobody can coerce them. If anyone were to try, I could go to the president and ask to be relieved of my duties,” Schaeuble said.

    The veiled threat was unusual coming from Schaeuble, who despite a difficult history and occasional disagreements over tactics, has remained loyal to Merkel throughout the euro crisis.

    In recent months, his hard line has made him a darling of the Greece-sceptic conservative wing of Merkel’s Christian Democratic Union (CDU) and losing his support would be a serious blow to her.

    A YouGov poll published on Sunday showed that a majority of Germans disapprove of the planned deal with Greece, in which it would agree to implement far-reaching reforms in exchange for up to 86 billion euros in aid. Around one in two would have preferred to see the troubled country quit the euro zone.

    In the ARD interview, Merkel reiterated that Greece could not be granted a “haircut”, or face value writedown of its debt, as long as it remained a member of the eurozone. But she raised the prospect of extending the maturity of Greek debt or slashing the interest rates on loans if the first review of a third bailout was successfully completed.

    In comments that are likely to please British Prime Minister David Cameron, Merkel also called for changes to be made to the EU treaty, saying an overhaul was needed to enshrine closer economic cooperation and embed legislation on Europe’s rescue fund, known as the European Stability Mechanism (ESM).

    Cameron is pushing for a commitment to treaty change before a British referendum on its EU membership, most likely in 2017.

    “There are a lot of member states that are worried about touching the treaties. This concern shouldn’t prevent us from doing what is right and important,” she said.

    “In the ARD interview, Merkel reiterated that Greece could not be granted a “haircut”, or face value writedown of its debt, as long as it remained a member of the eurozone. But she raised the prospect of extending the maturity of Greek debt or slashing the interest rates on loans if the first review of a third bailout was successfully completed.

    That was back in July of 2015 near the heights of the Greek game of chicken showdown with the Troika over all it’s austerity. And Merkel’s position was maybe loan extensions and rate cuts. While Schaeuble talks about giving Greece a five year “timeout” if Syriza and the Greek people didn’t cave to his demands. Literally. That’s how is seemed to worked. And Merkel couldn’t override Schaeuble even if she wanted to because of Schaeuble’s popular support. His hard line stance on Greece made him a darling of the CDU base. Plus Schaeuble was threatening to quit if Merkel forced him to change his stance. And considering one of the big excuses for Greece not getting any debt relief during the current negotiations is the upcoming German election in the Fall and damage it would do to Merkel (in sharp contrast to how the Troika timed the 2019 pension cuts Greece just agreed to to hit right before Syriza faces big election):


    Schaeuble, in an interview with weekly magazine Der Spiegel, was asked about differences of opinion with Merkel over Greece and appeared to signal that he would rather resign than be forced to defend a position he did not believe in.

    “Politicians’ responsibilities come from the offices they hold. Nobody can coerce them. If anyone were to try, I could go to the president and ask to be relieved of my duties,” Schaeuble said.

    The veiled threat was unusual coming from Schaeuble, who despite a difficult history and occasional disagreements over tactics, has remained loyal to Merkel throughout the euro crisis.

    In recent months, his hard line has made him a darling of the Greece-sceptic conservative wing of Merkel’s Christian Democratic Union (CDU) and losing his support would be a serious blow to her.

    A YouGov poll published on Sunday showed that a majority of Germans disapprove of the planned deal with Greece, in which it would agree to implement far-reaching reforms in exchange for up to 86 billion euros in aid. Around one in two would have preferred to see the troubled country quit the euro zone.

    “In recent months, his hard line has made him a darling of the Greece-sceptic conservative wing of Merkel’s Christian Democratic Union (CDU) and losing his support would be a serious blow to her”

    It’s a fascinating dynamic in the EU power structure: given the dominant role Germany’s financial sector has in Europe, the built in advantage that Germany’s Finance Minister has in terms of political successes makes them a likely favorite politician. Because the German Finance minister’s word is apparently the final word on matters regarding intra-EU/eurozone financial matters. And if they get popular and threaten to resign if they don’t get their way like Schaeuble did (and is presumably still doing), a popular German finance minister can truly become the most powerful person in any EU/eurozone-wide negotiation involving the banks because his say can become final on Eurogroup matters. And that makes the opinions of CDU and SPD hard core political bases immensely powerful. And all this gives a free excuse for “politics” to be the root cause of EU policies like the Greek bailout nightmare which is sort of true of you ignore the powerful interests influencing those bases. The German electorate is inevitably going to be extra important in big expensive decisions like Greek bailout or the general way the way the EU works or things like the current Troika negotiation that’s going to promise five more years of more austerity to run large surpluses at the cost of poorer children and slashed pensions. And the CDU’s base still loves Wolfgang Schaeuble is heading. And now he’s heading to Washington to meet the IMF to negotiate how he’s going to tell them “No” about anything other than a loan extension.

    Taken together, it would appear that Wolfgang Schaeuble is quite possibly the most powerful man in Europe. When it comes to things involving the eurogroup Schaeuble is the shot caller because Germany has the biggest financial clout. And that’s just how things work in the EU/eurozone when a country ends up in Greece’s situation. And now that Greece agreed to basically Schaeuble’s terms (with possible funds for poor children if things go well) Schaeuble is coming to Washington DC soon to negotiate the debt relief the IMF demanded. The debt relief that the IMF insists it must get if it’s going to participate. And if that keeps happening, Schaeuble will get his way once again. With a few minor concession no doubt. But it will be no debt relief for Greece. Maybe loan extensions only to extend the madness. That’s probably what’s going to happen. Greece signs on for five more years of madness and gets loans extensions maybe next year. Unless the unprecedented happens. We’ll find out when Schaeuble comes to Washington.

    It’s like Mr. Smith goes to Washington but the opposite in a stunning number of ways. Bizarro Mr. Smith goes to Washington scenario. Happening soon. Greece is about to get the austerity screws tightened big time for the next five years in exchange for talks on loan extensions. When the German Finance minister is a far-right super scrooge central banker political rock star who manages to become the most powerful man in Europe and then he goes to Washington to tell the IMF how it’s going to be and Greek poor kids can shove it that’s definitely Bizarro Mr. Smith territory.

    Posted by Pterrafractyl | April 7, 2017, 10:23 pm
  38. If it seemed like biggest risk of another ‘Grexit’-style showdown following Greece’s acceptance of the Troika’s austerity demands Friday is now the risk of the collapse of the upcoming negotiations between Wolfgang Schaeuble and the IMF over what, if any, debt relief Greece will receive in order to meet the IMF’s demands that Greece’s debt repayment schedule seem feasible, here’s a reminder that there’s still the risk that the IMF will capitulate in its negotiations with Schaeuble and get almost no debt relief and then Greece just might refuse to implement the austerity it just agreed to:

    Reuters

    Greek PM says debt relief is a condition for more austerity

    By Renee Maltezou and George Georgiopoulos | ATHENS
    Sun Apr 9, 2017 | 6:53am EDT

    Greece will implement additional austerity measures agreed with its official creditors on condition of further debt relief that will enable the country to be included in the ECB’s bond buying scheme, Prime Minister Alexis Tsipras said on Sunday.

    Athens struck a deal with its international creditors at Friday’s meeting of euro zone finance ministers in Malta on key elements of a reform package that could unlock bailout funds for the country to help it repay maturing debt in July.

    “Medium-term debt relief measures, able to include us in (the ECB’s) quantitative easing, and a fiscal path that will not be unattainable, is the condition for us to implement the measures we decided,” Tsipras told his leftist Syriza party’s central committee.

    Athens agreed to take measures that will cut government spending on pensions by 1.0 percent of economic output in 2019, a year after its current 86 billion euro bailout program expires.

    It also committed to tax reforms in 2020 to generate additional revenue equal to another 1 percent of gross domestic product, mainly by lowering the current income tax exemption threshold.

    To make the deal more palatable for Greece the lenders agreed that if budget savings targets are exceeded, Athens will be allowed to implement relief measures to boost the economy.

    “What was decided in Malta … renders the horizon for the country’s exit from supervision visible,” Tsipras said, in a bid to drum up support for the difficult measures his lawmakers will need to legislate.

    “After Malta, the road opens for specifying measures on debt relief. This will send a clear message that the crisis is behind us,” he said.

    Greece is aiming for a budget surplus before debt servicing outlays of 3.5 percent of GDP in 2018, a level it will have to maintain thereafter over the “medium term”.

    There is no agreement yet on what exactly “medium term” means as euro zone ministers did not discuss this during Friday’s meeting.

    “”Medium-term debt relief measures, able to include us in (the ECB’s) quantitative easing, and a fiscal path that will not be unattainable, is the condition for us to implement the measures we decided,” Tsipras told his leftist Syriza party’s central committee.”

    That’s Tsipras’s warning: no QE from the ECB, no austerity from Greece. The deal is off. At which point the Greek tragedy presumably reenters immediate crisis mode. And what’s going to be required for the ECB to allow Greece to join the QE program? If what ECB chief Mario Draghi warned back in February is still the conditions, the ECB has a stance very similar to the IMF: The ECB needs to be assured that Greece’s debt is sustainable. Of course, keep in mind that the Eurogroup of eurozone finance ministers which is doing the bulk of the negotiating for the EU’s side thinks its no-debt-relief proposal championed by Wolfgang Schaeuble and Angela Merkel are sustainable for Greece too. They’re justification for no debt relief is in fact based on extreme optimism about the sustainability of Greece’s debt.

    So the question of whether or not the ECB will allow Greece’s bonds to participate in the QE program comes down to one basic rule: the Scroogier the debt relief for Greece, the more optimistic the ECB needs to be to allow Greece into the QE program. Optimistic that the screwing of Greece isn’t so usurious that is ends up strangling the Greek economy to the point where it can’t make it’s payments. That’s underlying formula is going to be playing a big role in determining the fate of this phase of the Greek ‘bailout’. Assuming the warnings Draghi made back in February are still in force:

    Financial Times

    Mario Draghi lays out Greek QE hurdles amid bailout jitters

    by: Mehreen Khan
    February 6, 2017

    Greek government bonds will only be included in the European Central Bank’s major stimulus measures after the central bank has deemed the country’s debt to be sustainable, Mario Draghi has said.

    Laying out the hurdles to Greece’s inclusion into ECB quantitative easing, Mr Draghi told MEPs in Brussels that central bank policymakers would need to make their own “independent” assessment of the country’s debt dynamics, amid warnings from the International Monetary Fund that Greek debt was on an “explosive” path.

    Questions hang over the fate of Greece’s current three-year bailout programme, with the IMF due to make a major decision on its participation in the rescue later this month. Greece’s 10-year bond yields had surged to a two-month high on the jitters.

    Greece’s creditors in Brussels and the IMF have been at loggerheads over the level of the debt restructuring and budget surplus targets baked into its €86bn bailout, while Athens has long called on the ECB to ease its debt pressures by snapping up the country’s bonds under its asset purchase programme which has been running since March 2015.

    Mr Draghi however said the move would only be considered once EU and IMF creditors had agreed on what medium term debt relief measures would be granted to the country after 2018 and after finance ministers sign off on the country’s second bailout review.

    It is only then “the governing council in full independence will express its own assessment of debt sustainability based only on its own risk management considerations”.

    Greece’s current debt to GDP pile stands at 180 per cent of GDP but could swell to over 200 after 2022 without a major debt restructuring, according to the IMF.

    “Laying out the hurdles to Greece’s inclusion into ECB quantitative easing, Mr Draghi told MEPs in Brussels that central bank policymakers would need to make their own “independent” assessment of the country’s debt dynamics, amid warnings from the International Monetary Fund that Greek debt was on an “explosive” path.”

    If the ECB doesn’t independently conclude that Greece’s debt is going to be sustainable after the final debt relief terms of the deal are worked out, then no QE from the ECB for Greece’s bonds right when they reenter the bond markets. That’s what ECB chief Mario Draghi was warning back in February. Well, here we are with the final deal almost in place. The IMF and key EU figures like Wolfgang Schaeuble will all be meeting in DC for the IMF Spring Meeting to negotiate the terms of the ‘bailout’ with the IMF. And after that it sounds like it’s up to the ECB to determine that whatever plan is worked out is sustainable.

    So how optimistic should we expect the ECB to be if the debt relief negotiations don’t go well for Greece and the IMF capitulates and there’s basically no debt relief? Well, so far the ECB has been taking the IMF’s warnings about unsustainability of Greece’s debts without significant debt relief seriously enough for Draghi to issue the warning back in February based on the IMF’s warnings. That makes it seem like the ECB is going to be likely to say ‘no QE’ if the Schaeuble/Merkel faction ends up getting their way.

    But if ‘no QE’ happens, that means no austerity policies from Greece and and the whole ‘bailout’ breaks down and crisis resumes. And then there’s a giant crisis again. At least if Tsipras makes good on the threat he just made and the Greek public backs him up should a showdown ensue. Which may or may not happen. And it’s that ambiguity over whether or not Tsipras would make good on his threat and the public would back him up and threaten to ‘Grexit’ that incentivizes the ECB and IMF to just capitulate and go along with the ‘no debt relief’ demands of the Schaeuble/Merkel-led austerity-faction dominating the EU Commission. And yet utterly screwing Greece with no debt relief after all the new austerity pledges is exactly the kind of meta-F#ck You from the Troika to the Greek people that could fuel the ‘Grexit’ spirit in the Greek populace. That’s the kind of dynamic we’re looking at going into the IMF Sprint Meeting later this month: the only things standing between the current situation and another ‘Grexit’ showdown is the Troika not doing screwing over the Greek people again. Blatantly. If the ECB or IMF avoiding failing the Greece people and don’t both give in to the no-debt-relief demands we might not see a ‘Grexit’ situation soon. In other words, if the Troika doesn’t do what it always does we might not see a ‘Grexit’ situation soon. Uh oh.

    Posted by Pterrafractyl | April 9, 2017, 5:51 pm
  39. Here’s a quick update on one of the other dimensions of the Greek ‘bailout’: the privatizations. First up, 14 airports are now formally owned by a German-led consortium. Yay?:

    Associated Press

    Greece completes airport transfer to German-led consortium

    By Associated Press
    April 11, 2017 at 10:56 AM

    ATHENS, Greece — Greece has formally completed the transfer of 14 regional airports to a consortium led by Germany’s Fraport AG, in a privatization that is a key element of the country’s bailout program.

    The Greek state privatization agency says that under the deal signed Tuesday the consortium has paid a 1.23 billion-euro ($1.3 billion) lump sum.

    It said additional state revenues from an annual lease and a share in airport earnings will reach a total 10 billion euros ($10.62 billion) over the 40-year concession period.

    The 14 airports are Thessaloniki — Greece’s second largest city — Mykonos, Santorini, Rhodes, Corfu, Zakynthos, Kefalonia, Kos, Lesbos, Skiathos, Samos, Chania, Kavala and Aktio.

    “The Greek state privatization agency says that under the deal signed Tuesday the consortium has paid a 1.23 billion-euro ($1.3 billion) lump sum.”

    So long airports. And in exchange fr 14 airports a whole 1.23 billion euros is now freed up to pay back Greece’s Troikan creditors. And note how this includes the airport in Greece’s second biggest city, Thessaloniki:

    The 14 airports are Thessaloniki — Greece’s second largest city — Mykonos, Santorini, Rhodes, Corfu, Zakynthos, Kefalonia, Kos, Lesbos, Skiathos, Samos, Chania, Kavala and Aktio.

    So Greece’s second largest airport was sold off as part of a 1.23 billion euro deal that included 13 other airports (don’t forget that Greece’s is supposed to privatized 55 billion euros worth of assets).

    And in related news, Thessaloniki’s port is also up for sale:

    Market Watch

    Greece gets 3 bids in privatization of key port

    By Nektaria Stamouli
    Published: Mar 25, 2017 7:31 a.m. ET

    ATHENS–Greece has received three binding bids for a majority stake in its second-largest port in Thessaloniki, the state privatizations agency said on Saturday, as the country tries to privatize parts of its infrastructure to meet bailout terms.

    The offers came from Philippines-based International Container Terminal Services (ICTS); Dubai-based Peninsular and Oriental Stream Navigation Company (DP World); and a consortium comprising German private-equity firm Deutsche Invest Equity Partners, Terminal Link (a subsidiary of CMA CGM) and Russian-Greek investor Ivan Savvidis’s group.

    Greece had given investors until March 24 to submit binding bids for a 67% stake in the port. The submissions were tabled at Morgan Stanley in London on Friday. Revenues from the sale and other privatizations are a key part of the country’s ongoing EUR86 billion ($92.77 billion) bailout deal with the European Union and the International Monetary Fund.

    Apart from the price it has to pay for the majority stake, the preferred bidder will have to implement investments of at least EUR180 million within seven years.

    Conflicting interests in the Greek government have threatened to derail attempts to sell state assets to pay down debt and bring in foreign investment, a key element of Greece’s bailout plan. Dockworkers oppose the sale saying it reduces the value of the port.

    Last summer, Greece completed the sale of a 67% stake in the port of Piraeus, the country’s largest, to Chinese shipping company China Cosco Holding Co. for EUR368.5 million.

    Without the billions penciled in from asset sales, Greece would need to tap more loans and eventually would need further debt relief. But the loans are also vital for overcoming investors’ yearslong aversion to putting money into Greece and bringing down a 23% unemployment rate.

    The country must raise some EUR6 billion through the sale of state-controlled assets by 2018, according to the terms of its third bailout agreement with creditors reached in 2015.

    “Greece had given investors until March 24 to submit binding bids for a 67% stake in the port. The submissions were tabled at Morgan Stanley in London on Friday. Revenues from the sale and other privatizations are a key part of the country’s ongoing EUR86 billion ($92.77 billion) bailout deal with the European Union and the International Monetary Fund.

    Yep, Greece selling off itself is a key part of the country’s ‘bailout’ program. It’s either that or ditch the EU. Those are basically the choices Greece is facing. So let’s hope its at least getting a decent price for its second largest port. *fingers crossed*:

    MarineLink

    Greece Calls for Improved Thessaloniki Port Bids

    By Aiswarya Lakshmi
    April 9, 2017

    Hellenic Republic Asset Development Fund (HRADF) asked for improved financial bids from short-listed investors seeking to buy a majority stake in its second-largest port, reports Reuters.

    Greece’s privatization agency (TAIPED) got three offers last month for the sale of a 67 percent stake in Thessaloniki Port, which is required as part of Greece’s international bailout.

    The preferred bid is expected to be announced in mid May.The tender refers to a 40-concession for the port authority with an obligation to invest at least 180 million euros for Greece’s second largest port by 2021.

    Constantinos Mellios, chairman of Thessaloniki Port Authority, had stated that the winner of the tender will take over operations of the port in autumn 2017.

    “Hellenic Republic Asset Development Fund (HRADF) asked for improved financial bids from short-listed investors seeking to buy a majority stake in its second-largest port, reports Reuters.”

    Better luck next time. And there will be a next time since Greece doesn’t have a choice. And the plans are to have the operations of the Thessaloniki port transferred by the autumn. So if anyone ever wanted to buy the second largest port in Greece now might be the time to do it. There’s definitely not a bidding war going on.

    Posted by Pterrafractyl | April 12, 2017, 6:29 pm
  40. Here’s some good news for Greece heading into the big meeting at the IMF Summit this weekend where the EU and IMF will negotiate whether or not the IMF will even participate in the next round for the Greek ‘bailout’: The IMF is convinced that Greece will have no chance of keeping up its current exceptionally high 3.5 percent budget surplus over the next few years. Yes, that’s bad news on the surface, but since the EU is expecting Greece to maintaining that 3.5 percent surplus as a condition for its ‘bailout’ over the next few years, the fact that the IMF thinks that’s not feasible is actually good news since one of the key IMF demands is that Greece be put in a sustainable path if the IMF is going to continue participating. And while it remains to be seen how these negotiations will play out over the weekend, the possibility that the IMF will cave and accept the EU’s (primarily Germany’s) demands that Greece maintain a 3.5 percent surplus (without any debt relief) is a real possibility if the history of these Greek ‘bailouts’ is any indication of what to expect. So at least the IMF hasn’t preemptively caved. Yay. Such is the fate of Greece. Bad news that might prevent worse news is as good as the news gets:

    The Financial Times

    Greece set to miss budget surplus target, warns IMF
    Global fund urges euro area governments to lessen Athens’ debt burden

    by: Gemma Tetlow in Washington
    April 19, 2017 1:01 pm

    Greece is likely to fail to meet one of its most closely watched financial targets next year, according to the International Monetary Fund, raising pressure on euro area countries to ease their demands on Athens if they want the fund to join their bailout programme.

    The fund says a “largely temporary” boost to Greek revenues will dissipate and make it difficult for the country to hit a 2018 target for its primary budget surplus — a measure that excludes debt service costs.

    Fiscal forecasts published by the IMF on Wednesday showed they expect Greek government income to exceed spending, excluding debt interest, by 1.8 per cent of national income this year, after a surplus of 3.3 per cent in 2016.

    But Athens’ surplus is then forecast to increase only marginally to 2 per cent in 2018 — well short of the 3.5 per cent target that is part of Greece’s bailout programme.

    “The surplus in 2016 is likely to have been much stronger than we had expected,” said Vitor Gaspar, director of the fiscal affairs department of the IMF. “But that was largely due to temporary factors.”

    The fund’s view on Greece’s fiscal position is much more downbeat than the European Commission’s. Brussels said in February that strong government revenue last year was mainly caused by “dynamic growth in underlying tax bases” and “augurs well for the achievement of the [surplus] target…in 2018”.

    In contrast the IMF expects Greek government revenues to decline sharply, from 50.3 per cent of national income in 2016 to 47.3 per cent in 2018.

    Greece is in the middle of its third bailout programme since the financial crisis. It is set to receive a total of €86bn from creditors during this phase, which is due to end next year.

    While the IMF joined the first two rounds of the bailout, it has so far refused to participate in this stage.

    Progress on getting the IMF on board was made this month when the Greek government agreed with euro area countries on a package of reforms to pensions and income tax, which will be implemented from 2019.

    But the fund also wants agreement on a target for Greece’s primary surplus beyond 2018.

    Euro area governments have pushed for Greece to maintain a 3.5 per cent surplus for at least three years beyond 2018. However, Mr Gaspar reiterated on Wednesday that “the IMF sees a primary surplus of 1.5 [per cent of national income] as an appropriate level to be sustained over the medium to long run”.

    The IMF’s judgment that Greece will fail to achieve the 3.5 per cent target set for 2018 could put more pressure on euro area governments to rein in their demands. Germany has made clear that it cannot accept further aid being given to Athens without the IMF’s involvement in the bailout.

    The fund also wants euro area governments to say what debt relief they would be willing to provide to Greece.

    “Ensur[ing] that Greek debt is sustainable…require[s] a second leg of this programme for Greece, which is debt restructur[ing] on the part of official creditors,” said Mr Gaspar on Wednesday. So far euro area governments have resisted agreeing to any debt relief for Greece.

    An agreement on the details will need to be reached quickly if the IMF is to join the programme before the next tranche of funding is due, which Greece needs in order to make debt repayments of €6bn due in July.

    “The fund’s view on Greece’s fiscal position is much more downbeat than the European Commission’s. Brussels said in February that strong government revenue last year was mainly caused by “dynamic growth in underlying tax bases” and “augurs well for the achievement of the [surplus] target…in 2018”.”

    Brussels just can’t contain its optimism about Greece. Its incredibly cruel and cynical optimism about Greece that isn’t just optimism but also a condition for Greece to continue receiving those ‘bailout’ funds in coming years:


    Fiscal forecasts published by the IMF on Wednesday showed they expect Greek government income to exceed spending, excluding debt interest, by 1.8 per cent of national income this year, after a surplus of 3.3 per cent in 2016.

    But Athens’ surplus is then forecast to increase only marginally to 2 per cent in 2018 — well short of the 3.5 per cent target that is part of Greece’s bailout programme.

    The IMF isn’t quite as optimistic as the EU. Again, yay. But let’s also not forget that the IMF’s pessimism hasn’t just be used as an argument for why the EU should be granting Greece some sort of debt relief. That IMF pessimism has also been used as an argument for why Greece should employ more austerity than originally planned. And that’s a big reason why we shouldn’t necessarily expect the IMF’s resolve to hold. The IMF and EU have been engaged in a ‘goodish-bad cop/deplorable cop’ routine the entire time.

    So we’ll see what emerges from the upcoming negotiations. Will the IMF cave? Might Berlin back down? Those appear to be the two possible outcomes. Although we can’t rule out something like a mini-bailout that just last a year and leaves all these questions (like debt relief) unresolved. We definitely can’t rule that last option out:

    Reuters

    IMF may fund Greek bailout with small amount, for one year: government

    Thu Apr 20, 2017 | 7:52am EDT

    The International Monetary Fund may finance Greece’s current bailout program with a small amount for one year, the country’s government spokesman said on Thursday, adding that the issue was under discussion between Athens and its creditors.

    Greece’s current bailout, its third since the debt crisis broke out seven years ago, ends in 2018. The second review of its progress on reforms has dragged on for months, mainly due to a rift between the EU and the IMF over its fiscal targets.

    “What is under discussion is a small IMF funding program, which will last for one year and end at the same time with the ESM (European Stability Mechanism) program, in August 2018,” Dimitris Tzanakopoulos told reporters.

    Greece wants to conclude the review as soon as possible to receive bailout loans to pay off debt maturing in July.

    The review will also help the country qualify for inclusion in the European Central Bank’s quantitative easing program, which would help its return to bond markets before its program ends.

    Prime Minister Alexis Tsipras faces national elections in 2019.

    But the review talks have dragged on and the IMF has not yet decided whether to join the latest bailout. The fund’s participation is seen as a condition for Germany to unlock new funds to Greece.

    Athens hopes to discuss the fund’s participation, its post-bailout fiscal path and the prospect of further debt relief at the sidelines of the International Monetary Fund’s spring Meetings in Washington this week.

    Greek Finance Minister Euclid Tsakalotos is expected to meet the IMF’s Chief Christine Lagarde and German Finance Minister Wolfgang Schaeuble on Friday.

    It is unlikely that the bailout review will be wrapped up before May 22, when euro zone finance ministers are set to meet in Brussels to discuss the Greek issue, the spokesman said.

    “I don’t think it is possible to make it, to conclude the bailout review before May 22,” Tzanakopoulos said.

    “”What is under discussion is a small IMF funding program, which will last for one year and end at the same time with the ESM (European Stability Mechanism) program, in August 2018,” Dimitris Tzanakopoulos told reporters.”

    That appears to the “Option C” on the table now: keep all the austerity Greece agreed to in place, keep the IMF in the program, and push the debt relief talks back to 2018. And considering the extreme opposition from Berlin over any debt relief whatsoever at this point it’s hard to see what Option C isn’t going to be Option A. Especially now that we have reports that this is under discussion.

    And let’s not forget that both Angela Merkel and Wolfgang Schaeuble have previous hinted that the earliest they’ll even consider debt relief for Greece is in 2018. But let’s also not forget that they both indicated that the only debt relief they’ll consider in loan extensions. That’s it.

    So get ready for a very disappointing “let’s put this on hold for a year” resolution to the big IMF/EU negotiations this weekend. And if that does indeed happen, note the insane dynamic that emerges thanks to the conflicting levels of optimism over Greece’s ability to maintain a 3.5 percent surplus: As we saw above, the IMF is already project that Greece will only be able to achieve a 2 percent budget surplus in 2018, well short of the 3.5 percent demanded by the bailout conditions. So if the mini-bailout option happens, the surplus Greece manages to achieve over the next year is going to be a highly charged number. Even more so than normal because it’s going to be a test of whether or not the IMF’s pessimism gets validated.

    And let’s assume Greece does manage to eek out a 3.5 percent surplus…well, that’s just going to be used by the Greece’s EU creditors as a justification for ignoring the IMF and keeping that 3.5 percent surplus demand in place. In other words, if Greece has another ‘good news’ budget surplus over the next year, that could be really bad news for Greece. And its EU creditors know this and want to see that bad news happen. And that likely means they’re going to turn the austerity screws extra hard over the next year to ensure that Greece hits that 3.5 percent surplus. And Greece is going to have more incentive than ever to not hit that surplus target because it’s just going to mean more insane austerity going forward.

    That’s all part of the dynamic heading into this weekend’s negotiations. Bad expectations is good news for Greece right now and great news on Greek surpluses over the next year is really, really bad news for future years. So wish Greece luck! Although not too much luck. It’s complicated.

    Posted by Pterrafractyl | April 20, 2017, 8:40 pm
  41. Here’s another update on the seemingly endless negotiations between Greece and its EU/IMF creditors: while there still no agreement on whether not Greece will get any some sort of debt relief – which means there’s still no agreement on whether or not the IMF will be participating in the next round of ‘bailouts’ – there was one agreement reached this week: an agreement to implement 140 specific austerity measures as a prerequisite for the release of the next tranche of funds so Greece can avoid a default in July. And Brussels is now pressuring Greece to implement all of those austerity measures in one giant legislative package within days. So that’s basically the update. The austerity demands that Greece’s creditors have always had are now more specific demands and Greece is expected to implement them all within days. But the debt relief? Still no agreement:

    The Financial Times
    fastFT

    Brussels presses Greece on reforms to unlock €7bn bailout

    by: Rochelle Toplensky, Arthur Beesley
    May 5, 2017 10:50 AM

    Brussels is pressing Greece to pass a single legal act within days to execute dozens of contentious economic reforms as eurozone ministers prepare to unlock around €7bn in new rescue loans for the country.

    The reforms will also clear the way for talks with Athens on new debt-relief measures, but EU officials have insisted that formal steps won’t be taken until its current bailout programme ends in the summer of 2018.

    Despite progress in the long-stalled bailout, officials said uncertainty over the outcome of the talks was a drag on the country’s economy. The growth forecast for 2017, to be published on May 11th, will be revised down from 2.4 per to close to 2 per cent, a European official said.

    Greece and inspectors from the EU/International Monetary Fund struck a deal early on Tuesday to implement a package of 140 separate actions in return for a new round of aid from the European Stability Mechanism bailout fund.

    This process is already well in train, but new legislation is required to execute around 60 actions including healthcare changes, increasing the powers of the new independent revenue agency, the rollout of a guaranteed minimum income scheme and labour market reforms.

    The package also includes two additional fiscal measures from 2019 — cuts to pensions and income tax credits, each costing 1 per cent of gross domestic product. These may be offset by additional social spending if Greece continues to exceed its target for the primary budget surplus, which is the surplus before debt repayments.

    Greece aims to implement all of this in an omnibus legal act by May 18th, an ambitious timetable that concludes four days before eurozone finance ministers gather to sign off on the new loan.

    The payment is required to help Greece make a big debt repayment in July.

    Attention has again turned to the country’s campaign for debt relief from its international creditors, a constant source of tension given the IMF’s reluctance to join the bailout without steps to reduce a debt load it considers unsustainable.

    Germany has insisted the IMF must join the programme, but it remains hostile to the idea of a debt haircut, as it is the biggest single contributor to a bailout that will exceed €180bn once the next loans are issued.

    In a letter this week to Germany’s Frankfurter Allgemeine Zeitung, a top ESM official said it should be recalled that “the principle that nominal debt relief (‘haircut’) is not possible.”

    Still, eurozone finance ministers agreed a year ago to discuss a range of other medium- and longer-term measures once Greece meets conditions set for the current programme. In Brussels this week, senior officials poured cold water over German reports that plans were already in motion to swap some the country’s IMF loans with cheaper ESM loans.

    Athens has beaten its financial targets. The primary surplus reached 4.2 per cent of economic output in 2016, well ahead of the 0.5 per cent of GDP target for the year and even beating the 3.5 per cent goal for 2018.

    The European official said a number of one-off events contributed to that over-performance. But bailout inspectors have comfort that structural reforms are starting to deliver results, saying this was confirmed by the broad over-performance across a range of tax revenue targets.

    “Greece and inspectors from the EU/International Monetary Fund struck a deal early on Tuesday to implement a package of 140 separate actions in return for a new round of aid from the European Stability Mechanism bailout fund.”

    The ‘austerity for cash’ deal that Greece and the Troika have been working on for years now is one step closer to getting finalized. 140 additional austerity measures are specified and Greece appears to have agreed to them. And yet the debt relief part of the deal – which the IMF continues to demand and which the IMF and EU apparently couldn’t reach an agreement on during the IMF Summit a couple weeks ago – is still completely unresolved. And while there were reports that various debt relief proposals were under discussion those reports were refuted:


    Attention has again turned to the country’s campaign for debt relief from its international creditors, a constant source of tension given the IMF’s reluctance to join the bailout without steps to reduce a debt load it considers unsustainable.

    Germany has insisted the IMF must join the programme, but it remains hostile to the idea of a debt haircut, as it is the biggest single contributor to a bailout that will exceed €180bn once the next loans are issued.

    In a letter this week to Germany’s Frankfurter Allgemeine Zeitung, a top ESM official said it should be recalled that “the principle that nominal debt relief (‘haircut’) is not possible.”

    Still, eurozone finance ministers agreed a year ago to discuss a range of other medium- and longer-term measures once Greece meets conditions set for the current programme. In Brussels this week, senior officials poured cold water over German reports that plans were already in motion to swap some the country’s IMF loans with cheaper ESM loans.

    So according to the available reporting at this point, if there are any debt relief discussions the Troika apparently doesn’t want anyone to know about them. And when you look at the scenario that was reportedly discussed – that the ESM takes over the IMF’s loans to Greece which will count as debt relief because it will be at a lower interest rate – it sounds an awful lot like a discussion to remove the IMF from the program entirely. And what was the IMF’s core demand if it was going to stay in the program? Substantial debt relief for Greece. So you have to wonder if these refuted debt relief discussion were actually discussion about having the ESM take over for the IMF because the IMF is going to leave the program due to EU (primarily German) opposition to any sort of debt relief. While it’s difficult to guess what exactly the situation is, when you look at the other forms of debt relief that were reportedly under consideration and note that they were nothing remotely approaching the kinds of “substantial” debt relief that the IMF is demanding, it’s looking increasingly likely that those refuted debt relief discussions were probably discussions about relieving the IMF of its role in Greece’s ‘bailouts’:

    Reuters

    Germany says no debt relief being prepared for Greece

    Thu May 4, 2017 | 4:46pm EDT

    No debt relief measures are being readied for Greece, Germany’s Finance Ministry said on Thursday after the Handelsblatt business daily reported measures were under consideration.

    The implementation of reforms that Greece agreed to in return for aid would help ensure the sustainability of the country’s debt, the ministry said in a statement e-mailed to Reuters.

    “No debt relief is being prepared,” it added.

    Regarding possible debt measures, a clear agreement was reached in a statement by the Eurogroup of euro zone finance ministers last May.

    “According to that, after the full implementation of the adjustment program, there will be an assessment of whether debt measures are necessary. That still applies,” it said.

    Earlier, Handelsblatt reported that Greece’s international lenders were preparing possible debt relief for Athens for discussion by the finance ministers.

    The European Commission, the ESM euro zone rescue fund, the European Central Bank and the International Monetary Fund (IMF)had prepared various debt measures in a document to be sent to the Eurogroup for further discussion, it said, citing people familiar with the document.

    One option was for the ESM to take over loans paid out by the IMF. The advantage would be lower interest rates charged by the ESM.

    Others included extending debt maturities and having the ECB and national central banks send profits made on Greek bonds to Athens through national governments, Handelsblatt reported.

    An EU source told Reuters the document was originally a paper by the ESM, not all four institutions, and had been modified on the way to the version Handelsblatt saw.

    “It lays down several options for the restructuring of Greek debt and specifies possibilities which were given by the Eurogroup last May. One of the options still is that ESM would take debt from IMF,” the source said.

    “It is not clear yet if the IMF would agree on that.”

    “Earlier, Handelsblatt reported that Greece’s international lenders were preparing possible debt relief for Athens for discussion by the finance ministers.”

    So Handelsblatt reported on an intra-Troikan meeting over possible debt relief for Greece and the next day the German Finance Ministry is declaring that “no debt relief is being prepared.”

    But, again, even if the Handelsblatt report was accurate, look at what was allegedly actually discussed:


    The European Commission, the ESM euro zone rescue fund, the European Central Bank and the International Monetary Fund (IMF)had prepared various debt measures in a document to be sent to the Eurogroup for further discussion, it said, citing people familiar with the document.

    One option was for the ESM to take over loans paid out by the IMF. The advantage would be lower interest rates charged by the ESM.

    Others included extending debt maturities and having the ECB and national central banks send profits made on Greek bonds to Athens through national governments, Handelsblatt reported.

    even if the Handelsbatt report is accurate, the debt relief measures ranged from having the ESM take over the IMF’s loans at a lower interest to extending the maturities of Greece’s bonds or maybe having the interest earned on Greek bonds by EU central banks sent back to Greece. While those would certainly be helpful changes, they aren’t remotely close to the substantial debt relief the IMF is demanding. And yet the mere hint of such discussions triggered a vociferous denial from Germany’s Finance Ministry.

    Overall, what we can say for certain at this point is the same thing we could say for certain ever since Greece agreed to stick with the eurozone and drop the threat of a ‘Grexit’: Greece is getting a lot more austerity. And also that any future debt relief for Greece is a highly uncertain prospect. That’s something we’ve sadly been able to say with certainty for years.

    But when we consider both the ongoing refusal of the IMF to sign on to the next bailout without substantial debt relief with these refuted reports of talks that would see the ESM take over the IMF’s creditor role, it’s looking increasingly likely that the IMF is on the way out and some sort of joke debt relief offered exclusively by the EU is the only debt relief Greece is going to be offered. If any is offered at all.

    So what’s next? Well, based on the recent comments by Greece’s Prime Minister Alexis Tsipras, a very tense May 22 Eurogroup meeting:

    Reuters

    PM Tsipras says Greece has done its bit, now wants debt relief

    By Renee Maltezou | ATHENS
    Thu May 4, 2017 | 4:46pm EDT

    Prime Minister Alexis Tsipras called on Greece’s international lenders on Thursday to reach an agreement on easing its debt burden by May 22, when euro zone finance ministers meet in Brussels to discuss the bailout progress.

    Athens and its creditors reached a long-awaited deal this week on a series of bailout reforms Greece needs to unlock loans from its 86-billion euro rescue package, the country’s third since in 2010.

    The European Union and the International Monetary Fund, which has yet to announce if it will participate in the bailout, have now started negotiations over Greece’s post-bailout fiscal targets, a key element for granting it further debt relief.

    “Medium-term debt relief measures must be clearly defined by the May 22 Eurogroup meeting,” Tsipras told his cabinet on Thursday, referring to the finance ministers. “Greece has done its part and all parties must now fulfill their commitments.”

    An agreement on debt relief measures may help bring the IMF on board. It will also allow Greece to wrap up its formal bailout review after six months of tense talks, help it qualify for inclusion in the European Central Bank’s bond-buying program, and let it return to bond markets.

    Greece’s debt stands at 179 percent of gross domestic product. Under discussion are its targets for a primary surplus, which excludes debt servicing cots, over a decade.

    Tsipras’ leftist-led government aims to legislate the recently-agreed reforms, which include cutting pensions in 2019 and reducing the tax-free threshold in 2020, by May 17.

    The government, which faces elections in 2019 and is sagging in opinion polls, controls 153 lawmakers in the 300-seat parliament and should succeed. Labor unions have planned a 24-hour anti-austerity strike on the day of the vote.

    “We decided to complete the process by May 17 in order to deprive the Eurogroup of the right to talk about delays and finding excuses to extend the discussions on debt relief,” a government official said after the cabinet meeting.

    “”Medium-term debt relief measures must be clearly defined by the May 22 Eurogroup meeting,” Tsipras told his cabinet on Thursday, referring to the finance ministers. “Greece has done its part and all parties must now fulfill their commitments.””

    Yes, Greece’s government demanded a clearly defined debt relief plan by the May 22 Eurogroup meeting on the same day Germany’s Finance Ministry was denying that any debt relief measures were being discussed at all in response to reports about some completely inadequate debt relief measures being under discussions. So if there’s no substantial debt relief agreed upon soon, not only might the IMF leave the program (assuming it doesn’t cave at the last minute) but the Greek government might once again find itself in a mood for a major showdown. At least those are the signals being sent.

    So the overall update to the Greek situation is that there’s a very interesting meeting coming up in about two weeks. Sure, every meeting involving Greece these days has a ‘make or break’ element to it, but this one is going to be ‘make or break’-ier than usual.

    Posted by Pterrafractyl | May 6, 2017, 12:45 am
  42. So Greece made it official: it’s completely conceding to the EU’s and IMF’s joint demands. Which creates quite a few problems since the EU and IMF were making different demands often based on fundamentally different assumptions.

    The EU was demanding Greece agree to maintain its 3.5 percent annual budget surplus for the next four year (they set a 3-5 year negotiating range earlier) and Greece will be allowed to spend any additional savings on anti-austerity programs for Greece people (which is really mean). Greece agreed to do that and passed provisional stimulus packages that only kick in to the extent they exceed the insanely high 3.5 percent surplus. And the IMF previously and repeatedly called for something closer to a 1.5 percent surplus, viewing the 3.5 percent demands as damaging to the Greek economy (the 1.5 percent surplus demands are damaging too, just not nearly as much). But Greece is going ahead with the EU demands of 3.5 percent surplus for the next four years anyway.

    The IMF was also demanding that Greece pass a bunch of additional austerity measures the IMF says is is needed to make Greece’s debt situation sustainable. Greece did that. The EU doesn’t appear to object to that. Shocker.

    The IMF also demanded of the EU that Greece get substantial debt relief, but the EU is sticking to its position of ‘no outright debt forgiveness but maybe some loan extensions and rate cuts’. Maybe. Maybe not. The EU (mostly German) politics aren’t good for event interest rate caps. That’s what’s reported below. Still, Greece is demanding substantial debt relief like what the IMF is demanding now that it passed all the IMF’s austerity. But the EU is refusing so far and it’s unclear what the IMF is going to say about whether or not it will participate in the final deal if there isn’t significant debt-relief as this showdown approaches the July default deadline. .

    So the EU/IMF debt-relief showdown continues while Greece does the IMF’s extra austerity and the EU’s extra surplus. And in case it wasn’t obvious, it can’t be said that Greece doesn’t do basically everything ask of it and then some while continuing to get mercilessly screwed. For some reason the establishment of this as a precedent doesn’t terrify the rest of Europe. But oh well, mercilessless it shall be:

    Financial Times

    Athens calls on creditors to strike a deal
    Greece says it has pushed through painful reforms and upheld bailout agreement

    by: Jim Brunsden in Brussels
    05/21/2017

    Greece is calling on its creditors to strike a deal that would allow it to honour billions of euros in debt repayments, arguing that it has upheld its side of the bargain by pushing through painful tax and pension reforms.

    IMF officials and eurozone finance ministers will hold talks on Monday intended to pave the way for Athens’ next tranche of bailout aid so that it can make more than €7bn of debt repayments in July.

    “Greece has done its bit, most would say more than its bit,” Euclid Tsakalotos, Greece’s finance minister, told the Financial Times.

    He added that a deal would open the door to the country’s participation in the European Central Bank’s economic stimulus programme and provide “the signal to the markets that so many investors have been waiting for”.

    The aid is dependent on bringing the IMF into the bailout programme as a financial partner.

    But the fund has clashed with Greece’s eurozone creditors and, in particular, Germany, warning repeatedly that the country’s debt is unsustainable.

    In response to the fund’s concerns, Greece has adopted tax, pension and labour market reforms that have brought protesters on to the streets in force. Last week the government was rocked by a 24-hour general strike, with further strikes either planned or under way in the shipping industry and local government.

    In response to the fund’s concerns, Greece has adopted tax, pension and labour market reforms that have brought protesters on to the streets in force.

    The fund also insists that Greece’s eurozone creditors make more specific commitments to debt relief to make Athens’ burden more manageable.

    But Wolfgang Schäuble, the finance minister for Germany, which holds a general election in September and whose public is increasingly resistant to further aid for Athens, argues that the need for further debt relief has yet to be established.

    Pierre Moscovici, the EU’s economy commissioner, echoed Mr Tsakalotos’ call for a swift deal. “It is clear that the Greek authorities are working hard to keep their end of the bargain,” he said. “I hope that all Greece’s partners will now keep theirs.”

    EU officials warn that the Greek programme will run into logistical problems if a deal is not reached soon, especially given that approval procedures will be needed in some national parliaments to sign off the release of bailout aid.

    One senior EU official puts the prospect of an accord on Monday at “50-50”.

    According to people briefed on the talks, the sides have made progress in recent days with a tentative agreement that Greece’s current target of a primary surplus of 3.5 per cent of gross domestic product should be maintained for a further four years after 2018.

    The main forms of debt relief envisaged by euro zone governments are maturity extensions for older bailout loans, and deferral of interest payments. Governments have firmly ruled out any cut in what Greece owes, while interest-rate caps also pose political and practical obstacles.

    The talks have become snarled up on competing IMF and European predictions for Greece’s budget surpluses and growth stretching decades into the future. One person involved said planning debt relief based on the most pessimistic IMF forecasts would lead to Greece not paying off some bailout debts until after 2100, an outcome no one is seriously considering.

    “Pierre Moscovici, the EU’s economy commissioner, echoed Mr Tsakalotos’ call for a swift deal. “It is clear that the Greek authorities are working hard to keep their end of the bargain,” he said. “I hope that all Greece’s partners will now keep theirs.”

    It’s pretty undeniable that Greece is keeping up with the ultimatums handed down. And yet when the EU’s economy commissioner says, “I hope that all Greece’s partners will now keep theirs,” keep in mind that that the word Greece’s partners (primarily other eurozone governments the IMF) don’t have a precise word to keep. That’s part of the the hold up on these negotiations. The IMF and Greece demand some sort of substantial debt relief and German finance minister Wolfgang Schaeuble basically says no and only puts loan extensions on the table. And what’s the word now that Greece completely capitulated to all the demands?


    “The main forms of debt relief envisaged by euro zone governments are maturity extensions for older bailout loans, and deferral of interest payments. Governments have firmly ruled out any cut in what Greece owes, while interest-rate caps also pose political and practical obstacles.

    “Governments have firmly ruled out any cut in what Greece owes, while interest-rate caps also pose political and practical obstacles”. The worst of everything for Greece. That’s what Schaeuble, and therefore the EU, is putting on the table. Still. Even after Greece agreed to everything including the IMF’s extra austerity.

    So, you know, the eurozone is continuing to establish mercilessness as a major precdent for how it’s going to deal with the major debt crisis that will inevitably hit other member states in the future. It’s pretty horrible. That’s news, right? Unless this is a one-off beat down just for Greece and future similar situations for other nations won’t be quite so harsh, in which case this is horrible news for different reasons.

    Either way, there’s another round of talks between the IMF and EU on Greece’s bailout on Monday and the only news we can reasonably expect is an update on the scope of the mercilessness because that’s how powerful the forces of merciless austerity are in the EU at this crucial point in history where all these EU and eurozone precedents are getting established. That’s news, right?

    Posted by Pterrafractyl | May 21, 2017, 4:16 pm
  43. Here’s the latest ‘uh oh’ sign for Greece coming out of the German Finance Ministry: Remember how German Finance Minister Wolfgang Schaeuble has basically said that the only form of debt relief he’ll consider for Greece is a loan extension (and no interest caps)? A remember how Greeced caved to the EU’s demands that Greece maintain a 3.5 percent budget surplus for the next 4 years and is going to be expected to keep running surpluses for many decades to come?

    Well, if you were hoping that maybe Germany would at least consider an interest deferral to help Greece with those historic budget surplus demands in coming decades, you might want to reconsider that hope. Because Germany’s Finance Ministry just forecast how much Greece would effectively save if it was allowed to push back any interest payments on its ‘bailout’ debt until 2048, and concluded that this would effective constitute a new loan to Greece in the range of 118-123 billion euros. To put that number in perspective, the 2015 ‘bailout’ and the big showdown over the terms of that bailout that almost led to a ‘Grexit’ was for 86 billion euros in loans. And this current showdown (which has to be resolved soon if Greece going to avoid a default in July) is simply over whether or not Greece has fully implemented all the austerity terms in that 2015 ‘bailout’. So the German Finance Ministry concluded that an interest rate deferral would constitute a loan even larger than the 2015 loan that almost led to a ‘Grexit’ and only didn’t lead a ‘Grexit’ because Greece finally capitulated to Germany’s demands:

    Reuters

    Greek debt relief could mean creditors waiting for up to 123 billion euros: paper

    Fri Jun 2, 2017 | 11:29am EDT

    A Greek debt relief scenario that put back interest payments until 2048 would mean the nation’s euro zone creditors deferring receipt of up to 123 billion euros ($138.7 billion), according to a forecast by Germany’s Finance Ministry.

    The ministry’s calculations, which were contained in a letter to a member of parliament seen by Reuters on Friday, contemplated the various restructuring scenarios laid out by the euro zone bailout fund, the European Stability Mechanism (ESM).

    With such an interest deferral, it would de facto be a new loan with a volume that depends on the development of interest rates,” the document said. “The estimated volume of the deferred interest up until 2048 would be around 118-123 billion euros.”

    The International Monetary Fund (IMF) says it cannot contribute loans to Greece’s current bailout unless it gets assurances that its debt will be sustainable.

    The Fund has estimated that the Greek economy will only grew by 1 percent per year on average and that Greece will return to a primary surplus of 1.5 percent from 2023 after five years at 3.5 percent.

    Greece needs about 7 billion euros in loans from its 86-billion euro rescue package to repay debt maturing in July, but the disbursement hinges on its lenders’ assessment of its bailout progress, the conclusion of the so-called second review.

    ———-

    “Greek debt relief could mean creditors waiting for up to 123 billion euros: paper”; Reuters; 06/02/2017

    “”With such an interest deferral, it would de facto be a new loan with a volume that depends on the development of interest rates,” the document said. “The estimated volume of the deferred interest up until 2048 would be around 118-123 billion euros.””

    Yep, that definitely doesn’t bode well for Greece. And note that the Finance Ministry was talking about interest deferral. It’s not like the interest wouldn’t still be accruing under this scenario. But now that the “123 billion euro” number got officially put out by Germany’s Finance Ministry any talk of an interest rate deferral is going to be framed to the EU public as “OMG, a new 123 billion bailout for Greece!! This is so outrageous! Lazy Greeks!” Or something like that.

    And in tragically related news, PricewaterhouseCoopers (PwC) just put out an analysis on the scale of investment Greece would require soon if it was to have any hope of the kind of robust economic recover that it desperately needs over the next 5 years (a period during which Greece is expected to run a 3.5 percent budget surplus): 268 billion euros. If Greece is going to avoid anaemic growth in coming years that’s how much PwC estimates Greece needs in new investments. Now:

    Ekathimerini

    PwC: Growth to be anaemic in Greece

    01.06.2017 : 22:41

    Greece will need investments of some 268 billion euros in the period from 2017 to 2022 in order to achieve a rapid economic recovery. However, a study by PricewaterhouseCoopers argues that according to projected funding flows, those needs are unlikely to be met.

    The most likely scenario, according to the PwC study, is that Greece will shift from recession into an anaemic recovery due to lack of investment. It notes that “Greece has entered a vicious cycle of recession and credit inadequacy that have fully undermined competitiveness. It is particularly likely that the upcoming recovery will suffer from the lack of funding.”

    The study also highlights the structural difficulties existing in Greece for the realization of systematic large investments. They are summarized by enterprises’ low returns, the nonexistent credit expansion, scanty savings, the shrinking of “soft” financing – mostly originating from the European Commission – and the expansion of nonperforming loans.

    PwC says Greece needs more confidence in the political process and its creditors, the active management of NPLs, an acceleration of infrastructure investment, a revival of the housing market, changes in the framework of the banking system, a mobilization of funds for small enterprises, an increase in soft financing and the stabilization of the tax system.

    ———-

    “PwC: Growth to be anaemic in Greece”; Ekathimerini; 01/06/2017

    “The most likely scenario, according to the PwC study, is that Greece will shift from recession into an anaemic recovery due to lack of investment. It notes that “Greece has entered a vicious cycle of recession and credit inadequacy that have fully undermined competitiveness. It is particularly likely that the upcoming recovery will suffer from the lack of funding.””

    PwC projects that Greece needs 268 billion euros in new investments soon in order to avoid non-anaemic growth over the next five years which, of course, means PwC is projecting anaemic growth. Because that’s how the EU rolls. It’s not just vassal state usury. It’s economically destructive vassal state usury. And the world knows it. Or at least PwC knows it. And, of course, the Greeks are pretty aware of this.

    Posted by Pterrafractyl | June 2, 2017, 8:16 pm
  44. One of the ever present questions throughout Greece’s ‘bailout’ showdown is how would all the various parties somehow save face while they eventually cave to Germany’s demands of no debt relief. Greece’s government is maintaining (quite reasonably) that it must have debt relief of some sort agreed upon before the end of the current bailout review period (with a July deadline to avoid default) after passing one package of austerity measures after another. So it remains to be seen how Greece will respond if the final answer from the Troika ‘s ‘no debt relief at this time, maybe next year’.

    But it looks like we might have our answer from the IMF over how its going to cave to Germany’s demands while sticking to its own demands that Greece get substantial debt relief: The IMF is considering a scheme where Greece doesn’t get a debt relief agreement at this point (something the IMF has demanded for its continued participation in the program) and the IMF stays in the ‘bailout’ program, but the next loan the IMF makes to Greece (don’t forget these ‘bailouts’ are loans, not cash to pay down debt, hence the urgent need for debt relief) will be a “conditional” loan. The condition is that Greece actually get substantial debt relief in the future. And no funds from the IMF’s conditional loan will actually be released until those conditions are met.

    It’s a rather confusing scheme in one key sense: the urgency of the situation is the July deadline to complete the current ‘bailout’ review so Greece can get the next tranche of loans and roll over that 7.5 billion in debt. And the IMF’s solution is to offer a loan that won’t get paid out until some time next year.

    The devil is definitely going to be in the details but the IMF’s overall idea appears to be to create an agreement where it’s agreed that Greece will definitely get substantial debt relief in the future (or the IMF leaves), but it’s also agreed that the negotiations over that debt relief won’t happen until after the current ‘bailout'(usury) program is completed (in August of 2018 although that can be dragged out). This scheme will allow the IMF to say its demands for substantial debt relief have been met so it won’t be charged with backing down from its demands. The promise of a future showdown in exchange for austerity now and an end to the current impasse. That’s the IMF’s proposal to Greece:

    Bloomberg Markets

    IMF Weighs Greek Loan That Would Release Funds After Debt Relief

    by Andrew Mayeda
    June 8, 2017, 9:56 AM CDT

    * Fund prefers to see debt relief up front, spokesman says
    * Conditional loan would avoid possible ‘destabilizing’ outcome

    The International Monetary Fund is considering a conditional loan for Greece that would defer the release of the money until the nation’s European creditors agree to provide debt relief, the fund’s spokesman said.

    Typically, countries that borrow from the IMF have to show their debt burden is sustainable. While the IMF has expressed support for Greece’s proposed reforms, the fund believes its debt is unsustainable unless euro-area countries agree to ease its repayment terms under a European bailout program.

    If a debt-relief deal isn’t reached soon, the fund may consider a loan program that would be “approved in principle,” Rice said. The loan funds wouldn’t be released until Greece’s European creditors provide enough relief to make the nation’s debt sustainable.

    “We would still be insisting on reforms and debt relief before the IMF would disburse any of its funds,” he said. “So this is not a backing down or a walking away in any respect.”

    A conditional loan would bring Greece one step closer to receiving more funding from the IMF, while bolstering the credibility of the euro-zone bailout.

    Financial Stress

    A conditional loan would help avert a “destabilizing situation” next month, when Greece may find it difficult to make payments under its 86 billion-euro ($96 billion) bailout from the euro zone. “It’s good to avoid that financial stress on Greece,” Rice said.

    It’s unusual for the IMF to approve a loan “in principle” to a developed nation. The fund provided a series of such loans to developing countries in the 1980s, including to Brazil, Argentina, Mexico and Sudan.

    The IMF is hoping for an agreement on a Greek program next week, said Rice. Discussions on debt relief measures for Greece will be in focus during a Eurogroup meeting in Luxembourg on June 15 that IMF Managing Director Christine Lagarde plans to attend, he said.

    ———-

    “IMF Weighs Greek Loan That Would Release Funds After Debt Relief” by Andrew Mayeda; Bloomberg Markets; 06/08/2017

    “The International Monetary Fund is considering a conditional loan for Greece that would defer the release of the money until the nation’s European creditors agree to provide debt relief, the fund’s spokesman said.”

    Behold, the 11th hour kick-the-can loophole. Well done, IMF. If Greece and the EU agrees, there will be no “destabilizing situation” next month:


    A conditional loan would help avert a “destabilizing situation” next month, when Greece may find it difficult to make payments under its 86 billion-euro ($96 billion) bailout from the euro zone. “It’s good to avoid that financial stress on Greece,” Rice said.

    So did Greece bite? Nope, Greece in fact gagged on the offer:

    The Week

    Greece debt relief row clouds run-up to eurozone summit

    Athens says creditors ‘cannot continue deferring decisions’ after Germany and IMF disagree

    Jun 8, 2017

    Greece has “rejected a compromise deal” and sparked a fresh row over debt relief, ahead of a key eurozone summit next week to avoid a fresh eurozone crisis this summer, says The Times.

    Having failed earlier this year to agree terms to trigger the latest tranche of loans under the country’s third bailout, Athens is heading towards July’s deadline for a €7.3m (£6.3bn) loan repayment without sufficient funds.

    Creditors such as Germany and the International Monetary Fund (IMF) disagree whether Greece can meet ambitious surplus targets without debt relief.

    The IMF has said it will not participate in the bailout unless relief is offered, while Germany says it will not consider relief until Athens proves it is sticking to the terms of the deal.

    In practice, that probably means waiting until well after the German general election in September.

    According to the Times, this was effectively the solution offered in a “compromise” by the IMF chief Christine Lagarde yesterday.

    “[She] told the German newspaper Handelsblatt that the fund could bow to the wishes of Mrs Merkel’s government and stay on board in the Greek bailout,” says the paper.

    “She said that the fund would resist providing any further financial aid to Greece until debt relief measures had been clarified.”

    But Alexis Tsipras’s ruling Syriza party in Greece, which has faced strong criticism for passing fresh austerity measures to comply with the bailout terms last month, rejected any further delay to debt relief.

    Panagiotis Rigas, a leading Syriza member, said: “The IMF cannot just continue deferring decisions.

    “It cannot insist that Greece take painful measures and when it does, turn around and say, ‘Not to worry. We’ll deal with your debt at a later time in the distant future.’

    “We have met our obligations to creditors. It is also their time to deliver.”

    According to Reuters, Greece would like to come back to the market with new debt bonds to bolster its finances, although it will probably need European Central Bank assurances to get the cost to a manageable level below five per cent.

    That support, however, depends “primarily on whether Athens can agree a debt deal with the euro zone and International Monetary Fund next week”.

    ———-

    “Greece debt relief row clouds run-up to eurozone summit”; The Week; 06/08/2017

    “Greece has “rejected a compromise deal” and sparked a fresh row over debt relief, ahead of a key eurozone summit next week to avoid a fresh eurozone crisis this summer, says The Times. ”

    Yep, Greece wasn’t impressed with the IMF’s awful deal, which means the showdown continues:


    “[She] told the German newspaper Handelsblatt that the fund could bow to the wishes of Mrs Merkel’s government and stay on board in the Greek bailout,” says the paper.

    But Alexis Tsipras’s ruling Syriza party in Greece, which has faced strong criticism for passing fresh austerity measures to comply with the bailout terms last month, rejected any further delay to debt relief.

    Panagiotis Rigas, a leading Syriza member, said: “The IMF cannot just continue deferring decisions.

    “It cannot insist that Greece take painful measures and when it does, turn around and say, ‘Not to worry. We’ll deal with your debt at a later time in the distant future.’

    “”It cannot insist that Greece take painful measures and when it does, turn around and say, ‘Not to worry. We’ll deal with your debt at a later time in the distant future.'”

    As the Greek MP protests, the IMF can’t insist Greece do all the austerity with just half-assed promising of debt-relief down the line. Except that’s what Berlin is demanding so, yes, the IMF can and will insist on exactly that. Or, at this point, ask Greece if it’s willing to accept the offer. Will the IMF insist up on it now that Greece has rejected it? That’s what we’re going to see pretty soon.

    But don’t forget, if Greece ends up accepting a similar offer and the debt relief talks get pushed off until next year or later it’s not like those future negotiations are going to go any more smoothly.

    Posted by Pterrafractyl | June 11, 2017, 10:48 pm
  45. Huzzah! We have an agreement! The IMf and EU have reached an agreement that completes this review of Greece’s austerity implementation and allows Greece to get the ‘bailout’ disbursement it needs to avoid defaulting on its debt in July. So how did they resolve the impasse where the IMF demanded an agreement for debt-relief as a condition for staying with the program and German demanded no negotiations until next August while continuing to assert that no debt-relief was going to be needed at all? By using the option that was always on the table and always the most likeliest end result: Caving to Berlin. Yep, those recent IMF trial balloon about a ‘conditional’ loan that only gets paid out in the future if Greece gets the debt-relief the IMF deems necessary after the current bailout ends next August are the ‘compromise’ that create this ‘breakthrough’.

    So all that extra austerity the IMF demanded is still in place. But none of debt-relief it demanded. And no guarantees of future debt relief. Just the suggestion that the IMF will leave the program next year if there’s no debt-relief after the current bailout ends in August of 2018. Maybe. Unless the IMF caves again next year. That’s the ‘breakthrough’ for the current impass:

    The Financial Times

    Markets cheer Greek breakthrough but debt relief doubts persist

    by: Mehreen Khan
    June 16, 2017

    Nine months after schedule, Greece finally has some more creditor cash.

    The country’s stock index been driven to a two-year high and bonds are rallying this morning after eurozone and International Monetary Fund officials agreed to unlock an €8.5bn tranche of rescue cash to help Greece avoid default and pay off some of its arrears.

    Following months of disagreement with its EU partners, the IMF has agreed in principle to come on board with Greece’s bailout in a compromise where it will withhold providing any more cash until it can drill down more details on the debt alleviation measures Greece will get after its rescue ends next August.

    The accord breaks a more than 12-month impasse between creditors and will provide reassurances to Germany that the IMF is still involved in Greece after seven years of financial rescues.

    Christine Lagarde, the IMF’s managing director, said the deal was a “second best solution”. She will make a recommendation to the fund’s board for the approval of a 14-month “stand-by arrangement” that could see it provide around €2bn to Greece should it be sufficiently reassured about the sustainability of Athens’ debt pile, currently worth 180 per cent of its GDP.

    The “agreement in principle” (AIP) draws on an IMF practice where the fund is able to greenlight its involvement in a debtor country, conditional on the government and its creditors agreeing to future debt relief measures.

    Ms Lagarde said the breakthrough would buy more time for the EU to thrash out just how debt relief will work. The Washington-based fund has long called for ambitious payment deferrals and maturity extensions to bring down the debt burden that it fears will weigh down on the economy for decades.

    “Use of the AIP procedure will give confidence to creditors to disburse to Greece under the ESM program in July—thus reducing a potentially serious stress on the Greek economy and the overall financial system”, said the IMF.

    On its part, eurozone has touted the possibility of deferring interest payments and extending maturities for up to 15 years as well as a plan to link debt relief to economic growth.

    But as ever with Greek accords, the devil is in the detail. Crucially for the IMF, that detail is still missing for now and is not expected until Germany’s elections are over in September. Berlin has long insisted Greece may not need any restructuring at all if the economy picks up as they expect.

    The Eurogroup’s statement also repeats debt relief will be provided “to the extent necessary”.

    “The disbursement will only take place once the debt relief has been completely identified”, said Ms Lagarde. The IMF will be issuing two assessments of Greece’s debt sustainability: one next month and another at the end of the rescue in August 2018.

    Despite Ms Lagarde’s hope that the relief measures are clarified as soon as possible, some observers doubt whether the EU will budge at all over the next year or so.

    Mujtaba Rahman, head of Europe at political risk consultancy Eurasia Group, said stubborn opposition to bold restructruing in creditor countries, led by Berlin, makes it very unlikely that the IMF will end up providing any financial assistance to Greece in 2018.

    “The Eurogroup language suggests the IMF is in, but in practice they are out”, said Mr Rahman.

    “It is now very unlikely the Eurogroup will provide additional assurances on Greek debt relief that the IMF is asking for”.

    Analysts at US bank Citigroup, who first coined the term “Grexit” in 2012, note yesterday’s deal has made no substantive inroads on the thorny subject of debt relief: “The measures on the table are the same as those spelled out last year”.

    They warn that the chances of a fourth Greek bailout remain high. “We see it as quite unlikely that Greece could return to full market funding by the time the current programme ends in 12 months”, they add.

    ———-

    “Markets cheer Greek breakthrough but debt relief doubts persist” by Mehreen Khan; The Financial Times; 06/16/2017

    “Following months of disagreement with its EU partners, the IMF has agreed in principle to come on board with Greece’s bailout in a compromise where it will withhold providing any more cash until it can drill down more details on the debt alleviation measures Greece will get after its rescue ends next August.”

    And note the lingering skepticism that a deal will even be worked out next year. Skepticism that, in some cases, has grown now that everyone knows that the IMF will blink. And when ‘blinking’ in today’s showdown comes in the form of moving the showdown to next year, that doesn’t bode well for next year’s showdown:


    Despite Ms Lagarde’s hope that the relief measures are clarified as soon as possible, some observers doubt whether the EU will budge at all over the next year or so.

    Mujtaba Rahman, head of Europe at political risk consultancy Eurasia Group, said stubborn opposition to bold restructruing in creditor countries, led by Berlin, makes it very unlikely that the IMF will end up providing any financial assistance to Greece in 2018.

    “The Eurogroup language suggests the IMF is in, but in practice they are out”, said Mr Rahman.

    “It is now very unlikely the Eurogroup will provide additional assurances on Greek debt relief that the IMF is asking for”.

    So don’t forget, this wasn’t an agreement for future debt-relief. It was an agreement to agree to disagree over the necessity for any debt-relief and maybe continue to disagree in the future. All while the IMF caves on its demands and sticks with the program and Greece gets the IMF’s extra-austerity. That’s the agreement.

    And don’t forget that the IMF really did have real power in this situation thanks to the fact that the head of Merkel’s CDU declared that the IMF’s ongoing participation is necessary if Germany will remain in the ‘bailout’ program. If the IMF walked away, the ball would be in the court of those German politicians as to whether or not to stick with their demand and effective force a ‘Grexit’ by pulling Germany out of the program. Because it’s not like the IMF is actually needed for the ‘bailout’. It was just brought on board over hope that it would be an outside party that would maintain a consistent demand for austerity. Which has absolutely been the case. The IMF’s leverage was in the CDU demands that the IMF stay. Oh well.

    Still, it’s no unimaginable that Greece will be cut some sort of debt relief deal next year. Why? Because if you look at what’s being called “ambitious” debt relief, it’s just loan extensions and interest rate caps and not any outright debt relief. So as long as the IMF drops its earlier calls for outright debt forgiveness and settles for loan extensions and rate caps that merely extend Greece’s time in ‘bailout’ purgatory, there’s a decent chance we might see some debt-relief for Greece next year because the eurozone has already “touted the possibility” of such a plan. A possibility that’s definitely not a certainty:


    Ms Lagarde said the breakthrough would buy more time for the EU to thrash out just how debt relief will work. The Washington-based fund has long called for ambitious payment deferrals and maturity extensions to bring down the debt burden that it fears will weigh down on the economy for decades.

    “Use of the AIP procedure will give confidence to creditors to disburse to Greece under the ESM program in July—thus reducing a potentially serious stress on the Greek economy and the overall financial system”, said the IMF.

    On its part, eurozone has touted the possibility of deferring interest payments and extending maturities for up to 15 years as well as a plan to link debt relief to economic growth.

    But as ever with Greek accords, the devil is in the detail. Crucially for the IMF, that detail is still missing for now and is not expected until Germany’s elections are over in September. Berlin has long insisted Greece may not need any restructuring at all if the economy picks up as they expect.

    The Eurogroup’s statement also repeats debt relief will be provided “to the extent necessary”.

    “But as ever with Greek accords, the devil is in the detail. Crucially for the IMF, that detail is still missing for now and is not expected until Germany’s elections are over in September. Berlin has long insisted Greece may not need any restructuring at all if the economy picks up as they expect.

    So that’s the sadly now-predictable outcome for the latest Greek showdown. Everyone caved to Wolfgang Schaeuble. Again. Better luck next year!

    Posted by Pterrafractyl | June 18, 2017, 8:46 pm
  46. Now that the official discussions for any meaningful debt relief for Greece have been pushed back to the fall of 2018 at the earliest as part of the agreement reached between the EU, IMF, and Greece, one of the things to watch is what the chatter in the interim tells us about what to expect for those discussions next year. Well, there was some rather significant official chatter coming from the EU Commission just a few days after the agreement and on the surface it would appear to be positive chatter for Greece. Positive in the sense that the EU Commission’s projections of Greece’s debt load over the coming decades is likely to be so bad that some sort of official debt relief is going to be required. As as the article below notes, these negative projections are still a lot more positive than the Greek projections the IMF has been basing its own demands for debt relief on. But still negative enough for even the EU Commission to release a draft document of a report on a Greece that comes out and basically agree with the IMF’s assertions that Greece’s debt situation is unsustainable as it stands today.

    As the article also notes, the expectations are that Greece is going to keep a high budget surplus to pay down its debt for decades to come. So the fact that the EU is also projecting that Greece’s debt is going to rise substantially in coming decades at the same ties it runs an excruciatingly high budget surplus in the those same coming decades seems like a pretty strong case for debt relief:

    Bloomberg Markets

    EU Says Greece Needs More Debt Relief Despite Buffer

    By Marcus Bensasson, Sotiris Nikas, and Birgit Jennen
    June 20, 2017, 10:43 AM CDT June 20, 2017, 11:42 AM CDT

    * European Commission report obtained by Bloomberg News
    * Analysis sees ‘serious concerns’ over debt sustainability

    Greece will need additional debt relief to regain the trust of investors, even though it’s likely to exit its bailout with a 9 billion euros ($10 billion) cash buffer, the European Commission said in a draft report obtained by Bloomberg.

    The country’s 86 billion-euro third bailout program from the European Stability Mechanism, agreed by Prime Minister Alexis Tsipras and European creditors in 2015, will expire in August 2018 with 27.4 billion euros left unused, the commission estimates in the so-called “compliance report” dated June 16. Disbursements up to then should also “cater for the build-up of seizable cash buffer” of around 9 billion euros, according to the document.

    The report contains an analysis of the country’s public debt that points to potential wrangling with the International Monetary Fund following an agreement last week to disburse bailout funds, in which the Washington-based fund only agreed to a new program “in principle.” Even as the commission’s analysis points “to serious concerns regarding the sustainability of Greek public debt,” its assumptions about the country’s future growth prospects are still more optimistic than those of the IMF.

    The IMF hasn’t disbursed funds to Greece in almost three years on fears that the country’s debt is unsustainable. Last week’s compromise deal averts a Greek financing crisis this summer by allowing release of 8.5 billion euros of ESM funds, while the IMF holds out for more Greek debt relief from European creditors at a later stage before it gives out new loans.

    The June 15 deal by euro-area finance ministers commits to capping gross financing needs at 15 percent of GDP for the medium term, and 20 percent thereafter. The country’s gross financing needs will drop to 9.3 percent of gross domestic product in 2020 from 17.5 percent this year, before rising again and surpassing 20 percent after 2045, according to the baseline scenario of the commission’s debt sustainability report.

    The conclusion drawn from the report points to the need for additional “additional debt-mitigating measures,” even under the baseline assumptions. “An appropriate combination of debt management measures,” including an “extension of maturities and grace periods for principal and interest,” is necessary to “bring Greek debt back to a sustainable level in gross financing needs terms,” commission staff said.

    The baseline scenario is based on nominal GDP growth rates between 3 and 4 percent until 2060, considerably higher than past IMF baseline estimates. The fund’s own assessment will be released before its executive board meets to approve the in-principle stand-by arrangement next month.

    The debt dynamics “become explosive” from the mid-2030s in the the most adverse scenario. In this scenario, which is still more optimistic than IMF assumptions, Greece’s gross financing needs exceed 20 percent in 2033, reaching 56 percent by 2060, while debt skyrockets to 241.4 percent of Greek GDP by 2060.

    “Debt sustainability, and thus the need for additional debt measures, should be assessed in a manner that caters for a number of downside risks,” according to the report. There is uncertainty surrounding the capacity of the Greek government to sustain high primary surpluses over several decades. In addition, there are significant downside risks to growth linked to aging populations and trends in total factor productivity.”

    ———-

    “EU Says Greece Needs More Debt Relief Despite Buffer” by Marcus Bensasson, Sotiris Nikas, and Birgit Jennen; Bloomberg Markets; 06/20/2017

    “The debt dynamics “become explosive” from the mid-2030s in the the most adverse scenario. In this scenario, which is still more optimistic than IMF assumptions, Greece’s gross financing needs exceed 20 percent in 2033, reaching 56 percent by 2060, while debt skyrockets to 241.4 percent of Greek GDP by 2060″

    Greece’s debt is project to skyrocket through 2060 and that’s according to the EU Commission’s relatively optimistic projections. And now the EU Commission is concerned that Greece won’t be able to maintain the high primary budget surpluses that are destroying the society for decades to come:


    “Debt sustainability, and thus the need for additional debt measures, should be assessed in a manner that caters for a number of downside risks,” according to the report. “There is uncertainty surrounding the capacity of the Greek government to sustain high primary surpluses over several decades. In addition, there are significant downside risks to growth linked to aging populations and trends in total factor productivity.”

    So unless Greece gets meaningful debt relief, it’s going to be decades more of austerity and higher debt for Greece, with no real chance of escaping the austerity-trap. It’s a pretty compelling case for debt relief. Although note that the EU Commission is still only mentioning things like loan extensions or lower rates, and not outright debt forgiveness, as the debt relief options under consideration:


    The conclusion drawn from the report points to the need for additional “additional debt-mitigating measures,” even under the baseline assumptions. “An appropriate combination of debt management measures,” including an “extension of maturities and grace periods for principal and interest,” is necessary to “bring Greek debt back to a sustainable level in gross financing needs terms,” commission staff said.

    So the EU Commission is at least signalling that some sort of debt relief is likely going to be needed for Greece next year, even if it’s just the minimum debt relief measures like loan extensions that just keep Greece trapped in the current austerity straightjacket.

    But don’t forget that the real ‘decider’ on this topic is Germany’s Finance Minister. And what is he saying? Well, don’t forget the previous chatter from figures like Angela Merkel and German Finance Minister Wolfgang Schaeuble indicated that outright debt-relief is a non-starter and loan extensions are the probably the only option Berlin will accept, so it might be tempted to assume that Schaeuble is largely on board with the EU Commission’s report and open to something like loan extension when the topic comes up next year. It might be tempting to assume that. But Schaeuble just gave an interview with a Greek newspaper, and he was sounding…optimistic. Really optimistic. So optimistic that he doesn’t see Greece as having a debt problem at all. And if it becomes a problem in the future Schaeuble says he’s willing to talk about some form of relief. But not for now which sure sounds like Schaeuble has no interest in any meaningful debt relief for Greece next year.

    And what about the IMF’s demands that it won’t participate in further ‘bailout’ programs for Greece unless the country gets some sort of meaningful debt relief? Well, according to Schaeuble, all parties have agreed that the third ‘bailout’ – the current austerity program started in 2015 after Greece caved to Berlin’s demands – is going to be the last Greek ‘bailout’ the IMF participates in at all, which means any IMF threats to pull out of future bailout programs if Greece doesn’t get an relief are now moot. So get ready for no debt relief at all for Greece next year because, the way Schaeuble sees it, everything is fine as long as Greece continues with the unprecedented austerity indefinitely:

    Greek News Online

    Schaeuble: This is the last program with IMF participation

    July 2nd, 2017

    Athens.- (GreekNewsOnline, ANA-MPA, Reuters)

    German Finance Minister Wolfgang Schaeuble in an interview with “Ta Nea” newspaper on Saturday said that he will be glad when Greece returns to the markets and is not dependent on additional financial aid. As he said, this must be achieved by the middle of the next year. He estimated that the Greek debt is not a problem right now because Greece does not pay interest for long periods and has low interest rates. In the future, however, the debt may be a problem for Greece and this is when it must be discussed.

    “We will try to make the return to the markets feasible and when the Greek economy is not longer dependent on economic aid, we will see whether further steps are needed,” he stated.

    Schaeuble said that he has sympathy for the Greek people because it bears great burdens, but the solution to the problems lies within the improvement of the conditions in the country. He also stated that it is not right to blame the others for what Greece is experiencing.

    Asked whether the situation in Greece can be compared to the situation in Germany in 1953, Schaeuble said: The situation in Greece, fortunately, is not comparable to Germany after World War II. Greece receives ESM assistance with the same terms like all the other countries. All these countries succeeded in returning to the markets after a programme. Greece is now running the third programme.”

    Moreover, the German Finance Minister clarified that the third programme is the last one with the participation of the IMF.

    “We have all acknowledged (eurozone and IMF) that the third Greek (bailout) payment will be the last with the participation of the IMF,” Wolfgang Schaeuble told Greek daily Ta Nea.

    The German finance chief has been inflexible on the issue of Greek debt relief, in opposition to the IMF which says it needs to be done to breathe new life into Greece´s floundering economy.

    Agreement was reached last month to pay the third tranche of Greece´s 86-billion euro ($97-billion) bailout, after being held up for months by a row over its need for debt relief which has pitted bailout-weary Germany against the IMF.

    After participating in two previous international loans to save Greece from bankruptcy, the IMF is still set to take part in a third bailout.

    But for the moment, it has held back its contribution over the issue of whether the eurozone will decide to ease Greek debt — currently at 180 percent of gross domestic product (GDP). Since 2010, the international bailouts accompanied by tough austerity measures “have obtained some results but have not resolved the problem,” said Schaeuble, who hopes a solution can be reached by the end of the current programme in 2018.

    Under pressure especially from Berlin, Greece´s 18 other euro partners have not yet broached the issue of debt relief, preferring to push that hot-button topic to next year.

    But IMF chief Christine Lagarde has warned that Greece´s debt is not sustainable and that the country requires significant debt relief from Europe.

    In the interview, Schaeuble pointed to the European Stability Mechanism (ESM), a bailout fund for eurozone countries, as a way to respond to the future needs of countries sharing the single currency. Meanwhile, in another Greek newspaper, ESM chief Klaus Regling appeared to share that view, saying there is “a discussion in Europe on reinforcing the monetary union.”

    Speaking to the Efimerida ton syntakton (Journal of Editors), Regling said the eurozone had to become “less vulnerable” and that he was certain that “the ESM will play a very important role” if a new financial crisis arises.

    “We can assume some of the responsibilities the IMF has undertaken over these past few years and I think there is a wide consensus for that in the future,” he said.

    “If the reforms continue over the next 14 months, Greece will be able to return to the international markets,” he added.

    ———-

    “Schaeuble: This is the last program with IMF participation”; Greek News Online; 07/02/2017

    “German Finance Minister Wolfgang Schaeuble in an interview with “Ta Nea” newspaper on Saturday said that he will be glad when Greece returns to the markets and is not dependent on additional financial aid. As he said, this must be achieved by the middle of the next year. He estimated that the Greek debt is not a problem right now because Greece does not pay interest for long periods and has low interest rates. In the future, however, the debt may be a problem for Greece and this is when it must be discussed.”

    Greek debt problem? What Greek debt problem? That appears to be Wolfgang Schaeuble’s stance on the issue.

    And unless something changes over the next year it’s hard to see why that isn’t going to be his stance next year too since that’s basically been his stance all along. After all, while the agreement reached by Greece, the IMF, and the EU is often been portrayed as one where Greece agrees to austerity now, and the IMF agrees to tentatively stay on board for now, and then Greece gets some sort of debt relief next year, the actual agreement is that the EU will visit the possibility of debt relief next year if it’s determined Greece needs it. It’s no a guarantee of even crappy debt relief. Just a visitation of the topic.

    Of course, since the EU’s relatively optimistic projections has Greece’s debt exploding in coming decades it’s possible that Schaeuble is open to debt relief decades from now. But for now, with Schaeuble hinting at the IMF exiting from the Greek ‘bailout’ program entirely when the third ‘bailout’ ends next year, it’s looking like Greece shouldn’t expect debt relief any time soon. Wolfgang Schaebule’s optimistic will have to do instead.

    And when Schaeuble states that the situation Greece is facing now is nothing like the situation in Germany in 1953 when Germany got massive debt relief and then seems to blame the Greece for not magically using austerity to fix all its problem…


    Asked whether the situation in Greece can be compared to the situation in Germany in 1953, Schaeuble said: The situation in Greece, fortunately, is not comparable to Germany after World War II. Greece receives ESM assistance with the same terms like all the other countries. All these countries succeeded in returning to the markets after a programme. Greece is now running the third programme.”

    …it’s important to keep in mind one of the biggest major differenece between the situation Germany was in and the situation Greece is facing now: people like Wolfgang Schaeuble weren’t making these decisions for Germany in 1953. People like George Marshall were. It’s a pretty massive difference. The fact that Greece didn’t cause its debt crisis by trying to militarily conquer its neighbors is also a pretty big difference.

    Posted by Pterrafractyl | July 2, 2017, 4:48 pm
  47. Well, the IMF has formally agreed to a $1.8 billion “conditional” loan to Greece. The conditions being that Greece sticks with all the austerity demanded of it, including the extra austerity the IMF demanded over a concerns that Greece’s debt situation isn’t sustainable, along with the demand that Greece’s EU partners grant Greece significant debt relief.

    And sure, there’s no guarantee that the IMF will remain in the Greek ‘bailout’ program after the current one ends in the fall of 2018. And sure, if the IMF leaves the program there’s no reason to assume any significant debt relief will be forthcoming as long as Germany remains opposed. And sure, Germany’s Finance Minister Wolfgang Schaeuble, the de facto final decision-maker in these matters, as repeatedly said that the IMF won’t be participating in future Greek ‘bailouts’ once the current program ends next fall. And sure, Germany was the country that demanded the IMF’s participation in the first place because it was assumed that having the IMF involved would ensure greater austerity (which was an accurate assumption) so if Germany no longer demands the IMF participates in future Greek ‘bailouts’ there’s no reason to assume the rest of the EU will demand it. And sure, those are all reasons why there’s no reason to expect anything other than minimal debt relief for Greece, if any.

    But despite all that, the IMF approved its “conditional” $1.8 billion loan to Greece while touting its confidence that this will help ensure Greece gets significant debt relief next year. So the latest Troikan farce is now official:

    Bloomberg Markets

    Greece Approved for $1.8 Billion Conditional Loan From IMF

    * Fund will only dole out loans if it deems debt sustainable
    * Government monitoring bond market conditions for possible sale

    By Viktoria Dendrinou, Marcus Bensasson, and Andrew Mayeda
    July 20, 2017, 5:25 PM CDT July 20, 2017, 6:49 PM CDT

    The International Monetary Fund agreed to a new conditional bailout for Greece, ending two years of speculation on whether it would join in another rescue and giving the seal of approval demanded by many of the country’s euro-area creditors.

    The Washington-based fund said Thursday its executive board approved “in principle” a new loan worth as much as $1.8 billion. The disbursement of funds is contingent on euro-zone countries providing debt relief to Greece.

    “As we have said many times, even with full program implementation, Greece will not be able to restore debt sustainability and needs further debt relief from its European partners,” IMF Managing Director Christine Lagarde said in a statement. “A debt strategy anchored in more realistic assumptions needs to be agreed. I expect a plan to restore debt sustainability to be agreed soon between Greece and its European partners.”

    IMF officials estimate that, even if Greece carries out promised reforms, the nation’s debt will reach about 150 percent of gross domestic product by 2030, and become “explosive” beyond that point. European creditors could bring the debt under control by extending grace periods, lengthening the maturity of the debt or deferring interest payments, the IMF said in a report accompanying the announcement.

    The IMF’s decision to agree on the “precautionary stand-by arrangement” reflects the compromise reached in June between euro-area finance ministers reluctant to offer more generous repayment terms to Greece, and the fund, which resisted financing a country whose debt it considers too high to be paid back in full.

    “Despite no prospect of an immediate disbursement, the IMF’s participation is useful for everyone,” Tassos Anastasatos, an economist at Eurobank Ergasias, said before Thursday’s announcement. While for euro-area governments it’s a “disciplining device” on Greece, in the long-term it gives Athens leverage to demand something more on debt relief, he said.

    Having the IMF co-finance Greece’s rescue program was a key demand of many of the country’s euro-area creditors, led by Germany, who see the fund’s participation as ensuring the credibility of the reforms the country is asked to implement. But upcoming elections in Germany also made it impossible for Berlin to concede to any further debt relief for Greece, pushing instead for all decisions to be taken at the end of the country’s bailout in the summer of 2018 — and only if needed.

    While the fund’s decision helps both the IMF and Germany stick to their guns, it does mean the issue will likely arise after the German elections in the fall, when the question of whether Greece will actually receive any loans from the IMF resurfaces.

    ———-

    “Greece Approved for $1.8 Billion Conditional Loan From IMF” by Viktoria Dendrinou, Marcus Bensasson, and Andrew Mayeda; Bloomberg Markets; 07/20/2017

    IMF officials estimate that, even if Greece carries out promised reforms, the nation’s debt will reach about 150 percent of gross domestic product by 2030, and become “explosive” beyond that point. European creditors could bring the debt under control by extending grace periods, lengthening the maturity of the debt or deferring interest payments, the IMF said in a report accompanying the announcement.”

    Greece’s debt is scheduled to rise and then become “explosive” by the year 2030 according to the IMF. And yet the IMF isn’t actually recommending any outright debt forgiveness. Just measures that extend the nightmare over a longer timeframe like extending grace periods, lengthening the maturity of the debt or deferring interest payments. It’s better than nothing, but probably not good enough to make a meaningful difference. That’s the kind of ‘help’ the IMF is demanding as part of its conditional loan. A conditional loan that’s largely symbolic because it’s just that big compared to the scope of the program. But Germany demanded the IMF’s inclusion if it was going to participate in the ‘bailout’ too, so it’s a pretty important symbolic loan, conditional or not:


    Having the IMF co-finance Greece’s rescue program was a key demand of many of the country’s euro-area creditors, led by Germany, who see the fund’s participation as ensuring the credibility of the reforms the country is asked to implement. But upcoming elections in Germany also made it impossible for Berlin to concede to any further debt relief for Greece, pushing instead for all decisions to be taken at the end of the country’s bailout in the summer of 2018 — and only if needed.

    Yep, Greece might get some sort of crap debt relief next fall, but only if Wolfgang Schaueble deems it to be needed which he has already indicated is unlikely That’s, of course, assuming Angela Merkel wins reelection this fall as expected (Schaueble is likely out as Finance Minister if Martin Schulz defeats her). So don’t forget that the IMF provided Merkel with exactly the kind of ‘political crisis relief’ she needed to achieve that reelection in the fall by caving the way it did and avoiding a confrontation with Berlin that could have gotten politically very messy.

    Yes, part of the logic behind the IMF’s move was that some sort of debt relief is likelier after the German elections this fall. But that kind optimism assumes that the array of signals being sent from Berlin about how there’s going to be no debt relief and how the IMF isn’t going to be participating in future ‘bailouts’ is all smoke and mirrors despite the fact that Berlin has had the final word on virtually all of these Greek-related matters since the beginning of the crisis.

    So the IMF just handed formally agreed to an arrangement that Angela Merkel and Wolfgang Schaeuble a ‘get out of political crisis about excess cruelty’ card under the hope that by helping them stay in power it will suddenly and radically change Berlin’s stance on the issue. In other words, it’s good thing the IMF”s conditional loan is relatively small and symbolic and not something that Greece is definitely going to need but there’s a good chance those conditions aren’t going to be met.

    And in related news, it turns out Greece hit a new hurdle in its multi-year quest to return to the sovereign bond markets: Returning to the bond markets means issuing new debt, and Greece’s debt levels exceed the IMF’s debt cap so Greece needs to figure out a way to lower its debt before it will be allowed to issue new debt:

    Bloomberg News

    Greek Bond Sale Is Said to Be Delayed by IMF Debt Cap Rule

    * IMF resists an increase in Greece’s debt load, officials say
    * Investors still expect Greece to issue bonds later this year

    By Viktoria Dendrinou and Nikos Chrysoloras
    July 18, 2017, 4:43 PM CDT July 19, 2017, 6:57 AM CDT

    Greece’s much anticipated return to bond markets this week has been held off partly due to a ceiling set by the International Monetary Fund on the amount of debt the country can hold, according to three officials familiar with the matter who asked not to be identified as the talks are confidential.

    The debt cap is a technical hurdle unlikely to prevent the country from returning to the market later this year, the officials and investors said. The debt ceiling is included in a series of documents agreed on between Greek authorities and the Washington-based IMF that were prepared before a meeting of the Fund’s board Thursday to discuss a new credit line to Greece.

    The cap is such, the officials say, that the country can’t issue any more debt until it repays some of what it owes, meaning it has to wait until at least July 20 when it will pay another 4 billion euros ($4.6 billion) on bonds held by the European Central Bank. One of the officials, however, said that even after Greece repaid the ECB, its overall stock of debt would remain too high to issue new bonds under IMF requirements.

    The officials involved in the discussions expect the issue to be addressed quickly and that Greece will be able to access markets soon. A way around the debt ceiling could be for Greece to issue bonds without increasing its debt stock outright, using instead tools like swaps, which could improve its maturities profile without increasing the overall load.

    A finance ministry spokesman said that the government does not comment as to when or how Greece will return to financial markets.

    “They will find a solution to allow Greece to issue bonds later this year,” Carsten Hesse, a London-based economist at Berenberg, said in emailed comments. “In the end it’s in the interest of every official lender that Greece can tap the bond markets again, because this is how they will pay back the creditors money.”

    Greece has been considering a foray to the market for the first time since 2014 since an agreement by euro-area finance ministers in June cleared the way for 8.5 billion euros in fresh bailout cash, ending months of speculation over whether Athens would meet large bond payments due in July.

    Greek bonds rallied on the news of the deal, with yields on notes across maturities hitting successive multi-year lows. Yields on 2019 notes rose as much as 6 basis points to 3.5 percent on Wednesday in Athens. “Market reaction today shows that investors at least don’t expect the IMF to stop Greek plans by all means,” Daniel Lenz, who leads euro-zone market strategy at DZ Bank AG in Frankfurt, said in emailed comments.

    ———-

    “Greek Bond Sale Is Said to Be Delayed by IMF Debt Cap Rule” by Viktoria Dendrinou and Nikos Chrysoloras
    ; Bloomberg News; 07/18/2017

    “The cap is such, the officials say, that the country can’t issue any more debt until it repays some of what it owes, meaning it has to wait until at least July 20 when it will pay another 4 billion euros ($4.6 billion) on bonds held by the European Central Bank. One of the officials, however, said that even after Greece repaid the ECB, its overall stock of debt would remain too high to issue new bonds under IMF requirements.”

    So even after Greece received the $4.6 billion in new Troikan loans from the EU – which only happened after the IMF caved and agreed to its own “conditional” loan – the expectation from at least one officials was that Greece still would exceed the IMF’s debt cap and wouldn’t be able to issue any new debt. But at least is sounded like Greece could find a short-term temporary solution:


    The officials involved in the discussions expect the issue to be addressed quickly and that Greece will be able to access markets soon. A way around the debt ceiling could be for Greece to issue bonds without increasing its debt stock outright, using instead tools like swaps, which could improve its maturities profile without increasing the overall load.

    A finance ministry spokesman said that the government does not comment as to when or how Greece will return to financial markets.

    “They will find a solution to allow Greece to issue bonds later this year,” Carsten Hesse, a London-based economist at Berenberg, said in emailed comments. “In the end it’s in the interest of every official lender that Greece can tap the bond markets again, because this is how they will pay back the creditors money.”

    Don’t forget that reentering the bond markets has been one of Greece’s goals for years now. Also don’t forget that the IMF is projecting Greece’s debt to keep rising and then become “explosive” in the year 2030. So, you know, this debt cap rule is kind of a big deal in the long run if the IMF really does stay with the Greek program and yet the only solution to this cap is short-term financial gimicks.

    Here we are, after years of intense austerity Greece might finally be poised to return to the debt markets and yet it can’t because the IMF says its debt its too high. And while Greece has short-term options to get around that debt cap, it’s hard to see what its long-term options are as long as that cap remains in place. Especially since the IMF is projecting Greece’s debt to rise. And yet the IMF’s continued participation in the program is Greece’s best shot at debt relief next year but also a recipe for more and more austerity. And that participation in in question. And the debt relief the IMF is demanding is just stuff like loan extensions that’s going to keep Greece stuck in this trap even longer which presumably means even more austerity. So Greece is basically damned if the IMF does and damned if it doesn’t.

    Still, given how many horrible demands the IMF makes on Greece, it’s going to be pretty hard for Wolfgang Schaeuble to kick the IMF out of the program. Even if the price for its ongoing participation includes some mild debt relief next year. So that’s kind of good news for Greece. Wrapped in some very bad news.

    Posted by Pterrafractyl | July 20, 2017, 10:36 pm

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