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?

House­keep­ing Note: Com­ments 1 — 50 avail­able here.

@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.

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.

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.

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.

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.

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.”

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.

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.

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.

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”

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.

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...

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.

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.”

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.

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.”

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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”.

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.

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.

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.

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’.

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’.

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.

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.

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.

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.

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.

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.

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?

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.

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.

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!

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.

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.

That’s some dark humor right there: so the EU Com­mis­sion decid­ed to audit the design and man­age­ment of the first two Greek ‘bailouts’ from 2010 and 2012. What did the audit con­clude? That the Troi­ka did­n’t ade­quate­ly fore­see the deep and sus­tained reces­sion that fol­lowed from all the aus­ter­i­ty mea­sures. Yep, that was the les­son from the audi­tors arrived at: the aus­ter­i­ty design­ers appar­ent­ly did­n’t real­ize that mas­sive aus­ter­i­ty was going to cause a mas­sive reces­sion:

Asso­ci­at­ed Press

EU: Greece bailout plan­ners failed to antic­i­pate reces­sion

By DEREK GATOPOULOS and RAF CASERT
Nov. 16, 2017

ATHENS, Greece (AP) — Audi­tors from the Euro­pean Union’s exec­u­tive Com­mis­sion say mas­sive bailout pro­grams for Greece were not prop­er­ly planned and failed to antic­i­pate the reces­sion­ary effect of aus­ter­i­ty mea­sures.

A report pub­lished Thurs­day by the EU’s Euro­pean Court of Audi­tors crit­i­cized the first and sec­ond Greek bailouts, which were backed by the Inter­na­tion­al Mon­e­tary Fund and launched in 2010 and 2012.

Greece is near­ing the end of its third con­sec­u­tive bailout pro­gram next year, fol­low­ing years of gru­el­ing aus­ter­i­ty mea­sures that are set to con­tin­ue through 2020. Greece now has a nation­al debt touch­ing 180 per­cent of its gross domes­tic prod­uct and unem­ploy­ment high­er than 20 per­cent.

“Despite a grow­ing num­ber of con­di­tions, the first and sec­ond (bailout) pro­grams did not ade­quate­ly pri­or­i­tize their rel­a­tive impor­tance and they were not embed­ded in a broad­er strat­e­gy for the coun­try,” the report said.

Cred­i­tors ini­tial­ly esti­mat­ed that Greece would return to growth in 2012, the report not­ed. Instead, the coun­try lost more than a quar­ter of its eco­nom­ic out­put and has only emerged from a long peri­od of stag­na­tion this year.

In 2013, the IMF also admit­ted it made unre­al­is­tic assump­tions about the Greek econ­o­my, fail­ing to fore­cast the extent of the country’s crip­pling reces­sion.

A study pub­lished Thurs­day by the Fed­er­a­tion of Greek Enter­pris­es found that some 360,000 Greeks — just over a third of the job­less total — have been unem­ployed for more than four years.

As the country’s left-wing gov­ern­ment pre­pares to end Greece’s third bailout in August 2018, Finance Min­is­ter Euclid Tsakalo­tos announced this week the next pre-exit bond issue will not take place until next year, fol­low­ing a suc­cess­ful 3 bil­lion-euro bond sale of five-year notes in July.

...

———-

“EU: Greece bailout plan­ners failed to antic­i­pate reces­sion” by DEREK GATOPOULOS and RAF CASERT; Asso­ci­at­ed Press; 11/16/2017

“Audi­tors from the Euro­pean Union’s exec­u­tive Com­mis­sion say mas­sive bailout pro­grams for Greece were not prop­er­ly planned and failed to antic­i­pate the reces­sion­ary effect of aus­ter­i­ty mea­sures.”

That’s right, the Troi­ka had no idea it was going to inflict a deep and sus­tained reces­sion on Greece after man­dat­ing mas­sive cuts to wages and gov­ern­ment spend­ing. With vir­tu­al­ly no plan oth­er plan for Greece. Just aus­ter­i­ty. Mas­sive cuts to social ser­vices, pen­sions, and wages. That was the only plan for Greece in those ‘bailouts’. And appar­ent­ly the Troi­ka had no idea this was going to hap­pen as a result in a reces­sion. No, appar­ent­ly cred­i­tors thought Greece would return to growth in 2012:

...
Cred­i­tors ini­tial­ly esti­mat­ed that Greece would return to growth in 2012, the report not­ed. Instead, the coun­try lost more than a quar­ter of its eco­nom­ic out­put and has only emerged from a long peri­od of stag­na­tion this year.
...

And let’s not for­get, the IMF gave its first mea cul­pa over the ‘unfore­seen’ dam­age from the aus­ter­i­ty it demand­ed back in 2013. Because aus­ter­i­ty was an obvi­ous dis­as­ter back in 2013:

...
In 2013, the IMF also admit­ted it made unre­al­is­tic assump­tions about the Greek econ­o­my, fail­ing to fore­cast the extent of the country’s crip­pling reces­sion.
...

But as the fol­low­ing Der Spiegel arti­cle from June of 2011 — a year into the first Greek bailout — makes abun­dant­ly clear, it was com­plete­ly obvi­ous in 2011 that the aus­ter­i­ty-only poli­cies with­out any emer­gency stim­u­lus was going to cre­ate a self-rein­forc­ing debt trap that would doom Greece for the fore­see­able future. It was so obvi­ous that even the EU Com­mis­sion issued a report indi­cat­ing that it had been wild­ly opti­mistic when the Troi­ka pro­claimed in 2010, as part of the first ‘bailout’, that Greece would bounce back from the bailout pro­gram (finan­cial sup­port cou­pled with a shock aus­ter­i­ty regime) in 2012 and that would be the end of it. They actu­al­ly sold the crazy aus­ter­i­ty regime as quick a two-year stint ini­tial­ly.

But it was obvi­ous by June of in 2011 that the aus­ter­i­ty regime was not going to work. But it was also obvi­ous that there was very lit­tle pub­lic sup­port for real bailouts in the coun­tries that were going to have to pay for them. So it was known ear­ly on that the aus­ter­i­ty poli­cies were a fail­ure, but a pop­u­lar fail­ure in key coun­tries which is the under­ly­ing rea­son it con­tin­ued. It was­n’t because the Troi­ka did­n’t know it was per­pet­u­at­ing a dis­as­ter:

Der Spiegel

Troi­ka Report Greece Needs a New Bailout

The troi­ka of the Euro­pean Com­mis­sion, Euro­pean Cen­tral Bank and IMF has pre­pared a sober­ing report on Greece’s efforts to com­bat a debt cri­sis. The doc­u­ment, which has been obtained by SPIEGEL ONLINE, con­cludes that Athens will not be able to return to cap­i­tal mar­kets in 2012 and a fur­ther mas­sive bailout will be need­ed soon.

By Ste­fan Schultz

June 09, 2011 12:05 PM

It may be just nine pages long, but the report by the Euro­pean Com­mis­sion, Euro­pean Cen­tral Bank (ECB) and Inter­na­tion­al Mon­e­tary Fund (IMF) packs a punch. Accord­ing to the keen­ly await­ed report, which has been obtained by SPIEGEL ONLINE, it is unlike­ly that Greece will be able to return to bor­row­ing mon­ey on the cap­i­tal mar­kets in 2012 as pre­vi­ous­ly fore­seen — mean­ing Euro­pean tax­pay­ers will prob­a­bly have to prop up Greece with bil­lions in pay­ments for much longer than was orig­i­nal­ly planned.

The troika’s prog­no­sis is bleak. Although there is some evi­dence that “the rebal­anc­ing of the econ­o­my is ongo­ing and the quar­ter of deep­est con­trac­tion (has) already been passed,” the report warns that “a fur­ther con­trac­tion in real GDP is still expect­ed in the sec­ond half of 2011.” The real GDP growth rate for 2011 is now pro­tect­ed to be minus 3.8 per­cent, the authors con­clude, adding that pos­i­tive growth rates are not expect­ed before 2012. Even then, they will only be “mod­er­ate.”

The cur­rent neg­a­tive out­look presents the troi­ka with a major chal­lenge. The IMF’s statutes stip­u­late that the orga­ni­za­tion can only lend a coun­try mon­ey if it is cer­tain that the state will be able to meet its pay­ment oblig­a­tions for the next 12 months.

The new report has now made it clear that Greece is not in a posi­tion to guar­an­tee that, mean­ing that the IMF can­not trans­fer any more mon­ey while there is still a chance of Greece default­ing with­in the com­ing 12 months. “Giv­en the remote­ness of Greece return­ing to fund­ing mar­kets in 2012, the adjust­ment pro­gram is now under­fi­nanced. The next dis­burse­ment can­not take place before this under­fi­nanc­ing is resolved,” the report con­cludes.

This in turn means that Europe will have to come up with a new res­cue pack­age. Ger­man Finance Min­is­ter Wolf­gang Schäu­ble esti­mates that Greece will need €90 bil­lion ($132 bil­lion) to cov­er its fund­ing needs between 2012 and 2014, accord­ing to gov­ern­ment sources quot­ed by the news agency DPA on Wednes­day evening. Lux­em­bourg Prime Min­is­ter Jean-Claude Junck­er, who is head of the Euro Group, has also men­tioned the same fig­ure. On Wednes­day, fol­low­ing a tele­phone con­fer­ence of euro-zone finance min­is­ters, Junck­er said that Athens’ pri­va­ti­za­tion plans should bring in €30 bil­lion, cov­er­ing one-third of the need­ed funds.

But a new bailout for Greece could be a tough sell for the euro-zone mem­ber states, which will have to get their nation­al par­lia­ments to approve a new pack­age. The Ger­man gov­ern­ment will find that espe­cial­ly dif­fi­cult, giv­en domes­tic resis­tance to pro­vid­ing Athens with more funds.

Fears of anoth­er Lehman

In May 2010, the Euro­pean Union and the IMF put togeth­er a €110 bil­lion res­cue pack­age for Greece. The orig­i­nal bailout plan fore­saw Greece return­ing to cap­i­tal mar­kets in 2012. Until then, the so-called troi­ka of the Euro­pean Com­mis­sion, ECB and IMF needs to trans­fer mon­ey to the high­ly indebt­ed state at reg­u­lar inter­vals. With­out this sup­port, Greece would effec­tive­ly be bank­rupt. Present­ly, few investors are will­ing to lend the coun­try mon­ey, and those who are would demand a stag­ger­ing­ly high inter­est rate of 15 per­cent. Investors con­sid­er the risks to be too great.

...

Accord­ing to the troi­ka report, it will be dif­fi­cult for Athens to regain the nec­es­sary investor con­fi­dence that would allow it to bor­row mon­ey on the cap­i­tal mar­kets. “The reces­sion appears to be some­what deep­er and longer than ini­tial­ly pro­ject­ed,” the report reads. The coun­try’s gross domes­tic prod­uct (GDP) shrunk by 4.5 per­cent in 2010, the authors write, more than had been assumed at the start of the res­cue efforts.

The EU-IMF aid is paid out in tranch­es, with each new install­ment depen­dent on Athens meet­ing cer­tain con­di­tions in sort­ing out its finances. But reforms aimed at reduc­ing the coun­try’s huge lev­els of pub­lic debt — which cur­rent­ly stands at around €350 bil­lion — have stalled. Although the Greek gov­ern­ment made a “strong start” in reduc­ing its macro­eco­nom­ic and fis­cal imbal­ances, the imple­men­ta­tion of nec­es­sary reforms has come to a “stand­still” in recent quar­ters, the report reads. Greater efforts are need­ed to com­bat the coun­try’s ris­ing pub­lic debt, the troi­ka says, argu­ing that struc­tur­al reforms that would under­pin the eco­nom­ic recov­ery need to be stepped up.

In 2010, Greece’s bud­get deficit was equiv­a­lent to 10.5 per­cent of GDP — way over the 3 per­cent allowed under euro-zone rules. But Athens is strug­gling to reduce its debt bur­den, because tough aus­ter­i­ty mea­sures are hin­der­ing the eco­nom­ic growth that is nec­es­sary to gen­er­ate tax rev­enues. “If no action was tak­en, the gov­ern­ment deficit in 2011 would remain close to the 2010 lev­el,” the report reads.

Pri­vate Cred­i­tors Bail­ing Out

Mean­while, the Ger­man gov­ern­ment, which had said it would wait for the pub­li­ca­tion of the troi­ka report before decid­ing how to pro­ceed, has been try­ing to win sup­port for a new res­cue pack­age for Greece. On Wednes­day, Chan­cel­lor Angela Merkel and Finance Min­is­ter Schäu­ble argued in favor of a new bailout dur­ing a meet­ing with the par­lia­men­tary groups of the gov­ern­ing par­ties — the con­ser­v­a­tive Chris­t­ian Demo­c­ra­t­ic Union, its Bavar­i­an sis­ter par­ty the Chris­t­ian Social Union and the busi­ness-friend­ly Free Democ­rats — accord­ing to par­tic­i­pants quot­ed by DPA. Merkel also expressed her sup­port for Schäuble’s ini­tia­tive to involve pri­vate cred­i­tors in a new res­cue pack­age.

The only prob­lem is that there are few­er and few­er pri­vate cred­i­tors to involve. Pri­vate insti­tu­tions are sell­ing off Greek gov­ern­ment bonds on a large scale amid fear of a default or a so-called hair­cut. It is main­ly pub­lic insti­tu­tions such as Ger­many’s state-owned region­al banks and the Euro­pean Cen­tral Bank who still hold Greek bonds.

Accord­ing to a report in the Ger­man dai­ly Die Welt, Ger­man insur­ance com­pa­nies now only hold €2.8 bil­lion in Greek debt, down from a total of €5.8 bil­lion just a year ago. Sim­i­lar­ly, Ger­man banks have sold off around a third of their Greek debt since May 2010, accord­ing to new Bun­des­bank fig­ures quot­ed by the Finan­cial Times Deutsch­land on Thurs­day. Ger­man banks only held around €10.3 bil­lion in Greek bonds in Jan­u­ary and Feb­ru­ary 2011, com­pared to €16 bil­lion in April 2010.

———-

“Troi­ka Report Greece Needs a New Bailout” by Ste­fan Schultz; Der Spiegel; 06/09/2011

“In 2010, Greece’s bud­get deficit was equiv­a­lent to 10.5 per­cent of GDP — way over the 3 per­cent allowed under euro-zone rules. But Athens is strug­gling to reduce its debt bur­den, because tough aus­ter­i­ty mea­sures are hin­der­ing the eco­nom­ic growth that is nec­es­sary to gen­er­ate tax rev­enues. “If no action was tak­en, the gov­ern­ment deficit in 2011 would remain close to the 2010 lev­el,” the report reads.”

And that part of the report right there sort of cap­tures the essence of the mad­ness Greece has been stuck in for the past sev­en years:

Athens is strug­gling to reduce its debt bur­den, because tough aus­ter­i­ty mea­sures are hin­der­ing the eco­nom­ic growth that is nec­es­sary to gen­er­ate tax rev­enues. “If no action was tak­en, the gov­ern­ment deficit in 2011 would remain close to the 2010 lev­el,” the report reads.

In oth­er words, Greece is stuck in an aus­ter­i­ty debt trap, and “action” is need­ed. Action in the form of more aus­ter­i­ty and just enough finan­cial assis­tance to pre­vent a cri­sis in the bond mar­kets. Aus­ter­i­ty lim­bo. That was the “action” that the Troi­ka was actu­al­ly call­ing for in that June 2011 report on the year old first Greek ‘bailout’. And it’s the same action that’s been demand­ed of Greece ever since.

Don’t for­get that Greece is expect­ed to run unprece­dent­ed 3.5 per­cent-ish bud­get sur­plus­es for years to come under the terms Greece was forced to accept for the third ‘bailout’ it’s cur­rent­ly work­ing under and sur­plus­es in some form for decades to come. What­ev­er lessons the EU Com­mis­sion claims to have learned from this audit about the dan­gers of aus­ter­i­ty have yet to actu­al­ly be applied to Greece. It’s still an all-aus­ter­i­ty-all-the-time pol­i­cy for Greece. It’s still a nation mega-emer­gency sched­uled to con­tin­ue for years.

And let’s also not for­get the IMF’s crit­i­cal role in the per­pet­u­at­ing the aus­ter­i­ty death-trap: the IMF ensured Greece would be forced into mas­sive bud­get cuts due to the IMF’s rules that say it can only lend to a coun­ty that is expect­ed to be able to pay the IMF back on time. That might seem like a rule pro­mot­ing respon­si­bil­i­ty or some­thing (eco­nom­ics isn’t an after school spe­cial) but the real­i­ty is that this IMF rule made aus­ter­i­ty a require­ment for Greece regard­less of the eco­nom­ic wise­ness of such cuts at that point in time. Aus­ter­i­ty in the form of large bud­get cuts was one of the only ways for Greece to pre­dictably pro­vide the gov­ern­ment sav­ings need­ed to start ser­vic­ing those IMF loans financ­ing right away.

And this aus­ter­i­ty-no-mat­ter-the-cir­cum­stances approach by the Troi­ka was the case even when, by June of 2011, it was clear to every­one that Greece’s econ­o­my was going to con­tin­ue shrink­ing through 2012 (this was when the Troi­ka was still say­ing Greece would bounce back by 2012 which was absurd):

...
The troika’s prog­no­sis is bleak. Although there is some evi­dence that “the rebal­anc­ing of the econ­o­my is ongo­ing and the quar­ter of deep­est con­trac­tion (has) already been passed,” the report warns that “a fur­ther con­trac­tion in real GDP is still expect­ed in the sec­ond half of 2011.” The real GDP growth rate for 2011 is now pro­tect­ed to be minus 3.8 per­cent, the authors con­clude, adding that pos­i­tive growth rates are not expect­ed before 2012. Even then, they will only be “mod­er­ate.”

The cur­rent neg­a­tive out­look presents the troi­ka with a major chal­lenge. The IMF’s statutes stip­u­late that the orga­ni­za­tion can only lend a coun­try mon­ey if it is cer­tain that the state will be able to meet its pay­ment oblig­a­tions for the next 12 months.

The new report has now made it clear that Greece is not in a posi­tion to guar­an­tee that, mean­ing that the IMF can­not trans­fer any more mon­ey while there is still a chance of Greece default­ing with­in the com­ing 12 months. “Giv­en the remote­ness of Greece return­ing to fund­ing mar­kets in 2012, the adjust­ment pro­gram is now under­fi­nanced. The next dis­burse­ment can­not take place before this under­fi­nanc­ing is resolved,” the report con­cludes.
...

And keep in mind that the above Der Spiegel arti­cle is from June 9th, 2011, right Greece agreed to bil­lions in extra aus­ter­i­ty to pla­cate cred­i­tor con­cerns that the weak­er-than-expect­ed Greek econ­o­my would­n’t allow Greece to stay on track to repay its Troikan cred­i­tors on time. And as we can see from the fol­low­ing Reuters time­line from Novem­ber 2, 2011 that cov­ers the Greek ‘bailout’ up to that point, that was just one of the rounds of extra aus­ter­i­ty Greece had to agree to in 2011:

Reuters

Time­line: Greece’s debt cri­sis

Reuters Staff
Novem­ber 2, 2011 / 10:02 AM

(Reuters) — Here is a time­line of eco­nom­ic events since Greece’s Prime Min­is­ter George Papan­dreou first sealed a bailout deal in 2010.

May 2, 2010 — Papan­dreou says has sealed a deal with the EU and IMF, open­ing the door for a bailout in return for extra bud­get cuts of 30 bil­lion euros ($43 bil­lion) over three years.

– Three-year pack­age amounts to 110 bil­lion euros and rep­re­sents first res­cue of a euro zone mem­ber.

May 4/5 — Pub­lic sec­tor work­ers stage 48-hour nation­wide strike. Three peo­ple are killed when a bank is set on fire.

May 6 — Greek par­lia­ment approves aus­ter­i­ty bill.

May 9 — IMF unan­i­mous­ly approves its part of res­cue loans, with 5.5 bil­lion euros being pro­vid­ed imme­di­ate­ly.

May 10 — Glob­al pol­i­cy­mak­ers install emer­gency safe­ty net worth about $1 tril­lion to bol­ster inter­na­tion­al finan­cial mar­kets and pre­vent Greek cri­sis from dam­ag­ing the euro. The net con­sists of 440 bil­lion euros in guar­an­tees from euro zone states, plus 60 bil­lion euros in Euro­pean debt instru­ments. EU finance min­is­ters say IMF will con­tribute a fur­ther 250 bil­lion euros.

May 18 — Greece receives 14.5 bil­lion euro ($18.7 bil­lion) loan from EU and can repay imme­di­ate debt.

July 7 — Greek par­lia­ment pass­es pen­sion reform, key require­ment of the EU/IMF deal, which includes rais­ing women’s retire­ment age from 60 to match men at 65.

...

2011:

May 11 — EU and IMF inspec­tors arrive in Athens to press Greece to shore up finances and to deter­mine if coun­try will get fifth aid tranche of 12 bil­lion euros.

May 23 — Greece unveils series of pri­va­ti­za­tions, part of its goal to raise 50 bil­lion euros by 2015 to pay down debt.

June 8 — Greece agrees to 6.48 bil­lion euros of extra aus­ter­i­ty mea­sures for 2011 and sav­ings up to 2015 to cut deficits and to keep receiv­ing aid.

June 13 — Greece gets the low­est cred­it rat­ing in the world after S&P down­grades it by three notch­es, to CCC from B.

June 17 — Papan­dreou reshuf­fles cab­i­net, appoints Evan­ge­los Venize­los, Papandreou’s main par­ty rival, as new finance min­is­ter. The new cab­i­net wins con­fi­dence vote on June 22.

June 29 — Papan­dreou wins par­lia­men­tary major­i­ty in favor of five-year aus­ter­i­ty plan by 155 votes to 138, clear­ing major hur­dle to win­ning access to new inter­na­tion­al fund­ing.

July 8 — IMF approves dis­burse­ment of about 3.2 bil­lion euros to help Greece pay debts due this month. This tranche brings IMF dis­burse­ments to about 17.4 bil­lion euros.

July 21 — Euro zone lead­ers agree on sec­ond res­cue pack­age with extra 109 bil­lion euros ($157 bil­lion) of gov­ern­ment mon­ey, plus con­tri­bu­tion by pri­vate sec­tor bond­hold­ers esti­mat­ed to total as much as 50 bil­lion euros by mid-2014.

Sep­tem­ber 21 — Greece adopts more aus­ter­i­ty mea­sures, includ­ing cut­ting high pen­sions by 20 per­cent.

Sep­tem­ber 27 — Greece pass­es an unpop­u­lar prop­er­ty tax to per­suade IMF and EU it deserves the next 8‑bil­lion-euro tranche it needs to pay Octo­ber salaries and avoid bank­rupt­cy.

Sep­tem­ber 29 — The “troi­ka” team of inspec­tors begin talks on a plan demand­ed by lenders to deep­en bud­get cuts and raise tax­es.

Octo­ber 2 — Gov­ern­ment draft bud­get fig­ures say Greece will miss a deficit tar­get set just months ago in a mas­sive bailout pack­age. The 2012 draft bud­get is approved by cab­i­net and pre­dicts a deficit of 8.5 per­cent of GDP for 2011, well short of the 7.6 per­cent tar­get.

– The cab­i­net approves a mea­sure cre­at­ing a “labor reserve” allow­ing 30,000 state work­ers to be placed on 60 per­cent pay and be dis­missed after a year.

Octo­ber 5 — Pub­lic sec­tor work­ers and state util­i­ties employ­ees go on strike for 24-hours against anti-aus­ter­i­ty mea­sures in action called by main labor unions ADEDY and GSEE.

Octo­ber 21 — Greece approves a painful set of aus­ter­i­ty mea­sures, defy­ing vio­lent protests in Athens and a gen­er­al strike which has shut down much of the coun­try, bring­ing more than 100,000 peo­ple to the streets over the last two days. At least 74 peo­ple are injured and one man dies of a heart attack on the fringes of the protest.

Octo­ber 23 — Any solu­tion for fur­ther reduc­ing Greece’s debt bur­den must be vol­un­tary, a Greek gov­ern­ment offi­cial says fol­low­ing a meet­ing of EU lead­ers to try to find a solu­tion to the debt cri­sis.

Octo­ber 27 — Euro zone lead­ers strike a deal with pri­vate banks and insur­ers for them to accept a 50 per­cent loss on their Greek gov­ern­ment bonds under a plan to low­er Greece’s debt bur­den

Oct 31 — Papan­dreou calls a pop­u­lar vote on its lat­est bailout with­out con­sult­ing with Euro­pean lead­ers.

Novem­ber 2 — Papan­dreou faces a grilling from the lead­ers of Ger­many and France after win­ning cab­i­net back­ing to hold a ref­er­en­dum on a 130 bil­lion-euro ($178 bil­lion) bailout pack­age.

———-

“Time­line: Greece’s debt cri­sis” Reuters Staff; Reuters; 11/02/2011

“June 8 — Greece agrees to 6.48 bil­lion euros of extra aus­ter­i­ty mea­sures for 2011 and sav­ings up to 2015 to cut deficits and to keep receiv­ing aid.”

June 8th, 2011, Greece agrees to 6.48 bil­lion euros of extra aus­ter­i­ty. And that was a day before the Der Spiegel arti­cle about the Troikan find­ings that Greece’s econ­o­my isn’t per­form­ing near­ly as well as the Troi­ka ini­tial­ly project in 2010 (pro­jec­tions that laugh­ably had Greece exit­ing the ‘bailout’ in 2012). And then there was all the oth­er aus­ter­i­ty from 2011:

...
Sep­tem­ber 21 — Greece adopts more aus­ter­i­ty mea­sures, includ­ing cut­ting high pen­sions by 20 per­cent.

Sep­tem­ber 27 — Greece pass­es an unpop­u­lar prop­er­ty tax to per­suade IMF and EU it deserves the next 8‑bil­lion-euro tranche it needs to pay Octo­ber salaries and avoid bank­rupt­cy.

Sep­tem­ber 29 — The “troi­ka” team of inspec­tors begin talks on a plan demand­ed by lenders to deep­en bud­get cuts and raise tax­es.

Octo­ber 2 — Gov­ern­ment draft bud­get fig­ures say Greece will miss a deficit tar­get set just months ago in a mas­sive bailout pack­age. The 2012 draft bud­get is approved by cab­i­net and pre­dicts a deficit of 8.5 per­cent of GDP for 2011, well short of the 7.6 per­cent tar­get.

– The cab­i­net approves a mea­sure cre­at­ing a “labor reserve” allow­ing 30,000 state work­ers to be placed on 60 per­cent pay and be dis­missed after a year.

Octo­ber 5 — Pub­lic sec­tor work­ers and state util­i­ties employ­ees go on strike for 24-hours against anti-aus­ter­i­ty mea­sures in action called by main labor unions ADEDY and GSEE.

Octo­ber 21 — Greece approves a painful set of aus­ter­i­ty mea­sures, defy­ing vio­lent protests in Athens and a gen­er­al strike which has shut down much of the coun­try, bring­ing more than 100,000 peo­ple to the streets over the last two days. At least 74 peo­ple are injured and one man dies of a heart attack on the fringes of the protest.
...

And look what hap­pens at the end of this time­line: In response to the pop­u­lar unrest over the ever-grow­ing aus­ter­i­ty mea­sures, Greece’s Prime Min­is­ter Papan­dreou announces a pop­u­lar ref­er­en­dum so the pub­lic can vote on the sec­ond Greek ‘bailout’ pack­age on Octo­ber 31, 2011. And the time­line ends with Pan­pan­dreou gets grilled by France and Ger­many on Novem­ber 2nd:

...
Oct 31 — Papan­dreou calls a pop­u­lar vote on its lat­est bailout with­out con­sult­ing with Euro­pean lead­ers.

Novem­ber 2 — Papan­dreou faces a grilling from the lead­ers of Ger­many and France after win­ning cab­i­net back­ing to hold a ref­er­en­dum on a 130 bil­lion-euro ($178 bil­lion) bailout pack­age.

So what hap­pened next? Papan­dreou can­cels the ref­er­en­dum on Novem­ber 3rd, polit­i­cal infight­ing erupts, Papan­dreou resigns a few days lat­er and a new pro-aus­ter­i­ty ‘uni­ty gov­ern­ment’ led by the for­mer vice pres­i­dent of the ECB, Lucas Papademos, is formed.

So that was a brief look at the sit­u­a­tion in Greece in the mid­dle of the 2010–2012 ‘bailout’ peri­od that the EU Com­mis­sion just audit­ed. An audit that con­clud­ed that the Troi­ka was sim­ply too opti­mistic and did­n’t real­ize the dam­age aus­ter­i­ty would do to Greece’s econ­o­my. And yet, as we just saw, the Troi­ka was well aware of the dam­age aus­ter­i­ty was doing to the Greek econ­o­my, as evi­denced by the fact that more aus­ter­i­ty was jus­ti­fied based on the unex­pect­ed­ly poor per­for­mance of the Greek econ­o­my after the ini­tial rounds of aus­ter­i­ty.

It’s all a reminder that stud­ies about how the Troi­ka active­ly tanked the Greek econ­o­my are, on the one hand, quit use­ful for try­ing to under­stand how Greece arrived in the posi­tion it finds itself today, but on the oth­er hand not that use­ful because it’s obvi­ous that tank­ing Greece’s econ­o­my was the only plan all along.

Is that a light at the end of the tun­nel? Or the reach­able sun­light viewed from the bot­tom of an inescapable pit? It’s the ques­tion Greece has been ask­ing since the begin­ning of its cri­sis, through­out the aus­ter­i­ty-induced depres­sion, and it remains just as top­i­cal a ques­tion today. Trag­i­cal­ly.

But while the ques­tion of “is there any escape from this?” remains the same, at least the con­text is some­what dif­fer­ent. Today, after the Greek gov­ern­ment recent­ly agreed to all the Troi­ka terms for the final stages of the cur­rent third ‘bailout’ pro­gram (because that’s how it goes for Greece...no mer­cy), Greece and its Troikan over­seers are open­ly talk­ing about “exit­ing the bailout” in 2018. Ide­al­ly by the end of August, when the third ‘bailout’ pro­gram ends.

There’s even talk of a gen­er­al map of the mile­stones Greece needs to com­plete in com­ing months in order to pull off this feat and avoid­ing a fourth bailout, which is seen as a key step in free­ing Greece from the end­less new aus­ter­i­ty demands. So the ques­tion of whether or not there’s any hope of escape this year is, at this point, a ques­tion of whether or not Greece can real­is­ti­cal­ly accom­plish all the mile­stones laid out for it over the com­ing months.

So how real­is­ti­cal­ly is it that Greece man­ages to meet all of the Troika’s demands? Well, the answer appears to depend on whether or not the Greek gov­ern­ment is capa­ble of impos­ing one more mas­sive new round of “struc­tur­al reform” that’s basi­cal­ly a mas­sive list of aus­ter­i­ty demands. Pen­sions get anoth­er mas­sive round of cuts. Pen­sions sup­ple­ments for low-income seniors get mas­sive­ly cut. Labor laws are changes to make union strikes hard­er to declare. And a new round of mass pri­va­ti­za­tions of major state assets are all part of the list of demands. If Greece can do all those demands in com­ing months it might be able to exit the ‘bailout’.

And what about the debt relief demands that both the Greeks and the IMF have been insist­ing on in exchange for all this aus­ter­i­ty? Well, The EU is much less enthu­si­as­tic about talk­ing about that. They want to focus on see­ing ALL the aus­ter­i­ty demands imple­ment­ed as soon as pos­si­ble and then there can be talk of debt relief. But only after all the demands are met. That’s the sta­tus of the debt relief nego­ti­a­tions at this point. Sur­prise!

And let’s not for­get the most pow­er­ful mem­bers of the Eurogroup, notably Berlin, has long demand­ed that no debt relief be made avail­able at all except for per­haps some loan exten­sions maybe some­day. So it’s sure sound­ing like the kind of sit­u­a­tion where the Troi­ka is going to be search­ing for rea­sons not to talk about debt relief, and the most obvi­ous way to do that is to declare that Greece has­n’t met all of the Troika’s demands. Sur­prise!

And let’s also not for­get that Wolf­gang Schaeu­ble, the now for­mer Ger­man finance min­is­ter, has been call­ing for the IMF to not par­tic­i­pate in future bailouts for Greece. And that means there’s a much high­er like­li­hood of no debt relief ever oth­er than maybe a few mild mea­sures.

So the Troi­ka has cre­at­ed a set of demands that can be best accom­plished if its unrea­son­ably demand­ing and nev­er being quite sat­is­fied because doing so extends the whole sit­u­a­tion where it can keep mak­ing demands. That’s large­ly been the sit­u­a­tion the entire time and it’s still the sit­u­a­tion even as the Greeks are osten­si­bly about to final­ly exit the Troika’s ‘bailout’ pro­gram:

Bloomberg Pol­i­tics

Greece’s 10-Step Road Map to a Bailout Pro­gram Exit in August

By Sotiris Nikas
Jan­u­ary 6, 2018, 11:00 PM CST

* Pri­va­ti­za­tions are the most dif­fi­cult issue remain­ing
* Results of lenders’ stress test cru­cial for the real econ­o­my

For Greece, 2018 is a cru­cial year.

The key ques­tion in the months ahead for what was once the epi­cen­ter of the Euro­pean cred­it cri­sis is: Will it turn the cor­ner and wean itself of exter­nal aid like Ire­land, Por­tu­gal and Cyprus — some­thing the Greek gov­ern­ment wants? Or, will the cur­rent bailout pro­gram, which ends Aug. 20, be fol­lowed by a sim­i­lar arrange­ment — as some observers expect?

...

Since 2010, Greece has had three life­lines from euro-area coun­tries and the Inter­na­tion­al Mon­e­tary Fund with strin­gent con­di­tions in terms of fis­cal con­sol­i­da­tion and struc­tur­al reforms. It has also gone through two debt restruc­tur­ings. In the next six-to-eight months, the Greek gov­ern­ment and the country’s cred­i­tors have to work through some thorny issues if they want to avert yet anoth­er bailout pro­gram.

Here are the 10 cru­cial items on Greece’s cal­en­dar before the end of the bailout pro­gram:

* This week, the gov­ern­ment plans to sub­mit to par­lia­ment a bill to imple­ment all the mea­sures need­ed to con­clude the third bailout review. New poli­cies have to be vot­ed on by Jan. 17 so that audi­tors mon­i­tor­ing the pro­gram can present Greece’s com­pli­ance report at the Jan. 22 Eurogroup meet­ing, which will then approve the dis­burse­ment of the next bailout tranche.

* In late Jan­u­ary, Euro­pean bank­ing author­i­ties will final­ize the sce­nar­ios under which the bal­ance sheets of Greek lenders will be stress-test­ed. The banks have to con­clude these audits of their cap­i­tal ade­qua­cy ear­li­er than their EU coun­ter­parts.
* By ear­ly Feb­ru­ary, Greece intends to issue a new bond, with a matu­ri­ty most like­ly of three or sev­en years, as it strives to regain full mar­ket access after years in the wilder­ness.

* Dur­ing the first 10 days of Feb­ru­ary, the Euro­pean Sta­bil­i­ty Mech­a­nism is expect­ed to dis­burse the bailout tranche attached to the imple­men­ta­tion of the third review’s con­di­tions. The amount of mon­ey Greece will get has yet to be agreed on, but it will be at least 5.5 bil­lion euros ($6.6 bil­lion), accord­ing to the Greek Finance Min­istry.

* In Feb­ru­ary, Greek banks will start send­ing data to the Bank of Greece and Euro­pean author­i­ties for the stress tests.

* The Greek gov­ern­ment expects that in Feb­ru­ary cred­i­tors will start dis­cussing fur­ther debt relief mea­sures.

* In ear­ly March, the fourth bailout review is expect­ed to begin. It isn’t clear yet when cred­i­tor rep­re­sen­ta­tives will return to Athens, but the review has to start in March if Greece wants to com­plete anoth­er 82 mea­sures on time.

* One of the most impor­tant gath­er­ings between cred­i­tors before the end of the cur­rent bailout pro­gram will take place in Wash­ing­ton on April 20–22. The IMF’s spring meet­ings will prob­a­bly give cred­i­tors the oppor­tu­ni­ty to dis­cuss debt relief and what’s next for Greece.

* In ear­ly May, the stress test results will be announced. This will show if Greek lenders need more cap­i­tal and, if so, how seri­ous the prob­lem is for them and for Greece.

* By the end of May or June, both the Greek gov­ern­ment and cred­i­tors want to con­clude the fourth bailout review and strike a deal on the con­di­tions for any fur­ther debt relief and the post-pro­gram life for Greece. Greek author­i­ties are rul­ing out any kind of new pro­gram, but the Bank of Greece’s Gov­er­nor Yan­nis Stournaras recent­ly saidsaid a cred­it line after August would boost investor con­fi­dence. Euro­pean offi­cials also say there will be some kind of “fol­low-up arrange­ment until 2022,” accord­ing to a per­son with knowl­edge of the dis­cus­sions, since Greece has com­mit­ted to pri­ma­ry bud­get sur­plus­es of 3.5 per­cent of gross domes­tic prod­uct until then.

Exit­ing the bailout with­out any fol­low-up arrange­ment would cre­ate an annoy­ance for the country’s finan­cial sec­tor: it would mean junk-rat­ed Greek banks won’t be eli­gi­ble for a waiv­er allow­ing them to pledge sub-invest­ment grade sov­er­eign assets as col­lat­er­al for the ECB’s nor­mal refi­nanc­ing oper­a­tions, which pro­vide the country’s lenders with around 13 bil­lion euros in liq­uid­i­ty. This means that once Greece is no longer in a bailout pro­gram banks would have to con­vert some of that into Emer­gency Liq­uid­i­ty Assis­tance, which car­ries a 150-basis-point penal­ty over reg­u­lar cred­it lines.

Tough Sells

Greek Prime Min­is­ter Alex­is Tsipras’s admin­is­tra­tion will have to ful­fill a polit­i­cal­ly dif­fi­cult pri­va­ti­za­tion pro­gram as it seeks to boost growth and gain the trust of investors need­ed for a bailout exit.

The Greek gov­ern­ment projects that in 2018 it will man­age to get 2.73 bil­lion euros from the sale of state assets. But cred­i­tor esti­mates are more con­ser­v­a­tive and see the gov­ern­ment falling short of its expec­ta­tions. The country’s lenders are going to pres­sure the gov­ern­ment to imple­ment what has been agreed and bring in the pro­ject­ed rev­enues.

Gath­er­ing Pace

By June 2018, the gov­ern­ment has to launch the ten­der for the sale of 17 per­cent of Pub­lic Pow­er Corp., or find some oth­er way to mon­e­tize its stake in the util­i­ty. By the end of the first quar­ter, it has to do the same for the sale of 30 per­cent of Athens Inter­na­tion­al Air­port, 65 per­cent of Greek state-con­trolled nat­ur­al gas sup­pli­er Depa, 5 per­cent of Hel­lenic Telecom­mu­ni­ca­tions Orga­ni­za­tion SA and 35.5 per­cent of Hel­lenic Petro­le­um SA Greek author­i­ties will have to com­plete by Feb­ru­ary 2018 key con­di­tions need­ed for the start of the Hellinikon project.

Fail­ure to meet tar­gets may jeop­ar­dize gov­ern­ment efforts to seek addi­tion­al debt relief, as cred­i­tors will demand that the gov­ern­ment does its part for light­en­ing its bur­den before agree­ing to addi­tion­al con­ces­sions.

“What Greece has to do is stay on top of the reforms and if it does that, it cre­ates space for the Euro­pean Com­mis­sion and the Eurogroup to dis­cuss the big ques­tions,” Mujta­ba Rah­man, man­ag­ing direc­tor at Eura­sia Group in Lon­don said.

———-

“Greece’s 10-Step Road Map to a Bailout Pro­gram Exit in August” by Sotiris Nikas; Bloomberg Pol­i­tics; 01/06/2018

“The key ques­tion in the months ahead for what was once the epi­cen­ter of the Euro­pean cred­it cri­sis is: Will it turn the cor­ner and wean itself of exter­nal aid like Ire­land, Por­tu­gal and Cyprus — some­thing the Greek gov­ern­ment wants? Or, will the cur­rent bailout pro­gram, which ends Aug. 20, be fol­lowed by a sim­i­lar arrange­ment — as some observers expect?”

That’s the big omi­nous ques­tion: will the cur­rent bailout pro­gram, which ends Aug. 20, be fol­lowed by a sim­i­lar arrange­ment — as some observers expect?

But it’s a ques­tion we’ll get answered fair­ly soon. August 20th isn’t that far off and there are quite a few mile­stones the Greeks are expect­ed to hit before then:

...
Since 2010, Greece has had three life­lines from euro-area coun­tries and the Inter­na­tion­al Mon­e­tary Fund with strin­gent con­di­tions in terms of fis­cal con­sol­i­da­tion and struc­tur­al reforms. It has also gone through two debt restruc­tur­ings. In the next six-to-eight months, the Greek gov­ern­ment and the country’s cred­i­tors have to work through some thorny issues if they want to avert yet anoth­er bailout pro­gram
...

And note, in the list of 10 cru­cial mile­stones, the first one is for the Greek gov­ern­ment to sub­mit a par­lia­men­tary bill to imple­ment all the remain­ing demands that the Troi­ka has been mak­ing all along, with almost not com­pro­mise or mer­cy. It’s a mas­sive new aus­ter­i­ty bill and the Greeks have to sub­mit the bill to pass it all this week. And then, a new fourth review needs to be start­ed up in March for all the 82 spe­cif­ic demands remain­ing left in the third review — which are most­ly aus­ter­i­ty or dereg­u­la­tions — to be imple­ment­ed and avail­able for the final review:

...
Here are the 10 cru­cial items on Greece’s cal­en­dar before the end of the bailout pro­gram:

* This week, the gov­ern­ment plans to sub­mit to par­lia­ment a bill to imple­ment all the mea­sures need­ed to con­clude the third bailout review. New poli­cies have to be vot­ed on by Jan. 17 so that audi­tors mon­i­tor­ing the pro­gram can present Greece’s com­pli­ance report at the Jan. 22 Eurogroup meet­ing, which will then approve the dis­burse­ment of the next bailout tranche.

...

* In ear­ly March, the fourth bailout review is expect­ed to begin. It isn’t clear yet when cred­i­tor rep­re­sen­ta­tives will return to Athens, but the review has to start in March if Greece wants to com­plete anoth­er 82 mea­sures on time.
...

And don’t for­get, if those 82 demands aren’t all imple­ment­ed in time, Greece might not pass its final ‘bailout’ review and be allowed to escape the pro­gram in August.

Anoth­er source of pres­sure for rapid­ly pass­ing all 82 Troikan demands is the April meet­ing between the IMF and the EU gov­ern­ments to dis­cuss pos­si­ble debt relief. If there’s any demand that isn’t met you can be sure the EU gov­ern­ments will use that as an excuse to avoid any real debt relief nego­ti­a­tions. So Greece has to pass all the aus­ter­i­ty demands almost imme­di­ate­ly just for the hopes of have talks about debt relief. It’s an exam­ple of how the EU is incen­tivized to nev­er give Greece any debt relief: it’s an effec­tive car­rot, espe­cial­ly if Greece nev­er actu­al­ly gets to eat the car­rot and remains hun­gry. And by the end of May or June, both the Greek gov­ern­ment and the Troi­ka are sup­posed to fin­ish the fourth bailout review (cov­er­ing the 82 items left from the third bailout review) and strike a deal on the con­di­tions for debt relief and “the post-pro­gram life for Greece”:

...
* One of the most impor­tant gath­er­ings between cred­i­tors before the end of the cur­rent bailout pro­gram will take place in Wash­ing­ton on April 20–22. The IMF’s spring meet­ings will prob­a­bly give cred­i­tors the oppor­tu­ni­ty to dis­cuss debt relief and what’s next for Greece.

* In ear­ly May, the stress test results will be announced. This will show if Greek lenders need more cap­i­tal and, if so, how seri­ous the prob­lem is for them and for Greece.

* By the end of May or June, both the Greek gov­ern­ment and cred­i­tors want to con­clude the fourth bailout review and strike a deal on the con­di­tions for any fur­ther debt relief and the post-pro­gram life for Greece. Greek author­i­ties are rul­ing out any kind of new pro­gram, but the Bank of Greece’s Gov­er­nor Yan­nis Stournaras recent­ly saidsaid a cred­it line after August would boost investor con­fi­dence. Euro­pean offi­cials also say there will be some kind of “fol­low-up arrange­ment until 2022,” accord­ing to a per­son with knowl­edge of the dis­cus­sions, since Greece has com­mit­ted to pri­ma­ry bud­get sur­plus­es of 3.5 per­cent of gross domes­tic prod­uct until then.
...

That’s one omi­nous term: the post-pro­gram life for Greece. It sure sounds like more aus­ter­i­ty.

And note that just one of those 82 items is the ful­fill­ment of the mass pri­va­ti­za­tion pro­gram. And if this does­n’t hap­pen, the EU gov­ern­ments can declare no debt relief nego­ti­a­tions until that hap­pens. Which is a great way to ensure fire sale prices on those pri­va­ti­za­tions (you almost could­n’t send a worse sig­nal to poten­tial bid­ders):

...
Tough Sells

Greek Prime Min­is­ter Alex­is Tsipras’s admin­is­tra­tion will have to ful­fill a polit­i­cal­ly dif­fi­cult pri­va­ti­za­tion pro­gram as it seeks to boost growth and gain the trust of investors need­ed for a bailout exit.

The Greek gov­ern­ment projects that in 2018 it will man­age to get 2.73 bil­lion euros from the sale of state assets. But cred­i­tor esti­mates are more con­ser­v­a­tive and see the gov­ern­ment falling short of its expec­ta­tions. The country’s lenders are going to pres­sure the gov­ern­ment to imple­ment what has been agreed and bring in the pro­ject­ed rev­enues.

Gath­er­ing Pace

By June 2018, the gov­ern­ment has to launch the ten­der for the sale of 17 per­cent of Pub­lic Pow­er Corp., or find some oth­er way to mon­e­tize its stake in the util­i­ty. By the end of the first quar­ter, it has to do the same for the sale of 30 per­cent of Athens Inter­na­tion­al Air­port, 65 per­cent of Greek state-con­trolled nat­ur­al gas sup­pli­er Depa, 5 per­cent of Hel­lenic Telecom­mu­ni­ca­tions Orga­ni­za­tion SA and 35.5 per­cent of Hel­lenic Petro­le­um SA Greek author­i­ties will have to com­plete by Feb­ru­ary 2018 key con­di­tions need­ed for the start of the Hellinikon project.

Fail­ure to meet tar­gets may jeop­ar­dize gov­ern­ment efforts to seek addi­tion­al debt relief, as cred­i­tors will demand that the gov­ern­ment does its part for light­en­ing its bur­den before agree­ing to addi­tion­al con­ces­sions.
...

“Fail­ure to meet tar­gets may jeop­ar­dize gov­ern­ment efforts to seek addi­tion­al debt relief, as cred­i­tors will demand that the gov­ern­ment does its part for light­en­ing its bur­den before agree­ing to addi­tion­al con­ces­sions.”

So that’s the road map Greece is expect­ed to fol­low. Start­ing this week with the par­lia­men­tary intro­duc­tion of the bill that will put those 82 demands in place.

Is that a real­is­tic road map? Well, as the fol­low­ing arti­cle about HSBC’s take on the sit­u­a­tion, it is indeed pos­si­ble that Greece could exit the bailout pro­gram and escape (although there’s still the post-bailout con­di­tions). But as HSBC’s ana­lyst notes, a fail­ure to escape and a fourth ‘bailout’ is also very pos­si­ble. And it’s going to be a lot more pos­si­ble to see that fourth bailout if Greece does­n’t actu­al­ly get debt relief because Greece won’t qual­i­fy for the ECB’s QE pro­gram with­out debt relief and with­out that QE sup­port Greece’s debt could become too expen­sive to sup­port.

And as the HSBC ana­lyst also notes, even if Greece is allowed to qual­i­fy for that QE sup­port, enabling it to poten­tial­ly escape the ‘bailout’ pro­gram, it prob­lem won’t be able to actu­al­ly escape. Because a post-pro­gramme enhance sur­veil­lance pro­gram that ensure Greece meets the con­di­tions required to qual­i­fy for that ECB QE pro­gram might still be nec­es­sary. And that sounds like more Troikan demands. That was the HSBC ana­lysts con­clu­sion, which means no debt relief like­ly means no escape from the Troikan trap and and if Greece does escape it won’t be allowed to tru­ly escape:

The Finan­cial Times
fastFT

‘Plau­si­ble’ that Greece will exit bailout pro­gramme this year – HSBC

Adam Sam­son
Jan­u­ary 4, 2018

Greece may be able to exit the bailout pro­gramme estab­lished by inter­na­tion­al author­i­ties as soon as this year, HSBC has said, in a sign of just how far the euro­zone has come since the depths of the debt cri­sis in 2011.

The coun­try last year regained access to cap­i­tal mar­kets, its econ­o­my is look­ing less drea­ry, and it will have enough cash reserves in August of this year to finance itself for the next “year or so”, said Fabio Bal­boni, Euro­pean econ­o­mist at HSBC.

“For a num­ber of years, there has been con­cern about a pos­si­ble Greek exit from the euro­zone. But, hav­ing regained access to mar­kets last year, in 2018 Greece might exit its bailout pro­gramme instead, after eight long years, and nine finance min­is­ters,” he said.

How­ev­er, it is less clear whether Greece will be able to make a clean break, one with­out a fol­low-up scheme.

“A ‘clean’ exit might be fea­si­ble, at least for a peri­od. But a pre­cau­tion­ary pro­gramme, or at least ‘enhanced’ post-pro­gramme sur­veil­lance, might be need­ed to ensure Greek bonds remain eli­gi­ble in the ECB refi­nanc­ing oper­a­tions,” said Mr Bal­boni.

If Greece is suc­cess­ful in mov­ing past the string of bailouts it has received over the past eight years from the EU and Inter­na­tion­al Mon­e­tary Fund, it would mark the lat­est sign of progress for one of the coun­tries that was bad­ly maimed dur­ing the debt cri­sis.

Greece’s job­less rate was 26.5 per cent in 2014, with youth job­less reach­ing 52.4 per cent that year. In Octo­ber of last year, Greece’s over­all unem­ploy­ment had eased to a still-ele­vat­ed 20.6 per cent, data from Euro­stat show.

Mean­while, the econ­o­my grew sequen­tial­ly in the third quar­ter 2017 for the third quar­ter in a row, the longest such streak since 2006, accord­ing to HSBC’s tab­u­la­tions.

...

There has also been a vast improve­ment in the sec­ondary mar­ket: the yield on Greece’s bench­mark 10-year bond was 3.9 per cent on Thurs­day. It had surged close to 40 per cent in 2012, accord­ing to Reuters data. Trad­ing activ­i­ty is mut­ed in Greek sov­er­eign bonds, mean­ing that the moves may be exac­er­bat­ed rel­a­tive to broad­er investor sen­ti­ment.

Mr Bal­boni not­ed that Greece is “still far from an invest­ment grade [and] the coun­try remains exclud­ed from the [Euro­pean Cen­tral Bank’s] QE pro­gramme.” He reck­ons inclu­sion into the bond buy­ing pro­gramme is “some way off”, which could lim­it a fur­ther reduc­tion in bond yields.

Much hinges on the eurozone’s will­ing­ness to pro­vide Greece with debt relief. The bloc owns 80 per cent of Greece’s debt, accord­ing to HSBC. With­out “sub­stan­tial” relief, “Greece will fail to meet the IMF’s debt sus­tain­abil­i­ty require­ment,” said Mr Bal­boni.

“Fur­ther­more, under some rea­son­able assump­tions in terms of growth, and with the pri­ma­ry sur­plus tar­gets agreed at last July’s Eurogroup meet­ing, Greece’s debt would not sta­bilise, as cheap euro­zone loans get replaced by more expen­sive bonds,” he added.

———-

“‘Plau­si­ble’ that Greece will exit bailout pro­gramme this year – HSBC” by Adam Sam­son; The Finan­cial Times; 01/04/2018

““A ‘clean’ exit might be fea­si­ble, at least for a peri­od. But a pre­cau­tion­ary pro­gramme, or at least ‘enhanced’ post-pro­gramme sur­veil­lance, might be need­ed to ensure Greek bonds remain eli­gi­ble in the ECB refi­nanc­ing oper­a­tions,” said Mr Bal­boni.”

A ‘clean’ exit might be fea­si­ble. That’s the opti­mistic sce­nario. But post-pro­gramme sur­veil­lance might be nec­es­sary too even if Greece does leave the ‘bailout’ in order to qual­i­fy for the ECB QE pro­gram and avoid a spike in bor­row­ing costs. It’s a remark­able ‘almost no win’ sit­u­a­tion.

And note the cur­rent eco­nom­ic state of affairs that these demands are being made in: Greece’s job­less rate was 26.5 per cent in 2014, with youth job­less reach­ing 52.4 per cent that year. And last year it dropped all the way down to 20.6 per cent. Which is still, you know, cat­a­stroph­i­cal­ly high. Because aus­ter­i­ty has been a dis­as­ter:

...
If Greece is suc­cess­ful in mov­ing past the string of bailouts it has received over the past eight years from the EU and Inter­na­tion­al Mon­e­tary Fund, it would mark the lat­est sign of progress for one of the coun­tries that was bad­ly maimed dur­ing the debt cri­sis.

Greece’s job­less rate was 26.5 per cent in 2014, with youth job­less reach­ing 52.4 per cent that year. In Octo­ber of last year, Greece’s over­all unem­ploy­ment had eased to a still-ele­vat­ed 20.6 per cent, data from Euro­stat show.

Mean­while, the econ­o­my grew sequen­tial­ly in the third quar­ter 2017 for the third quar­ter in a row, the longest such streak since 2006, accord­ing to HSBC’s tab­u­la­tions.
...

And that depress­ing state of affairs is part of why the HSBC ana­lyst sees “sub­stan­tial” debt relief a neces­si­ty. Not only is the debt relief required to meet IMF demands but it’s also a sim­ple real­i­ty that exit­ing the pro­gram is going to increase the inter­est costs on Greece’s debt and that’s going make it’s large debt load grow even more. It’s a sit­u­a­tion that screams for sub­stan­tial debt relief (and also screams of usury):

...
Mr Bal­boni not­ed that Greece is “still far from an invest­ment grade [and] the coun­try remains exclud­ed from the [Euro­pean Cen­tral Bank’s] QE pro­gramme.” He reck­ons inclu­sion into the bond buy­ing pro­gramme is “some way off”, which could lim­it a fur­ther reduc­tion in bond yields.

Much hinges on the eurozone’s will­ing­ness to pro­vide Greece with debt relief. The bloc owns 80 per cent of Greece’s debt, accord­ing to HSBC. With­out “sub­stan­tial” relief, “Greece will fail to meet the IMF’s debt sus­tain­abil­i­ty require­ment,” said Mr Bal­boni.

“Fur­ther­more, under some rea­son­able assump­tions in terms of growth, and with the pri­ma­ry sur­plus tar­gets agreed at last July’s Eurogroup meet­ing, Greece’s debt would not sta­bilise, as cheap euro­zone loans get replaced by more expen­sive bonds,” he added.
...

So is debt relief remote­ly pos­si­ble, giv­en that it appears to be a require­ment for any real­is­tic expec­ta­tions of Greece leav­ing the pro­gram? Well, here’s what the pres­i­dent of the Eurogroup had to say about these mat­ters a few weeks ago:
Greece had bet­ter com­plete every item demand­ed of it and only then will there be talk of debt relief. And also every­one should be patient with sup­port­ing Greece after it exits the bailout pro­gram, which sounds like talk of a post-pro­gramme sur­veil­lance pro­gram, which sounds like a new ver­sion of the ‘assis­tance in exchange for aus­ter­i­ty’ bailout regime under a new name:

CNBC

Greece should only get a debt deal after its bailout is fin­ished, new Eurogroup pres­i­dent says

* Greece is set to con­clude its third bailout pro­gram in August of next year
* Speak­ing to CNBC in ear­ly Decem­ber, mem­bers of the Greek gov­ern­ment expressed hope for an agree­ment before they end the bailout pro­gram
* But Cen­teno made it clear that the bailout pro­gram needs to be com­plet­ed first

Sil­via Amaro | @Silvia_Amaro
Pub­lished 2:52 AM ET Thu, 14 Dec 2017 Updat­ed 3:01 AM ET Thu, 14 Dec 2017

Greece needs to ful­ly com­plete its cur­rent bailout pro­gram before the coun­try receives any relief on its huge debt pile, the new Eurogroup pres­i­dent told CNBC.

Speak­ing to CNBC in an exclu­sive inter­view, Mario Cen­teno, the incom­ing chief of the 19 finance min­is­ters from the euro zone, said there are still “some inter­me­di­ate steps” before the debt restruc­tur­ing talks with Greece begin.

Greece is set to con­clude its third bailout pro­gram in August of next year. The coun­try has been promised mea­sures to make its debt more sus­tain­able over the long term, but the issue has sparked divi­sion among its cred­i­tors. While the Inter­na­tion­al Mon­e­tary Fund argues that this is a mat­ter that needs to be looked at as soon as pos­si­ble, Euro­pean cred­i­tors believe that this is not a pri­or­i­ty.

...

“I think we will achieve a very, very good result very soon,” Dim­itris Tzanakopou­los, the Greek min­is­ter of state who is also the Greek gov­ern­ment spokesper­son, told CNBC in Athens.

“We will have an agree­ment before the end of the pro­gram. This is very impor­tant for us in order to be able to refi­nance our debt with­out offi­cial sec­tor sup­port, I think this is a pre­con­di­tion in order for us to do that,” Tzanakopou­los said.

But Cen­teno made it clear that the bailout pro­gram needs to be com­plet­ed.

“We are in a good mood to fin­ish it by mid-2018; August of 2018. We hope that the Greek author­i­ties con­tin­ue the out­stand­ing work they’ve been doing in the last years to accom­plish all the mea­sures and all the tar­gets that we have in the pro­gram,” Cen­teno said.

At the same time, Cen­teno, who is also head of the Por­tuguese finance min­istry where a bailout pro­gram also took place between 2014 and 2015, asked Euro­pean insti­tu­tions to sup­port Greece after the pro­gram and to be patient with the coun­try.

“We hope that the Greek author­i­ties con­tin­ue the out­stand­ing work they’ve been doing in the last years to accom­plish all the mea­sures and all the tar­gets that we have in the pro­gram … And then, going back to this idea of reform­ing, hav­ing patience, what the insti­tu­tions need real­ly is to back the Greek author­i­ties in the process after the reforms,” Cen­teno said.

———-

“Greece should only get a debt deal after its bailout is fin­ished, new Eurogroup pres­i­dent says” by Sil­via Amaro; CNBC; 12/14/2017

“Greece is set to con­clude its third bailout pro­gram in August of next year. The coun­try has been promised mea­sures to make its debt more sus­tain­able over the long term, but the issue has sparked divi­sion among its cred­i­tors. While the Inter­na­tion­al Mon­e­tary Fund argues that this is a mat­ter that needs to be looked at as soon as pos­si­ble, Euro­pean cred­i­tors believe that this is not a pri­or­i­ty.”

Not a pri­or­i­ty. That’s the EU gov­ern­ments’ gen­er­al take on the debt relief nego­ti­a­tions. But the IMF con­tin­ues to demand debt relief at some point so we’ll see if the IMF com­plete­ly folds again (these aren’t new demands).

And the Greek gov­ern­ment makes the same point the HSBC ana­lyst made: debt relief is a basic require­ment for Greece to leave the ‘bailout’ pro­gram and return to the debt mar­kets because it’s debt is going to become a lot more expen­sive after leav­ing the pro­gram:

...
“I think we will achieve a very, very good result very soon,” Dim­itris Tzanakopou­los, the Greek min­is­ter of state who is also the Greek gov­ern­ment spokesper­son, told CNBC in Athens.

“We will have an agree­ment before the end of the pro­gram. This is very impor­tant for us in order to be able to refi­nance our debt with­out offi­cial sec­tor sup­port, I think this is a pre­con­di­tion in order for us to do that,” Tzanakopou­los said.
...

But Europ­group pres­i­dent Cen­teno repeat­ed­ly made clear that ALL the Troikan demands will have to be imple­ment­ed and pass the final review before any debt relief nego­ti­a­tions can hap­pen. And also he thinks every­one should be patient about ‘sup­port­ing’ Greece after it leaves the bailout pro­gram. And giv­en the nature of the ‘sup­port’ we’ve seen so far for Greece through­out this entire night­mare it seems like that sup­port is going to come with a lot of aus­ter­i­ty-strings attached:

...
But Cen­teno made it clear that the bailout pro­gram needs to be com­plet­ed.

“We are in a good mood to fin­ish it by mid-2018; August of 2018. We hope that the Greek author­i­ties con­tin­ue the out­stand­ing work they’ve been doing in the last years to accom­plish all the mea­sures and all the tar­gets that we have in the pro­gram,” Cen­teno said.

At the same time, Cen­teno, who is also head of the Por­tuguese finance min­istry where a bailout pro­gram also took place between 2014 and 2015, asked Euro­pean insti­tu­tions to sup­port Greece after the pro­gram and to be patient with the coun­try.

“We hope that the Greek author­i­ties con­tin­ue the out­stand­ing work they’ve been doing in the last years to accom­plish all the mea­sures and all the tar­gets that we have in the pro­gram … And then, going back to this idea of reform­ing, hav­ing patience, what the insti­tu­tions need real­ly is to back the Greek author­i­ties in the process after the reforms,” Cen­teno said.
...

Of course, it’s pos­si­ble Greece could get some no-strings-attached extra sup­port after exit­ing the ‘bailout’ pro­gram. It should. But don’t for­get that one of the rea­sons the euro­zone has been so insane­ly harsh on Greece is to main­tain the estab­lish that the euro­zone mem­bers won’t actu­al­ly bail each oth­er out even when the alter­na­tive is years of bru­tal aus­ter­i­ty and mas­sive unem­ploy­ment.

And as the fol­low­ing arti­cle that gives more details on those 82 demands reminds us, Greece has already agreed to main­tain 3.5 per­cent pri­ma­ry sur­plus­es until 2022. So Greece has already signed up for some sort of over­sight regime that will go on even if it for­mal­ly exits the ‘bailout’. And as the fol­low­ing arti­cle also makes clear, those 82 remain­ing demands include A LOT of aus­ter­i­ty, includ­ing aus­ter­i­ty for the poor. This is what Greece is try­ing to escape:

Neos Kos­mos

New bailout pro­gram for Greece?

Details of Greece’s bailout pro­gram update, as agreed between the Tsipras gov­ern­ment and the cred­i­tors, include 82 pri­or actions

15 Decem­ber 2017

The Greek gov­ern­ment has at least four dif­fi­cult months ahead of it to set in motion the 82 pri­or actions includ­ed in the third review of the Euro­pean Sta­bil­i­ty Mech­a­nism (ESM). These actions are out­lined in a sup­ple­men­tal Mem­o­ran­dum of Under­stand­ing: Greece (SMoU) approved by the ESM Board of Gov­er­nors and signed by Greece and the Euro­pean Com­mis­sion, act­ing on behalf of the ESM, on 5 July. The Third Review of the ESM was leaked last week­end and print­ed in the Sun­day edi­tion of acclaimed broad­sheet news­pa­per Kathimeri­ni. The SMoU review draft, dat­ed 3 Decem­ber, reads as a sum­ma­ry of Greece’s sto­ry so far, begin­ning with the sig­na­ture of the third mem­o­ran­dum: “In July 2015, Greece request­ed sup­port from its Euro­pean part­ners to restore sus­tain­able growth, cre­ate jobs, reduce inequal­i­ties, and address the risks to its own finan­cial sta­bil­i­ty and to that of the euro area”.

It goes on to say “In August 2015, the Hel­lenic Repub­lic con­clud­ed an agree­ment for sta­bil­i­ty sup­port in the form of a loan from the Euro­pean Sta­bil­i­ty Mech­a­nism for an avail­abil­i­ty peri­od of three years”. This update on the bailout pro­gram sets out the coun­try’s main goal, which is for it to be over by August 2018.

In order for Greece to achieve it, a detailed action plan is set out for the Greek gov­ern­ment before the pro­gram’s fourth and final review.

What is clear­ly laid out through­out the leaked doc­u­ment, is that Athens will not do any­thing with­out per­mis­sion from the ‘insti­tu­tions’ i.e. the lenders’ rep­re­sen­ta­tives. This is expressed with a state­ment at the start of the agree­ment: ‘Suc­cess requires own­er­ship of the reform agen­da by the Greek author­i­ties. The gov­ern­ment there­fore stands ready to take any mea­sures that may become appro­pri­ate for this pur­pose as cir­cum­stances change.’

These mea­sures include reg­u­la­tion of indus­tri­al rela­tion­ships, pro­tec­tion of the bank­ing sys­tem, pro­vi­sion for the Non-Per­form­ing Loans (NPLs), pri­vati­sa­tion of pub­lic assets, mobil­i­ty of the pub­lic sec­tor, actions to fight tax eva­sion and cor­rup­tion and a nation­al pol­i­cy to increase growth and encour­age invest­ment. Again, the doc­u­ment sets out the goals in elo­quent lan­guage: “The recov­ery strat­e­gy takes into account the need for social jus­tice and fair­ness, both across and with­in gen­er­a­tions. Fis­cal con­straints have imposed hard choic­es, and it is there­fore impor­tant that the bur­den of adjust­ment is borne by all parts of soci­ety and tak­ing into account the abil­i­ty to pay.

Pri­or­i­ty has been placed on actions to tack­le tax eva­sion, fraud and strate­gic defaults, as these impose a bur­den on the hon­est cit­i­zens and com­pa­nies who pay their tax­es and loans on time. Prod­uct mar­ket reforms seek to elim­i­nate the rents accru­ing to vest­ed inter­est groups as the asso­ci­at­ed high­er prices under­mine the dis­pos­able income of con­sumers and the com­pet­i­tive­ness of com­pa­nies.

The pen­sion reform takes into account that exist­ing pen­sion­ers find it more dif­fi­cult to com­pen­sate for income loss­es and it has applied cuts pro­gres­sive­ly, based on the lev­el of pen­sions. To get peo­ple back to work and pre­vent the entrench­ing of long-term unem­ploy­ment, the author­i­ties have accel­er­at­ed the absorp­tion of ESIF funds and are work­ing to ensure an effec­tive impact on the econ­o­my, both in the short and the long run.

A fair­er soci­ety requires that Greece con­tin­ues to improve the design of its wel­fare sys­tem, so that there is a gen­uine social safe­ty net which tar­gets scarce resources at those who need them most. In this con­text, the author­i­ties have tak­en mea­sures to pro­vide access to health care for all (includ­ing the unin­sured) and rolled out nation­al­ly a basic social safe­ty net in the form of a Social Sol­i­dar­i­ty Income (SSI) in ear­ly 2017.”

MEDIUM-TERM TARGETS

The ‘updat­ed mem­o­ran­dum’ con­firms Greece’s com­mit­ment to tar­get a medi­um-term pri­ma­ry sur­plus of 3.5 per cent of GDP, which will be main­tained over the medi­um term until 2022. It acknowl­edges the coun­try’s per­for­mance so far, stat­ing that it has not only met, but exceed­ed, this tar­get and con­firms that the gov­ern­men­t’s deci­sion to allo­cate the exceed­ing funds towards the most vul­ner­a­ble was made in accor­dance with the lenders. Oth­er basic goals include the con­tin­u­a­tion of the “ambi­tious pri­vati­sa­tion pro­gram” already set in motion, as well as “the imple­men­ta­tion of reforms to increase the qual­i­ty and effi­cien­cy of the pub­lic sec­tor in the deliv­ery of essen­tial pub­lic goods and ser­vices.”

One issue of par­tic­u­lar con­cern, regard­ing finan­cial sta­bil­i­ty in Greece, is that of tack­ling the large stock of NPLs. “This requires in par­tic­u­lar the effec­tive imple­men­ta­tion of the strength­ened frame­work to sup­port NPL res­o­lu­tion (mar­ket for NPLs, out-of-court work­out (OCW), e‑auctions, insol­ven­cy frame­work)”, states the mem­o­ran­dum, out­lin­ing how “banks and the pub­lic sec­tor need to speed up the restruc­tur­ing of debts and the liq­ui­da­tion of non-viable busi­ness­es to sup­port the recov­ery of the econ­o­my along with the grad­ual phas­ing out of cap­i­tal con­trols.”

The doc­u­ment also touch­es on the coun­try’s growth strat­e­gy, stat­ing that “for the 2014–2020 peri­od, more than €35 bil­lion is avail­able to Greece through EU funds and Greece should con­tin­ue in its effort to max­imise and speed up absorp­tion of this enve­lope”.

The Tsipras Gov­ern­ment has agreed to present a growth strat­e­gy by Decem­ber 2017, “which inter alia should aim at cre­at­ing over the next three to five years a more attrac­tive busi­ness envi­ron­ment, enhanc­ing growth oppor­tu­ni­ties from infra­struc­ture, improv­ing the edu­ca­tion sys­tem as well as human cap­i­tal for­ma­tion through voca­tion­al edu­ca­tion and train­ing (...), strength­en­ing the financ­ing of busi­ness, and devel­op­ing R&D and inno­va­tion. It should also help design sec­to­r­i­al pri­or­i­ties in areas such as ICT, tourism, trans­port, phar­ma­ceu­ti­cals, and logis­tics, and agri­cul­ture and agri-food. The author­i­ties will imple­ment the strat­e­gy with the assis­tance of a Sci­en­tif­ic Devel­op­ment Coun­cil includ­ing social part­ners and sec­toral busi­ness organ­i­sa­tions as well as an advi­so­ry pan­el of for­eign investors.”

All these activ­i­ties will be coor­di­nat­ed by the Nation­al Devel­op­ment Bank, which the Greek gov­ern­ment has agreed to estab­lish. “The new enti­ty will not accept deposits from the pub­lic nor engage in direct lend­ing. The new enti­ty’s func­tions, final struc­ture, and by-laws will reflect in-depth con­sul­ta­tion and agree­ment with the insti­tu­tions and will be designed to ensure no risks to pub­lic finances and finan­cial sta­bil­i­ty; its objec­tives, instru­ments and gov­er­nance will be estab­lished in line with inter­na­tion­al best prac­tice and with the tech­ni­cal sup­port.”

TAX REFORMS

The Greek gov­ern­ment is pre­sent­ed with an array of dead­lines, con­cern­ing all aspects of gov­er­nance. In what con­cerns the much-debat­ed tax reforms, author­i­ties have agreed to under­take a series of actions by March 2018, not least among them to “review pref­er­en­tial tax treat­ments for the ship­ping indus­try in the light of the indi­ca­tions of the Euro­pean Com­mis­sion”, but also to “cod­i­fy and sim­pli­fy the VAT leg­is­la­tion” and “if not already com­plet­ed, the author­i­ties will amend the Code of Pub­lic Rev­enue Col­lec­tion to pro­vide for the exten­sion of the e‑auctions mech­a­nism to auc­tions con­duct­ed by the rev­enue author­i­ties under the Code of Pub­lic Rev­enue Col­lec­tion under its pro­vi­sions.”

By May 2018, the author­i­ties will “review the stamp duty code with the aim of mod­ernising and sim­pli­fy­ing the stamp duty regime by tak­ing into account the mod­ern busi­ness envi­ron­ment”.

As for prop­er­ty tax, Greece has agreed to anoth­er series of dead­lines: by March 2018, “the author­i­ties with the aid of tech­ni­cal sup­port will leg­is­late to align prop­er­ty tax assess­ment zon­al val­ues with mar­ket prices and will devel­op a ded­i­cat­ed team and a per­ma­nent IT sys­tem for prop­er­ty reval­u­a­tion.

By May 2018 (...), the author­i­ties will leg­is­late to adjust tax rates and broad­en the prop­er­ty tax base if nec­es­sary in a rev­enue neu­tral way in order to issue ENFIA bills by August 2018. The author­i­ties will review the imple­men­ta­tion of the cap­i­tal gains tax on real estate by April 2018 and adopt leg­is­la­tion if need­ed by May 2018.”

SOCIAL WELFARE

The review doc­u­ment goes to great lengths to make a case for what is out­lined as “sus­tain­able social wel­fare”, an issue dom­i­nat­ed by the over­haul of the pen­sion sys­tem in Greece.

In terms of that, it demands, as pri­or action, that “at least 30 per cent of all main pen­sion appli­ca­tions sub­mit­ted between 13 May 2016 and Decem­ber 2016 have to be recal­cu­lat­ed and processed, with­out any dis­rup­tion to final­is­ing the cal­cu­la­tion of final pen­sions to pre­vi­ous appli­cants; at least 3,500 sup­ple­men­tary pen­sion appli­ca­tions sub­mit­ted from 1 Jan­u­ary 2015 will be recal­cu­lat­ed and processed, with­out any dis­rup­tion to final­is­ing the cal­cu­la­tion of final pen­sions to pre­vi­ous appli­cants.

“As a key deliv­er­able, by April 2018, the author­i­ties will cal­cu­late and process all main pen­sion appli­ca­tions of 2016 and 30 per cent of main pen­sions appli­ca­tions sub­mit­ted in 2017 and at least 13,800 of sup­ple­men­tary pen­sion appli­ca­tions sub­mit­ted from 1 Jan­u­ary 2015 and 31 Decem­ber 2016”.

Fur­ther­more, the Greek gov­ern­ment is required to “phase out the sol­i­dar­i­ty grant (EKAS) for all pen­sion­ers by end of Decem­ber 2019, reduc­ing it by €570 mil­lion by 2017; €808 mil­lion by 2018; and €853 mil­lion by 2019. The author­i­ties will adopt as a pri­or action the Min­is­te­r­i­al Deci­sion set­ting all the details for the award­ing of EKAS in 2018. The Min­is­te­r­i­al Deci­sion set­ting all the details for the award­ing of EKAS in 2019 will be issued by June 2018”.

As for the health sec­tor reforms, they include “com­pul­so­ry patient reg­is­tra­tion” to be “finalised and become ful­ly oper­a­tional by March 2018”.

The over­haul includes a reform of the dis­abil­i­ty ben­e­fits pol­i­cy, with the aim of mov­ing “from the cur­rent impair­ment assess­ment to an assess­ment includ­ing func­tion­ing con­di­tions to deter­mine eli­gi­bil­i­ty i.e. the abil­i­ty of the per­son to per­form activ­i­ties of dai­ly liv­ing”. The pilot pro­gram of the func­tion­al dis­abil­i­ty assess­ment sys­tem will be rolled out by Feb­ru­ary 2018, while the leg­is­la­tion for the nation­al roll­out of the new scheme will be adopt­ed in May 2018, apply­ing the new dis­abil­i­ty assess­ment to all con­trib­u­to­ry dis­abil­i­ty and wel­fare ben­e­fits, with a view to com­mence nation­al imple­men­ta­tion by June 2018.

Fur­ther­more, the doc­u­ment sets a dead­line for March 2018 for a new leg­is­la­tion regard­ing a “means-test­ed hous­ing ben­e­fit, devel­oped with advice from the World Bank, to be rolled out as part of the growth-enhanc­ing mea­sures”.

PRIVATE AND PUBLIC BUSINESS

Among the reforms out­lined as pri­or actions for the bailout pro­gram, the most sig­nif­i­cant have to do with indus­tri­al rela­tions. This is clear­ly out­lined in the doc­u­ment, which states that the Greek gov­ern­ment, “in con­sul­ta­tion with the social part­ners and in agree­ment with the insti­tu­tions, are devel­op­ing a reli­able admin­is­tra­tive sys­tem to assess rep­re­sen­ta­tive­ness, to be made oper­a­tional by March 2018”, with a view “to pro­mote and mon­i­tor the rep­re­sen­ta­tive­ness of sec­toral col­lec­tive agree­ments”.

The most impor­tant part of this sys­tem involves an oblig­a­tion by the author­i­ties, as a pri­or action, to “analyse and adopt leg­is­la­tion to increase the quo­rum for first-degree unions to vote on a strike to 50 per cent.”

This will have a deci­sive effect on labour unions and work­force organ­i­sa­tion in the future. Equal­ly sig­nif­i­cant, if more, is the oblig­a­tion of Greece to pro­ceed with the long-stalled “eval­u­a­tion” of its pub­lic sec­tor work­force, some­thing that will be done elec­tron­i­cal­ly. Fur­ther­more, accord­ing to the doc­u­ment, the Greek author­i­ties are already imple­ment­ing the new mobil­i­ty scheme for pub­lic sec­tor employ­ees.

...

Last but not least, giv­en that it has to do with what is the coun­try’s most vital source of income, the issue of pri­vati­sa­tions is out­lined in detail.

It involves “launch­ing of the ten­der for the sale of 30 per cent of AIA, 65 per cent of DEPA and five per cent of OTE, on the basis of the rec­om­men­da­tions of the hired by TAIPED advi­sors”, by March 2018. The same dead­line is to be met, regard­ing “the ten­der for the sale of 35.5 per cent of HELPE; the per­cent­age of shares to be sold could be low­er, if by that date, agree­ment has been reached with the insti­tu­tions on an alter­na­tive form of mon­eti­sa­tion with at least equiv­a­lent finan­cial ben­e­fits for the Hel­lenic Repub­lic. By June 2018, launch the ten­der for the sale or oth­er form of mon­eti­sa­tion of 17 per cent of PPC pro­vid­ed it gen­er­ates at least equiv­a­lent finan­cial ben­e­fits to the Hel­lenic Repub­lic com­pared to the sale.”

By all accounts, the third review will be offi­cial­ly con­clud­ed in the first part of Jan­u­ary or even ear­ly Feb­ru­ary 2018.

———-

“New bailout pro­gram for Greece?”; Neos Kos­mos; 12/15/2017

“The Greek gov­ern­ment has at least four dif­fi­cult months ahead of it to set in motion the 82 pri­or actions includ­ed in the third review of the Euro­pean Sta­bil­i­ty Mech­a­nism (ESM). These actions are out­lined in a sup­ple­men­tal Mem­o­ran­dum of Under­stand­ing: Greece (SMoU) approved by the ESM Board of Gov­er­nors and signed by Greece and the Euro­pean Com­mis­sion, act­ing on behalf of the ESM, on 5 July. The Third Review of the ESM was leaked last week­end and print­ed in the Sun­day edi­tion of acclaimed broad­sheet news­pa­per Kathimeri­ni. The SMoU review draft, dat­ed 3 Decem­ber, reads as a sum­ma­ry of Greece’s sto­ry so far, begin­ning with the sig­na­ture of the third mem­o­ran­dum: “In July 2015, Greece request­ed sup­port from its Euro­pean part­ners to restore sus­tain­able growth, cre­ate jobs, reduce inequal­i­ties, and address the risks to its own finan­cial sta­bil­i­ty and to that of the euro area”.”

82 “pri­or actions” (pri­or demands that Troi­ka made) have to be put in motion in the next four months. And as the leaked draft of those 82 items makes clear, those 82 “pri­or actions” are going to be insane­ly unpop­u­lar. It’s a mean list of 82 “pri­or actions”.

And note the warn­ing to the Greek gov­ern­ment that they need to “take own­er­ship” of all this by being will­ing to do what­ev­er is demand­ed of it “as cir­cum­stances change”:

...
What is clear­ly laid out through­out the leaked doc­u­ment, is that Athens will not do any­thing with­out per­mis­sion from the ‘insti­tu­tions’ i.e. the lenders’ rep­re­sen­ta­tives. This is expressed with a state­ment at the start of the agree­ment: ‘Suc­cess requires own­er­ship of the reform agen­da by the Greek author­i­ties. The gov­ern­ment there­fore stands ready to take any mea­sures that may become appro­pri­ate for this pur­pose as cir­cum­stances change.’
...

That’s “tak­ing own­er­ship” for Greece these days: doing what the Troi­ka demands as the sit­u­a­tion changes.

And don’t for­get that one of the like­ly changes to the sit­u­a­tion is all this new aus­ter­i­ty dam­ag­ing the Greek econ­o­my, so it’s very pos­si­ble the 82 mea­sures could be put in place, tank the Greek econ­o­my, and then the Troi­ka comes back and demands even more aus­ter­i­ty in response. Because that’s how things work in the euro­zone.

Also don’t for­get about those 3.5 per­cent sur­plus­es Greece was forced to pledge to main­tain through 2022. That’s going to be a a reg­u­lar excuse to remand more aus­ter­i­ty “as the sit­u­a­tion changes” if the chang­ing sit­u­a­tion is a falling sur­plus under 3.5 per­cent. And this is going to hap­pen dur­ing a big gov­ern­ment “qual­i­ty and effi­cien­cy” dri­ve along with the mass pri­va­ti­za­tion dri­ve and both of those are going to equate to pub­lic lay­off and cuts in pay for pub­lic ser­vice work­ers. So that 3.5 per­cent sur­plus is prob­a­bly going to be used as a call for more pri­va­ti­za­tions and more more lay­offs. Which prob­a­bly isn’t going to be great for the Greek econ­o­my over the next five years even if it cuts down on the gov­ern­ment costs some­what:

...
MEDIUM-TERM TARGETS

The ‘updat­ed mem­o­ran­dum’ con­firms Greece’s com­mit­ment to tar­get a medi­um-term pri­ma­ry sur­plus of 3.5 per cent of GDP, which will be main­tained over the medi­um term until 2022. It acknowl­edges the coun­try’s per­for­mance so far, stat­ing that it has not only met, but exceed­ed, this tar­get and con­firms that the gov­ern­men­t’s deci­sion to allo­cate the exceed­ing funds towards the most vul­ner­a­ble was made in accor­dance with the lenders. Oth­er basic goals include the con­tin­u­a­tion of the “ambi­tious pri­vati­sa­tion pro­gram” already set in motion, as well as “the imple­men­ta­tion of reforms to increase the qual­i­ty and effi­cien­cy of the pub­lic sec­tor in the deliv­ery of essen­tial pub­lic goods and ser­vices.”

One issue of par­tic­u­lar con­cern, regard­ing finan­cial sta­bil­i­ty in Greece, is that of tack­ling the large stock of NPLs. “This requires in par­tic­u­lar the effec­tive imple­men­ta­tion of the strength­ened frame­work to sup­port NPL res­o­lu­tion (mar­ket for NPLs, out-of-court work­out (OCW), e‑auctions, insol­ven­cy frame­work)”, states the mem­o­ran­dum, out­lin­ing how “banks and the pub­lic sec­tor need to speed up the restruc­tur­ing of debts and the liq­ui­da­tion of non-viable busi­ness­es to sup­port the recov­ery of the econ­o­my along with the grad­ual phas­ing out of cap­i­tal con­trols.”
...

And then there’s the dri­ve for “sus­tain­able social wel­fare”. That appears to be the term they’re using for shred­ding the safe­ty-net. And this is going to include “recal­cu­lat­ing” at least 30 per­cent of the pen­sion appli­ca­tion from the sec­ond half of 2016 (pre­sum­ably to cut them) and also phase out the “sol­i­dar­i­ty grant” for pen­sion­ers (EKAS), which was set up for low-income pen­sion­ers:

...
SOCIAL WELFARE

The review doc­u­ment goes to great lengths to make a case for what is out­lined as “sus­tain­able social wel­fare”, an issue dom­i­nat­ed by the over­haul of the pen­sion sys­tem in Greece.

In terms of that, it demands, as pri­or action, that “at least 30 per cent of all main pen­sion appli­ca­tions sub­mit­ted between 13 May 2016 and Decem­ber 2016 have to be recal­cu­lat­ed and processed, with­out any dis­rup­tion to final­is­ing the cal­cu­la­tion of final pen­sions to pre­vi­ous appli­cants; at least 3,500 sup­ple­men­tary pen­sion appli­ca­tions sub­mit­ted from 1 Jan­u­ary 2015 will be recal­cu­lat­ed and processed, with­out any dis­rup­tion to final­is­ing the cal­cu­la­tion of final pen­sions to pre­vi­ous appli­cants.

“As a key deliv­er­able, by April 2018, the author­i­ties will cal­cu­late and process all main pen­sion appli­ca­tions of 2016 and 30 per cent of main pen­sions appli­ca­tions sub­mit­ted in 2017 and at least 13,800 of sup­ple­men­tary pen­sion appli­ca­tions sub­mit­ted from 1 Jan­u­ary 2015 and 31 Decem­ber 2016”.

Fur­ther­more, the Greek gov­ern­ment is required to “phase out the sol­i­dar­i­ty grant (EKAS) for all pen­sion­ers by end of Decem­ber 2019, reduc­ing it by €570 mil­lion by 2017; €808 mil­lion by 2018; and €853 mil­lion by 2019. The author­i­ties will adopt as a pri­or action the Min­is­te­r­i­al Deci­sion set­ting all the details for the award­ing of EKAS in 2018. The Min­is­te­r­i­al Deci­sion set­ting all the details for the award­ing of EKAS in 2019 will be issued by June 2018”.
...

Note that the Greek gov­ern­ment slashed the EKAS for low-income pen­sion­ers by 70 per­cent last month. And all the rest of those cuts to pen­sions are going to have to hap­pen soon as part of the new rode map to escap­ing the ‘bailout’.

And then there’s the move to push more peo­ple off of dis­abil­i­ty ben­e­fits with impair­ment assess­ments to see what kinds of func­tions they can per­form and means-test­ing hous­ing. That sounds like more than just search­ing for fraud. That sounds like mak­ing it eas­i­er to declare some­one not dis­abled and forced to work and get­ting their hous­ing ben­e­fits cut off:

...
The over­haul includes a reform of the dis­abil­i­ty ben­e­fits pol­i­cy, with the aim of mov­ing “from the cur­rent impair­ment assess­ment to an assess­ment includ­ing func­tion­ing con­di­tions to deter­mine eli­gi­bil­i­ty i.e. the abil­i­ty of the per­son to per­form activ­i­ties of dai­ly liv­ing”. The pilot pro­gram of the func­tion­al dis­abil­i­ty assess­ment sys­tem will be rolled out by Feb­ru­ary 2018, while the leg­is­la­tion for the nation­al roll­out of the new scheme will be adopt­ed in May 2018, apply­ing the new dis­abil­i­ty assess­ment to all con­trib­u­to­ry dis­abil­i­ty and wel­fare ben­e­fits, with a view to com­mence nation­al imple­men­ta­tion by June 2018.

Fur­ther­more, the doc­u­ment sets a dead­line for March 2018 for a new leg­is­la­tion regard­ing a “means-test­ed hous­ing ben­e­fit, devel­oped with advice from the World Bank, to be rolled out as part of the growth-enhanc­ing mea­sures”.
...

And then there’s the changes to union rules that make it hard­er to declare a strike. Of course.

And mak­ing it hard­er to strike is going to be hand­ing dur­ing the upcom­ing “eval­u­a­tion” of all gov­ern­ment employ­ees. There’s a planned “mobil­i­ty” pro­gram that can move employ­ees to oth­er func­tions, but the eval­u­a­tions are almost cer­tain­ly going to be used for mass lay­offs because that’s what the Troi­ka has want­ed all along:

...
PRIVATE AND PUBLIC BUSINESS

Among the reforms out­lined as pri­or actions for the bailout pro­gram, the most sig­nif­i­cant have to do with indus­tri­al rela­tions. This is clear­ly out­lined in the doc­u­ment, which states that the Greek gov­ern­ment, “in con­sul­ta­tion with the social part­ners and in agree­ment with the insti­tu­tions, are devel­op­ing a reli­able admin­is­tra­tive sys­tem to assess rep­re­sen­ta­tive­ness, to be made oper­a­tional by March 2018”, with a view “to pro­mote and mon­i­tor the rep­re­sen­ta­tive­ness of sec­toral col­lec­tive agree­ments”.

The most impor­tant part of this sys­tem involves an oblig­a­tion by the author­i­ties, as a pri­or action, to “analyse and adopt leg­is­la­tion to increase the quo­rum for first-degree unions to vote on a strike to 50 per cent.”

This will have a deci­sive effect on labour unions and work­force organ­i­sa­tion in the future. Equal­ly sig­nif­i­cant, if more, is the oblig­a­tion of Greece to pro­ceed with the long-stalled “eval­u­a­tion” of its pub­lic sec­tor work­force, some­thing that will be done elec­tron­i­cal­ly. Fur­ther­more, accord­ing to the doc­u­ment, the Greek author­i­ties are already imple­ment­ing the new mobil­i­ty scheme for pub­lic sec­tor employ­ees.
...

And, final­ly, the pri­va­ti­za­tion needs to hap­pen. Which means rushed sales to buy­ers who all know Greece is fac­ing a dead­line to get these sales done. It’s like the worst sales pitch pos­si­ble:

...
Last but not least, giv­en that it has to do with what is the coun­try’s most vital source of income, the issue of pri­vati­sa­tions is out­lined in detail.

It involves “launch­ing of the ten­der for the sale of 30 per cent of AIA, 65 per cent of DEPA and five per cent of OTE, on the basis of the rec­om­men­da­tions of the hired by TAIPED advi­sors”, by March 2018. The same dead­line is to be met, regard­ing “the ten­der for the sale of 35.5 per cent of HELPE; the per­cent­age of shares to be sold could be low­er, if by that date, agree­ment has been reached with the insti­tu­tions on an alter­na­tive form of mon­eti­sa­tion with at least equiv­a­lent finan­cial ben­e­fits for the Hel­lenic Repub­lic. By June 2018, launch the ten­der for the sale or oth­er form of mon­eti­sa­tion of 17 per cent of PPC pro­vid­ed it gen­er­ates at least equiv­a­lent finan­cial ben­e­fits to the Hel­lenic Repub­lic com­pared to the sale.”
...

Rais­ing income by pri­va­tiz­ing state indus­tries. And as we saw in the first arti­cle, the AIA is the Athens Inter­na­tion­al Air­port. The DEPA is the state-con­trolled nat­ur­al gas sup­pli­er. The OTE is the Hel­lenic Telecom­mu­ni­ca­tions Orga­ni­za­tion, the HELPE is Hel­lenic Petro­le­um SA, and the PPC is the Pub­lic Pow­er Corp. So these are sig­nif­i­cant state assets that have to get sold off. Soon. If Greece is going to be allowed to escape this night­mare.

So a mas­sive round of aus­ter­i­ty, mass gov­ern­ment lay­offs, pen­sion cuts, dis­abil­i­ty and hous­ing cuts and mass pri­va­ti­za­tions of sig­nif­i­cant state assets. That all has to hap­pen very soon if Greece is going to have any hope of escape by August. And if Greece miss­es any of those goals the Troi­ka can either delay the review for pos­si­bly even press ahead with a fourth bailout if things go awry. And they could eas­i­ly go awry because this is a cru­el pro­gram and that tends to cre­ate its own trou­ble.

And even if Greece does escape the bailout it’s still signed up for huge manda­to­ry 3.5 per­cent sur­plus­es through 2022 and the require­ment to do what­ev­er is nec­es­sary to main­tain the reform efforts, which basi­cal­ly forces the Greek gov­ern­ment to impose aus­ter­i­ty going for­ward as a default response to fis­cal pres­sures.

And there’s no guar­an­tee this game won’t be played well past 2022 since the envi­sioned time frame for Greece pay­ing off its debt is decades from now. And that prob­a­bly means decades of ‘post-bailout sur­veil­lance’.

So, in a sense, we do already know the answer to the ques­tion of whether or not there’s a pos­si­bil­i­ty that Greece will be allowed to actu­al­ly exit the ‘bailout’ pro­gram in August and avoid a fourth bailout. And that answer is that it’s pos­si­ble, although not nec­es­sar­i­ly prob­a­ble, and large­ly beside the point because there is no escape for Greece. Even if Greece leaves the bailout it’s still going to be bound by the same con­straints man­dat­ing aus­ter­i­ty and large sur­plus­es for years to come. It’s like a choose-your-own-adven­ture book that with aus­ter­i­ty lurk­ing behind every cor­ner and no end. That’s the actu­al long-term road map the Troi­ka is offer­ing Greece.

Here’s an update on ongo­ing nego­ti­a­tions between Greece and the Troi­ka over how to tran­si­tion from the cur­rent ‘bailout’ pro­gram that expires in August to a post-bailout pro­gram that returns Greece to the bond mar­kets and gives Greece the free­dom to imple­ment its own eco­nom­ic poli­cies for the first time in eight years.

A sec­ond crit­i­cal ele­ment of the nego­ti­a­tions is the terms of what, if any, debt relief Greece will receive. The IMF con­tin­ues to demand “sig­nif­i­cant” debt relief for Greece if it will con­tin­ue with the bailout pro­gram that expires in August and Ger­many con­tin­ues to demand that the IMF stay with the pro­gram. But Ger­many also con­tin­ues to lead the fac­tion that oppos­es any kind of debt relief oth­er than low­ered inter­est rates and the return to Greece of some inter­est pay­ments.

And as we’ve seen before, that lack of any sub­stan­tial debt relief con­flicts with anoth­er key demand of the IMF: that Greece’s path to debt repay­ment remain ‘on track’. And for that to hap­pen Greece will need to main­tain its cur­rent 3.5 per­cent annu­al bud­get sur­plus­es for years to come. So while the debt relief mea­sures the euro zone coun­tries are con­sid­er­ing are help­ful, the fact that those mea­sures aren’t near­ly at the scale of what is need­ed guar­an­tees to that the main­te­nance of those 3.5 per­cent bud­get sur­plus­es will end up remain­ing a demand on Greece for years to come.

But if the end of the bailout pro­gram this August means Greece will now be free to adopt its own eco­nom­ic poli­cies again, how is the Troi­ka going to ensure Greece sticks with aus­ter­i­ty poli­cies that make those sur­plus­es pos­si­ble and not decide to spend that mon­ey on things like edu­ca­tion and health care instead? Sim­ply, the Troi­ka is work­ing a “post-bailout sur­veil­lance pro­gram” that will make any debt relief (like­ly just reduced inter­est on the debt) con­di­tion­al on Greece stick­ing with the aus­ter­i­ty.

In oth­er words, the ‘bailout’ of forced aus­ter­i­ty isn’t actu­al­ly going to end because Greece is going to be forced to agree to con­tin­ue imple­ment­ing what­ev­er aus­ter­i­ty is nec­es­sary to main­tain those 3.5 per­cent sur­plus­es indef­i­nite­ly. Specif­i­cal­ly, the euro­zone nations appear to be plan­ning on demand­ing that the 3.5 per­cent sur­plus­es be main­tained until “at least” 2022, which is a polite way of say­ing “for the fore­see­able future” because Greece will hard­ly make a dent in its debt load by 2022, which is why there’s a real need for sub­stan­tial debt relief.

And, of course, there’s a big empha­sis from the Troi­ka on mak­ing sure Greece itself put forth pro­pos­es that it stick with these aus­ter­i­ty mea­sures and sur­plus­es in order to frame this as Greece ‘tak­ing own­er­ship’ of these ‘reform’ (aus­ter­i­ty) demands so every­one can offi­cial­ly pre­tend that Greece isn’t still be forced to sub­mit to more years of bru­tal aus­ter­i­ty with no escape in sight:

Bloomberg Pol­i­tics

Greece’s Cred­i­tors Close to Com­pro­mis­ing on Debt.

* Eurogroup pres­i­dent says debt dis­cus­sions are in final mile
* Greece’s cred­i­tors hold talks on the side­lines of IMF meet­ings

By Vik­to­ria Den­dri­nou
April 21, 2018, 9:13 AM CDT

Greece’s cred­i­tors are get­ting clos­er on a deal to ease the country’s debt bur­den, accord­ing to Eurogroup Pres­i­dent Mario Cen­teno.

Greece’s 86-bil­lion euro ($106-bil­lion) bailout pro­gram is set to run out in August, and cred­i­tors are work­ing on find­ing a com­pro­mise on debt repay­ments that would help to man­age the country’s financ­ing needs after it stops receiv­ing inter­na­tion­al aid. A debt deal would also allow the Inter­na­tion­al Mon­e­tary Fund to par­tic­i­pate in the cur­rent bailout..

“The posi­tions today are much clos­er than they used to be before,” Cen­teno, who is Portugal’s finance min­is­ter and chairs the meet­ings of his euro-area coun­ter­parts, said in an inter­view in Wash­ing­ton. “We still have a final mile to go but there is a pos­i­tive sen­ti­ment around the table so I think that reflects a true will­ing­ness to be part of the pro­gram.”

Fur­ther eas­ing Greek debt is a key pre­con­di­tion for the Wash­ing­ton-based IMF before it can par­tic­i­pate in the country’s pro­gram. While the IMF has co-financed Greece’s first two bailouts it hasn’t yet acti­vat­ed its third one, argu­ing the euro area must arrange for more debt sus­tain­abil­i­ty. But the par­tic­i­pa­tion of the fund, even a few months before the end of the bailout, is impor­tant for some coun­tries includ­ing Ger­many, who see the IMF com­ing on board as a seal of approval that will offer cred­i­bil­i­ty to the bailout.

...

Debt Deal

Talks among Greece’s cred­i­tors and euro-area coun­tries on like­ly debt mea­sures have been going on at a tech­ni­cal lev­el for months. That includes a pro­pos­al to link debt repay­ments to eco­nom­ic growth, so the coun­try can pay back more if it is doing well, and less if it isn’t. The aim is to have a final agree­ment in the ear­ly sum­mer, but key dif­fer­ences among cred­i­tors on the scope and type of debt relief per­sist.

The IMF would like to see wide-scale debt relief on all of Greece’s euro-area loans –includ­ing those from oth­er coun­tries and the bloc’s bailout fund. That demand is fac­ing resis­tance by many Euro­pean cred­i­tors who are only will­ing to dis­cuss eas­ing the terms of some loans.

Oth­er dis­agree­ments have to do with whether the debt relief will be grant­ed to Greece uncon­di­tion­al­ly or whether it should be tied to bud­get dis­ci­pline and fur­ther eco­nom­ic reforms. The dif­fer­ences were dis­cussed at a meet­ing of offi­cials from Greece’s key cred­i­tor coun­tries and insti­tu­tions on the side­lines of the IMF meet­ings in Wash­ing­ton this week.

Eco­nom­ic Link

In order for the IMF to have suf­fi­cient time to acti­vate its bailout for Greece before it runs out in August, an agree­ment on all these para­me­ters will like­ly need to be struck by the end of next month.

For Cen­teno, the key is that any con­di­tions attached to debt relief come from Greece’s own plans for growth. “We all want debt con­di­tion­al­i­ty to be embed­ded in the growth strat­e­gy for Greece,” he said, refer­ring to the country’s plans for the econ­o­my in its post-bailout life.

“Own­er­ship is the sin­gle word that may and should define the process in the com­ing months.”

———-

“Greece’s Cred­i­tors Close to Com­pro­mis­ing on Debt” by Vik­to­ria Den­dri­nou; Bloomberg Pol­i­tics; 04/21/2018

“Fur­ther eas­ing Greek debt is a key pre­con­di­tion for the Wash­ing­ton-based IMF before it can par­tic­i­pate in the country’s pro­gram. While the IMF has co-financed Greece’s first two bailouts it hasn’t yet acti­vat­ed its third one, argu­ing the euro area must arrange for more debt sus­tain­abil­i­ty. But the par­tic­i­pa­tion of the fund, even a few months before the end of the bailout, is impor­tant for some coun­tries includ­ing Ger­many, who see the IMF com­ing on board as a seal of approval that will offer cred­i­bil­i­ty to the bailout.”

And that’s the crux of the ongo­ing intra-Troikan nego­ti­a­tions: the IMF is demand­ing debt relief, and the Ger­many is demand­ing the inclu­sion of the IMF. But Ger­many also leads the fac­tion of euro­zone nations unwill­ing to accept out­right cuts to Greece’s debt and will only con­sid­er lim­it­ed mea­sures like low­er­ing inter­est rates:

...
Debt Deal

Talks among Greece’s cred­i­tors and euro-area coun­tries on like­ly debt mea­sures have been going on at a tech­ni­cal lev­el for months. That includes a pro­pos­al to link debt repay­ments to eco­nom­ic growth, so the coun­try can pay back more if it is doing well, and less if it isn’t. The aim is to have a final agree­ment in the ear­ly sum­mer, but key dif­fer­ences among cred­i­tors on the scope and type of debt relief per­sist.

The IMF would like to see wide-scale debt relief on all of Greece’s euro-area loans –includ­ing those from oth­er coun­tries and the bloc’s bailout fund. That demand is fac­ing resis­tance by many Euro­pean cred­i­tors who are only will­ing to dis­cuss eas­ing the terms of some loans.

Oth­er dis­agree­ments have to do with whether the debt relief will be grant­ed to Greece uncon­di­tion­al­ly or whether it should be tied to bud­get dis­ci­pline and fur­ther eco­nom­ic reforms. The dif­fer­ences were dis­cussed at a meet­ing of offi­cials from Greece’s key cred­i­tor coun­tries and insti­tu­tions on the side­lines of the IMF meet­ings in Wash­ing­ton this week.
...

And, of course, we find the Troi­ka insist­ing that the “key” to these nego­ti­a­tions is that if any con­di­tions are imposed on Greece in exchange for debt relief that those con­di­tions come from Greece’s own plan for growth growth. In oth­er words, Greece as to offi­cial­ly play along and pre­tend like it was Greece’s idea to keep impos­ing these aus­ter­i­ty mea­sures for the fore­see­able future:

...
Eco­nom­ic Link

In order for the IMF to have suf­fi­cient time to acti­vate its bailout for Greece before it runs out in August, an agree­ment on all these para­me­ters will like­ly need to be struck by the end of next month.

For Cen­teno, the key is that any con­di­tions attached to debt relief come from Greece’s own plans for growth. “We all want debt con­di­tion­al­i­ty to be embed­ded in the growth strat­e­gy for Greece,” he said, refer­ring to the country’s plans for the econ­o­my in its post-bailout life.

“Own­er­ship is the sin­gle word that may and should define the process in the com­ing months.”

And as the fol­low­ing arti­cle makes clear, if there’s an ongo­ing dis­agree­ment over whether or not Greece should be forced to main­tain its 3.5 per­cent sur­plus­es and exist­ing aus­ter­i­ty mea­sures in exchange for some mild form of debt relief that dis­agree­ment does­n’t appear to be with­in the euro­zone mem­ber states or the EU Com­mis­sion. Because as Euro­pean Com­mis­sion Vice Pres­i­dent Vald­is Dom­brovskis puts it, “The Greek gov­ern­ment needs to stick to the imple­ment­ed reforms and post-pro­gram fis­cal tra­jec­to­ry, which means sus­tained large lev­els of pri­ma­ry sur­plus­es for an extend­ed peri­od of time...We think it is ful­ly realistic...We expect Greece being on track with the fis­cal tra­jec­to­ry.”

Reuters

Euro zone to link debt relief to sound future Greek poli­cies

Jan Strupczews­ki
April 21, 2018 / 2:57 PM

WASHINGTON (Reuters) — Euro zone cred­i­tors are work­ing on a debt relief offer for Greece that would be an incen­tive for Athens not to back­track on reforms from its three inter­na­tion­al bailouts and to con­tin­ue to stick to pru­dent fis­cal pol­i­cy, senior EU offi­cials said.

...

Once the bailout ends, Greece will be free to set its own eco­nom­ic pol­i­cy — a polit­i­cal turn­ing point for the coun­try that has long been forced to imple­ment high­ly unpop­u­lar reforms sug­gest­ed by the euro zone and the Inter­na­tion­al Mon­e­tary Fund.

But many offi­cials are wor­ried that as time pass­es, Greek politi­cians will be under increas­ing pres­sure to loosen bud­get strings again, so they are seek­ing ways to make it worth Greece’s while to be fis­cal­ly pru­dent as long as pos­si­ble.

“The Greek gov­ern­ment needs to stick to the imple­ment­ed reforms and post-pro­gram fis­cal tra­jec­to­ry, which means sus­tained large lev­els of pri­ma­ry sur­plus­es for an extend­ed peri­od of time,” Euro­pean Com­mis­sion Vice Pres­i­dent Vald­is Dom­brovskis told Reuters in an inter­view.

Offi­cials say a well-designed offer of fur­ther debt relief for Greece could pro­vide an incen­tive for Athens not to stray from the agreed reform path and keep a high pri­ma­ry bud­get sur­plus — the bal­ance before debt ser­vic­ing costs — of 3.5 per­cent of GDP, until at least 2022.

“We think it is ful­ly real­is­tic,” Dom­brovskis said. “We expect Greece being on track with the fis­cal tra­jec­to­ry.”

Anoth­er way of ensur­ing Greece sticks to sound poli­cies would be through extend­ing a pre­cau­tion­ary cred­it line from the euro zone bailout fund ESM to Greece, because such a cred­it line comes with con­di­tions.

But this is why Athens does not want it, and the euro zone nei­ther can, nor wants to force Greece into some new bailout in dis­guise.

NO NEW “BAILOUT IN DISGUISE”

“For me this is out of the ques­tion. It is some­thing that would be unfair, that would not be legit­i­mate,” Euro­pean Com­mis­sion­er for Eco­nom­ic and Finan­cial Affairs Pierre Moscovi­ci told Reuters in an inter­view on the side­lines of the IMF spring meet­ings in Wash­ing­ton.

“We need to find debt relief which is con­vinc­ing,” Moscovi­ci said, not­ing the basis for that was in a French pro­pos­al to link debt repay­ment to the pace of GDP growth — the faster the Greek econ­o­my expands, the high­er the debt repay­ments.

“The last build­ing block is the post-pro­gram sur­veil­lance ... which ensures that reforms are pur­sued and that com­mit­ments tak­en by Greece on fis­cal sur­plus­es are real­is­tic and are met. That is what we are work­ing on,” Moscovi­ci said.

Offi­cials said the euro zone offer would have to include some debt relief up front and some spread over time.

Because Greece will not have used all the mon­ey ear­marked for it in the lat­est bailout, pos­si­bly up to 27 bil­lion euros, this could be used by the euro zone to replace much more expen­sive IMF loans to Greece with its own, cheap­er cred­it.

While there is no dis­cus­sion of a reduc­tion of the nom­i­nal val­ue of the Greek debt, Greece might also receive back the prof­its made by euro zone nation­al cen­tral banks on their port­fo­lios of Greek bonds and see matu­ri­ties and grace peri­ods on euro zone loans extend­ed.

As part of the debt relief plan, Greece is to present next week at a meet­ing of euro zone finance min­is­ters in Sofia its own plan for boost­ing eco­nom­ic growth.

Euro zone offi­cials say it is a cru­cial part of the plan, because no out­side incen­tives for sound pol­i­cy will work well if Greece itself does not believe in the sug­gest­ed pol­i­cy.

The last hur­dle to qual­i­fy for the euro zone debt relief offer is for Greece to imple­ment 88 so-called pri­or actions — final reforms agreed with the cred­i­tors — by the end of May, so that euro zone finance min­is­ters can review and approve their com­ple­tion at a meet­ing on June 21.

“When we con­clude that chap­ter, it will have not only mate­r­i­al, but also sym­bol­ic sig­nif­i­cance that those 10 years of cri­sis are over,” Moscovi­ci said.

———-

“Euro zone to link debt relief to sound future Greek poli­cies” by Jan Strupczews­ki; Reuters; 04/21/2018

“Once the bailout ends, Greece will be free to set its own eco­nom­ic pol­i­cy — a polit­i­cal turn­ing point for the coun­try that has long been forced to imple­ment high­ly unpop­u­lar reforms sug­gest­ed by the euro zone and the Inter­na­tion­al Mon­e­tary Fund.”

Once the bailout ends, Greece will be free to set its own eco­nom­ic pol­i­cy. And that’s the big prob­lem from the EU and euro­zone’s stand­point:

...
But many offi­cials are wor­ried that as time pass­es, Greek politi­cians will be under increas­ing pres­sure to loosen bud­get strings again, so they are seek­ing ways to make it worth Greece’s while to be fis­cal­ly pru­dent as long as pos­si­ble.

“The Greek gov­ern­ment needs to stick to the imple­ment­ed reforms and post-pro­gram fis­cal tra­jec­to­ry, which means sus­tained large lev­els of pri­ma­ry sur­plus­es for an extend­ed peri­od of time,” Euro­pean Com­mis­sion Vice Pres­i­dent Vald­is Dom­brovskis told Reuters in an inter­view.
...

““The Greek gov­ern­ment needs to stick to the imple­ment­ed reforms and post-pro­gram fis­cal tra­jec­to­ry, which means sus­tained large lev­els of pri­ma­ry sur­plus­es for an extend­ed peri­od of time,” Euro­pean Com­mis­sion Vice Pres­i­dent Vald­is Dom­brovskis told Reuters in an inter­view.”

Large sur­plus­es for an “extend­ed peri­od of time.” That’s what Euro­pean Com­mis­sion Vice Pres­i­dent Vald­is Dom­brovskis tells us. So any dis­agree­ment with­in the Troi­ka is like­ly a dis­agree­ment between the IMF and the EU Com­mis­sion. But we’ve seen this movie before. The IMF will say some­thing like, “we think Greece deserves some out­right debt relief,” and the the EU Com­mis­sions says “No” and then the IMF replies that this means Greece will have to main­tain large bud­get sur­plus­es instead and the EU says “Ok, that sounds great, let’s do that instead.” And that’s were we appear to be right now. The plan is to ensure Greece is forced to main­tain the large sur­plus­es because there’s going to be no sig­nif­i­cant debt relief:

...
Offi­cials say a well-designed offer of fur­ther debt relief for Greece could pro­vide an incen­tive for Athens not to stray from the agreed reform path and keep a high pri­ma­ry bud­get sur­plus — the bal­ance before debt ser­vic­ing costs — of 3.5 per­cent of GDP, until at least 2022.

“We think it is ful­ly real­is­tic,” Dom­brovskis said. “We expect Greece being on track with the fis­cal tra­jec­to­ry.”
...

And the oth­er option being con­sid­ered is extend­ing Greece loans through Euro­pean Sta­bil­i­ty Mech­a­nism (ESM), which would enable a new set of aus­ter­i­ty con­di­tions. But this appears to be seen as prob­lem­at­ic by the Troi­ka because appear­ing to force pre­con­di­tions are Greece at this point is some­thing they clear­ly want to avoid. Yes, the Troi­ka clear­ly wants to actu­al­ly force to pre­con­di­tions, but it does­n’t want to look like it’s doing so:

...
Anoth­er way of ensur­ing Greece sticks to sound poli­cies would be through extend­ing a pre­cau­tion­ary cred­it line from the euro zone bailout fund ESM to Greece, because such a cred­it line comes with con­di­tions.

But this is why Athens does not want it, and the euro zone nei­ther can, nor wants to force Greece into some new bailout in dis­guise.
...

And that appears to be one of the per­verse new dynam­ics emerg­ing in the Greek ‘bailout’ saga as the offi­cial bailout pro­gram winds down: a top pri­or­i­ty now is for every­one to pre­tend like Greece isn’t still being forced to live under an aus­ter­i­ty regime. So we’ll hear talk about things like a “post-pro­gram sur­veil­lance” regime but every­one will still pre­tend like Greece is going along with the sur­veil­lance regime vol­un­tar­i­ly:

...
NO NEW “BAILOUT IN DISGUISE”

“For me this is out of the ques­tion. It is some­thing that would be unfair, that would not be legit­i­mate,” Euro­pean Com­mis­sion­er for Eco­nom­ic and Finan­cial Affairs Pierre Moscovi­ci told Reuters in an inter­view on the side­lines of the IMF spring meet­ings in Wash­ing­ton.

“We need to find debt relief which is con­vinc­ing,” Moscovi­ci said, not­ing the basis for that was in a French pro­pos­al to link debt repay­ment to the pace of GDP growth — the faster the Greek econ­o­my expands, the high­er the debt repay­ments.

“The last build­ing block is the post-pro­gram sur­veil­lance ... which ensures that reforms are pur­sued and that com­mit­ments tak­en by Greece on fis­cal sur­plus­es are real­is­tic and are met. That is what we are work­ing on,” Moscovi­ci said.
...

And just to make it clear that the EU isn’t con­sid­er­ing debt relief mea­sures beyond the low­er­ing of inter­est rates, we learn that one of the sources for debt relief is the 27 bil­lion that was allo­cat­ed for Greece in the cur­rent bailout pro­gram that was nev­er spent. So does Greece get to use that 27 bil­lion to reduce its debt? Nope, instead it might get to use that 27 bil­lion to replace high­er inter­est loans from the IMF for low­er inter­est loans from the EU. And Greece might also be allow to see grace peri­ods (of no inter­est) and loan matu­ri­ties extend­ed, but there is no dis­cus­sion of out­right cut­ting of Greece’s debt. That is off the table:

...
Offi­cials said the euro zone offer would have to include some debt relief up front and some spread over time.

Because Greece will not have used all the mon­ey ear­marked for it in the lat­est bailout, pos­si­bly up to 27 bil­lion euros, this could be used by the euro zone to replace much more expen­sive IMF loans to Greece with its own, cheap­er cred­it.

While there is no dis­cus­sion of a reduc­tion of the nom­i­nal val­ue of the Greek debt, Greece might also receive back the prof­its made by euro zone nation­al cen­tral banks on their port­fo­lios of Greek bonds and see matu­ri­ties and grace peri­ods on euro zone loans extend­ed.
...

But before there can be any debt relief, Greece needs to imple­ment the 88 remain­ing so-called “pri­or actions” — most­ly addi­tion­al aus­ter­i­ty demands — by the end of May. And, of course, the EU Com­mis­sion is plac­ing an empha­sis on hav­ing Greece itself put forth pro­pos­als that it stick with the aus­ter­i­ty mea­sures for years to come. It’s being framed as Greece’s own plan for “boost­ing eco­nom­ic growth”:

...
As part of the debt relief plan, Greece is to present next week at a meet­ing of euro zone finance min­is­ters in Sofia its own plan for boost­ing eco­nom­ic growth.

Euro zone offi­cials say it is a cru­cial part of the plan, because no out­side incen­tives for sound pol­i­cy will work well if Greece itself does not believe in the sug­gest­ed pol­i­cy.

The last hur­dle to qual­i­fy for the euro zone debt relief offer is for Greece to imple­ment 88 so-called pri­or actions — final reforms agreed with the cred­i­tors — by the end of May, so that euro zone finance min­is­ters can review and approve their com­ple­tion at a meet­ing on June 21.

“When we con­clude that chap­ter, it will have not only mate­r­i­al, but also sym­bol­ic sig­nif­i­cance that those 10 years of cri­sis are over,” Moscovi­ci said.

““When we con­clude that chap­ter, it will have not only mate­r­i­al, but also sym­bol­ic sig­nif­i­cance that those 10 years of cri­sis are over,” Moscovi­ci said.”

LOL, yeah, behold the sym­bol­ism show­ing the past 10 years for Greece is pow­er­less­ness and aus­ter­i­ty is over: instead of being told out­right what to do by the Troi­ka, Greece is get­ting extort­ed in exchange for inad­e­quate debt relief. It’s a whole new era for the Greek Tragedy.