Cyprus One Year After Bank Bail-In — the Canary That Lived

by Matina Stevis

Wall Street Journal
February 28, 2014

Cyprus was the canary in a coalmine of European bank breakdowns, the country’s president, Nicos Anastasiades, told The Wall Street Journal in an interview this week.

Last March, Mr. Anastasiades oversaw the unprecedented overhaul of his country’s banking sector in exchange for €10 billion in financial assistance from the euro area and the International Monetary Fund.

Now, almost one year later, he’s trying to put it all behind him. But it’s difficult, and the state of the financial industry in Cyprus, once its crown jewel, makes it ever more so.

“The system had to be tried in a country that wouldn’t cause systemic problems to the rest of the euro area,” Mr. Anastasiades said in his office in Nicosia. “That’s why the bail-in was implemented ring-fencing the branches in Greece, to stop the virus from spreading and create repercussions to the rest of the system.”

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Berlin attacks EU’s easing of austerity demands

by Peter Spiegel

Financial Times
February 28, 2014

The German and Finnish finance ministries have issued a stinging rebuke of Brussels’ attempt to ease austerity demands on struggling eurozone countries, saying such flexibility improperly provided France and Spain with additional time to cut their budgets to meet EU deficit limits.

The rebuke, in an eight-page memo obtained by the Financial Times, accuses the European Commission of using “a somewhat arbitrary approach” in granting the budget flexibility to Madrid and Paris, and suggests “a separate pair of eyes” is needed to ensure Brussels is properly applying the new budget rules.

“Since 2012, the commission has substantially changed the way it assesses whether a member state has taken ‘effective action’ to comply with [EU budget rules],” the memo states. “The recent methodological changes imply the risk of watering down the newly strengthened [rules] at its implementation stage.”

The memo on the budget rules, which were adopted three years ago at the height of the eurozone crisis, was distributed to all 28 EU national capitals last week and debated by finance ministry deputies in Brussels on Thursday.

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Greece in banking sector stand-off with bailout lenders

Financial Times
February 24, 2014

The Greek government and its bailout lenders are locked in a new stand-off over the health of Greece’s banking sector, with Athens contending its financial system requires less than €6bn of new capital, while international monitors insist it needs at least three times that amount.

The €6bn estimate was calculated by the Greek central bank after a long-awaited private analysis by BlackRock and was provided to monitors from the so-called “troika” of international lenders, ahead of their arrival in Athens on Monday to resume talks over their latest review of the bailout programme.

The review, the most contentious in more than a year, was to be completed in September, but troika officials say less than half of the economic reform commitments made by the Greek government have been completed. Their return to Athens on Monday is their first visit in two months.

The dispute over banks’ recapitalisation needs risks adding a new, potentially explosive point of contention between the two sides, as it will have a direct effect on whether Athens will require a third international bailout when the remaining €10.1bn in EU funding in the current €172bn rescue runs out later this year.

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Bruegel Think Tank Says Greece Needs New €40 Billion Bailout

by Gabriele Steinhauser

Wall Street Journal
February 20, 2014

Greece should get a new €40 billion bailout and the euro zone should be prepared to forego interest payments from the government if if the country’s debt remains too high, economists at a Brussels think tank argued on Thursday.

According to the paper published by economists at Bruegel, the additional easing of Greece’s bailout terms currently under discussion* would still leave Greece’s debt at 120% of gross domestic product by 2022 – far off the target of “substantially lower than 110%” that the euro zone agreed with the International Monetary Fund in November 2012. By 2030, Greece would have to issue some €74 billion in new bonds and still have a debt-to-GDP ratio of 95%.

And this calculation is based on a growth and budget performance that even the paper’s authors – economists Zsolt Darvas, André Sapir and Guntram Wolff – concede is optimistic. For their model, the three economists assumed that Greece would hit all targets for economic growth and primary budget surpluses outlined in its bailout program. Since growth forecasts only exist until 2018, they used a Consensus Economics forecast for Spain for the period after that, while the long-term primary surplus was taken from an IMF study on successful fiscal consolidations (more details on p. 6).

For Greece, that means a primary surplus of between 3.1% as well as nominal GDP growth of 3.7% from 2022 to 2030. In addition, Greece would have to be able to borrow on international markets at an interest rate of just 2 percentage points above that of Germany.

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Read the Bruegel paper

Greece Posts First Current-Account Surplus

by Stelios Bouras

Wall Street Journal
February 19, 2014

Greece's current account swung into a surplus for the first time on record in 2013, data showed Wednesday, though the economy has yet to turn the corner and join the ranks of its more competitive euro-zone peers.

The current-account surplus for the year came in at €1.2 billion ($1.65 billion), versus a deficit of €4.6 billion in 2012 and a €20.6 billion shortfall in 2011, according to figures from the country's central bank.

Plunging consumption and investment brought on by the country's six-year contraction resulted in a 4.5% drop in imports in 2013, the Bank of Greece said. Tourism proved to be a big winner in 2013, helping boost export revenues 2.3% in a trend likely to continue in the sector this year.

It is the country's first current account surplus since 1948, when the Bank of Greece started keeping records of the trade figures.

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Greek Budget Surplus Beats Target

by Stelios Bouras

Wall Street Journal
February 16, 2014

Greece's primary budget surplus for 2013 will be nearly double its target, the country's prime minister said Sunday.

Antonis Samaras said the primary budget surplus, which doesn't take into account interest payments, will exceed €1.5 billion ($2.05 billion), compared with an upwardly revised target of €812 million.

The apparent improvement comes a year ahead of schedule and after years of tax rises and spending cuts demanded by international creditors in exchange for two bailouts worth a combined €240 billion. Athens wasn't expected to achieve a primary surplus until the end of 2014, according to goals set by the European Union and the International Monetary Fund.

"I tell you now that it exceeds €1.5 billion," Mr. Samaras is quoted as saying by weekly newspaper To Vima in comments confirmed by his office. "This means that a very large part of it will be returned this year to the community."

Under the conditions of Greece's lending agreement, the country is able to distribute 70% of any excess primary surplus above its target.

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Greek Economy Contracts Less Than Expected

by Stelios Bouras

Wall Street Journal
February 14, 2014

Greece's economy contracted less than expected last year, data showed Friday, further boosting hopes of a return to growth in 2014 after six painful years of recession.

Data from the Hellenic Statistical Authority showed that Greece's gross domestic product shrank by an annual rate of 2.6% in the last quarter of 2013, slowing from a drop of 3% in the prior three-month period. It was the country's best performance since the 2010 first quarter.

The fourth-quarter data mean that Greece's economy contracted by an annual rate of 3.7% last year—beating a forecast 4% contraction by Greece and its international creditors.

Since entering recession in 2008, Greece's economy has shrunk by more than a quarter—made worse by waves of austerity measures imposed after 2010 by international creditors—while unemployment has reached a staggering 28% of the workforce. But various data have lately pointed to some signs of stabilization, suggesting that Greece's contraction is finally bottoming out.

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Cyprus Economy Doing Better Than Expected

by Matina Stevis

Wall Street Journal
February 11, 2014

The economy of Cyprus, which was recently on the cusp of leaving the euro zone, is doing better than expected, a team of international experts overseeing its bailout program said Tuesday.

The tiny island nation's economic output contracted by about 6% in 2013—about two percentage points less than the experts originally thought. While the recession is very deep, it compares with some private-sector estimates last year that projected the country would lose up to 15% of its economic output

The team of inspectors from the so-called troika of institutions—the European Commission, the European Central Bank and the International Monetary Fund—issued the statement after completing a review of Cyprus's bailout, a €10-billion ($13.64 billion) aid package agreed last March and funded by euro-zone countries and the IMF.

The experts said the Cypriot economy will shrink by another 4.8% in 2014 before it returns to slow growth of 1% in 2015—sticking to their original projections but warning that they too may be revised if things continue going well.

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Η Ελλάδα να βγει στις αγορές πριν από τις ευρωεκλογές

του Νίκου Οικονομίδη

Καθημερινή
9 Φεβρουαρίου 2014

Το 2009 η Ελλάδα είχε τρία μεγάλα προβλήματα. Πρώτα το τεράστιο δημόσιο χρέος. Δεύτερο το πολύ μεγάλο έλλειμμα του προϋπολογισμού. Τρίτο την έλλειψη ανταγωνιστικότητας. Στο πρώτο πρόβλημα, σε ποδοσφαιρική ορολογία, η Ελλάδα παίρνει Χ. Κατάφερε επί κυβέρνησης Παπαδήμου τη σημαντική μείωσή του (κούρεμα) και τη χρονική μετατόπιση μεγάλου μέρους του στο απώτερο μέλλον. Αλλά το δημόσιο χρέος παραμένει ακόμα μεγάλο και δυσβάστακτο, περίπου 320 δισ. ευρώ. Στο δεύτερο πρόβλημα, η Ελλάδα κέρδισε. Η μεγάλη επιτυχία της χώρας είναι η ισοσκέλιση του προϋπολογισμού του κράτους και η δημιουργία (έστω και μικρού) πρωτογενούς πλεονάσματος (δηλ. πλεονάσματος χωρίς τις δαπάνες για τόκους). Στο τρίτο πρόβλημα η Ελλάδα χάνει στα πέναλτι. Κατάφερε να κάνει σημαντικές αλλαγές στην αγορά εργασίας, αλλά απέτυχε σε πολλές άλλες διαρθρωτικές μεταρρυθμίσεις που είτε δεν έγιναν είτε καθυστέρησαν πολύ. Το οικονομικό και κοινωνικό κόστος της επιτυχίας στα δημοσιονομικά είναι η σημερινή μεγάλη ανεργία και ύφεση. Το κόστος της αποτυχίας στις διαρθρωτικές μεταρρυθμίσεις και της μη βελτίωσης της ανταγωνιστικότητας θα το πληρώνει η Ελλάδα για δεκαετίες.

Εχοντας καταγράψει τα αποτελέσματα (μία μεγάλη επιτυχία, μία ισοπαλία, μία ήττα στα πέναλτι και ένα μεγάλο κόστος) η Ελλάδα του 2014 έχει καινούργιες δυνατότητες που δεν είχε από την αρχή της κρίσης. Η σοφή επιλογή είναι τώρα πια απαραίτητη και θα καθορίσει την ευημερία για τα επόμενα δέκα χρόνια της Ελλάδας. Τρία είναι τα κύρια ερωτήματα. Πρώτα, χρειάζεται απομείωση του ελληνικού χρέους προς την Ευρωπαϊκή Ενωση. Δεύτερο και σημαντικότατο, ποτέ και πώς πρέπει να μπει η Ελλάδα στις διεθνείς χρηματαγορές. Τρίτο, πώς θα μπει η Ελλάδα σε αναπτυξιακή τροχιά.

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Greece manufacturing sector growth boosts eurozone recovery hopes

Guardian
February 3, 2014

Greece's factory sector has finally returned to growth for the first time in more than four years, fuelling hopes that the country's long slump could be easing.

A survey released on Monday showed that Greek manufacturers finally reported their first expansion since August 2009 in January, helping Europe's manufacturing sector enjoy its strongest expansion in almost three years.

Markit, the data provider, reported that Greek factories recorded an increase in new orders and higher exports last month, although manufacturers continued to trim their workforces. Economists said the long-awaited recovery in Greek manufacturing boosted hopes the overall economy will finally stop shrinking this year – amid reports that the eurozone is close to agreeing a third bailout loan for Greece, worth up to €20bn (£16bn).

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