Hope and fear in the endless Greek crisis

by Martin Wolf

Financial Times
December 22, 2015

The Greek economic crisis has blighted the country and the eurozone for six years. The election last January, which brought Alexis Tsipras and his leftwing Syriza party to power, added further friction between Greece and the rest of the eurozone. Mr Tsipras vowed to undo austerity — a promise he could not deliver on his own.

In the event, after winning a referendum in July against the terms offered by the eurozone, he agreed to a new €86bn three-year eurozone programme on terms not so different from those he had persuaded the Greek people to reject. After a split in his party, Mr Tsipras then won another election in September. Yet the capital controls imposed in June remain in force and the economy has fallen back into recession.

Is there a good chance that economic recovery will take hold in 2016? This was in my mind as I visited Athens last week. My conclusion was that a chance does exist. But it is not, alas, that good.

The starting point has to be with the differences of view among the main players: the Greek government and wider political community; the International Monetary Fund; and eurozone creditors, particularly Germany.

As Mr Tsipras made clear last week, one of his aims is to avoid another programme with the IMF. He finds its demands hard to bear. More broadly, he thinks that “the sooner we get away from the [bailout] programme the better for our country”. He notes: “If Greece completes the first [progress] review in January, we’ll be covering more than 70 per cent of fiscal and financial measures in the agreement.” He hopes Greece will soon regain its sovereignty or, with the IMF out of the picture, at least will only have other Europeans to deal with.

More

Alexis Tsipras pushes for IMF to stay out of next Greek bailout

by Kerin Hope & Martin Wolf

Financial Times
December 20, 2015

Greek prime minister Alexis Tsipras is pushing for the International Monetary Fund to stay out of the country’s €86bn third bailout, leaving the eurozone to take full responsibility for overseeing economic reforms.

Mr Tsipras said in an interview with the Financial Times he was “puzzled by the unconstructive attitude of the fund on fiscal and financial issues”. He indicated that the IMF should leave his country’s third bailout to the eurozone when it decides whether to stay involved early next year.

“We think that after six years of managing in extraordinary crisis, Europe now has the institutional capacity to deal successfully with intra-European issues.”

Mr Tsipras’s assertion is likely to anger the German government, which has always insisted the IMF stay on board. Berlin values the fund’s technical expertise as much as it doubts the European Commission’s resolve.

Mr Tsipras also risks alienating the IMF, which is a strong advocate of debt relief for Athens while Germany and other eurozone members are strongly against debt writedowns, although he praised the fund’s support on this issue.

More

Binding Bids for Greece’s Piraeus Port Expected Next Week

by Costas Paris

Wall Street Journal
December 17, 2015

The long-delayed privatization of Greece’s main port of Piraeus is moving forward, with three of the world’s biggest port operators expected to submit their binding bids next week, the head of the country’s​privatization department said Thursday.

​Greece’s leftist government had pushed the move back for a year, upsetting potential investors and ​the country’s international creditors. The creditors had made the selling of state assets a condition for a multibillion euro bailout package to keep​Greece from defaulting on its debts.

“We understand the frustration caused by the delays, but we are now moving forward full speed,” Stergios Pitsiorlas, the head of Hellenic Republic Asset Development Fund, which manages privatizations, told The Wall Street Journal. “All the offer documents are with the potential investors and the deadline for binding bids is on Monday. From there on, the bids will be evaluated and the deal will be completed.”

The deal involves bids for a 67.7% stake in​ Piraeus Port Authority SA . A 51% slice will be transferred to the winning bidder at once and the remaining 16.7% over the next five years as required infrastructure investments at the port take shape.

More

The Greek right, in search of a leader

by Yannis Palaiologos

Politico
December 17, 2015

It was a study in contrasting political styles. As the center-right New Democracy party’s leadership race enters the final stretch, this writer attended rallies by Kyriakos Mitsotakis, the Harvard- and Stanford-educated scion of one of Greece’s great political dynasties, and Adonis Georgiadis, the book salesman and TV personality who has moved from the right-wing fringes to the position of standard-bearer of unapologetic conservatism. The first round of voting takes place December 20, with a majority required for an outright victory. Also in the running are Evangelos Meimarakis, the old party hand who served as interim leader between July and November, and Apostolos Tzitzikostas, the young regional governor of Central Macedonia.

In the municipal council hall of Kallithea, a suburb of Athens just south of the city center, after a warm introduction from the reformist-minded mayor, Mitsotakis delivered a polished, confident half-hour performance, without notes, emphasizing the reasons why he is the man the Greek center-right needs to recover its mojo.

He told the assembled crowd of close to 200 people, mostly middle-aged or older, that they would not only be voting for a party leader — “You will also be voting for the next prime minister of the country.” He admitted that in the past New Democracy, having “caught the populist bug,” had strayed from its liberal ideals, and he talked up his record as minister of public administration reform under Antonis Samaras — a grueling 18-month stint during which he took some important first steps toward bringing order and meritocracy to the chaos of the Greek public sector.

More

Greek Lawmakers Approve New Economic Overhauls

by Stelios Bouras

Wall Street Journal
December 15, 2015

Greek lawmakers approved Tuesday a new set of economic overhauls the government must implement to receive a €1 billion ($1.1 billion) slice of its bailout financing.

In the country’s 300-seat legislature, 153 lawmakers backed the reforms, while 138 opposed and nine abstained. The measures were backed by all of the parliamentarians belonging to the ruling left-wing Syriza party and its junior coalition partner, the right-wing Independent Greeks.

Senior officials from eurozone finance ministries are expected to give the go-ahead on Wednesday for the disbursement of the aid tranche from Greece’s third bailout loan, reaching up to €86 billion.

The measures include overhauls to the banking sector, the design of a privatization fund and the partial privatization of the power grid operator ADMIE.

The grid operator will be split off from the power utility Public Power Corp. The state will retain a majority 51% stake, while 20% will be sold to a strategic private investor and the remaining 29% will be privatized, under Greece’s agreement with lenders.

More

14 Airports in Greece to Be Privatized in $1.3 Billion Deal

by Niki Kitsantonis

New York Times
December 14, 2015

Greece’s leftist-led government on Monday signed its first major privatization deal, granting a German company the right to lease and manage more than a dozen regional airports.

The contract, worth 1.2 billion euros, or $1.3 billion, is part of an effort to privatize state assets and adopt economic changes demanded by international creditors under Greece’s €86 billion bailout program. Some other measures are under debate in the Greek Parliament and are scheduled for a vote Tuesday night.

The airport management contract had been under negotiation with the German company, Fraport, when Prime Minister Alexis Tsipras and his leftist Syriza party stormed to power in January. The party pledged to end years of austerity and foreign oversight by the country’s creditors: the other nations that use the euro, the European Central Bank and the International Monetary Fund.

The airport contract talks were revived only after Mr. Tsipras capitulated to creditors during the summer as Greece teetered on the brink of bankruptcy, accepting the country’s third bailout since 2010.

The government’s debt problems have for years deprived many Greek airports of sufficient money for maintenance and modernization. One exception is the Athens airport, which has already been partly privatized and generally lives up to its role as a modern international hub.

More

Expected Real GDP growth for 2016 in the Member States

3 million views!

Eurozone Fund Weighs Greece Debt-Relief Options

by Viktoria Dendrinou

Wall Street Journal
December 10, 2015

A deal to reduce Greece’s debt burden could include capping interest payments, extending debt maturities and linking debt repayments to economic growth, according to a paper drawn up by the eurozone’s bailout fund.

The nine-page document, dated Aug. 10 and seen by The Wall Street Journal, was put together by the European Stability Mechanism, the Luxembourg-based eurozone bailout fund, and outlines different options to reduce Greece’s large debt load.

The paper focuses on three measures: extending the maturity of some of Greece’s loans, linking fixed debt repayments to the country’s gross domestic product and capping or deferring interest payments.

“These measures provide the necessary conditions for bringing debt service back to a sustainable path,” it says

The document doesn’t examine cutting the face value of the debt, an option ruled out by eurozone leaders in July.

More

Greek central bank governor warns of danger to government reforms

by Kerin Hope

Financial Times
December 4, 2015

The governor of Greece’s central bank has warned that political infighting over a critical final round of economic reforms is threatening to derail a long-awaited recovery in 2016.

On Friday, Yiannis Stournaras took the unusual step of prefacing the bank’s half-yearly report to parliament on monetary policy with an appeal to MPs on the need to maintain consensus on implementing Greece’s €86bn third bailout programme.

“Parliament must contribute to the legislative work of completing the programme, at this precise moment when most of the adjustment has been achieved and only a very small portion remains,” the report said.

“A basic condition for returning to economic normality is to maintain a climate of political stability and consensus.”

More

Greece’s Sane Party Is Losing the Plot

by Yannis Palaiologos

Wall Street Journal
December 3, 2015

With Prime Minister Alexis Tsipras running aground in his efforts to implement Greece’s latest bailout program, conditions seem ideal in the country for the return of a pro-European center-right party. The Syriza leader’s popularity is falling fast. This summer’s poisonous division over the bailout has subsided. A party that espouses free-market principles and a government meritocracy might find voters once again receptive to its ideas. But as the recent implosion of the New Democracy leadership contest painfully showed, it’s far from clear that such a party in Greece exists.

Nov. 22 was supposed to be the day New Democracy, Greece’s center-right official opposition, held the first round of elections to pick its new leader. It was supposed to be something like an open primary: Anyone willing to pay a €3 fee could register and choose among the four candidates who, back in October, had collected the necessary 50 signatures from party insiders. Instead, the date will now be remembered as a red-letter day in the annals of Greek conservatism.

To start, the technology company hired to run the election proved risibly unequal to the task. It failed to detect and fix the glitches in the electronic system that was designed to register voters and tabulate results. On election day, it quickly became clear that the system couldn’t guarantee the integrity of the proceedings. The vote was suspended, but not before many New Democracy supporters had already made their way to the polls.

More

Greece warned EU will reimpose border controls

Financial Times
December 1, 2015

The EU is warning Greece it faces suspension from the Schengen passport-free travel zone unless it overhauls its response to the migration crisis by mid-December, as frustration mounts over Athens’ reluctance to accept outside support.

Several European ministers and senior EU officials see the threat of pushing out Greece over “serious deficiencies” in border control as the only way left to persuade Alexis Tsipras, Greece’s prime minister, to deliver on his promises and take up EU offers of help.

If the EU follows through on its threat, it would mark the first time a country has been suspended from Schengen since its establishment in 1985.

The challenge to Athens comes amid a bigger rethink on tightening joint border control to ensure the survival of the Schengen zone. The European Commission will this month propose a joint border force empowered to take charge of borders, potentially even against the will of frontline states such as Greece.

Greece’s relatively weak administration has been overwhelmed by more than 700,000 migrants crossing its frontiers this year. Given the severity of the crisis, EU officials are vexed by Athens’s refusal to call in a special mission from Frontex, the EU border agency; its unwillingness to accept EU humanitarian aid; and its failure to revamp its system for registering refugees.

More

A Greek Bank Tragedy

by Emilios Avgouleas

Greek Public Policy Forum
November 25, 2015

The recent attempt to cover the needs of Greek banks in fresh capital via a mix of a private and public infusion of funds amounts to nothing else than a fire sale. The recent rights issues of Greek banks were fully covered because Greek bank shares were sold for a few pennies with offer prices ranging from 0.02 to 0.04 cent per share. At the same time, the Greek taxpayers’ stake in Greek banks, held via the so-called financial stability fund, is sharply diluted, e.g. in Alpha Bank the state’s stake is reduced to 11% from 66,4% today, in the Eurobank from 35% to 2,4%, in Piraeus Bank, which sold its new shares for 0.03 cent per share, from 67% today to 22%, although the bank will still receive 2.6bn Euros state aid, 2bn in the form of CoCos purchased exclusively by the Greek state, and 0.6bn in shares. Then, for the greatest Greek bank, the National Bank of Greece that didn’t manage to cover even 1/3 of the total amount sought while its shares were offered at 0.03 pence per share, the reduction of the Greek state’s stake will be 24% to 33% from 57% today. This while the state will still inject 2.75bn Euros in fresh funds, 2.06bn of this in CoCos and the rest in shares. At the same time, the state waives its rights on 1.45bn Euros preference shares, which will now be converted to common shares. In addition, the National Bank will have to sell its most valuable asset, its Turkish subsidiary at 2bn Euros while its acquisition in 2006 cost the Greek bank 5bn EUR.

These are horrendous figures and show both the scale of the fire sale that takes place and that very little is left from the injection of borrowed state money of nearly 45bn in cash in the previous recapitalisation rounds. Given that this gigantic fire sale is done with the blessings of European creditors, it is very hard to brand it asset looting as would be the case if the exercise had been solely conducted by the Greek vested interests, but still the amount of end loss for the Greek taxpayer stands at dizzying heights. Some of it is due to SYRIZA’s catastrophic negotiation strategy between January and July and the ensuing flight of deposits, liquidity crunch and imposition of capital controls, and some due to the recessionary dynamic of the Greek economy and the very optimistic provisioning forecasts incorporated in previous recapitalisations that plainly proved inadequate.

More

The Greek Shipping Myth

by Tom Bergin

Reuters
November 25, 2015

On the day he took office as Greece’s shipping minister in June 2012, Kostis Moussouroulis received a visit from a 90-year-old shipowner. He still remembers the older man’s words: “Don’t forget, the best minister of shipping and maritime affairs is the minister who is doing nothing for the shipping industry. He is the one who is leaving us alone.”

That’s the way Greek shipowners like it. The magnates who run one of the biggest merchant marine fleets in the world have long argued that if Greece tried to tax them, they would leave - and that their departure would devastate the economy. In recent years, as international institutions repeatedly bailed out Greece, the lenders have also pushed Athens to beef up its tax take. Shipowners have resisted any effort to ditch the tax breaks they enjoy, and no government has dared touch them.

“Shipping is a pillar of the Greek economy,” says the Union of Greek Shipowners, the ocean-going industry’s main association.

Greece’s statistics office says shipping contributes around $9 billion - or 4 percent - of the country’s Gross Domestic Product (GDP). When you include related business, the industry says, the figure jumps to 7.5 percent of GDP, or about $17 billion a year. Deep-sea shipping and related trades employ more than 192,000 people, it says. That’s 4 percent of all Greek workers.

More

The $400 billion ripoff that could destroy the Greek bailout

by Nasos Koukakis

CNBC
November 24, 2015

As if Greece didn't have enough economic market woes, last week foreign investment funds managed to take control of four of the country's largest banks — Alpha Bank, Eurobank, National Bank of Greece and Piraeus Bank — through $6.42 billion worth of capital increases and a complex set of legal manipulations. As a result, bank shares sold like penny stocks, diluting state ownership in these important institutions that have assets totaling $358 billion.

The country's stake in the National Bank of Greece dropped to 24 percent from 57 percent, and in Eurobank it fell to 2.4 percent from 35 percent, while its stake in Alpha Bank was reduced to 11 percent from 64 percent and in Piraeus Bank it dropped to 22 percent from 67 percent. This translates to a loss of almost $44 billion that Greek taxpayers gave to bail out the banks over the past three years.

Greek stock market and legal experts believe that the maneuvers were engineered after a statutory legal provision was amended by the Greek Parliament that allowed private investors to price bank shares using a so-called "book-building method." Under this method, the share price in capital increases is not predetermined, and investors set the price at which they want to buy the shares.

It also made it mandatory for the country's regulatory body, the Hellenic Financial Stability Fund, to accept book-building prices, even if they were not properly reflecting share values.

More

Pelagidis & Mitsopoulos, "Who's to Blame for Greece? Austerity in Charge of Saving a Broken Economy"

by Theodore Pelagidis (Brookings Institution and University of Piraeus) & Michael Mitsopoulos (Hellenic Federation of Enterprises)

Palgrave, November 2015

The Euro constitutes the crowning achievement of a prolonged process of integration between European states. It incarnates the vision for a united and prosperous Europe: the attainment of major political goals through the promotion of closer economic cooperation. However, the 2009 crisis brought the EU head-to-head again with its perennial threat – the short-term interests of member states. Greece's economy symbolizes in many ways the Euro area's economic problems and divergent interests as it amasses most of the economic disadvantages characterizing the Euro area's economy itself.

After almost five years since inception of the crisis, Greece's economy today is in the headlines again – this time for the so-called political risk. This book discusses the economic and political challenges to Greece and the EU member states.

Greece Presents 2016 Budget and Revamps Recession Prediction

by Niki Kitsantonis

New York Times
November 20, 2015

Greece on Friday presented an optimistic budget for 2016, predicting a recession milder than expected in previous forecasts.

The government also said that final numbers for 2015 would indicate the economy will have been flat for the full year, rather than the deep contraction of 2.3 percent that had been expected. One reason is that the capital controls the government imposed on banks over the summer were less damaging to the Greek economy than had been feared.

And next year, the government said, the economy will shrink by only 0.7 percent as it continues carrying out cost cuts required by its 86-billion-euro, or $92 billion, international bailout package. As recently as last month, the government had predicted an economic contraction of 1.3 percent in 2016.

The new assessment came as the finance minister, Euclid Tsakalotos, on Friday presented the budget to Parliament, which is to vote on the package early next month.

“The Greek economy endured, disproving disaster scenarios,” according to a statement by the finance ministry that accompanied the budget.

More

Athens backs reforms to unlock bailout funds

by Kerin Hope

Financial Times
November 19, 2015

Greece’s parliament has backed additional reforms needed to unlock €12bn from the latest, €86bn, bailout to recapitalise struggling banks and pay off overdue debts to government suppliers.

The reform bill was approved by 153 to 137 votes following a stormy debate that brought the sacking of two deputies from the governing Syriza-led coalition. They had refused to support a measure limiting protection for mortgage holders in default.

Stathis Panagoulis, a long-serving leftwing deputy, said that he was leaving Syriza “because I won’t accept seeing hardworking homeowners thrown into the street”.

His departure and that of Nikos Nikolopoulos from the rightwing Independent Greeks, the junior coalition partner, leaves the government with only a two-seat majority.

Euclid Tsakalotos, finance minister, said that more than 90 per cent of homeowners with unpaid mortgages would be eligible for some protection, even though only those with an annual income below €23,000, would be safe from foreclosures.

More

No time for Tsipras to go wobbly on Greek reform

Financial Times
Editorial
November 12, 2015

Alexis Tsipras’s first administration flirted with sovereign default in the summer before ending a bruising stand-off with Greece’s eurozone partners by signing a document that was in spirit almost identical to the one it had hitherto rejected. Now, two months into his second term and with the ink barely dry on that deal, Mr Tsipras seems determined to start another fight with his creditors.

The prolonged period of political brinkmanship from both sides of the negotiating table inevitably weakened the mutual trust between Greece and its single-currency partners. The bailout deal has been signed, but the possibility of Grexit has never been fully eliminated. While the current frictions are no more than that, they are heading in the same way as the last.

By now, Greece should have already received the first €2bn of its bailout funds. Instead, the October instalments are still in Brussels’ coffers. The eurozone will only release them once the Greek parliament has passed 48 “milestones”, mostly leftover pledges from Greece’s previous two bailouts. But not only is Mr Tsipras three weeks late with these reforms, he wants to reopen the negotiations over a contentious issue, home foreclosure protection.

The Greek government wants to keep the existing generous legal protection from house repossessions. Greeks already beaten down by the thinning prospect of finding a job and shrinking welfare support should not also be forced to move out of their homes.

More

First general strike since Syriza win brings Greece to standstill

by Kerin Hope

Financial Times
November 12, 2015

Government offices stayed shut and public transport closed down on Thursday as Greece’s resurgent trade unions staged the first 24-hour general strike since the leftwing Syriza party came to power in January.

Thousands of public sector employees, pensioners and jobless workers shouted anti-austerity slogans as they marched to the Greek parliament in Athens, giving voice to a growing mood of despondency over looming foreclosures on family homes and further pension cuts agreed with creditors under Greece’s €86bn third bailout.

Riot police clashed briefly with a group of protesters throwing petrol bombs and stones in the square outside the parliament building. Three people were detained, according to police.

Some protesters held pink balloons labelled “Alexis’ promises” — harking back to the bold threats made while he was in opposition by Alexis Tsipras, prime minister, to roll back bailout reforms and default on repaying Greece’s public debt.

“We are resuming the struggle to reverse the bailout measures and win debt writedowns,” declared a large banner held up by members of Adedy, the civil servants union, the country’s largest labour organisation.

More

Greece Comes to a Standstill as Unions Turn Against Tsipras

by Nikos Chrysoloras

Bloomberg
November 12, 2015

As Greek workers took to the streets in protest on Thursday, Alexis Tsipras was for the first time on the other side of the divide.

Unions -- a key support base for the prime minister’s Syriza party -- chanted in rallies held in Athens the same slogans Tsipras once used against opponents. Doctors and pharmacists joined port workers, civil servants and Athens metro staff in Greece’s first general strike since he took office in January, bringing the country to a standstill for 24 hours.

Greece’s biggest unions, ADEDY and GSEE, are holding marches accusing Tsipras of bowing to creditors and imposing measures that “perpetuate the dark ages for workers,” as the country’s statistical agency released data showing that 1.18 million Greeks, or 24.6 percent of the workforce, remained unemployed in August.

The 41-year-old Greek premier, who was among anti-austerity protesters in previous general strikes, is now racing to complete negotiations with creditors on belt-tightening in exchange for the disbursement of 10 billion euros ($10.7 billion) to be injected into banks. Failure to reach an accord with euro-area member states and the International Monetary Fund on policies including primary residence foreclosures, and stricter rules on overdue taxes, would put the solvency of the country’s lenders in doubt.

More

Greek economy on ice as lenders battle capital shortfall

by Kerin Hope

Financial Times
November 11, 2015

Piraeus Bank used to be a lifeline for small entrepreneurs such as Evgenia, a 33-year-old Athenian who received a loan from the neighbourhood branch to finance her start-up selling fresh flowers.

“Other banks didn’t want to know me,” she says, declining to give her surname. “Even when the crisis came and I couldn’t make interest payments they [Piraeus] still cut me some slack.”

A reluctance to pursue distressed borrowers is one reason why Piraeus is judged to be the most precarious among Greece’s four top lenders, according to the European Central Bank’s latest health check of the sector.

As Greece’s biggest bank, shoring up the finances of Piraeus, and those of its peers, will be crucial in kick-starting lending to the country’s economy, helping it to climb out of a brutal recession that has shrunk the economy by almost a quarter since 2009.

The bank’s dire straits has revived debate about the aggressive expansion strategy pursued by Michalis Sallas, Piraeus’s long-serving chairman, at the height of the Greek crisis.

More

What Europe Owes to Greece

by Yannis Palaiologos

Wall Street Journal
November 10, 2015

More refugees crossed the Mediterranean into Europe last month than in all of 2014. The vast majority of them landed in Greece, but many other European Union members have also been affected and are now reconsidering their open-border policies.

Meanwhile, Athens continues to struggle with the terms of its latest bailout, an orphan program unloved by both the government that signed it and the creditors that imposed it. The two greatest achievements of European integration—the free movement of people and the common currency—are now threatened, and in both cases Greece is on the front line of the crisis.

Critics can point to many things that Greece did wrong to bring its economy to its present situation: reckless spending, corruption, a lax attitude to tax collection, the unwillingness of successive governments to go beyond austerity and meaningfully reform the way the public sector and the economy work.

In the government of Prime Minister Alexis Tsipras these critics have found the perfect foil. The ruling party, Syriza, is made up of unreconstructed, Marxist-minded leftists who are hostile to the free market, willing to perpetuate the worst practices of the precrisis era, in an alliance with a party of hard-right nationalists and conspiracy theorists. This coalition is again resisting administrative and economic reforms that would both boost growth and help build the government’s capacity to manage crises.

More

Greece plans a return to capital markets

by Elaine Moore & Kerin Hope

Financial Times
November 9, 2015

Greece is making preparations to rejoin global debt markets less than six months after a stand-off with bailout lenders pushed the country close to a forcible ejection from the eurozone.

Relations between the government and the office responsible for arranging sales of Greek debt broke down earlier this year after Alexis Tsipras, leader of the leftwing Syriza party, was elected in January with vows to move away from the old political regime and end austerity.

However, the situation has eased following the government’s deal with European creditors for a €86bn bailout in July and Greece is now preparing for a market return that could come as early as the first half of next year.

“It won’t be in the first quarter but summer has been talked about,” said a person familiar with the situation. “It depends on a positive chain reaction of events but discussions have been held.”

More

Greek Banking Crisis 2015 Update: What Will Recapitalization Mean For Average Greeks?

by Jess McHugh

International Business Times
November 5, 2015

The four leading banks in Greece are expected Friday to lay out their plan for recapitalization, less than four months after the debt-stricken nation's financial institutions reopened following a near-collapse in July. The long-awaited recapitalization process, however, which is likely to include a mix of private investment and bailout money from eurozone lenders, is not an instant solution for average citizens suffering under continued debt.

Greater liquidity and more stability in the long term will follow from the recapitalization, according to economists, as the short-term outlook for average Greeks remains bleak. Average Greek citizens and local businesses will continue to live under strict capital controls, such as account withdrawal limits, as growth in the cash-strapped country stalls and faith in the ruling government wanes.

“The growth issue is a big question mark,” said Marco Vicenzino, director of the Global Strategy Project, a geopolitical risk and international business advisory firm. Vicenzino described Greek citizens worrying about how recapitalization will affect daily activities, such as whether families can provide necessities or if small businesses will be able to pay their employees. Many Greeks are not optimistic, according to Vicenzino: “Most people don’t see the light at the end of the tunnel.”

More

Tsipras’ biggest stress tests yet to come

by Hugo Dixon

Reuters
November 2, 2015

One stress test is over, but several more are looming. Alexis Tsipras received good news at the weekend when a stress test showed the top Greek banks need to raise a lowish 14.4 billion euros in capital. But the leftist Greek prime minister has to implement more tough measures before he can get the economy growing. Until then, he faces political risks, which could yet tip Greece back into crisis.

An assessment by the European Central Bank found that the four banks – Alpha Bank, Eurobank, National Bank of Greece and Piraeus Bank – have a collective capital shortfall of 14.4 billion euros in the so-called “adverse” scenario. This is less than the 25 billion euro maximum earmarked for bank recapitalisation as part of Greece’s latest bailout programme. What’s more, the banks will only need to find perhaps around half that amount in state aid. The rest they can probably get by swapping bondholder debt into equity capital, issuing shares to private investors and selling assets.

What this means is that Greece’s headline debt may be roughly 15 to 20 billion euros lower than earlier projections – peaking at a still eye-popping level of 190 percent of GDP, rather than 200 percent.

More

ECB says Greece’s banks need more than €14bn in fresh capital

Financial Times
October 31, 2015

The European Central Bank has said Greece’s troubled banks need more than €14bn in fresh capital pumped into them to survive.

The results of the ECB’s health check of Greek banks show the top four lenders are short of €14.4bn in capital under supervisors’ so-called “adverse scenario”, where lenders must be able to withstand a worsening of economic and financial conditions. Under the standard scenario of what is known officially as the “comprehensive assessment”, the capital shortfall is €4.4bn.

Piraeus Bank needs €4.9bn in fresh capital, the National Bank of Greece €4.6bn, Alpha Bank €2.7bn and Eurobank €2.1bn.

The banks have until 6 November to say how they plan to plug the capital hole. They have already moved to pre-emptively boost their capital in advance of results of the tests, which are a key part of the €86bn Greek bailout that euro area leaders agreed in July. That bailout deal earmarked as much as €25bn in support for the banks.

More

Greece reconsiders a tax on private education

Economist
October 30, 2015

Before Greece’s snap elections in September, the outgoing left-wing government laid out plans for a value-added tax of 23% on private education. The measure, dreamed up by the governing Syriza party as an alternative to raising tax on beef, featured in their manifesto as a blow against plutocracy. It looked like a double win that would simultaneously please creditors and demonstrate the government’s commitment to helping the underprivileged. Unsurprisingly, it did neither.

Some of the country’s reasonably priced private schools were forced to close, leaving staff jobless. Elsewhere, fees rose. Those affected were not just rich families. Greece has more than 300 full-time private schools, attended by about 6% of school-age children, many of whom come from middle- and lower-income families. With tuition fees as low as €2,500 ($2,750) a year, some operate in working-class areas and attract parents who are keen to give their children a leg up.

Those whose parents were unable to pay higher fees moved into the already overwhelmed state system. At the beginning of term in September, Greek schools were short of some 12,000 teachers, according to the ministry of education. Some predict the shortfall will soon exceed 20,000.

More

Greece: Dynastic divisions

by Peter Spiegel

Financial Times
October 29, 2015

Until Alexis Tsipras swept to victory in national elections nine months ago, Greece had been governed almost continuously by scions of the country’s most politically-connected families for over a decade.

Antonis Samaras, Mr Tsipras’s immediate predecessor, descends from a family so prominent that the street running into the entrance of his Athens prep school was named for his maternal grandfather. George Papandreou, premier at the outset of the eurozone crisis, is the son and grandson of prime ministers. And Kostas Karamanlis, the longest-serving of the group, is the nephew of another prime minister who founded the country’s main centre-right party, New Democracy.

Kyriakos Mitsotakis, one of the politicians seeking to revive New Democracy after it was crushed by Mr Tsipras’s far-left Syriza party in elections last month, says it is time to end the dominance of the Greek political dynasties.

“New Democracy, if you look at the party, it’s almost feudal in its structure,” Mr Mitsotakis says, sitting tieless in his Athens office. “You have the big political families . . . the big players, the old prime ministers, and everyone is sort of bargaining for power. This is rubbish.”

But Mr Mitsotakis — arguably the most prominent of four candidates seeking to lead New Democracy — acknowledges he may be a somewhat awkward messenger. Not only is he the son of a former prime minister, but his sister, Dora Bakoyannis, is a former mayor of Athens and Greek foreign minister who ran for party leader against Mr Samaras six years ago.

More

ECB Check of Greek Banks to Show 14 Billion-Euro Hole

Reuters/New York Times
October 29, 2015

The European Central Bank's health check of Greece's four big banks will show a total capital shortfall of up to 14 billion euros ($15.34 billion) if economic conditions become "adverse", two banking sources told Reuters on Thursday.

The ECB's Single Supervisory Mechanism (SSM) is assessing the capital needs of National Bank of Greece, Piraeus, Alpha Bank and Eurobank. Results will be released on Saturday.

The ECB's so-called comprehensive assessment of the banks' books included a scrutiny of their loan portfolios and stress tests carried out using baseline and more adverse scenarios for the course of the Greek economy to project possible credit losses up to 2017.

Under the baseline scenario, the stress test will show a capital gap of about 4.5 billion euros for the four banks, one of the sources said. Factoring in the adverse scenario, it could be as high as about 14 billion.

More

EU's Dombrovskis: Greece must recapitalize its banks by year end

Reuters
October 27, 2015

Greece and international lenders must recapitalize its banks by the end of the year and swiftly finalize an assessment of the country's bailout-mandated economic reforms, EU Commission Vice-President Valdis Dombrovskis said on Tuesday.

Unless Greece's four biggest banks are recapitalized before legislation takes effect in January, depositors will be liable for plugging capital shortfalls, he said.

"Euro group conclusions on this question are quite clear, that recapitalization of the banks is to take place after the first review, but no later than the 15th of November," Dombrovskis told Greece's Skai TV in an interview.

Dombrovskis - in Athens to discuss the reforms Greece needs to complete under terms of an 86-billion-euro ($95-billion)bailout - said that things would get "more complicated" if that did not happen.

"Then you need to apply the Bank Resolution and Recovery Directive ... which may imply a bail-in," he said, referring to bank depositors being forced to contribute to recapitalization, similar to a raid on deposits in Cyprus in 2013.

More

Greece’s Long Road From ‘No’ to ‘Yes’

by Nikos Konstandaras

New York Times
October 26, 2015

Greeks will commemorate the Oct. 28 national holiday in a very different country from what it was a year ago. The anniversary marks the day in 1940 when a Greek government rejected an ultimatum from Fascist Italy to allow its troops to enter the country. The “No” (“Ochi” in Greek) united a deeply divided country behind a right-wing dictatorship and thrust Greece into World War II on the side of the Allies. “No” is a symbol of defiance. But now Greeks must decide what they want, rather than what they reject.

On “Ochi Day,” military parades and patriotic speeches hail a small nation’s resilience against insurmountable odds. After initially pushing Italian invaders deep back into Albania, the Greeks were overwhelmed by a German blitz that led to four years of brutal occupation and determined resistance. After the war, the old divisions roared back, with a civil war between Communist forces and a government that was backed first by Britain and then by the United States leaving a lasting legacy of pain and suspicion between left and right.

Despite divisions and strife, the “No” of 1940 has stood as a unifying memory of a nation that will tolerate no foreign master. Recently, though, in the throes of a devastating economic crisis, the Greeks were divided once again, and the talismanic “No” was commandeered by one side.

More

Hoping to Save a Way of Life by Rooting Out Greeks Who Farm on Paper

by Suzanne Daley & Dimitris Bounias

New York Times
October 23, 2015

In a stone cottage beside his pomegranate fields here in northern Greece, Christos Gontias, 46, is chain smoking and trying to give an interview. But his cellphone is ringing so incessantly, often with requests from news outlets and farmers joining his most recent call for a nationwide protest, that he rarely has time to finish his thought.

He readily admits that he likes all the attention. But there is far more to it than that, he says. He believes his way of life is on the line.

“I’m in love with the land,” said Mr. Gontias, a farmer and a union leader, glancing out the window. “By that I mean I love putting seeds in the ground and watching them grow, and knowing that I am providing a healthy product. And I am willing to fight for the ability to keep doing that.”

These days, he is fighting the terms of Greece’s latest bailout by its international lenders, which calls for sharp rises in the taxes farmers must pay and in their pension contributions, and he has been bringing hundreds of farmers with him into the streets. Using tactics reminiscent of French farmers’, they have repeatedly parked their tractors in central intersections and even outside polling stations during the elections last month.

More

Tspiras fires his tax chief

by Yannis Palaiologos

Politico
October 23, 2015

The Greek government decided Thursday to fire the head of the General Secretariat for Public Revenue, in a move that critics are slamming as old-school clientelism, which could create tensions in the country’s relations with its official creditors.

The office in question, the top position in Greece’s beleaguered tax administration, was created in 2012 by the Antonis Samaras government under intense pressure from the troika, with the express purpose of restricting political involvement in the collection of taxes and the auditing of businesses and individuals. The forced resignation of its first head, Haris Theoharis, now an MP for Potami, in June 2014 constituted a blow to Samaras’ relationship with Greece’s creditors from which he never recovered.

Now the same treatment is being meted out to Theoharis’s successor, Katerina Savvaidou, a feisty former PwC tax lawyer, only 16 months into a supposedly fixed five-year term.

More

Three days that saved the euro

by Ian Traynor

Guardian
October 22, 2015

Late on the afternoon of Friday 10 July, as European finance ministers were packing their bags for Brussels to attend yet another meeting on the Greek debt crisis, a shocking email from Berlin landed in the inboxes of a very small number of top officials. Earlier that week, the Greek prime minister, Alexis Tsipras, had been given an ultimatum by his fellow European leaders: deliver a radical new blueprint for economic reform and spending cuts – or face bankruptcy.

Tsipras had delivered a new set of proposals, but before officials could meet in Brussels to discuss them, the German finance minister, Wolfgang Schäuble, delivered a preemptive strike: if the Greek government would not undertake more drastic reforms, the German email said, “Greece should be offered swift negotiations on a time-out from the eurozone.” There had been speculative talk that Greece might have to quit the single currency – and sentiment among other euro members had hardened against Athens in the six months since Syriza, Tspiras’s leftwing movement, came to power – but until now, no one had formally proposed pushing the country out.

“It was clear,” one recipient said. “It was written down. It was harsh. It was brutal.” Schäuble, the most experienced politician in power in Europe, had gone for the jugular – and the email sent alarm bells ringing in Paris, Rome, Frankfurt and Brussels.

“It was never officially distributed – only to core people,” said a senior official involved in the meetings, who saw the email on the Friday evening. “It showed a tough stance. It was clear that Grexit was an option. It meant that on Monday we would start the preparations.”

More

Greece open for business, head of privatisation programme says

by Kerin Hope

Financial Times
October 19, 2015

Disputes among hard-left cabinet ministers and lingering concerns about Greece’s future in the eurozone have not made it any easier to sell Greek assets to foreign investors.

Still, such distractions have not dented Stergios Pitsiorlas’s hopes of wrapping up three key infrastructure sales potentially worth billions of euros by early next year.

The chairman of Greece’s privatisation agency, the Hellenic Asset Development Fund, (Taiped) insists that deals involving ports, railways and airports that were frozen when the leftwing Syriza government took over in January are now back on track.

“These are transactions that are going to have a big economic impact. When they’re completed the Greek economy will present a very different picture,” Mr Pitsiorlas said in an interview.

Greece committed to privatising €50bn in state-owned assets to help repay its debts when it accepted its first international bailout in 2010. Yet the programme has so far been a mess. Cash proceeds last year came to just €530m.

More

Syriza presents controversial package of tax and pension reforms

by Kerin Hope

Financial Times
October 13, 2015

Greece’s leftwing Syriza-led government has presented more tax and pension reforms to parliament amid growing concerns that the package of measures will prolong the country’s six-year recession.

The proposals are being discussed under emergency procedures so that Greece can meet a weekend deadline set by creditors for implementing a tough front-loaded package of fiscal and structural measures in return for an €86bn bailout.

Winning approval for the package will be a test for Alexis Tsipras, the prime minister, and his party that won last month’s general election but only has a four-seat majority in parliament.

Mr Tsipras, whose policy somersault in July to embrace economic reforms prompted a rebellion by Syriza hardliners and triggered the general election, has already moved to head off possible further defections by Syriza backbenchers.

He rallied Syriza’s central committee behind him at a weekend meeting and tightened his grip on the party executive with the election of three cabinet ministers to the 17-member political committee.

More

Requiem for the Loony Left

by Yannis Palaiologos

Politico
October 9, 2015

This weekend saw the swearing-in of Greece’s new parliament and the election of the new speaker of the house, Nikos Voutsis, a Syriza elder and loyal associate of the prime minister, Alexis Tsipras. At the same time, the pompously named Greek Debt Truth Commission, led by the outgoing speaker Zoe Konstantopoulou, delivered the findings of its investigation on the origins of the country’s debt problem. Predictably, it found that Greece’s debts were “illegitimate, illegal and odious.”

Konstantopoulou, who has failed in her bid to be reelected as an MP, called a four-day session of the Truth Commission just after the September 20 election, in a desperate bid to remain in the spotlight for a little bit longer.

She had even pre-announced that she would call on Yanis Varoufakis, the mercifully departed finance minister, to appear, in order to explain how the country was led to sign a third bailout agreement. The public sessions were broadcast on the television channel of the parliament.

More

The Mirage of Structural Reform

by Dani Rodrik

Project Syndicate
October 8, 2015

Every economic program imposed on Greece by its creditors since the financial crisis struck in 2009 has been held together by a central conceit: that structural reforms, conceived boldly and implemented without slippage, would bring about rapid economic recovery. The European Commission, the European Central Bank, and the International Monetary Fund anticipated that fiscal austerity would be costly to incomes and employment – though they significantly underestimated just how costly. But they argued that long-delayed (and much-needed) pro-market reforms would result in a compensatory boost to the Greek economy.

Any serious assessment of the actual results produced by structural reforms around the world – particularly in Latin America and Eastern Europe since 1990 – would have poured cold water on such expectations. Privatization, deregulation, and liberalization typically produce growth in the longer term at best, with short-run effects that are often negative.

It is not that governments cannot engineer quick growth takeoffs. In fact, such growth accelerations are quite common around the world. But they are associated with more targeted, selective removal of key obstacles, rather than broad liberalization and economy-wide reform efforts.

More

Alexis Tsipras pledges to steer Greece back to growth

by Kerin Hope

Financial Times
October 6, 2015

Alexis Tsipras has pledged to steer Greece back to economic growth in the second half of next year but said he would try to negotiate softer terms with the country’s creditors on energy liberalisation and social policies.

The Greek premier won an unexpectedly solid victory in a snap election held last month. In his first big policy speech since his election, Mr Tsipras said in parliament on Monday night that debt relief would be a priority for the new Syriza-led government after it legislates a new €4.3bn package of fiscal and structural reforms in the coming weeks.

In contrast with the fiery anti-austerity rhetoric of his first days in office last January, a subdued Mr Tsipras said he was “fully aware the new (bailout) agreement has difficult points . . . VAT increases, tax hikes for farmers and changes in the pension system, all these will create problems”.

But he vowed to “do everything we can to find alternatives or ways of moderating the negative consequences (of reforms)”.

More

Greece’s to-do list

by Zeke Turner

Politico
October 5, 2015

Greek Prime Minister Alexis Tsipras will need to reach almost 50 reform milestones later this month in order to keep the bailout money flowing.

Eurozone finance ministers meeting here Monday evening agreed Greece must continue implementing austerity measures, including tax increases for farmers, changes to personal bankruptcy rules, pension cuts and the privatization of state-owned utilities.

In exchange, Greece can borrow €2 billion from a loan package arranged with creditors in August and worth up to €86 billion.

Some of the measures should have been completed last month, according to the terms of the bailout, but were delayed by Greek elections.

“There were just elections, the government has just been formed, it’s too early to talk about there being a delay,” German Finance Minister Wolfgang Schäuble told reporters when he arrived.

In what has become a perverse ritual, Greece is expected to use some of the new money to repay old debts. The country faces an October 13 bill of €450 million on an existing loan from the International Monetary Fund connected to its first bailout program in 2010.

More

Greek bank recap is race against time

by Hugo Dixon

Reuters
October 5, 2015

Greece is racing against time to recapitalise its banks. Capital must be injected by year-end, when euro zone rules on financial bailouts change. This is to avoid a haircut of uninsured depositors, which could cause the country to enter a new downward spiral.

To meet the deadline, lots of things need to fall into place. The European Central Bank first has to finish its stress test to decide how much capital the banks, whose balance sheets have been hit by capital controls and recession, require.

The four systemically important banks – Alpha, Eurobank, National Bank of Greece and Piraeus - then need to see if private investors will take part. If not, the recapitalisation will be funded entirely by a loan from the euro zone to Athens, an outcome which would lead to almost total nationalisation and probably the removal of the existing management.

Alexis Tsipras, Greece’s recently re-elected prime minister, also needs to deliver on a wide array of commitments he has made to its euro zone partners. If he doesn’t, they won’t lend Athens up to 25 billion euros to pop into the banks, as promised under the country’s new bailout programme.

More

Greek tragedy for education opportunities

by Matt Pickles

BBC News
September 30, 2015

When considering the effects of the debt crisis on Greece, most people probably think of long queues outside banks and protests in the streets.

A less visible but perhaps further reaching outcome is that Greece's education system has become one of the most unequal in the developed world.

Although education in Greece is free, public schools are suffering from spending cuts imposed as a condition of the bailout agreements.

In practice, over the last 30 years it has become increasingly necessary for students to pay for expensive private tuition to pass the famously difficult Panhellenic exams required to get to university.

But with unemployment rising and salaries falling, many poor and middle-class families are struggling to pay for this extra tuition.

A World Economic Forum report this month ranked Greece last of 30 advanced economies for education because of the close relationship between students' performance and their parents' income.

And a professor of law and economics at the University of Athens warns that losing talented students from poor backgrounds is a "national catastrophe" which could hinder Greece's long-term economic recovery.

More

After the somersault, Tsipras walks the tightrope of power

by Tony Barber

Financial Times
September 29, 2015

According to a joke doing the rounds in Athens, the best thing that Alexis Tsipras has going for him, as he embarks on his second spell as Greece’s prime minister, is that he will not be under attack from Alexis Tsipras.

All Greek governments have struggled since 2010 to implement reforms and austerity measures demanded by international creditors as the price for multibillion-euro bailouts. But no critic was more scathing of their efforts and, ultimately, more popular with the public than the leftwing populist Mr Tsipras.

Now, fresh from a policy somersault in July and August, Mr Tsipras occupies the hot seat, committed to market-friendly reforms, under strict foreign supervision, that until recently he denounced as wrong-headed and an outrage to Greek sovereignty.

It is just as well, as the joke suggests, that the moderate incarnation of Mr Tsipras has no Doppelgänger on his left flank, impatient to give him a tongue-lashing for hypocrisy and opportunism.

Ultra-leftist rivals in his Syriza party, who might have performed this role, broke with him over his U-turn but won too few votes to enter parliament in Greece’s September 20 general election. Other critics in Syriza’s parliamentary group are, for the moment, lying low, aware that the party owed its victory largely to Mr Tsipras’s personal qualities.

More

Nicos Christodoulakis, "Greek Endgame: From Austerity to Growth or Grexit"

Rowman & Littlefield
2015

The book explores in depth both the origins of the Greek debt crisis and the conditions under which the economy might be turned around from its current malaise. Greek debt turned explosive after the 2008 global crisis, through a combination of a fiscal spree and domestic policy complacency, but the unpreparedness and indecision of the European Union intensified the problem of liquidity and a massive bail-out agreement became inevitable. However, the stringencies of the adjustment program led to more recession and unemployment, while social tension and political polarization became entrenched. In 2015, a radical Left party, Syriza, ascended to power on a ticket to end austerity and renegotiate Greece’s debt agreements, but a long-lasting growth and reform agenda is still to be settled upon. This book lays out some key reforms that would allow Greece to return to growth and, at the same time, keep the Euro, an option that still remains a cornerstone for the country’s economic and geopolitical stability.

Nikos Christodoulakis is a Professor at the Athens University of Economics and Business. Research Associate at the Hellenic Observatory, London School of Economics, UK. Former Minister of Finance for Greece (2002-2003) and Acting Chairman of the Eurogroup.

More info

A fox inside the Greek henhouse

by Tony Barber

Financial Times
September 25, 2015

Alexis Tsipras, Greece’s re-elected prime minister, is finding the first few days back in government anything but plain sailing.

On Thursday this blog reported how Mr Tsipras had demanded the resignation of a deputy transport minister barely 24 hours after having appointed him. The minister, Dimitris Kammenos, was from the rightwing nationalist Independent Greeks party, the junior coalition partner to Mr Tsipras’s leftwing Syriza party. Embarrassingly, his social media accounts contained anti-Semitic content.

Now some curious details are emerging about another deputy minister, this time from inside Syriza itself.

They concern Alexis Haritsis, who, as a deputy finance minister, has been given the responsibility of ensuring that Greece makes the most efficient use possible of the billions of euros that the nation receives each year in EU structural aid funds (money that is separate from bailout funds).

More

Triumphant Tsipras returns to fight for Greek economy, debt relief

by Lefteris Papadimas & Renee Maltezou

Reuters
September 21, 2015

Alexis Tsipras took the oath of office for a second term as Greek prime minister on Monday, promising to revive the crippled economy while demanding debt relief from creditors as his "first big battle" following an unexpectedly clear election victory.

The firebrand leftist solidified his position as Greece's dominant political figure in Sunday's election, but faces a dauntingly long "to do" list that includes implementing austerity polices and dealing with migrants landing on Greek shores.

Voters gave Tsipras and his Syriza party the benefit of the doubt over a dramatic summer U-turn, when he ditched his anti-austerity platform to secure a new bailout and avert 'Grexit', a Greek exit from the euro zone.

More

Greece’s Saga Is Far From Over

by Yannis Palaiologos

Wall Street Journal
September 21, 2015

After Greece’s third visit to the polls in eight months on Sunday, it’s fair to ask what the purpose of all this year’s political and economic upheaval was. The far-left Syriza party, whose leadership precipitated this year’s crisis, is back in power with almost the same share of the vote it won in January, and the hard-right Independent Greeks, known by their Greek acronym ANEL, will resume their role as zany but obedient junior coalition partner. There will be no grand coalition with the center-right or any other expanded governing alliance, which would have increased the government’s stability.

Syriza is now regularly referred to as “pro-bailout.” This is a misreading of the situation. Prime Minister Alexis Tsipras may have seen off the pro-drachma rebels led by Syriza’s most radical leftists, whose breakaway party failed to elect a single member of parliament on Sunday.

But he, his coalition and his party remain deeply skeptical of the bailout program he signed with creditors in August. A group of 53 party cadres, including Euclid Tsakalotos, the finance minister who sealed the bailout deal, wrote an open letter in late July warning against implementation of any deal such as the one that emerged, on the grounds that it would lead to the transformation of Syriza into a “systemic” party, as opposed to a radical one.

More

Tsipras’s next act — governing

by Matthew Karnitschnig

Politico
September 21, 2015

Alexis Tsipras has proven his skills as a political tactician. Now comes the real test — governing.

In the coming weeks, in the wake of Sunday’s election triumph, Tsipras will have to push a slew of controversial structural overhauls, including labor market reform and taxes on farmers. Overcoming resistance to the measures in his fractious Syriza party won’t be easy. But the real difficulty will come when the government has to actually implement the reforms outlined in the bailout program.

“I’m not convinced they can implement it fully,” said George Pagoulatos, a professor of politics and economics at Athens University of Economics and Business, adding that the last Syriza government was “one of the worst” Greece has ever had. “The program relies on the Greek state for implementation and that is its great weakness.”

More