Last Exit Before Chaos

by Paul Krugman

New York Times
May 30, 2015

There’s an odd summer-of-1914 feel to the current state of the Greek crisis. While some of the main players are, rightly, desperate to find a way to head off Grexit and all it entails, others – on the creditor as well as the debtor side — seem not just resigned to collapse but almost as if they’re welcoming the prospect, the way, a century ago, far too many Europeans actually seemed to welcome the end of messy, frustrating diplomacy and the coming of open war.

Is there still a way out? There should be. As I and others have been saying for a while, the arithmetic is actually quite clear: Greece cannot run a primary deficit, it cannot be forced to run a large primary surplus, so a small primary surplus is the obvious solution and better for all concerned than euro exit.

There is, one must admit, a new problem caused by the current confrontation itself: uncertainty has pushed Greece back into recession, and the primary surplus achieved last year has vanished. But given a deal it should be possible to arrange some temporary financing while a modest recovery puts the primary balance back into the black.

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Greece, Argentina, and the Middle-Income Trap

by Andrés Velasco

Project Syndicate
May 30, 2015

Aside from an established tradition of bad macroeconomics, what do Greece and Argentina have in common? One answer is that they were the world’s longest-held captives of the so-called middle-income trap – and remain within its reach to this day. With countries in Asia, Eastern Europe, and Latin American fearing that, having reached the international middle class, they could be stuck there, Greece and Argentina shed light on how that might happen.

A recent paper by economists from Bard College and the Asian Development Bank categorizes the world economy according to four groups – with the top two categories occupied by upper-middle-income and high-income countries – and tracks countries’ movements in and out of these groups. Which countries were stuck for the longest period in the upper-middle-income category before moving to high income? You guessed it: Greece and Argentina.

Correcting for variations in the cost of living across countries, the paper concludes that $10,750 of purchasing power in the year 1990 is the threshold for per capita income beyond which a country is high income, while $7,250 makes it upper-middle income. (These thresholds may sound low, but the World Bank uses similar cutoffs.)

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Varoufakis’s Great Game

by Hans-Werner Sinn

Project Syndicate
May 29, 2015

Game theorists know that a Plan A is never enough. One must also develop and put forward a credible Plan B – the implied threat that drives forward negotiations on Plan A. Greece’s finance minister, Yanis Varoufakis, knows this very well. As the Greek government’s anointed “heavy,” he is working Plan B (a potential exit from the eurozone), while Prime Minister Alexis Tsipras makes himself available for Plan A (an extension on Greece’s loan agreement, and a renegotiation of the terms of its bailout). In a sense, they are playing the classic game of “good cop/bad cop” – and, so far, to great effect.

Plan B comprises two key elements. First, there is simple provocation, aimed at riling up Greek citizens and thus escalating tensions between the country and its creditors. Greece’s citizens must believe that they are escaping grave injustice if they are to continue to trust their government during the difficult period that would follow an exit from the eurozone.

Second, the Greek government is driving up the costs of Plan B for the other side, by allowing capital flight by its citizens. If it so chose, the government could contain this trend with a more conciliatory approach, or stop it outright with the introduction of capital controls. But doing so would weaken its negotiating position, and that is not an option.

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Market calm on Grexit an eerie recall of pre-Lehman bets

by Jamie McGeever

Reuters
May 28, 2015

Relative calm on global markets during the latest Greek debt standoff more closely reflects the low probability assigned to a euro exit than how contained such a shock could be.

As Greece has returned to the precipice of another default and the outsize chance of Grexit - Greece being forced out of the euro zone - world markets have barely flinched.

Unlike the previous Greek crisis in 2012, the assumption is that banking and private sector exposure has been cut to near zero, financial firewalls have been put in place in the euro zone, and world prices have the Grexit risk factored in.

But no one really knows the true consequences of such an unprecedented move. What's more, investors' ability to discount low-probability but high-impact events - what are called tail risks - has been found wanting in the past, most spectacularly before the Lehman Brothers bankruptcy in 2008.

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Time Politicians Handed Greece an Ultimatum

by Simon Nixon

Wall Street Journal
May 27, 2015

The Greek government has spent the past four months demanding a “political solution” to its debt crisis. The time may have come for the eurozone to offer it one.

Until now, Europe’s political leaders have been reluctant to be drawn into the process, preferring to hide behind the officials in the institutions formerly known as the Troika: the European Central Bank, the International Monetary Fund and the European Commission. Partly, that reflects practical and legal reality: elected politicians do not have the capacity or capability to negotiate the details of bailout programs.

But it also reflected a political reality: no one wanted to be seen to be sitting in judgment on a fellow eurozone member state’s budget. They preferred to stay one step removed, providing time and space for an inexperienced government to reach its own agreement with the creditors, reflecting its own political choices while respecting eurozone rules.

But the reality is that the bailout talks have gone—and appear to be going—nowhere. Despite daily assurances from Athens that a deal is imminent, eurozone officials say that the two sides remain “miles apart.”

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Tsipras trapped; Ominous signals for Greek depositors

by Christian Schulz

Intelligent News
May 27, 2015

While the Greek economy and its financial system are increasingly at peril of a major collapse, Syriza has achieved virtually nothing in the negotiations with the troika. The key conditions for remaining €7.2bn disbursement from the second bail-out remain the same. Worse, a follow-on package is inevitable come July, and with Eurozone and IMF trust shattered, the conditions will have to be tough and the monitoring of the implementation is going to be very tight. Compared to what a hypothetically re-elected Samaras would probably have achieved, Tsipras has been an unequivocal disaster.

Are things coming to a head now? On Wednesday, May 28, the ECB apparently left the ELA limit unchanged at €80.2bn. This was only the second time since February that it did so and it comes as a surprise. Deposit outflows have re-accelerated according to some Greek media reports to €300m per day from €100m as recently as last week. This may not threaten the immediate liquidity position of Greek banks, who last week were said to have an ELA buffer of €3bn.

But there are two reasons for concern.

(1) The minority in the ECB who are openly worried about the impact of the deepening Greek recession on Greek banks solvency seems to be growing and putting pressure on the majority to limit the risks to the institution.

(2) With no clear data about banks’ liquidity position available, the unchanged ELA limit could trigger more concerns by Greek households and companies about potential capital controls and thus trigger accelerated withdrawals.

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How four Greek businesses are coping amid default crisis

by Kerin Hope

Financial Times
May 27, 2015

Greece’s business climate has worsened as bailout talks between the leftwing Syriza-led government and the country’s creditors drag on, prompting fears of a Greek debt default and, possibly, a Grexit from the euro.

But life — and commerce — go on. The profiles below illustrate how four businesses are coping with the uncertainty surrounding Greece’s future in the eurozone.

The oil explorer

Day-to-day activity at Energean, a privately owned Greek oil producer which pumps 1,800 barrels a day from a platform in the north Aegean Sea, carries on as if nothing had changed in Athens.

A recently acquired drilling rig, refurbished at a Greek shipyard, is due to start exploring next month for new oil deposits in Energean’s offshore concession.

But the company’s plans for strategic partnerships with international oil companies are on hold because of political constraints, according to Matthaios Rigas, the chief executive.

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Meet One of the Most Hated Men in Greece

Bloomberg
May 27, 2015

When the IMF’s point man on Greece, Poul Thomsen, rebuffed the nation’s proposal in December to unlock more bailout funding, he wound up making his job even tougher.

The Greek government’s failure then to secure an agreement with its creditors helped pave the way for its defeat in January by the anti-austerity Syriza party. Instead of negotiating with Greece’s establishment, Thomsen finds himself facing a novice group whose leaders have likened the lenders’ conditions to “fiscal waterboarding.”

Now the 60-year-old Danish economist is holding his ground against Syriza economic plans that fail to meet International Monetary Fund criteria for putting Greece’s debt on a sustainable path. And this time, the nation’s membership in the euro and the IMF’s credibility hang in the balance as Greece runs low on cash and European leaders look to the fund’s blessing before disbursing more bailout money.

The situation has Thomsen, whose thesis adviser was an architect of the euro, in the role of helping decide the currency’s fate. Thomsen has been closely involved with the Greek bailout since its inception in 2010, and often represents the fund at meetings of euro-area finance ministers, where officials from the European Commission and European Central Bank also typically attend. Those two institutions and the IMF form the so-called troika of Greek creditors.

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Time running out for Greece, ESM head Regling says

Reuters
May 25, 2015

Time is running out for Greece to reach an agreement on reforms with lenders and there will be no further funds for Athens without it, the head of the European Stability Mechanism Klaus Regling told Germany's Bild newspaper on Tuesday.

"There is little time left," Regling told the best-selling newspaper. "That's why we're working day and night for an agreement. Without an agreement with the creditors, Greece will not get any new loans. Then there's a threat of insolvency. There are a lot of risks contained in that," he added.

"Even missing a payment to the IMF would be dangerous. That would have an effect on other lenders like us. On the other hand, the rescue fund can only extend loans when reforms are implemented. That is also the case now and that's the only way Greece will be able to restore its economy's fiscal health," he said.

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Greece’s Governing Syriza Party Divided Over Debt Terms

by Stelios Bouras

Wall Street Journal
May 25, 2015

As financial pressure mounts on Greece to sign a deal with its foreign lenders, Prime Minister Alexis Tsipras is facing what may be his biggest problem yet: the struggle within the ruling Syriza party over whether to swallow creditors’ tough terms or default.

Dissent is spreading within left-wing Syriza against the economic policies Greece is likely to have to enact in return for fresh bailout funding from other eurozone governments and the International Monetary Fund.

The Syriza-led coalition government holds only a thin majority of 12 seats in Greece’s 300-seat Parliament, so a rebellion against a deal could easily cost Mr. Tsipras his governing majority.

Greece’s lenders are particularly worried about vocal threats by Syriza’s Left Platform, a hard-line leftist faction within the party, to reject any deal that crosses ideological “red lines” by cutting pensions or workers’ rights.

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With Money Drying Up, Greece Is All but Bankrupt

by Landon Thomas Jr.

New York Times
May 25, 2015

Bulldozers lie abandoned on city streets. Exhausted surgeons operate through the night. And the wealthy bail out broke police departments.

A nearly bankrupt Greece is taking desperate measures to preserve cash. Absent a last-minute deal with its creditors, the nation will run out of money early next month.

Two weeks ago, Greece nearly defaulted on a debt payment of 750 million euros, or about $825 million, to the International Monetary Fund.

For the rest of this month, Greece should be able to cover daily cash deficits of around 100 million euros, government ministers say. Starting June 5, however, these shortfalls will rise sharply, to around 400 million euros as another I.M.F. obligation comes due. They will then double in size on June 8 and 9.

“At that point it is all over,” said a senior Greek finance official who spoke on the condition of anonymity.

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Tsipras wins backing over bailout talks

by Kerin Hope

Financial Times
May 25, 2015

Alexis Tsipras, the Greek prime minister, won backing from his radical Syriza party to conclude a bailout deal in the face of opposition from an extreme left faction that warned against giving in to “blackmail” by the country’s creditors.

Greece was in the final stretch of negotiations and would accept a viable “but not a humiliating” agreement, the premier told a meeting of Syriza’s 350-strong central committee, without giving details of the talks with the EU and International Monetary Fund.

Government officials in Athens claim a deal could be struck by the end of this week. But European partners say the two sides are still far apart on issues Mr Tsipras calls “red lines we cannot cross”, including pension reforms and increases in value-added tax, according to several people with knowledge of the negotiations.

The two-day meeting, which was staged to review the Syriza-led government’s first 100 days in power, endorsed the leadership’s stance that if the government’s cash crunch escalated “to an extreme point”, paying pensions and public sector wages would take priority over meeting repayments of bailout loans.

“Our commitment above all is to protect workers and pensioners who have been the victim of austerity,” said one participant.

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Austerity Is the Only Deal-Breaker

by Yanis Varoufakis

Project Syndicate
May 25, 2015

A common fallacy pervades coverage by the world’s media of the negotiations between the Greek government and its creditors. The fallacy, exemplified in a recent commentary by Philip Stephens of the Financial Times, is that, “Athens is unable or unwilling – or both – to implement an economic reform program.” Once this fallacy is presented as fact, it is only natural that coverage highlights how our government is, in Stephens’s words, “squandering the trust and goodwill of its eurozone partners.”

But the reality of the talks is very different. Our government is keen to implement an agenda that includes all of the economic reforms emphasized by European economic think tanks. Moreover, we are uniquely able to maintain the Greek public’s support for a sound economic program.

Consider what that means: an independent tax agency; reasonable primary fiscal surpluses forever; a sensible and ambitious privatization program, combined with a development agency that harnesses public assets to create investment flows; genuine pension reform that ensures the social-security system’s long-term sustainability; liberalization of markets for goods and services, etc.

So, if our government is willing to embrace the reforms that our partners expect, why have the negotiations not produced an agreement? Where is the sticking point?

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Greece Could Bundle Its Next IMF Payments to Buy Even More Time. But at What Cost?

by Ian Talley

Wall Street Journal
May 25, 2015

As Greece roots around for cash to cover upcoming bills amid stalled bailout talks, one option it could consider is bundling next month’s payments to the International Monetary Fund.

The Greek leadership, at this point, doesn’t appear to be considering the option and doesn’t see it as advantageous given concerns about the signals it could send, according to people familiar with the government’s thinking.

Obscure IMF rules allow Greece to clump its principal payments into one deposit that the government could ostensibly pay later in the month, without falling into arrears. Athens owes the IMF four principal payments totaling $1.7 billion in June. Should Greece seek to take advantage of the opportunity, bundling its IMF payments would buy Greece’s government more time for negotiations in the deadlocked bailout talks.

An IMF spokeswoman declined to say whether Greece had made such a request or even inquired about the option.

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Key to a Greek Deal Lies With the People

by Hugo Dixon

New York Times
May 24, 2015

Most scenarios facing Greece are bleak. The country could default, introduce capital controls, forcibly convert savers’ deposits into bank capital, quit the euro and so forth.

But there is still a chance that things will end up relatively O.K. All those who care about Greece, starting with Prime Minister Alexis Tsipras, need to work hard on the least bad path forward.

This will require Mr. Tsipras not only to eat his words, but also to call a new election. The timing is tough, given a series of payments Athens needs to make to the International Monetary Fund and the European Central Bank in the next three months — but just doable.

The essential first step is for Greece to agree on a short-term deal with its creditors: to unlock 7.2 billion euros, or about $7.9 billion, worth of loans and avoid a bankruptcy that will probably otherwise occur next month. Given that the two sides are still far apart, this won’t be easy. On the other hand, Mr. Tsipras says he is hopeful about a deal — so maybe that indicates he is finally ready to make concessions.

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Interior minister warns Greece will default on June IMF repayment

by Kerin Hope

Financial Times
May 24, 2015

Greece has again threatened to default on loan repayments due to the International Monetary Fund, saying it will be unable to meet pension and wage bills in June and also reimburse €1.6bn owed to the IMF without a bailout deal with creditors.

“The money won’t be given . . . It isn’t there to be given,” Nikos Voutsis, the interior minister, told the Greek television station Mega. He claimed the EU and IMF were pressing Greece to make unacceptable concessions in the bailout talks in return for unlocking €7.2bn of aid frozen since last year.

The warning by Mr Voutsis, one of prime minister Alexis Tsipras’s oldest political allies, comes just two weeks after Mr Tsipras made a similar threat in writing to Christine Lagarde, the IMF managing director.

Mr Tsipras had said Greece would miss a €750m payment in May. That payment was ultimately met, though only through tapping an emergency account held by the IMF. Athens in effect borrowed IMF assets to repay the Fund.

Predicting when Athens will run out of cash has proven a fraught affair for eurozone officials, who have been bracing for default since March.

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Greece's radicals: The wild ones

Economist
May 25, 2015

"Would [a Greek exit from the euro] be such a catastrophe?" asked Panagiotis Lafazanis, Greece's industry, energy and environment minister, at a two-day meeting of the governing Syriza party over the weekend. Mr Lafazanis is the leader of Syriza's Left Platform, the radical faction of an already radical left-wing party. At the meeting of the party's central committee, Left Platform argued for an alternative plan to Greece's ongoing efforts to negotiate an agreement with its creditors: the government should break off the bail-out talks, default on its loans from the International Monetary Fund and prepare the country for Grexit. A strong minority of the central committee's 350 members backed the radicals' plan. But ultimately Alexis Tsipras, the prime minister, won support for the government's negotiating efforts in a show-of-hands vote.

For weeks Mr Tsipras has sounded defiantly optimistic in the face of a worsening cash squeeze and excruciatingly slow bail-out negotiations with the European Union and the IMF. Though Greece’s plight is becoming desperate, Mr Tsipras still insists a deal will be struck with creditors by the end of this week, freeing up €7.2 billion ($7.9 billion) of bailout aid. That would be enough to prevent a default in June on a €1.6 billion loan repayment to the IMF and give the cash-strapped government some breathing room. The talks have made some progress since Mr Tsipras removed his free-wheeling finance minister, Yanis Varoufakis (pictured above arriving at the central-committee meeting on Saturday), from the negotiating process.

Yet Mr Tsipras’s previous assertions that Greece was on the brink of an agreement have all come unstuck. Last week, for example, his aides claimed that Angela Merkel, Germany's chancellor, would cut the “Gordian knot” of disputed issues at the EU summit in Riga. Instead, Mrs Merkel insisted the IMF, which is seen as more hardline than the EU, would have to approve any bail-out aid. A worried Mr Tsipras immediately asked the American government to try to soften the IMF’s tough conditions for a deal.

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Greece and Creditors Struggle for Elusive Deal

Wall Street Journal
May 22, 2015

Greece and its lenders are casting around for ways to prevent the country from defaulting on debts to the International Monetary Fund in June, as negotiations to unlock bailout aid barely inch forward and the Athens government runs dangerously low on cash.

Greece needs financial help in some form by mid-June in order to repay a series of IMF loans falling due, several officials from the country and its creditors said. The Greek government is expected to be able to cover pensions and public-sector wages in May, and it can probably scrape together enough cash to repay a €300 million ($331 million) IMF loan on June 5, these people said.

But three subsequent IMF payments totaling €1.25 billion due in mid-June pose a severe challenge to Athens’s bare treasury, the officials say, and could force the government to either take politically costly measures such as raiding pension funds or delay the payments and risk an unpredictable fallout at home and abroad.

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Schaeuble Said to Cite Option of Greek Parallel Currency

Bloomberg
May 22, 2015

German Finance Minister Wolfgang Schaeuble raised the possibility that Greece may need a parallel currency alongside the euro if the country’s talks with creditors fail, people familiar with his views said.

Schaeuble mentioned the idea of parallel currencies at a recent meeting without endorsing it, according to two people who attended and asked not to be identified because the gathering was private. He also cited the example of Montenegro, which uses the euro but isn’t a member of the currency union, one person said.

The comments suggest that some in Germany are preparing for the worst amid a standoff with Greece that has dragged on since February. While Chancellor Angela Merkel and her finance minister say the goal is to keep Greece in the euro, Schaeuble has also said he wouldn’t rule out a Greek exit from the 19-nation currency.

Germany is “ready to take this brinkmanship very far,” with Schaeuble in the role of “attack dog,” Jacob Funk Kirkegaard, senior fellow at the Peterson Institute for International Economics in Washington, said by phone. “The risks of contagion to other euro-area countries from a deterioration in Greece is very low.”

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The Only Three People Worth Listening to on Greece

Bloomberg
May 22, 2015

As Greece hurtles toward another denouement, figuring out who to listen to can be a challenge.

One minute Finance Minister Yanis Varoufakis is moving Greek bond yields by saying a deal is imminent. The next, his claims are being shot down by Germany’s Wolfgang Schaeuble. The result has pushed securities this way and that while giving few clues as to how the crisis will eventually play out.

The trick, say economists from ING Diba in Frankfurt to Berenberg Bank in London, is to focus on the people who exercise true power over the euro region’s bond and currency markets right now: Greek Prime Minister Alexis Tsipras, German Chancellor Angela Merkel and European Central Bank President Mario Draghi.

“You’ll have to take your guidance from these three,” ING Diba’s chief economist, Carsten Brzeski, said in a telephone interview. “While Merkel is keeping a low profile with her comments, she plays a crucial role.”

In charge of Europe’s economic powerhouse for a decade, Merkel has been around since the opening act of the Greek crisis and will be critical in deciding how it ends, juggling voter saturation at subsidizing Greece with the desire to avoid a breakup of the euro. Leading the opposite camp is Tsipras, playing hardball to end the austerity, humiliation and suffering of the Greeks. In the middle, the Italian-born central banker is doing whatever it takes to preserve the euro.

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Greece To Be Granted A Bailout Extension; Eurozone Lacks Credibility

by Stephen Pope

Forbes
May 21, 2015

Since the general election of January 25th when the Syriza led coalition government was elected it has has failed on six occasions to present to its international creditors a meaningful set of reforms that would have paved the way for the next tranche of bailout money to be advanced and so avoid a default.

The far left of centre government has known the timetable and yet has been totally shambolic in the propositions its has offered to the European Union. It has argued against austerity whilst expecting international sources of finance to simply let the struggling nation off the hook.

Syriza won the election by playing a populist card without any regard for the reality of life which is that he who pays the piper is allowed to call the tune. However, perhaps Greece has been the smarter party as right now, just when the debt and default clock is ticking ever louder it appears that the European parties Greece has to satisfy have themselves rolled over to have their tummies tickled.

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How politics will seal the fate of Greece

by Philip Stephens

Financial Times
May 21, 2015

Forget debt ratios, fiscal balances, liquidity crunches and the rest. The EU and International Monetary Fund technicians negotiating with Athens are going through the motions. The Greek crisis was always as much about politics as economics. Now it is all about politics.

There are two theories of the Syriza government led by Alexis Tsipras. One presents a cast of bungling amateurs who have spent the past several months digging Greece into an ever deeper economic hole — all the while squandering the trust and goodwill of its eurozone partners. The other says the antics of Yanis Varoufakis, finance minister, are an elaborate political charade calculated to set Greece free from the shackles of merciless creditors.

The first hypothesis is the most popular. The preening and pirouetting, the interviews in glossy magazines, the undergraduate Marxism and love of the limelight — all point to a colossal failure on Mr Varoufakis’s part to grasp the depth of Greece’s plight or the sensitivities of its European partners. Along the way, tens of billions of dollars have drained from Greek banks as citizens stash their savings elsewhere.

The conspiracy theory, though, also has its adherents. They start with the assumption that no one could be quite as witless as Syriza has often seemed. Mr Tsipras’s government knew from the outset that it could not reconcile its domestic promises with Greece’s international obligations. The problem was that Greeks had voted at once for an end to austerity and to stay in the euro. A crisis had to be manufactured to show the government’s hand had been forced. By the Germans, of course.

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New Companies Try to Build a New Greece

by Yannis Palaiologos

Wall Street Journal
May 21, 2015

The sense of expectation in the small room was palpable. It was a mid-May morning and a group of 30 young Greeks, selected on the basis of academic achievement and an interview process, had gathered in the offices of Upstream Systems. They were there to learn what opportunities the company has to offer and what skills it is looking for.

Upstream embodies the virtues Greece needs in its companies if the country is to transcend its bankrupt economic model. Begun as a mobile-marketing company 15 years ago before the fertile union of mobile telephony and the Internet, over time Upstream evolved into a mobile-commerce company. These days, it sells goods and services via mobile phone—anything from gaming apps to microloans. Its revenue has shot up to €200 million ($222.6 million) from €35 million in six years. As much as 90% of that is earned in emerging markets, yet more than 75% of Upstream’s workforce is based in Greece.

Most Greek firms take little interest in employee satisfaction, fostering teamwork or giving their top people a sense of ownership. Youth tends to be kept down until it turns into age, and competitors are usually viewed as personal enemies whose downfall is more desirable than one’s own good performance.

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Why Greece’s Syriza party is not sticking to the script on an IMF deal

by Paul Mason

Channel 4
May 21, 2015

The leaked IMF document seen by Channel 4 News last weekend effectively signals a three-week endgame in the Greek debt stand-off.

The IMF thinks there is “no possibility” that Greece can meet €11bn worth of debt repayments due between June and the end of August. The Greek government is running out of cash.

Yanis Varoufakis, the finance minister, told Channel 4 News last night (see video below) that faced with the choice of paying €350m due on 5 June to the IMF on 5 June, or paying pensions and salaries, he would choose the latter.

Privately, those within the ruling far-left party Syriza who were once confident of reaching a compromise with lenders, are now alarmed. Euro exit plans drawn up by the far left of the party are being studied seriously by those previously dismissive of them; articles contemplating a debt default have begun to appear in the party’s daily paper Avgi.

In the script according to the eurozone, the expected ending is: Syriza splits; finance minister Varoufakis makes good his pledge not to sign a surrender and resigns. A government of the centre-left forms, with Alexis Tsipras now allied to the centrist Potami party and with tacit support from a liberal wing of the New Democracy party. Debt relief happens, but on the terms dictated by the lenders, and Syriza survives to complete its mutation into a centre-left social democratic party.

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Schaeuble: Greek optimism about imminent deal not justified

Reuters
May 21, 2015

German Finance Minister Wolfgang Schaeuble has told Reuters the Greek government's optimism about clinching a cash-for-reforms deal with its lenders within days is not backed up by the negotiations, and he cannot rule out Greece becoming insolvent.

Greek Finance Minister Yanis Varoufakis said on Monday that an agreement could be reached within a week.

But Schaeuble said reports from the International Monetary Fund, the European Central Bank and the European Commission on their negotiations with Athens suggested talks were progressing "very hesitantly".

"What I know from discussions with the three institutions does not back up the optimism arising from announcements from Athens," Schaeuble said in an interview on Wednesday.

"There is not yet any substance to the mere announcement that we are closer to an agreement. This is still within the realms of atmosphere."

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Investors eye consequences of a Greek default

Financial Times
May 20, 2015

With Greece fast running out of cash, investors and policy makers have begun contemplating the possibility of a default and its consequences.

The question they are asking is whether it is possible to keep Athens in the eurozone even if it failed to repay some of its creditors, thereby sparing the global economy renewed uncertainty.

“Our base-case scenario remains that Greece and its international partners will reach an agreement,” wrote Reinhard Cluse, an economist at UBS, in a research note. “Nevertheless . . . the risk of failure and eventual Grexit [Greek exit from the currency bloc] should not be underestimated”.

The cash position of the Greek government is extremely murky, making it hard to assess when exactly Athens might be forced to renege on its obligations.

Silvia Merler, an economist at European think-tank Bruegel, has calculated that the government is running a better than expected primary surplus. However, this is largely the result of a severe squeeze on public spending, which is partly due to delayed supplier payments.

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Greek Pensions Said to Be in Creditor Crosshairs

Bloomberg
May 20, 2015

Greece’s creditors are making pension reforms a top priority, leaving the door open to compromises on other issues like the country’s minimum wage proposals.

Greek negotiators are meeting Wednesday with the so-called Brussels Group as efforts continue to reach a deal by month-end, according to two officials close to the talks.

If Prime Minister Alexis Tsipras can offer sufficient pledges to overhaul Greece’s retirement program -- one of the nation’s biggest hurdles to qualifying for International Monetary Fund aid -- creditors might offer leniency on their demands to restrict increases to the minimum wage, according to another official, who asked not to be identified because the talks are private.

“The pension system looks unsustainable and needs reform,” said Guntram Wolff, director of the Brussels-based Bruegel group. “If you don’t reform it and want debt relief, you’re essentially asking your partners to fund an unsustainable pension system.”

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Greece says it will default in June without aid from lenders

Reuters
May 20, 2015

Greece will not be able to make a payment to the International Monetary Fund due on June 5 unless foreign lenders provide more aid, a senior ruling party lawmaker said on Wednesday, the latest warning from Athens that it is on the verge of default.

Prime Minister Alexis Tsipras's leftist government says it hopes to reach a cash-for-reforms deal in days, although European Union and IMF lenders are more pessimistic and say talks are moving too slowly for that.

Payments to the IMF totaling about 1.5 billion euros ($1.7 billion) fall due next month, starting with a 300 million euro payment on June 5.

"Now is the moment that negotiations are coming to a head. Now is the moment of truth, on June 5," Nikos Filis, spokesman for the ruling Syriza party's lawmakers, told ANT1 television.

"If there is no deal by then that will address the current funding problem, they won't get any money," he said.

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A Finance Minister Fit for a Greek Tragedy?

by Suzy Hansen

New York Times
May 24, 2015

Yanis Varoufakis knows when he will go. “I’m not going to humiliate myself, and I’m not going to become compromised in terms of principles and in terms of logic,” he told me in early May. The Greek finance minister had just returned to Athens from a hopscotch tour of European capitals, during which he warned his fellow European leaders that they faced a Continental crisis: If they didn’t lend money to his ailing country soon, Greece might end up forced to leave the eurozone. And yet Greece wouldn’t accept many of the conditions they were demanding in return. He sounded angry. “I’ll be damned if I will accept another package of economic policies that perpetuate this same crisis. This is not what I was elected for.” He would resign, he said, rather than push the Greek people deeper into economic despair: “It’s not good for Europe, and it’s not good for Greece.”

Varoufakis has been Greece’s finance minister for only four months, but the story of how he has thrown Europe into turmoil is one many years in the making. After Greece joined the European Union’s monetary union in 2001, the tiny country of 10 million was flooded with money from elsewhere on the Continent. Over the course of the next decade, Greek leaders, whose sclerotic and corrupt economy had long been rife with patronage and tax evasion, borrowed billions from imprudent European banks and then lied to E.U. officials about its mounting debts. When the financial crisis finally rolled into Greece in 2009 and 2010, the country was an estimated $430 billion in debt, a staggering figure that imperiled the economic health of its near and distant neighbors — indeed, all of Europe. The European Commission, International Monetary Fund and the European Central Bank (often referred to as the troika) agreed to bail out the sinking economy by loaning it $146 billion. In return, as Athenians rioted in the streets in protest, the government promised the troika it would reduce state spending by slashing pensions and wages, eliminating jobs and raising taxes, an approach to debt reduction known as “austerity.”

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German Finance Minister Schäuble Doesn’t Rule Out Greek Default

Wall Street Journal
May 20, 2015

Germany’s finance minister said he couldn’t rule out a Greek default, a stance that will add pressure on Athens as negotiations over much-needed financing enter their final stretch.

Asked whether he would repeat an assurance he gave in late 2012 that Greece wouldn’t default, Wolfgang Schäuble told The Wall Street Journal and French daily Les Echos that “I would have to think very hard before repeating this in the current situation.”

“The sovereign, democratic decision of the Greek people has left us in a very different situation,” he said, referring to the January election that delivered a radical-left government that has vowed to reverse five years of creditor-mandated austerity and painful economic overhauls.

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Greece proposes imposing bank transaction tax

Reuters
May 20, 2015

Greece has proposed imposing a levy on certain bank transactions to raise revenues to meet fiscal targets during negotiations with European Union and the International Monetary Fund lenders, two sources close to the talks said on Wednesday.

"There is no final decision yet but it is under discussion," a government official said. "The proposal is certainly not about all banking transactions."

Another source close to the talks said that the discussion was still on a "preliminary level".

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A Parallel Currency for Greece

by Thomas Mayer

Centre for European Policy Studies
May 20, 2015

Greece and its creditors seem to be engaged in a game of chicken: both sides expect the other to yield at the last moment. The game will almost certainly end with each side deviating somewhat from its preferred course. This High-Level Brief discusses how a parallel currency could contribute to a resolution of the conflict. In the author's view, it would be the least-bad option for both sides among three possible options on the table.

Download the Commentary (PDF)

The ECB's in a Tight Spot Over Greece

Bloomberg
May 20, 2015

European Central Bank policy makers will discuss Greek bank aid on Wednesday in a chore that is getting more uncomfortable every week.

The Governing Council is due to meet in Frankfurt to debate the Greek central bank’s request for an increase of 1.1 billion euros ($1.2 billion) in the emergency funding it can offer lenders, people familiar with the matter said. As Greece veers toward default, ECB officials are aware that their response could worsen the political crisis just as bailout talks show signs of progress.

ECB President Mario Draghi has repeatedly said politicians rather than unelected central bankers must decide on Greece’s future, and council decisions will be based on rules such as the solvency of its banks and a prohibition on state financing. European leaders will have their next chance at a summit on Thursday in Riga, Latvia.

“It’s very simple: the ECB doesn’t want to be the one that pulls the plug on Greece when political negotiations are still ongoing,” said Marco Valli, an economist at UniCredit SpA in Milan. “As long as there is the chance that Greece will remain solvent, that it might receive further European Union aid, then ELA can be given. Should this possibility disappear, then it will have to stop.”

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Merkel Said to Plan Address for Greece If Deal Reached

Bloomberg
May 19, 2015

German Chancellor Angela Merkel is considering delivering a keynote address to make the case for aiding Greece as she faces down a potential revolt from as much as a third of her bloc’s lawmakers.

Merkel would hold the speech after Greece and its creditors agree on a deal with conditions she deems strong enough to sell to parliament and the German public, according to two government officials. She would argue that a Greek exit from the euro area would risk causing geopolitical instability in the region, said the officials, who asked not to be identified because the discussions are private.

Merkel’s desire to keep Greece in the euro is fraught with political risk given the level of exasperation in Germany with Prime Minister Alexis Tsipras after four months of brinkmanship. While some German policy makers have hardened their stance against helping Greece, others are hinting at more flexibility to avert a financial collapse.

“Should we seriously go and prescribe in detail what the Greeks are allowed to spend and what revenue they can have?” Deputy Finance Minister Thomas Steffen said in an interview. “I say no. It’s the rough framework that has to be clear.

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Greece's True Deadline May be May 29

by Mark Gilbert

Bloomberg
May 19, 2015

When does Greece finally run out of money? At what point will depositors have drawn so much cash out of the Greek financial system that its banks are essentially insolvent? And how long before Greece exhausts its bag of tricks, such as drawing down account balances at the International Monetary Fund to pay money owed to the International Monetary Fund? Here's a potential answer.

Greek banks have been increasingly reliant on emergency liquidity assistance from the European Central Bank since February. And because Greece's banks only have sufficient collateral to cover 95 billion euros ($106 billion) of ELA funding, extrapolating the growth in that reliance on a chart delivers a deadline -- May 29:

Of course, there's a huge caveat to this kind of extrapolation. The pace of Greece's appetite for ECB cash might decelerate, so the upper limit might not be reached so quickly. Or the ECB may decide it needs to be more generous in how it treats the collateral against which it's lending, which could raise the threshold. Or Greece's creditors might decide to release a portion of the funds the government in Athens is seeking, throwing it a lifeline in exchange for implementing at least some economic reforms.

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What to make of the new “Juncker Plan” for Greece?

by Peter Spiegel

Financial Times
May 18, 2015

The Greek daily To Vima has a nice scoop this afternoon about a document they’ve been leaked purporting to be a new proposal from Jean-Claude Juncker, the president of the European Commission, on how to break the standoff between Athens and its creditors.

According to the To Vima report, the plan envisions a deal with Greece that completely cuts out the International Monetary Fund and releases about €5bn in aid to Athens from three different sources: the €1.8bn remaining in the EU’s portion of the current bailout; €1.9bn in profits from Greek bonds purchased by the European Central Bank back in 2010; and another €1.3bn or so in additional Greek bond profits the ECB will get in July.

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Greece Remains Defiant as It Seeks Creditor Deal This Week

Bloomberg
May 17, 2015

Greece’s government said it won’t back down on election pledges to end austerity even while seeking to agree on a deal with creditors as soon as this week to unblock financing and avert a default.

“We’re striving for a mutually beneficial agreement by Friday,” Nikos Filis, spokesman for the parliamentary group of Prime Minister Alexis Tsipras’s Syriza party, said Sunday in comments broadcast on Mega TV. “Our mandate from the Greek people is to reach an agreement where we stay in the euro area without harsh austerity measures,” he said, adding that “tough negotiations” will take place before a summit meeting of European Union leaders in Riga, Latvia, on May 21-22.

Tsipras’s so-called red lines include no further cuts to wages and pensions. More than 110 days of talks between Greece and its creditors have failed to produce an agreement to unlock additional aid from a 240 billion-euro ($275 billion) bailout. The standoff has triggered a liquidity squeeze, pulling the country back into a recession and renewing doubts over Greece’s future in the euro area.

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Greek Prime Minister Rejects Further Austerity or Labor Changes

by Niki Kitsantonis

New York Times
May 15, 2015

Greece’s prime minister, Alexis Tsipras, said in a speech on Friday that his government wanted a deal with the country’s creditors but that it would not enforce additional austerity measures, like further pension cuts.

Mr. Tsipras said Greece wanted a “unified agreement” that would restructure its huge debt, a thorny issue not on the agenda of the current talks.

Weeks of difficult negotiations have yielded some common ground, Mr. Tsipras told an audience of entrepreneurs and politicians at a conference in Athens sponsored by The Economist. Convergence on fiscal targets, “marginal changes” to value-added tax rates and an improvement to the tax collection system “make us optimistic that we are very close to an agreement,” he said.

But he said the two sides remained divided on the contentious issues of overhauling the labor sector and the pension system.

“I want to reassure the Greek people that there is no possibility or chance that the Greek government will back down on pension and labor issues,” he said, adding that additional pension cuts “cannot be accepted.”

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The Tsipras recession

by Holger Schmieding

Intelligent News
May 15, 2015

Unfortunately, this is one of the few things which Greece's double populist coalition has done so far. Since December, the risk has become clearer and clearer that the Samaras recovery of 2014 could give way to a Tsipras recession if a Syriza-led government were to insist on its impossible campaign promises. The GDP data for Q1 (-0.2% qoq) on Wednesday confirm that Greece has indeed fallen back into recession.

That the left-right populists in Athens have annoyed Greece's international creditors is the smaller of the problems. Much worse is that the government has shattered trust at home.Capital flight of some €55bn from December to March, equivalent to some 30% of Greek annual GDP, is crippling the economy while a drain of deposits (€23bn in the last four months) has partly paralysed the banking system, putting it on ECB life support.

Assessing the damage

Nothing brings out the damage more clearly than the comparison to Spain. Until late November, that is until the political risk in Athens came to the fore, Greece and Spain were roughly on the same recovery track with annualised GDP growth of around 2.3% for the first three quarters of 2014. Strong business confidence last autumn and a 1.6% yoy rebound in employment from the very depressed crisis levels pointed to even better Greek news for 2015 to come.

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Why Syriza Will Blink

by Anatole Kaletsky

Project Syndicate
May 14, 2015

Once again, Greece seems to have slipped the financial noose. By drawing on its holdings in an International Monetary Fund reserve account, it was able to repay €750 million ($851 million) – ironically to the IMF itself – just as the payment was falling due.

This brinkmanship is no accident. Since coming to power in January, the Greek government, led by Prime Minister Alexis Tsipras’s Syriza party, has believed that the threat of default – and thus of a financial crisis that might break up the euro – provides negotiating leverage to offset Greece’s lack of economic and political power. Months later, Tsipras and his finance minister, Yanis Varoufakis, an academic expert in game theory, still seem committed to this view, despite the lack of any evidence to support it.

But their calculation is based on a false premise. Tsipras and Varoufakis assume that a default would force Europe to choose between just two alternatives: expel Greece from the eurozone or offer it unconditional debt relief. But the European authorities have a third option in the event of a Greek default. Instead of forcing a “Grexit,” the EU could trap Greece inside the eurozone and starve it of money, then simply sit back and watch the Tsipras government’s domestic political support collapse.

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BRICS Bank Invite to Greece Has Jim O’Neill Thinking It’s a Joke

Bloomberg
May 14, 2015

Having scratched together the 750 million euros ($845 million) it owes the International Monetary Fund and with a few weeks of cash left in its accounts, Greece is now being invited to join a club with a membership fee running into the billions.

The disclosure this week from Athens that Russia wants to make Greece the sixth member of the BRICS bank sounded like nothing more than a late April Fool’s joke to Jim O’Neill. He’s the former Goldman Sachs Group Inc. economist who in 2001 coined the term BRIC -- Brazil, Russia, India and China. South Africa was subsequently invited to join by the others.

Last year they set up a development bank to rival the IMF. It will have authorized capital of $100 billion with each founding member contributing $10 billion.

So what gives? Certainly Greece, whose economy has shrunk by about a quarter as it became of ward of the euro zone, doesn’t exactly meet the vision laid out by O’Neill to highlight the growing economic weight of developing nations.

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Why Greece is Different

by Daniel Gross

Project Syndicate
May 13, 2015

The seemingly interminable negotiations between the new Greek government and its international creditors – the International Monetary Fund, the European Central Bank, and the European Commission – on a new loan deal have entered a dangerous phase. At this point, a mistake on either side threatens to trigger the kind of accident that could precipitate a new crisis in Europe.

The IMF seems ready to throw in the towel – not least because of the recent revelation that Greece could post a small primary budget deficit (which excludes interest payments) this year, rather than the planned sizeable surplus. But, with Greece’s economy tanking again, its government is convinced that the current repayment program is not working – and that, in the absence of significant adjustments, it never will.

Fundamental to Greece’s case for new bailout terms is the narrative – reinforced by its current economic travails – that it has been a victim of excessive austerity. But this neglects a crucial fact: austerity worked in Europe’s other crisis-hit countries. Indeed, Portugal, Ireland, Spain, and even Cyprus are showing clear signs of recovery, with unemployment finally falling (albeit slowly and from high levels) and access to capital markets restored.

Why is Greece different?

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Greek PM says time for action from lenders, IMF payment scrapes by

Reuters
May 12, 2015

Greek Prime Minister Alexis Tsipras on Tuesday called on lenders to break an impasse in cash-for-reform talks after Athens had to resort to a temporary expedient to make a crucial payment to the IMF.

Greek officials told Reuters they had emptied an International Monetary Fund holding account to repay 750 million euros to the global lender on Monday, avoiding default but underscoring the dire state of the country's finances.

At his second cabinet meeting in three days, Tsipras told ministers Athens was sticking to its "red lines" and that it was time to see lenders meet Greece halfway, according to a government official. The official said Greece is still expecting a deal by the end of the month.

"The Greek side has so far fully met everything the Feb. 20 Eurogroup decision foresaw. It has taken as many steps as possible towards the European partners' side," the official quoted Tsipras as telling his cabinet. "It's now our partners' turn to make the necessary steps in order for them to prove in practice their respect towards the democratic popular mandate."

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EU Said to Consider Plan for Greece in Event of Euro Exit

Bloomberg
May 12, 2015

Euro-area governments are considering putting together an aid package for Greece to cushion the country’s economy if it was forced out of the euro, according to two people familiar with the discussions.

The Greek government doesn’t expect to need that help. Prime Minister Alexis Tsipras says he’s not considering leaving the currency bloc and is focused on getting the aid he needs to avoid a default.

Even so, European officials are considering mechanisms to ring fence Greece both politically and economically in the event of a euro breakup, in order to shield the rest of the currency bloc from the fallout, one of the people said.

“There is always a plan B,” Filippo Taddei, an economic adviser to Italian Prime Minister Matteo Renzi, said in an interview in Rome on Tuesday, without referring to the aid package specifically. “But you have to ask yourself who has the ability to step in, in that event. And I think if you start making up a list you realize very quickly that that list is very short.”

While euro-area finance ministers welcomed the progress Greece has made toward qualifying for more financial aid at a meeting in Brussels on Monday, policy makers are still concerned Tsipras may not be prepared to swallow the concessions necessary for a disbursement.

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Syriza must let markets and meritocracy rule

by Yannis Palaiologos

Financial Times
May 12, 2015

The Syriza-led government caused a stir in Greece last month when it made Leonidas Bobolas, a prominent businessman, pay €1.8m in back taxes to avoid being formally charged with tax evasion.

Mr Bobolas is the chief executive of Ellaktor, the country’s leading construction company, and his family is among the most powerful operators in the media sector. People like him have long been considered by the average Greek to be beyond the reach of the tax authorities, so his arrest became the talk of Athens . But there are reasons to doubt this blow for justice is the start of a successful campaign against the clientelism at the heart of the Greek malaise.

A succession of leaders, especially since 2009, has rightly indicted the ruinous effect of the clientelist mentality on the nation’s public finances and its competitiveness — but they were only paying lip service to the need for reform. There was little will to tackle the structures of favouritism on which the political system and its clients thrived.

Voters hoped Syriza — new to governing and so comparatively free of corrupt entanglements — would be more likely to cut the ties binding politics to rent-seeking special interests. This was always a false hope, as the leftwing government’s underwhelming record shows. Syriza cannot be the battering ram that crushes the ramparts of clientelism for the simple reason that it refuses to recognise vital aspects of it. For Prime Minister Alexis Tsipras, the problem lies exclusively in the collusion (or diaploki ) between the old governing parties and powerful families with significant media holdings. Their networks were chiefly tools to influence politics in order to entrench their position in other sectors, in particular construction and energy.

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Greece taps IMF reserves to pay €750m debt

Financial Times
May 12, 2015

Greece took the unusual step of raiding its holdings of the International Monetary Fund’s de facto currency to make a €750m payment to the fund on Tuesday, in another sign of the country’s increasingly desperate cash crunch.

The €750m payment to the IMF on Tuesday was the biggest Athens has made to the fund so far this year. But it is just the first in a series of major payments to the IMF and the European Central Bank due in the coming months that have raised the spectre of a Greek default and exit from the eurozone.

Athens drew €650m from its holdings of the IMF’s Special Drawing Rights to make the loan payment and also give it room to disburse nearly €1bn on Wednesday to pay public sector salaries.

A Greek central bank official said Tuesday’s withdrawal from its SDR holdings was unusual but not unprecedented. He also said there was no specific deadline for replenishing the account but that Greece would be expected to gradually replace the funds over the coming months.

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Greece's Payment Plan Is a Shell Game

by Mark Gilbert

Bloomberg
May 12, 2015

"I love deadlines; I like the whooshing sound they make as they go by," wrote Douglas Adams, author of the "Hitchhikers Guide to the Galaxy." He'd have found plenty to admire in Athens in the past few months, where the whooshing has become deafening. Greece's international creditors are probably less pleased by the sound -- although judging from the desperate method the country used to meet today's debt payment there may not be many deadlines left to miss.

Greece has to pay the International Monetary Fund about 750 million euros ($847 million) today. To avoid a default, the nation pulled out 650 million of reserves -- from its account at the IMF, according to Greece's Kathimerini newspaper. It's the equivalent of writing a check to yourself to clear your bank overdraft; and the deadline it sets for Greece may turn out to be the most serious one yet for the nation.

Greece has to replenish its IMF funds within a month, Kathimerini says. With the IMF already struggling with its own rules that forbid it from throwing good money after bad by lending to governments that aren't at least on a path to fiscal rectitude, Greece may have done nothing better than exchange one kind of default for another. The hackneyed phrase "kicking the can down the road" has never seemed more apt.

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Greece Completes Latest IMF Loan Repayment

by Stelios Bouras

Wall Street Journal
May 12, 2015

Greece on Tuesday completed a €750 million ($836.7 million) loan repayment to the International Monetary Fund, according to officials from the finance ministry and the Bank of Greece.

The Bank of Greece official said the money was paid from an emergency account held by the central bank after two meetings last week between Governor Yannis Stournaras, Deputy Prime Minister Giannis Dragasakis and Deputy Foreign Minister Euclid Tsakalotos, who manages Greece’s talks with international creditors over its bailout.

“In order for money to be taken from this account, the IMF had to approve it. It was given,” the Bank of Greece official said.

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Greece Inches Closer to an Accident

by Mohamed A. El-Erian

Bloomberg
May 12, 2015

An immediate crisis has been averted once again in the Greek drama. At least that is how most media outlets will interpret Greece's approval of a scheduled 750 million euros ($836 million) debt payment to the International Monetary Fund this week. The decision was made as euro group finance ministers expressed some satisfaction at the greater seriousness shown by the Greek government and urged it to do more, and quickly.

This interpretation is strictly correct; it is also potentially misleading.

The deal does buy time for Greece and Europe. But it doesn’t get either side much closer to resolving a crisis that is causing considerable human tragedy in Greece and eroding the credibility of European institutions. At best, it is another attempt to prolong the muddling through, despite the escalating costs and steadily diminishing effectiveness. As a result, conditions on the ground continue to slowly slip out of the control of Greek and European policy makers.

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Germany floats Greek referendum on reform, others doubt timing

Reuters
May 12, 2015

EU paymaster Germany suggested on Monday that Greece might need a referendum to approve painful economic reforms on which its creditors are insisting, but Athens said it had no such plan for now and others warned a vote could delay vital aid.

Greece calmed immediate fears of a default by making a crucial 750 million euro payment to the International Monetary Fund a day early. But Finance Minister Yanis Varoufakis said the liquidity situation was "terribly urgent" and a deal to release further funds was needed in the next couple of weeks.

Euro zone finance ministers welcomed some progress in slow-moving talks on a cash-for-reform deal between Athens and the IMF, the European Commission and the European Central Bank but said more work was needed to each a deal.

"We acknowledged that more time and effort are needed to bridge the gaps on the remaining open issues," they said in a short statement after spending barely an hour on a progress review on the negotiations behind held among senior officials.

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Greece Dodges Economic Bullet With Progress Toward Deal

Bloomberg
May 11, 2015

Greece handed the European Central Bank an excuse to maintain the life support for its financial system by persuading its skeptical German-led creditors it’s serious about delivering the policies needed to escape a default.

Less than three weeks after a Greek aid meeting broke up in taunts and acrimony, Finance Minister Yanis Varoufakis assured euro-area governments that his country is aiming to strike a bargain to win the final installments of its 240 billion-euro ($268 billion) aid program.

“We are making faster progress,” Dutch Finance Minister Jeroen Dijsselbloem told reporters in Brussels on Monday after leading a meeting of euro ministers. “I’m not satisfied but just a bit more optimistic.”

Pressure on the two sides had intensified with the ECB due to reassess the emergency liquidity lines keeping the Greek banking system in business on Wednesday. Although some central bankers are pushing for stricter terms, it’s now unlikely that policy makers will decide to restrict funding this week, according to two European officials.

With global bond markets sliding, the yield on Greece’s notes due 2017 rose 17 basis points to 21.4 percent at 12:04 p.m. local time. The Athens benchmark stock index was little changed.

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Apple Could Make Money by Bailing Out Greece

by Leonid Bershidsky

Bloomberg
May 11, 2015

That Apple should buy Greece with all the useless cash it has on hand is just a joke that won't go away. Yet it's true that, if big American corporations and European politicians had any imagination, they could probably engineer a bailout for the nearly bankrupt country on terms that would benefit everyone.

Back in 2012, an investor attending Apple's general meeting asked Tim Cook, the chief executive officer, if he'd ever considered using the company's growing cash stash -- $97.6 billion at that point -- to acquire Greece. "We've looked into many things," but not that, Cook replied. Of course, entire countries can't be bought -- not even in novels, it seems. In Iain Banks's "The Business," such a deal fell through, even though the acquisition target was an obscure Himalayan monarchy, not an old democracy like Greece.

So everyone had a laugh and moved on. Things briefly got better for Greece when it received the biggest bailout in history, and private creditors agreed to a haircut. But its economy still failed to grow, and the country's debt burden, at 175 percent of economic output, remained unsustainable. Apple, in the meantime, more than doubled its hoard, which now amounts $194 billion in cash and equivalents. The company has been paying generous dividends and buying back stock, but the cash pile keeps growing. There's no way to invest it all. For years, Cook has been talking about mind-blowing products his company has in the pipeline, but he's only managed to come up with incremental improvements to existing products, an average streaming music service and an overpriced smartwatch, and these haven't required much capital. Unless Apple starts building cars -- or perhaps spaceships -- it will keep accumulating cash.

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