Threat of Schengen expulsion a new EU humiliation for Greeks

by Kerin Hope

Financial Times
January 29, 2016

Six months after Greece narrowly avoided a disorderly exit from the euro, a new threat looms that many in Athens see as equally damaging: being summarily ejected from Europe’s passport-free Schengen zone.

Brussels this week gave the faltering administration of Prime Minister Alexis Tsipras three months to take control of Greece’s maritime border with Turkey, set up reliable identity checks for refugees and other migrants and provide medium-term shelter for up to 50,000 arrivals.

If the Syriza-led government is unable to meet the deadline, Greeks will lose access to a coveted privilege of EU membership: seamless travel across most European borders with the wave of a national identity card.

It is a worrying prospect for a nation grown accustomed to frequent travelling within Europe, with tens of thousands of young Greeks studying in Europe’s core capitals and increasing numbers migrating to find jobs as the crisis shrinks opportunities for working at home.

Leaving Schengen would be “disastrous”, said Kostis Michalos, who travels frequently to Brussels and other European cities in his role as deputy chairman of the Association of European Chambers of Commerce and Industry.

“It would mark the beginning of the end of our eurozone identity,” said Mr Michalos.

“It’s the political connotation even more than the possible inconvenience: you’re losing freedom of movement and that’s a big loss.”

More

Greece’s far-left Syriza government is tottering

Economist
January 29, 2016

On January 24th Alexis Tsipras, Greece’s prime minister, gave a rousing speech to his supporters in a stadium in Athens, marking the first year in power of his far-left, anti-austerity Syriza party. He vowed to come down hard on his party’s enemies, and blamed the Greek people’s continuing misery on the opposition. Meanwhile Greece’s public broadcaster, ERT, aired a six-minute retrospective on Syriza’s first year, featuring gauzy shots of Mr Tsipras and a voice-over proclaiming that his government had battled elites, delivered social justice, fixed the economy and made Greece an international symbol of dignity. Even leftists rolled their eyes at the heavy-handed propaganda. But if Mr Tsipras’s speech and video were intended to boost morale, they backfired.

Many Greeks were infuriated that the prime minister’s speech failed to mention the refugee crisis, reinforcing a growing feeling that Mr Tsipras is out of touch. His party has been weakened by corruption scandals. George Stathakis, the economy minister, is being probed by a parliamentary committee for failing to include 38 properties and €1.8m ($1.9m) in his 2011 declaration of assets. Earlier this month, the Greek press alleged that Syriza MPs and officials had appointed family and friends to senior public-sector jobs. The government is moving to privatise ports, airports and other public assets: measures that, while economically sensible, are deeply unpopular. Taxes are rising, and unemployment remains at 25% (and near 50% for those aged 18-24). Capital controls, including a measure limiting bank withdrawals to €420 a week, are still in place.

More

Alexis Tsipras and Kyriakos Mitsotakis clash over Greek pensions

by Kerin Hope

Financial Times
January 26, 2016

Alexis Tsipras has fended off attacks from Kyriakos Mitsotakis, Greece’s newly elected opposition leader, by insisting that his Syriza government can rescue the country’s underfunded pension system without cutting benefits to retirees.

The prime minister and his rival went head-to-head on Tuesday night in a heated parliamentary debate, their first confrontation since Mr Mitsotakis, a pro-European reformer, was voted in to lead the centre-right New Democracy party this month.

“There will be no reductions in main pensions,” a defiant Mr Tsipras said. “One pension is a whole household’s income in the present [recessionary] circumstances.”

Syriza has resisted pressure from creditors — the EU and IMF — to impose hefty pension cuts by March. The move, postponed from last year, has become an urgent priority with bailout monitors due to return to Athens next week to assessing progress on the reforms agreed in return for a €86bn third international bailout.

Taking aim at Mr Mitsotakis, the son of a former conservative premier, Mr Tsipras asserted that state pension funds were poised to collapse because of “sustained looting” over decades by previous governments.

More

EU Slows Down on Greece Support as Compliance Trumps Urgency

Bloomberg
January 16, 2016

Greece’s next bite of bailout money may turn into a movable feast if Prime Minister Alexis Tsipras can’t convince euro-area authorities he’s making good on his promises.

“Everyone got used to the fact the reviews take longer,” Lithuanian Finance Minister Rimantas Sadzius said in an interview on Friday. “Everyone’s prepared to demand that agreements are implemented at 100 percent.”

European governments won’t rush additional aid until Tsipras delivers on pledges to fix Greece’s pension system, update its labor markets and close fiscal gaps. A slow approach has already pushed borrowing costs to levels not seen since August and risks renewing last year’s conflict that nearly ended Greece’s membership in the euro area. Greek political party leaders will debate pension reform proposals in parliament on Tuesday, ahead of planned strikes by seamen, journalists, and lawyers against government policies.

Greece may get 4 billion euros ($4.3 billion) or more once the nation’s creditors complete a review of the most recent bailout, according to a euro-area official who asked not to be named because talks are ongoing. If Greece fails to unlock more funding it may face a cash crunch by the middle of the year.

More

Syriza one year on: what happened to the radical left dream in Greece?

by Vassilis Petsinis

Open Democracy
January 25, 2016

On 25 January 2015, Syriza and Alexis Tsipras won the Greek parliamentary elections. Syriza’s proponents as well as critics, at home and abroad, regarded this as a landmark for Greek politics: It was the first time in Greece’s history that a political party with ‘genuinely’ leftist origins had entered the halls of power. The first weeks after Syriza’s victory were marked by a renewed wave of optimism that a more positive turn for Greece could still be feasible despite the critical phase that the country has been going through.

Nevertheless, a few months later, this optimism was gradually replaced with disillusionment. For a start, the government coalition with the right-wing Independent Greeks/ANEL did not resonate well with the ‘older’ segment of Syriza’s electorate.

Furthermore, it soon became evident that, during his electoral campaign, Alexis Tsipras had made various promises to different target-groups which were often incompatible with each other (e.g. the ‘Thessaloniki Declaration’ in September 2014).

For instance, pledges to maintain the wage-grid intact and suspend additional layoffs in the public sector combined with promises to relax taxation for small and medium-size entrepreneurs.

More

The Greek who out-reforms Alexis Tsipras

by Yannis Palaiologos

Politico
January 15, 2015

In Greek politics, appearances can be deceptive.

At first glance, Kyriakos Mitsotakis, who won a January 10 contest to lead the center-right New Democracy party, and Prime Minister Alexis Tsipras have little in common. To many, Tsipras embodies change. The 41-year-old is a self-made politician who rose to the top without the help of family connections, and who leads a party that has never before been in power.

Mitsotakis, 47, on the other hand, is the son of a former prime minister, the brother of a former foreign minister and the uncle of one of Greece’s most promising regional governors. He became the leader of the party that formed the first government of the post-junta republic in 1974, and which alternated in power with the center-left PASOK until Tsipras’ Syriza took office in January 2015.

By traditional standards, Tsipras represents the new, Mitsotakis the old.

More

Next Up for Greece: How to Shrink the Debt

by Viktoria Dendrinou

Wall Street Journal
January 14, 2015

Greece’s creditors are expected to start talking soon over an issue that has been looming over the eurozone since 2010: cutting the country’s mountainous debt burden.

Greece already sliced its debts to private lenders through a bond swap in 2012. But that wasn’t enough. Now, most of its debt is owed to other eurozone governments, which have conceded Athens needs more relief.

The debt talks won’t begin until after still-difficult negotiations over steps Greece must take, including pension changes and budget cuts, to complete the first review of its latest bailout package for up to €86 billion ($93.4 billion) agreed to last year.

Jeroen Dijsselbloem, the Dutchman who presides over meetings of eurozone finance ministers, said Thursday that once there is agreement on that, “then we will start political debates on debt sustainability.”

But while the creditors—the eurozone and the International Monetary Fund—broadly agree on how they could go about cutting Athens’ debt, they will likely lock horns over how much relief the country will need.

More

Greek Pensions Crisis: The Last Act of the Greek Tragedy?

by Michael Iakovidis, Daniel Mahoney & Tim Knox

Centre for Policy Studies
Economic Bulletin 70
January 14, 2016

The Greek pensions system, after decades of political exploitation, state interference and crony capitalism, is close to collapse. The system has been plagued by an unsustainable worker to pensioner ratio, endemic corruption along with major financial losses on investments in Greek banks and Government bonds. To sustain the unaffordable pension system, the Greek Government has plugged the gap with €216 billion of subsidies since 2000.

In the summer 2015, the “Troika” (comprising the European Commission, the European Central Bank and the International Monetary Fund) requested further reforms to Greek pensions in return for continuing its financial assistance via the bailout programme. The Greek Government has tabled a package of pension reforms, which is currently being scrutinised by European Ministers. It is probable that reforms to pensions will pass the Greek Parliament later this month, but the underlying deep-rooted problems will not be addressed. The reforms, although politically extremely painful, will do nothing to alleviate the Greek crisis.

Download the Report (PDF)

Greece’s biggest foreign investor threatens to halt mines project

by Kerin Hope

Financial Times
January 12, 2016

A Canadian mining company that has invested $700m in gold extraction projects in northern Greece has threatened to suspend its operations because of delays in issuing licences and permits, its chief executive has announced.

The leftwing Syriza government responded by accusing Eldorado Gold, the largest foreign investor in Greece, of attempting to blackmail the Greek state.

“Our investment is being treated as a political toy,” Paul Wright, chief executive of the Vancouver-based miner, said in Athens on Tuesday. “We’re just spinning tyres, spending money and not making progress.”

Mr Wright said that activities at two gold mines under development will be shut down at the end of March, with the loss of about 600 jobs, if the environment ministry fails to approve applications to install processing facilities that had been agreed by previous administrations.

More

Greek conservatives bank on unlikely lad to revive flagging party

by Kerin Hope

Financial Times
January 11, 2016

For almost a decade Kyriakos Mitsotakis languished on the backbenches of the Greek parliament, sidelined by his own conservative New Democracy party even when it held power.

His background as the reformist son of a former prime minister, equipped with degrees from Harvard and Stanford universities and experience as a consultant with McKinsey, counted for little with the old-fashioned grandees running the party.

Yet his moment has arrived. To the surprise of many conservatives, including some of his 300 campaign volunteers, the 47-year-old pulled off an unlikely victory in Sunday’s run-off election for leadership of the floundering opposition to prime minister Alexis Tsipras and his leftwing Syriza party.

Evangelos Meimarakis, the folksy former speaker of parliament who led by an 11-point margin after the first round of voting by grass roots New Democracy, supporters was so taken aback by the results that he failed to concede defeat for several hours after the election outcome had become clear.

To Greeks disillusioned with Syriza’s broken promises to expel the hated bailout monitors, reduce persistently high unemployment and boost social spending after years of recessionary cuts, Mr Mitsotakis’s pledge to put common sense above populism offered a ray of hope.

More

How the SYRIZA-led government privatized Greek banks

by Miranda Xafa

Centre for International Governance Innovation
January 3, 2015

After lengthy negotiations that lasted through the summer, Greece’s radical left SYRIZA government and its creditors reached an agreement last August to secure €86 billion in bailout funds. Within this total, €50 billion were set aside to recapitalize the Greek banks, which had suffered massive deposit withdrawals prior to the imposition of capital controls in late June, funding pressures, and a sharp rise in non-performing loans (NPLs) as the payment culture deteriorated in response to Grexit fears. Greece and the troika of program monitors —the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF) — went out of their way to speed up the bank recapitalization part of the agreement in order to avoid triggering new "burden sharing" rules on Greek depositors that went into effect on January 1, 2016.

The rush to avoid hitting the new Bank Resolution and Recovery Directive reflects the Single Supervisory Mechanism’s (SSM) reluctance to impose a haircut on uninsured deposits in excess of €100,000 that belong to Greek corporations and would negatively affect economic activity. This aggressive timeline to recapitalize Greek banks risked imposing losses on taxpayers in order to protect Greece's depositors. The Greek taxpayers' existing stake in the four systemic banks, valued at €25.5 billion in May 2013, faced certain dilution, as did €8.3 billion in fresh capital injected by private investors in the spring of 2014, ahead of the ECB’s Comprehensive Assessment of all Euro area bank balance sheets. Asking all four systemic banks to raise funds at the same time in in a risk-off market environment ahead of the Fed’s tightening cycle, and before the Greek government had shown a clear commitment to the program by concluding the first review, including bank-related reforms, appeared to be a hard sell.

This was the third Greek bank recapitalization in as many years, each agreed as part of rescue packages funded by official creditors. The first one, finalized in May 2013, followed the debt exchange of 2012, which recognized the losses incurred by Greek banks in the government bond portfolio. The Greek state, through the Hellenic Financial Stability Fund (HFSF), acquired majority stakes in each systemic bank through direct capital injections of €25.5 billion, funded by the ESM. A second bank recapitalization took place in April 2014, ahead of the SSM’s Comprehensive Assessment of all Euro area banks. It was entirely funded by private investors, who acquired a 27 percent stake in Greek banks by injecting an €8.3 billion of equity.

More