Double crisis deepens despair in Greece’s ‘warehouse of souls’

by Tracy McVeigh & Helena Smith

Observer
February 27, 2016

In Victoria Square, Athens, home to an ever-growing number of migrants, a dubious night-time economy has emerged. On Saturday, as a large, middle-aged man walked his small dog, an Afghan boy pointed him out to his new friend, Abdul Waris. “He is one of them who comes here at night,” said the boy. Abdul’s eyes widened. “It’s OK. They don’t want underage – they take the young men who will go willingly to their homes and give them a shower and €10 or €15 for sex. Some go, the ones who have no money left.”

That developing trade is possible because, in a piazza now synonymous with the migrant crisis overwhelming Greece, and where two Pakistani men hanged themselves from a tree on Thursday, many are running out of money.

There are more than 25,000 refugees and migrants stuck in Greece, police sources have told the Observer. The borders leading out have closed down one by one, leaving the country in danger of becoming what the Greek prime minister, Alexis Tsipras, described last week as a “warehouse of souls”.

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Schaeuble Hints Germany May Be Ready to Give Greece Some Leeway

Bloomberg
February 27, 2016

German Finance Minister Wolfgang Schaeuble hinted his country is willing to allow Greece some leeway as it struggles with the twins tasks of reforming the economy and caring for an influx of refugees.

“The financial situation is difficult,” Schaeuble told reporters at a Group of 20 briefing in Shanghai. “Greece is in the situation that it is receiving a lot of solidarity from Germany but not from all the others.”

Tensions over the handling of the region’s refugee crisis escalated on Friday as Greece denied an Austrian request for talks and the European Union’s top immigration official warned the deepening discord risks disaster. The divisions are widening ahead of an extraordinary summit of the EU’s 28 leaders on March 7 called to take stock of efforts to secure the bloc’s external frontiers and mitigate the influx of migrants.

“We are strongly fighting to combine the European tasks,” Schaeuble said of the refugee crisis and economic reforms in Greece. “Both come together.”

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Renowned U.S. Economist Says High Taxes Squash Greece’s Prospects for Recovery

by C.J. Polychroniou

Greek Reporter
February 22, 2016

A recently released study by the Economics Department at the National Kapodistrian University of Athens revealed that Greece has the third highest taxation rate among 21 European countries. Only Sweden and Denmark have a higher tax rate, countries with highly advanced welfare states and without the fiscal problems that plague Greece.

For a country asked to embark on rapid systemic reforms, entailing deep and painful structural adjustment policies, high taxes are extremely counterproductive and squash the prospects of recovery, says renowned American economist John Howland Cochrane.

In a lengthy talk, John H. Cochrane, who specializes in financial economics and macroeconomics and is the AQR Capital Management Distinguished Service Professor of Finance at the University of Chicago and a Senior Fellow at the Hoover Institution at Stanford University, said that “especially raising taxes on people who wanted to invest in Greece, expand businesses, and hire people was a very poor decision.”

Professor Cochrane added that “Greece may be expected to pay back its debts, but this should be done by helping its economy grow, not by imposing ever higher taxes on business and citizens.”

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Greek Anti-Austerity Hopes Boosted by Budget Surplus

by Nektaria Stamouli

Wall Street Journal
February 19, 2016

Greece had a primary budget surplus of 0.2% of gross domestic product in 2015, according to senior government officials, who hope the better-than-expected outcome will help them to convince creditors that Greece doesn’t need extra austerity measures this year.

The officials’ estimate, if verified by Greek and European Union statistics agencies, would mean that Greece’s budget had a surplus before interest payments of around €350 million ($389.1 million).

Greece’s new bailout program, agreed last summer with the eurozone and International Monetary Fund, foresaw a primary deficit of 0.25% of GDP for 2015.

A positive budget balance at the end of 2015 would help the Greek government’s argument that it doesn’t need large extra spending cuts or tax hikes, beyond those already agreed, to hit this year’s fiscal target.

Greece hopes to pass the first review of its performance under the bailout plan by March, to unlock rescue loans and shore up business and consumer confidence to help the economy stabilize this year.

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Closing the Balkan Route: Will Greece Become a Refugee Bottleneck?

Spiegel
February 9, 2016

At five o'clock in the morning last Tuesday: Macedonia has once again closed its border, and just a few hours later, chaos reigns. Eighty buses with 4,000 refugees have been stopped by the Greek police 20 kilometers from the frontier and they are now waiting in a gas-station parking lot. Bus drivers argue, refugees jostle on the overfilled lot and overwhelmed police officers yell orders. "Macedonia, Macedonia," the people waiting scream, "open the border!"

But today, the border remains closed to most people. And if it were up to Brussels and the Germans, it would remain that way -- that is, to anyone not from Syria, Iraq or Afghanistan. Since mid-November, Macedonia has tightened its border controls and whoever isn't from one these three countries is turned away. Now, many people's dreams of Europe come to an end here, in Idomene.

For it has recently become clear that Turkey is both unable and unwilling to stop the flow of refugees. As a result, the EU is placing its bets on Macedonia, with a plan that has the support of European Commission President Jean-Claude Juncker.

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Cheap Cigarettes Are Burning Greece's Finances

by Nikos Chrysoloras

Bloomberg
February 8, 2016

On an unremarkable morning on Stournari street in downtown Athens, just a few blocks away from the epicenter of every riot the city has seen during its recent crisis years, two men of Asian origin politely and openly hawk cigarettes to passersby.

The illegal packs of R.G.D.-branded smokes cost 1.50 euros ($1.70) each, less than half the price of 20 Marlboros or Prince at one of Greece’s ubiquitous street kiosks.

As Prime Minister Alexis Tsipras walks another tightrope between creditor demands for additional belt tightening and a social backlash, the scene exposes an unhealthy truth: Greeks could smoke, drink and gamble their way out of their next financial hole, if only they were taxed on all of it.

“Illicit cigarette and bulk tobacco trade strips the Greek state from significant revenue each year that could be used for paying pensions, salaries, and social benefits,” said Iakovos Kargarotos, vice-president of Philip Morris International’s affiliate in Greece, Papastratos AVES. “It creates a big public revenue hole that taxpayers have to fill.”

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Greece’s Prime Minister on the Ropes

by Yannis Palaiologos

Wall Street Journal
February 8, 20156

January was a bad month for Greece’s Prime Minister Alexis Tsipras. The election of Kyriakos Mitsotakis on Jan. 10 to the leadership of the official opposition and the rise of mass protests against the government’s plans for pension reform have decisively altered Greek politics in ways that undermine Mr. Tsipras’s plans for a more stable second term.

To start, Greece’s economic pain is back in the news. Technocrats representing the country’s creditors arrived in Athens last week for the first review of Greece’s progress in fulfilling the terms of its August bailout. There’s already been an uproar, especially among farmers and the self-employed, in reaction to Mr. Tsipras’s proposal to increase contributions, limit early retirement and cut pay-outs on pensions. But creditors, especially the International Monetary Fund, are likely to continue insisting that current retirees swallow further cuts in order to achieve a reduction in pension spending equal to 1% of gross domestic product this year.

Athens and its creditors also will have to agree on the fiscal measures for the entire 2016-18 period, by the end of which Greece is required to have achieved a primary surplus of 3.5% of GDP. With this government, that’s likely to mean more tax hikes. The finance ministry has already proposed an increase of the top tax rate to 50% for individuals making more than €60,000, or about $67,000.

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State Transformation and the European Integration Project: Lessons from the financial crisis and the Greek paradigm

by Evangelos Venizelos

Centre for European Policy Studies
CEPS Special Report #130
February 4, 2016

The financial crisis that erupted in the eurozone not only affected the EU’s financial governance mechanisms, but also the very nature of state sovereignty and balances in the relations of member states; thus, the actual inequalities between the member states hidden behind their institutional equality have deteriorated. This transformation is recorded in the case law of the Court of Justice of the European Union and the member states’ constitutional courts, particularly in those at the heart of the crisis, with Greece as the most prominent example.

It is the issue of public debt (sovereign debt) of the EU member states that particularly reflects the influence of the crisis on state sovereignty as well as the intensely transnational (intergovernmental) character of European integration, which under these circumstances takes the form of a continuous, tough negotiation. The historical connection between public debt (sovereign debt) and state sovereignty has re-emerged because of the financial crisis. This development has affected not only the European institutions, but also, at the member state level, the actual institutional content of the rule of law (especially judicial review) and the welfare state in its essence, as the great social and political acquis of 20th century Europe. From this perspective, the way that the Greek courts have dealt with the gradual waves of fiscal austerity measures and structural reforms from 2010 to 2015 is characteristic. The effect of the financial crisis on the sovereignty of the member states and on the pace of European integration also has an impact on European foreign and security policy, and the correlations between the political forces at both the national and European level, thus producing even more intense pressures on European social democracy. In light of the experience of the financial crisis, the final question is whether the nation state (given the large real inequalities among the EU member states) currently functions as a brake or as an engine for future European integration.

Evangelos Venizelos is former Deputy Prime Minister of Greece (2011–12, 2013–15), Minister of Foreign Affairs (2013–15), Minister of Finance (2011–12), Minister of Defence (2009–11) and former Leader of PASOK (2012–15). He currently serves as a member of the Greek parliament and is Professor of Constitutional Law at the Aristotle University of Thessaloniki.

Read the Report (PDF)

The Grexit that Could Actually Happen

by Jacob Funk Kirkegaard

Peterson Institute for International Economics
February 1, 2016

For years the euro area has labored to successfully prevent a financial exit by Greece from the common currency, a fear commonly known as “Grexit.” Following the September 2015 elections, Greece now has a parliament that is overwhelmingly pro-euro and in compliance with the program imposed by the European Commission, the European Central Bank, and the International Monetary Fund (IMF), known as the Troika. Barring major external economic and political shocks, the country can return to growth in 2016 and get further debt relief from the euro area. The migration crisis in Europe threatens this hopeful forecast and could even force a de facto “physical Grexit” from the rest of Europe.

Last week the European Commission started a bureaucratic doomsday clock threatening Greece with expulsion from the Schengen Area of open borders if it does not manage its border with Turkey more effectively. The legal basis for such an expulsion would be the conclusion of the so-called Schengen Evaluation Report of Greece, based on unannounced inspections to verify compliance with its rules for identification and registration of migrants at the Turkish-Greek border in late 2015.

The draft report has not been made public, but EU Migration and Home Affairs Commissioner Dimitris Avramopoulos has described “serious deficiencies in the management of the external border in Greece.” Unless Greece implements in the next three months whatever remedial measures the Commission and Schengen Evaluation Committee propose,1 a qualified majority of Schengen members (e.g. , able to outvote Greece) may reintroduce physical internal border control to protect the common interest of the Schengen Area and hence leave Greece out for up to two years.

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