Greece and Creditors Spar Over Legislation Changes

by Nektaria Stamouli

Wall Street Journal
May 30, 2016

Greece is arguing with its international creditors about a few small but politically sensitive measures creditors want implemented before they release some €7.5 billion ($8.4 billion) of badly needed bailout funds.

A teleconference between Greek officials and representatives of the country’s lenders failed on Sunday to reach agreement on whether and how Greece should amend recent legislation to comply with the conditions of its bailout program.

Creditors, represented by the European Commission, other eurozone institutions, and the International Monetary Fund, say Greece must make specific changes to recent laws on areas including banking regulation, retiree benefits, and privatization. But Greek Finance Minister Euclid Tsakalotos has written a letter to the commission, the IMF and the European Central Bank saying his government can’t carry out all of the lenders’ demands, according to Greek officials, citing political obstacles.

Greece needs its bailout funding by mid-July at the latest, when it must repay heavy debts, including bonds held by the ECB. Considering the amount of legislation that has already passed, it is unlikely the deal would be scuttled over the issues.

More

European Money Doesn’t Like Greece

by Mark Whitehouse

Bloomberg
May 30, 2016

Greece and its creditors may have averted a crisis by agreeing on the release of another dose of bailout money, but the deal does little to address a deeper problem: Europeans still don't want to put their money there.

The flow of capital between the rest of the euro area and Greece offers a useful indicator of confidence in the integrity of the currency union. It can be tracked by looking at the Bank of Greece's liabilities to other central banks in the currency union -- a number that rises, for example, when concerns that Greece will abandon the euro prompt people to move currency out of the country.

The ascendance of Prime Minister Alexis Tsipras's leftist Syriza party to power, and its prolonged standoff with creditors, prompted an exodus: During the year through June 2015, an amount equivalent to more than 40 percent of Greece's annual economic output fled the country. This stopped after Tsipras did a U-turn in July, agreeing to harsh deficit-reducing measures in return for more loans. Not much private money, though, has come back since then -- reflecting both the effect of capital controls and persistent concerns about whether Greece will remain in the euro area.

More

Greece’s debt deal is not a game-changer

by Yannis Palaiologos

Financial Times
May 27, 2016

On Wednesday, Greece’s creditors agreed to release more than €10bn in bailout money and to consider ways of restructuring the country’s debt. Some breathed a sigh of relief that a renewed escalation of the Greek debt crisis had been averted. Others observed that, once again, the path of messy compromise had been chosen and the day of reckoning postponed.

It is useful to recall how we got here, and ask whether there is any chance that Greece will escape the fate of being seen as Europe’s eternal problem child. The thoughts of seasoned observers of Greece’s travails over the past half-decade will have turned back to the spring of 2010, the early days of the crisis, when there appeared to be some movement on the issue of possible relief to go along with any eventual bailout programme.

The International Monetary Fund, its fingers burnt in the Argentine debt crisis of 2001, seemed resolved not to make big loans to members unless it could be near-certain that their debt was sustainable, which Greece’s clearly was not. There were meetings between IMF staff and French and German officials. In Athens, the investment bank Lazard did a study on ways to lighten the country’s Olympian debt load.

More

Deal Between Greek Creditors Doesn’t End Saga

by Marcus Walker & Gabriele Steinhauser

Wall Street Journal
May 25, 2016

A truce between Greece’s creditors averts an immediate panic over Greek bankruptcy this summer, yet as officials and onlookers digested the deal, it became apparent that less was agreed than meets the eye.

The deal, struck in the small hours of Wednesday morning at the Eurogroup meeting of eurozone finance ministers in Brussels, broke an impasse between Germany and the International Monetary Fund that was holding up Greece’s bailout funding for this summer.

But by papering over deeper differences, the deal sets up tough haggling over the country’s debt and economic overhauls for this fall and beyond.

The main breakthrough, heralded by German Finance Minister Wolfgang Schäuble, is that the IMF agreed in principle to rejoin the Greek bailout effort this year with new loans. In return, Germany and other eurozone countries pledged to restructure Greece’s rescue loans in 2018 “if…needed.” That promise fell short of the IMF’s demand that Europe should decide now how it would relieve Greece’s debt in coming years.

More

Greece’s Inconclusive Debt Deal

by Simon Nixon

Wall Street Journal
May 25, 2016

Greece has a new debt deal—but then it was always going to get a new debt deal.

Time and again, the eurozone has demonstrated that it is bound together by impressive reservoirs of political will: not only the will of debtors such as the Greeks, for whom the euro is both a trusted store of value and a symbol of their common European destiny, but also the will of creditors, who have been unwilling to risk the great costs and inevitable political upheavals of a eurozone breakup. Indeed, the determination to reach a deal was even greater at a time the breakup of the European Union itself is on the table in the U.K.’s Brexit referendum.

Even so, the deal agreed on Tuesday night is hardly the decisive break in the Greek debt crisis originally envisaged under the bailout deal thrashed out last summer. By now, Athens was supposed to have undertaken far-reaching reforms of its tax and pension system, the eurozone to have delivered meaningful debt relief, and the International Monetary Fund to have agreed to help finance the program.

Instead, Greece has promised to tackle the reforms “if needed” to hit its 2018 budget target, the eurozone will deliver the debt relief “if needed” when the program ends in 2018, and the IMF will join the program by the end of this year, subject to technical clarifications. This is a classic euro-fudge, whose purpose is to kick the can decisively down the road, deferring the grittiest political decisions until 2017 and 2018.

More

The IMF, Trying to Lend Europe Credibility for a Greek Bailout, Risks Losing Some of Its Own

by Ian Talley

Wall Street Journal
May 25, 2016

The International Monetary Fund acted tough on Greek debt relief. But it appears to have caved under pressure by its largest shareholders, the U.S. and Europe.

That means Greece’s economic crisis will likely continue to simmer. It also means the fund may again forfeit some of its credibility for the sake of the eurozone.

“The agreement does little to address the underlying problems the Greek economy is currently suffering,” IHS Global Insight economists Diego Iscaro and Blanka Kolenikova said of Europe’s fresh bailout deal. “The promises of debt relief are, in our view, too distant and vague to make a material impact on confidence.”

Facing German resistance to upfront debt relief, European, U.S. and IMF officials worried another Greek standoff could fuel global economic and geopolitical instability by giving leverage to proponents of a U.K. exit from the European Union.

“There will be no repeat of last year’s drama,” said Marc Chandler, global head of currency strategy at investment bank Brown Brothers Harriman.

More

Just enough Greek debt relief to keep IMF on board

by Pierre Briançon

Politico
May 25, 2016

The finance ministers of the eurozone early Wednesday agreed on a new set of funding measures for Greece that was bolder than forecast but nonetheless falls way short of the radical steps needed to put Athens on a sound financial path.

One of the package’s most important consequences will be to allow the International Monetary Fund to continue participating in the Greek financial rescue after the Eurogroup of finance ministers agreed on the initial details of a debt-relief program for the cash-strapped country.

The finance ministers’ deal, reached after an 11-hour meeting, was deemed “a major breakthrough” by Eurogroup President and Dutch Finance Minister Jeroen Dijselbloem. But its only certain impact is that it will allow Greece to meet payments due this summer, thanks to the first disbursement of a €7.5 billion loan tranche next month.

Beyond that, six years after the Greek debt crisis shook the eurozone to its foundations, a Eurogroup deal may once again be seen as a messy compromise mostly aimed at playing for time. Once again, it can be criticized for skirting the radical decisions that would allow Greece to stand on a firmer footing. And once again, it will be seen as a cynical ploy to avoid those decisions because of electoral politics: in this case, postponing major choices until after the 2017 German elections.

More

Eurozone and IMF Strike Deal on Greek Debt

by Viktoria Dendrinou & Gabriele Steinhauser

Wall Street Journal
May 25, 2016

Eurozone finance ministers and the International Monetary Fund patched together a deal in the early hours of Wednesday that clears the way for fresh loans for Greece and sets out how the country could get debt relief in the future.

The ministers, who held an 11-hour meeting in Brussels, said Greece had done what was necessary to unlock the next slice of financial aid, concluding a review of its bailout that was delayed for months. The new payouts will save Greece from defaulting on big debt redemptions to the IMF and European Central Bank in July.

“On the package of reforms Greece had committed to last summer, we now have full agreement,” said Jeroen Dijsselbloem, the Dutch finance minister who presided over the meeting of finance ministers.

Once all 19 eurozone countries have formally signed off on the new deal, Greece will get €10.3 billion ($11.48 billion) in fresh loans, starting with a €7.5 billion installment in the second half of June.

More

Another missed opportunity for a more lasting deal to help Greece

by Raoul Ruparel

Open Europe
May 25, 2016

The Eurogroup yesterday reached an agreement on releasing further bailout funds to Greece as well as a partial agreement on debt relief. However, for the most part the tough decisions are once again delayed, leaving Greece in an uncertain position moving forward. Open Europe Raoul Ruparel explains.

What has been agreed?

You can find the Eurogroup statement here and the press release here which spell out the key points of the agreement.

Essentially the first review of the third Greek bailout is now completed and the funds – €10.3bn in total, €7.5bn in June – can now be released. This means Greece will avoid any extended funding dramas this summer and will be able to repay the maturing bonds held by the ECB (as always expected).

More interesting, is that there was a broader agreement on debt relief, though this mostly involved delaying the key decisions until 2018 – after the current bailout is completed. The key points are:

• Short term – use funding tools available to smooth Greece interest payments on Eurozone bailout loans.
• Medium term – after 2018 provide greater debt relief via some combination of: extending the maturity of Greek bailout loans, repaying profits on bonds held by the ECB to Greece and buying out the more expensive IMF loans using leftover funds from the bailout. Keep Greece funding needs under 15% of GDP per year.
• Long term – consider further steps to help Greece keep funding needs under 20% GDP per year. May create mechanism where these kick in automatically if funding need rises above threshold.

More

How Greece Got Another Debt Deal

by Marcus Walker

Wall Street Journal
May 25, 2016

The deadlock between Germany and the International Monetary Fund which has held Greece’s bailout funding hostage this spring has been broken. The deal falls short of a definitive peace that resolves conflicts between Greece and its international creditors. Rather, it’s a truce that aims to keep the difficulties and tensions manageable for a while longer. But for how long?

Q: What Does the Deal Boil Down To?

A: The IMF told eurozone governments it will recommend a new Greek loan facility to its board – the precondition that Germany had set for releasing any further bailout funding for Greece. In return, the IMF got much less than it wanted in the way of reductions to Greece’s debt.

Instead of a European decision now to restructure Greece’s bailout loans progressively in coming years, the IMF won only a promise by Germany and other eurozone governments to review the situation in 2018, and to take measures “if…needed.”

The IMF said it still needs to crunch the numbers, thus withholding its final consent to rejoining the bailout as a lender. But that looks more like a face-saver than a usable escape hatch. It’s unlikely that the IMF can withdraw now, because it has already given in on the main question that divided the fund and Berlin. The IMF agreed last night that final decisions on debt relief will be delayed until the end of the bailout program, as Germany wanted.

More

Greece reaches breakthrough deal with creditors

Financial Times
May 25, 2016

Greece’s international creditors have bought time to secure the country’s financial future after agreeing broad but inexact principles to ease its debt mountain and break an impasse between Germany and the International Monetary Fund.

After almost 11 hours of talks in Brussels, eurozone finance ministers and the IMF agreed to a range of measures to restructure Greece’s debts when its €86bn bailout ends in 2018 — but put no figures on the concessions and left them subject to political decisions by eurozone countries. Most significant decisions would be taken after the German federal elections next year.

Reacting to the news of the breakthrough on Wednesday, Greek 10-year bonds yielded under 7 per cent for the first time since November.

One of the debt relief options involves dramatically reducing the IMF’s exposure to the Greek programme by buying out up to €14.6bn of its loans. For now, the IMF said it would participate financially in the programme at some stage later this year — a crucial demand for Germany — but only if the eurozone committed to a scale of relief that meets the fund’s normal lending guidelines.

“We have achieved a major breakthrough on Greece which enables us to enter a new phase in the Greek financial assistance programme,” said Jeroen Dijsselbloem, president of the eurogroup.

More

Greek police start to move migrants out of Idomeni camp

by Kerin Hope

Financial Times
May 24, 2016

Greek police have begun transferring refugees and migrants from a tent camp at Idomeni next to the shuttered border crossing with Macedonia to accommodation in the city of Thessaloniki.

The operation to close the site where more than 8,000 people have been camped out in overcrowded conditions will take about a week, said George Kyritsis, head of the government’s migration co-ordination unit.

More than 14,000 police officers, including riot squad units sent from Athens, sealed off surrounding roads early on Tuesday and instructed volunteers and aid workers to leave the camp. Journalists and television crews were kept 6km from the site.

Buses began transporting people from the camp shortly after 7am, while dozens left on foot. By evening, more than 2,000 people had been bussed to Thessaloniki, where they will be housed in newly refurbished former industrial premises, police said.

More

IMF: Substantial Re-Profiling of European Loans to Greece is Required

by Ian Talley

Wall Street Journal
May 23, 2016

The International Monetary Fund said Monday Greece’s European creditors must give the country “upfront unconditional” debt relief to win additional financing from the emergency lender, setting the stage for contentious bailout talks among Eurogroup finance ministers Tuesday.

The IMF’s comments, made in an updated assessment of the measures needed to put the country’s financial obligations onto a sustainable path, are at odds with Europe’s more rosy outlook and resistance by powerhouse Germany to any type of debt relief for the Mediterranean nation. It puts to rest, at least for the moment, speculation the IMF might compromise on its increasingly strict line that Greece needs concrete, realistic and upfront debt relief to win fund support and ramps up the pressure on Europe to grant Greece a restructuring.

Greece needs the bailout cash to avert a debt default in July at the latest. Some in Europe, and many officials around the world, fear the Greek problem threatens to deepen fissures building in the European Union, including the possibility of a U.K. exit from the EU.

More

The IMF and calling Berlin’s bluff over Greece

by Wolfgang Münchau

Financial Times
May 21, 2016

At one level, the recurring Greek crises fit the idea from Karl Marx of history repeating itself, first as tragedy then as farce. Greece came close to a eurozone exit last summer. While it will probably come close this year, it is unlikely to leave.

But prepare for some tense moments in the next few weeks and months as Greece and its creditors struggle to agree the first review of last year’s bailout.

The International Monetary Fund has concluded that Greek public debt, at 180 per cent of gross domestic product, is unsustainable; as is the agreed annual primary budget surplus, before interest payments, of 3.5 per cent of GDP. The fund insists on debt relief, but Germany resists.

A year ago Angela Merkel, German chancellor, and Wolfgang Schäuble, her finance minister, sold the Greek bailout to their party and parliament as a loan only. They argued that once you accept a debt writedown, you turn a loan into a transfer. And once you accept the principle of a one-off transfer to Greece, you are on a slippery road to what the Germans call a transfer union, one where they pay and others receive.

More

IMF Said to Seek Delay of Greek Loan Repayments Until 2040

Reuters
May 20, 2016

The International Monetary Fund proposed that Greece shouldn’t make payments on its European bailout loans until 2040, underscoring key differences with euro-area lenders over the future of the Greek economy.

The Washington-based fund’s debt-restructuring proposal, contained in an IMF document obtained by Bloomberg News, goes much further than anything advanced by euro-area creditors who are locked in talks to trigger Greece’s next aid payout. Finance ministers from the currency union will meet on May 24 in Brussels to discuss the debt-relief options.

The IMF wants all payments on European loans granted to Greece since its first bailout in 2010 to be deferred until at least 2040 with maturities extended until 2080, according to the note. Interest payments on loans from the euro area’s crisis fund would be fixed at a maximum 1.5 percent until at least 2045. The IMF’s projections for the Greek economy rely on a baseline assumption that debt will rise to 293.8 percent of gross domestic product by 2060 without the proposed measures.

More

Why the IMF must walk away from Greece

by Meg Lundsager

Reuters
May 17, 2016

The depth of distrust between Greece and its creditors grows increasingly clear as both sides resume negotiations for a new bailout program.

The International Monetary Fund is demanding more European debt relief for Greece -- at a minimum, a longer payback period on its European Union loans. But Germany insists that the fund lend to Greece even if Athens receives no immediate additional debt relief. More relief would not be needed for “the coming years,” German Finance Minister Wolfgang Schaeuble said.

Yet, additional IMF loans would only paper over Greece’s economic problems and postpone the reforms Athens needs to make to remain in the euro zone. Instead of more loans, the IMF should force Greece and its creditors to come up with long-term compromise solutions.

Given Greece’s poor record in meeting previous loan conditions, the Europeans seek Greek parliamentary approval of additional budget measures, imposed if Athens fails to meet its targets. This course would leave Greece still uncertain if, or how, its creditors might ease its debt burden. Such economic brinksmanship would also offer Greece little hope of real solution -- which would include restoring private-sector confidence, attracting foreign investment and restarting growth.

More

IMF Wants Eurozone Debt Relief for Greece Until 2040

by Marcus Walker

Wall Street Journal
May 17, 2016

The International Monetary Fund is pressing the eurozone to let Greece skip paying interest or principal on bailout loans until 2040, say officials familiar with the talks.

The IMF wants the loans to Greece to fall due gradually in the following decades, and as late as 2080, according to the IMF’s proposal.

Greece’s interest rate on eurozone loans would be fixed for 30 to 40 years at its current average level of 1.5%, with all interest payments postponed until loans start falling due, under the IMF proposal.

The IMF’s proposal, presented to eurozone governments late last week, would keep Greece’s annual debt-service needs below 15% of its gross domestic product, under the IMF’s relatively pessimistic forecast for Greece’s long-term economic trajectory.

The IMF’s demands go far beyond what Greece’s eurozone creditors have said they are willing to do to help Greece regain its financial health.

More

Greek Bailout Deal Must Have Concrete Debt Relief, State Minister Says

by Ian Talley

Wall Street Journal
May 13, 2016

Greece will not accept a bailout deal without a concrete agreement for debt relief from the country’s European creditors, a top aide to Prime Minister Alexis Tsipras said.

“We want real solutions, not interim solutions,” Nikos Pappas, Greece’s Minister of State, said in an interview Friday after several days of talks with senior U.S. officials. “No more kicking the can down the road.”

Although Mr. Pappas said he’s “very optimistic” Greece and Europe will seal a final accord on debt relief by May 24, his comments underscore the hurdles ahead as the Athens government tries to negotiate fresh financing to keep the country’s finances afloat.

Without fresh bailout funds, Greece faces bankruptcy in July at the latest. That could revive risks across the eurozone, which is already grappling with a migration crisis, a movement in the U.K. to leave the European Union and the rise of populist parties across the continent.

European powerhouse Germany is pushing Greece and the IMF to accept another bailout agreement based on possible debt relief in the future. The fund, trying to regain credibility it lost in the first two failed Greek bailouts, is taking a firm stand on debt restructuring. It wants defined commitments that would definitively reduce the country’s obligations in exchange for further budget tightening.

More

Real Greek Drama Is About Reforms, Not Debt Relief

by Simon Nixon

Wall Street Journal
May 11, 2016

Greece is invariably held up as Exhibit One in the case against the European Union. Its six-year debt crisis—now threatening to reignite right before a British referendum on EU membership—is often presented as proof that the EU is an anti-democratic, sovereignty-destroying, austerity-loving bully. But this narrative is wide of the mark. The starting point for any debate is to recognize that most of the blame for Greece’s problems lies with Greece itself, which in the decades before the crisis embraced a catastrophically unsustainable economic model and has largely refused to change it since.

For sure, mistakes were made in the design of the country’s first bailout: It would have been better for Greece, if not the eurozone, if government debt had been restructured in 2010 rather than in 2012. And it is true the program’s fiscal targets have been demanding, as they always are when a country is obliged to rely on other countries’ taxpayers to service their debts and fund their state. But Greece has always had full sovereignty to choose how to hit those targets—and much of the calamity that has since unfolded stems from how successive governments exercised that sovereignty.

Over decades, Greek governments of left and right built an egregiously generous welfare state and lavished protections on a wide range of interest groups, funding their largess via reckless borrowing and by levying ever-higher taxes on an ever-narrower base of taxpayers. When the crisis hit, Athens didn’t abandon this model. It doubled up on it.

More

The Greek Deal That No One Wants

by Yannis Palaiologos

Wall Street Journal
May 10, 2016

Old Greek bailouts never die, it seems. They just fade into new, equally bad arrangements that amplify the mistakes of the recent past.

Protests erupted again in Athens this weekend as Prime Minister Alexis Tsipras and the coalition led by his far-left Syriza party pushed through another round of tax increases and pension cuts. Mr. Tsipras is trying to show Greece’s creditors he’s abiding by the deal he struck with eurozone governments in July, the third bailout in five years. That deal requires Athens to achieve a fiscal surplus of 3.5% of gross domestic product, excluding debt service, by 2018, and for decades to come.

The bill approved by Parliament Sunday accounts for most of the €5.4 billion ($6.15 billion) in extra revenue and reduced spending the government and its European creditors think will get it to that target. But the creditors aren’t united. The International Monetary Fund, which participated in the first two bailouts but has yet to sign on to the current plan, thinks both sides are working from unrealistic projections of growth and revenue. It believes Athens would need to find another €3.6 billion in cuts—2% of GDP—to reach its 2018 target. The Fund wants the Greek government to pass a “contingency” plan of cuts that will kick in automatically if its own, less-rosy fiscal forecasts turn out to be correct.

More

Where Do We Stand on Greek Debt?

by Viktoria Dendrinou & Gabriele Steinhauser

Wall Street Journal
May 10, 2016

Why was Monday’s Eurogroup important?

Eurozone finance-ministry officials, for the first time, discussed in some detail what they might be willing to do to ease Greece’s debt burden.

The basis for this debate was a so-called nonpaper — the kind of document that is meant to be confidential but somehow always finds its way to an enterprising journalist — dubbed “Greece: Proposal for Debt Relief Measures” (full document behind the link). The nonpaper was prepared by Greece’s European creditors, namely the European Commission, the European Central Bank and the European Stability Mechanism, which raises the money for Athens’ third bailout.

As we explained here, the suggested measures range from capping interest rates and principal payments on Greece’s loans from the European Financial Stability Facility, which funded the country’s second bailout, to returning central-bank profits from Greek government bonds to Athens. Maybe more controversially, it also suggests that any money left over once the €86 billion eurozone rescue program expires in 2018 could be used to pay back more-expensive loans from the International Monetary Fund.

More

Greek Prime Minister Alexis Tsipras Expresses Optimism Over Bailout Talks

by Marcus Walker & Nektaria Stamouli

Wall Street Journal
May 10, 2016

Greece’s leader Alexis Tsipras on Tuesday claimed a major breakthrough in its debt-and-austerity talks, even as officials from Greece’s creditors warned that big obstacles remain to a deal that keeps the country afloat this summer.

“After six years of continued cuts, bad news and harsh austerity, we finally had some good news,” Mr. Tsipras said in a televised speech to his cabinet. He said Greece was on course to get fresh bailout loans without having to legislate additional austerity measures.

Eurozone finance ministers also heralded progress after talks in Brussels on Monday. But major sticking points remain. European officials hope they can be resolved by the next ministerial meeting on May 24. Some warn it could take longer.

The International Monetary Fund and Greece are still at odds over what Athens must do to ensure it hits its tough fiscal targets. The IMF and Germany remain far apart on how much debt relief Greece needs, with Berlin determined to avoid signing up to any significant restructuring of loans until 2018.

More

Eurozone Asked to Consider More Concessions on Greece’s Debt

by Viktoria Dendrinou & Gabriele Steinhauser

Wall Street Journal
May 9, 2016

A confidential document debated by eurozone finance ministers detailed for the first time what Greece’s creditors could do to ease the country’s debt load and how that burden would develop over the coming decades without new relief measures.

The document, which was reviewed by The Wall Street Journal, served as the basis of Monday’s emergency meeting, in which the ministers discussed for the first time the possibility of further debt relief for Greece. The finance chiefs said they aimed to reach a deal on the matter by their next meeting May 24 to resolve an impasse among the country’s creditors and release much-needed bailout funds to Athens.

But the wide variations in the document’s debt projections signaled more difficult discussions ahead among Greece’s lenders over how to allow the country to stand on its own feet again after three international bailouts. Those creditors include the 18 other eurozone countries—led by Germany, which opposes all but minimal changes to Greece’s debt burden—and the International Monetary Fund, which wants to see as much relief as possible.

More

Greece’s biggest bank chief faults Tsipras for sluggish reforms

by Kerin Hope

Financial Times
May 9, 2016

The chairman of Greece’s biggest bank has taken aim at the leftwing government of Alexis Tsipras, the prime minister, saying it must own and fully implement reforms — not just legislate them — if the country is to return to growth.

“The real issue is that Greece implements the measures, that the government strengthens the role of the private sector and that the role of the state in the economy is restricted,” Michalis Sallas said in an interview with the Financial Times.

A normally reclusive figure, the Piraeus Bank chairman visibly exudes the frustration felt by senior Athens bankers over a six-month delay in completing a progress review of Greece’s third international bailout, which many regard as critical to attracting investors back to the cash-strapped country.

Mr Sallas and other bankers fault the Tsipras government more than the creditors for the delays, and worry that continued foot-dragging raises the risk of Athens defaulting on a sovereign debt payment and plunging the country into another crisis.

More

Greece Seeks to Unlock Aid as Impasse Risks Political Unrest

by Jonathan Stearns

Bloomberg
May 9, 2016

Greece returns to center stage on Monday when aid deliberations by its international creditors will signal whether the country faces a renewed period of political drift or wins some breathing space after six years of turbulence.

The euro area and the International Monetary Fund will assess whether Greek Prime Minister Alexis Tsipras has made enough budget-tightening commitments to gain another disbursement of emergency loans. At issue is an IMF demand for fiscal “contingency measures” worth about 3.5 billion euros ($4 billion) in case Greece strays off budgetary course.

Such a package, equal to 2 percent of Greece’s gross domestic product, is politically thorny for a premier who promised voters he’d oppose any extra austerity and who governs with a three-seat parliamentary majority. Should the IMF give the Greek government insufficient wiggle room at the meeting with euro-area finance ministers in Brussels, Tsipras could end up calling snap elections or a referendum -- both of which featured last year when Greece came close to a euro exit.

“The nature of the contingency package could determine the government’s fate, as it would be very difficult to secure the required parliamentary majority for detailed measures,” Wolfango Piccoli, an analyst at Teneo Intelligence in London, said in a May 6 report. “The risk of snap polls could increase significantly if the lenders decide to play hardball.”

More

Greek parliament begins debate on austerity measures amid wave of strikes

by Kerin Hope

Financial Times
May 7, 2016

The Greek parliament has opened a two-day debate on tough new pension and tax measures demanded by bailout creditors amid a wave of unannounced strikes that shut down local media outlets, public transport and ferries to the Aegean islands.

A vote is due on Sunday night in the 300-member house, where the leftwing Syriza party of Alexis Tsipras, the prime minister, and his coalition partner, Independent Greeks, together control a fragile two-seat majority.

The premier unexpectedly brought forward the vote hoping to convince eurozone finance ministers meeting on Monday that Greece is now committed to completing a first review of its €86bn bailout after six months of foot-dragging over details of the reforms.

Greek officials were upbeat on Saturday about a call by Christine Lagarde, the International Monetary Fund chief, for negotiations to begin immediately on granting debt relief for Greece. At the same time, the Fund backtracked on earlier demands for another €3bn in “contingency” budget cuts, saying they were “fruitless”.

“It’s a positive development for Greece after weeks of fighting hard against the contingency measures,” said a senior Greek official. “Debt relief is expected to be part of the discussion on Monday.”

More

Leaked: The annotated Lagarde letter on Greece

by Peter Spiegel

Financial Times
May 6, 2016

Monday was supposed to be the day when eurozone finance ministers flew to Brussels for an emergency eurogroup meeting (just their first of 2016!) to agree a way forward on Greece’s star-crossed €86n third bailout. But despite weeks of intensive talks, negotiators are no closer to a deal then they were when they were sent back to Athens two months ago.

Last night, Christine Lagarde, the International Monetary Fund chief, sent a letter to all 19 finance ministers ahead of the Monday meeting with her demands: drop all the talk about new austerity measures and quickly agree a plan for debt relief so that a deal can be met before a possible Greek default in July. We got a hold of the letter, and have posted a news story on its contents here. But as is our practice at the Brussels Blog, we thought we’d offer up an annotated version of the full text, sent to national capitals last night:

Dear minister:

Program discussions between Greece and the institutions have made progress in recent weeks, but significant gaps remain to be bridged before an agreement can be reached that would include the IMF under one of our program facilities. I think it is time for me to clarify our position, and to explain the reasons why we believe that specific measures, debt restructuring, and financing must now be discussed simultaneously.

This is the main news in the letter: until now, negotiators have been trying to sequence three different sets of agreements in order. First, they wanted to agree a core set of reforms that were originally part of the new bailout programme. Second, and this was a relatively new idea, they were to agree a set of “contingency measures” that would kick in if the Greek programme veered off course. Third would come debt relief. Lagarde is essentially saying here that trying to do this sequentially makes no sense. She also is clearly signalling the “contingency measures” talks – which have been holding up progress for a month – are becoming fruitless.

More

A Push for Greek Cuts Even Creditors Think Go Too Far

by Marcus Walker

Wall Street Journal
May 5, 2016

Six years to the week after Greece’s ill-starred bailout began, the government and its creditors are stuck at an impasse that threatens to push the country to the brink of default again.

The deadlock concerns a package of fiscal retrenchment measures that could come to 5% of Greece’s gross domestic product.

The paradox is that it is hard to find a policy maker involved—or an economist—who argues that further belt-tightening on that scale is what Greece’s economy needs at this point. But differences between its main creditors, the eurozone and the International Monetary Fund, are preventing a reassessment of how to put Greece back on its feet.

Back in May 2010, a heavy austerity program in Greece was inevitable. The country had lost control of its finances. No lender was willing to finance the status quo. Greece’s primary budget deficit, which excludes interest, was over 10% of its gross domestic product.

More

Study: Bailouts for Banks, Not Greeks

by Jan Hildebrand and Thomas Sigmund

Handelsblatt
May 4, 2016

After six years of ongoing bailouts amounting to more than €220 billion, or $253 billion in loans, Greece just cannot get out of crisis mode.

It is tempting to blame those who refused to reform the country’s pensions and labor markets for the latest calamity. But a study by the European School of Management and Technology, a copy of which Handelsblatt has obtained exclusively, gives another perspective. The aid programs were badly designed by Greece’s lenders, the European Central Bank, the Europe Union and the International Monetary Fund. Their priority, the report says, was to save not the Greek people, but its banks and private creditors.

This accusation has been around for a long time. But now, for the first time, the Berlin-based ESMT has compiled a detailed calculation over 24 pages. Their economists looked at every individual loan instalment and examined where the money from the first two aid packages, amounting to €215.9 billion, actually went. Researchers found that only €9.7 billion, or less than 5 percent of the total, ended up in the Greek state budget, where it could benefit citizens directly. The rest was used to service old debts and interest payments.

The report comes as the European Union and the Greek government prepare to hold negotiations about further debt relief. E.U. Economics Commissioner Pierre Moscovici said he hoped all sides could reach an agreement at a special meeting of the Eurogroup of euro-zone finance ministers next Monday. Extensions of credit repayment periods, deferments and freezing interest rates are all being discussed. This “debt relief light” would not affect private investors – just the loans from Europeans.

More

The threat of Grexit never really went away

Economist
May 4, 2016

The tagline of the film “My Big Fat Greek Wedding 2”, which was released in March, is “People change. Greeks don’t.” Whether any euro-zone finance ministers have seen the film, let alone detected any resemblance to their ongoing talks with the Greek government over its third bail-out, is unknown. But the renewed bickering about whether Greece is keeping to its end of the bargain, complete with threats of a snap election if its creditors don’t give more ground, has the air of a duff sequel.

Greece badly needs the next dollop of the €86 billion ($99 billion) bail-out creditors promised it last summer, in exchange for promises of austerity and reform. But it will not get the money until the creditors complete a review of its progress, which has been dragging on since November. The government has scraped together enough cash (by raiding independent public agencies) to pay salaries and pensions in May, perhaps even in June. But by July 20th, when a bond worth more than €2 billion matures, the country once again faces default and perhaps a forced exit from the euro zone. The threat of Grexit is not exactly back; it never really went away.

With a referendum on Britain’s EU membership in June and a possible flare-up of the refugee crisis as summer approaches, the last thing Europe needs is another Greek drama. The European Commission is thus in a mood for compromise. It emphasises that negotiations are “99%’’ complete. But the other creditor, the IMF, is less forgiving. With tax arrears in Greece rising and reforms constantly delayed, the fund has little faith that the programme’s target of a 3.5% primary budget surplus by 2018 can be achieved. It wants Greece to make a contingency plan to raise more money or cut spending further before it approves the next instalment of the bail-out.

More

Greece's Next Bailout Battle

by Stathis N. Kalyvas

Foreign Affairs
May 3, 2016

The Greek crisis erupted in 2009 and peaked for the first time in the spring of 2010. Unable to refinance its enormous debt, Greece was bailed out by the European Commission, the European Central Bank, and the IMF. The bailout prevented a major economic catastrophe but signaled the start of a protracted economic and political drama that spread to the rest of the eurozone. In Greece, the crisis peaked twice more: in the summer of 2012, when two successive elections left Greece’s political system in shambles, and in the summer of 2015, when Greece’s newly elected left-wing government unsuccessfully threatened its European creditors and the IMF with a massive default in a failed attempt to win some debt relief and a break from austerity policies.

At each inflection point, commentators wrung their hands over the potential contagion from a catastrophic Greek default and subsequent exit from the eurozone. The near collapse of June-July 2015 was perhaps the most dramatic, peaking with a bank shut-down and bizarre referendum in which the embattled Greek prime minister and anti-austerity champion, Alexis Tsipras, urged Greeks to reject a bailout package that he had just negotiated with Greece’s Troika of creditors.

In the end, the doomsayers were wrong all three times. Grexit did not happen and the euro survived. As for the July 2015 showdown, its resolution was decidedly anti-climactic. Greeks voted “no” in the referendum, but faced with the prospect of complete economic collapse, Tsipras executed an undignified U-turn, settling for an 85 billion euro ($96 billion) bailout, the country’s third since 2010. A new round of elections was called in September 2015. Tsipras won again, but with the exact opposite mandate of the one that he had before: instead of abolishing austerity, he now promised to implement it. The weeks wore on and, as before, Greece retreated from the global headlines.

More