Greece: A question of independence

by Jim Brunsden & Kerin Hope

Financial Times
December 29, 2016

As Yannis Stournaras, the governor of the central bank of Greece, settled into his seat for the three-hour flight from Athens to Frankfurt, he felt a sense of relief that one of the many problems in his in-tray was about to be resolved.

Attica Bank, the country’s fifth-largest lender, was poised to install a new management team he thought was capable of turning round the struggling lender. The only step left was for Attica’s board to officially approve the appointment of Theodoros Pantalakis, a former chairman of Agricultural Bank of Greece, as its new chief executive.

When he landed in the German city that afternoon in early September, however, he realised something had gone wrong. While he was in the air, the government in Athens reversedthe decision to award the job to Mr Pantalakis. It was his introduction to a web of allegedly related events, ranging from a raid on his wife’s business to an unsuccessful bid for TV rights backed by Attica loans.

According to sources, government figures arranged with the Engineers and Public Contractors Pension Fund (TSMEDE), Attica’s largest shareholder, to hand the job instead to Constantine Makedos, a civil engineer with little banking knowledge. Attica has close ties to Syriza, Greece’s ruling party, through links with the trade union that controls TSMEDE.

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Greece’s New Year of Living Dangerously

by Yannis Palaiologos

Wall Street Journal
December 21, 2016

If last year was the year of upheaval and survival for Alexis Tsipras, this year has been the year of the slow grind. As we near the end of 2016, Mr. Tsipras finds himself squeezed—by Germany and the International Monetary Fund, by Turkey and the refugee crisis, by his false promises and collapsing popularity—to the point of political extinction.

The pace of decline in the Greek prime minister’s fortunes is remarkable. Coming into the final quarter of the year, the government appeared to have a narrative and a plan. In early October it put the finishing touches on the first review of its third bailout program—albeit a year later than initially expected. Mr. Tsipras and his economic team then set the ambitious target of finalizing the second review by the Dec. 5 meeting of the eurozone finance ministers. This would have cleared the way for the European Central Bank to buy Greek government bonds under its quantitative-easing program, sending a strong signal of confidence to investors.

There were warning signs, of course, that all would not go smoothly. Mr. Tsipras’s government ministers continued, for instance, to obstruct central planks of the bailout program, especially the privatization of state-owned assets. But doubters were told to ignore the noise. A cabinet reshuffle in early November, sidelining some members of this internal resistance, was an encouraging sign.

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The drawn-out drama of Greek debt has no end in sight

by Kerin Hope

Financial Times
December 19, 2016

In Athenian cafés where politics are discussed, a furious debate rages over when in 2017 Greece is likely to hold the next general election.

The question might seem premature, given that the current government of Alexis Tsipras, prime minister and leader of the leftwing Syriza party, is only 14 months into its four-year term.

However, as café analysts point out, the average lifespan of administrations since the country plunged into an economic abyss in 2009 is below two years.

“It [the election] will be early spring or early autumn next year. I’m betting on autumn,” says Miltiades, a civil servant who claims to have predicted correctly the timing and outcome of three recent elections. “Regardless of when it happens, it’s likely there’ll be a change of government,” he adds.

Some observers argue that the country’s political instability reflects the unwillingness of successive Greek governments to take decisive “ownership” of reforms despite urging by their main creditors, the eurozone countries and the International Monetary Fund.

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Greek asset sell-offs begin to attract foreign investors

by Kerin Hope

Financial Times
December 19, 2016

Stergios Pitsiorlas admits without hesitation that Greece has a problem with attracting foreign investors. “There’s a culture here that’s not friendly to investors and it’s deep-rooted,” he says. “But it’s beginning to change.”

To underline his point, Mr Pitsiorlas lists half a dozen disposals of state-controlled companies, infrastructure and chunks of real estate that were completed while he served as executive chairman of the Hellenic Republic Asset Development Fund (Taiped), the country’s privatisation agency.

All were eventually approved by the Greek parliament in spite of strong resistance from hard-left cabinet ministers in the Syriza-led government, trade unions and local municipalities.

Promoted recently to deputy economy minister for investment, Mr Pitsiorlas is optimistic that the country may finally be turning a corner. “There is serious interest now in Greece,” he says. Manufacturing is among the areas of interest, “as wages have fallen significantly during the crisis”. The fact that the country’s two biggest privatisation deals are now being implemented has given an overall boost to investor confidence, Mr Pitsiorlas argues.

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Tsipras walks tightrope of reform

by Kerin Hope

Financial Times
December 19, 2016

The fiery rhetoric against austerity is gone, at least for now. A more composed Alexis Tsipras says he welcomes foreign investment as “mutually beneficial” for business and for the country.

The prime minister and leader of the leftwing Syriza party is anxious to see Greece return to borrowing on international capital markets in 2017 after a three-year gap.

He has sacked some, though not all, of the far leftists in his cabinet who opposed an ambitious new €50bn privatisation programme agreed with the Greece’s creditors, the eurozone bloc and the International Monetary Fund.

Syriza’s policymaking has turned upside down since mid-2015 when voters in a referendum rejected tough new bailout proposals, heightening fears that Greece would crash out of the euro.

Mr Tsipras capitulated within days, signing up to a €86bn third bailout that carries harsh conditions. Nonetheless, Syriza won a snap general election in September last year and immediately renewed an unlikely coalition with the rightwing nationalist Independent Greeks (Anel) party formed after its first electoral victory in January 2015.

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The drawn-out drama of Greek debt has no end in sight

by Tony Barber

Financial Times
December 19, 2016

The geopolitical, economic and moral themes of the Greek debt crisis are engrossing. They make it one of the great international dramas of the early 21st century. But 2016 was the year when much of the audience lost interest and turned its attention elsewhere.

Britain’s vote to leave the EU, Matteo Renzi’s defeat in Italy’s constitutional reforms referendum and Donald Trump’s US presidential election victory were compelling theatrical spectacles. The repercussions will be profound for the UK, Europe and the post-1945 US-led liberal world order.

By contrast, spectators of the Greek drama feel cheated. It is a play that seems stuck in its third or fourth act, still a long way from either a happy or unhappy ending and not as likely to shake the world as seemed possible in 2015.

For the drama’s failure to reach a denouement, blame the scriptwriters. These include Greece’s political and administrative classes, the nation’s eurozone partners and the International Monetary Fund. Year after year, each contributes a farrago of actors’ lines and stage directions. Yet the curtain never falls and the play drags interminably on.

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Hangover cure and clutching at straws drive Greece’s export sales

by Kerin Hope

Financial Times
December 19, 2016

The challenges faced by Greece’s many small companies have mounted as the financial crisis has gone on. The country’s manufacturers in particular have been hit hard by falling domestic sales and a desperate lack of bank credit to finance export drives.

“Small producers are among the worst hit by capital controls and the squeeze on bank liquidity, especially companies that have to import raw materials,” says Kostis Michalos, chairman of the Athens chamber of commerce and industry.

Yet small companies in sectors such as food and beverages and specialised plastic products are improving their international competitiveness by targeting niche markets.

The makers of Tuvunu, a low-calorie soft drink, uses Greek mountain tea, a local herb, as the raw material for making a rival to international iced-tea brands, doing away with the need for imported raw materials.

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Tsipras will put pensioner bonus to Greek parliament

BBC News
December 14, 2016

The Greek Prime Minister Alexis Tsipras has refused to back down over his plans to give poor Greek pensioners a pre-Christmas bonus.

A government official said Mr Tsipras would ask parliament on Thursday to approve the payment, worth €617m (£517m) in total.

Earlier, eurozone lenders suspended their recently agreed short-term debt-relief plan for Greece.

They said they had not been asked to approve the bonuses plan.

The European Stability Mechanism (ESM), the body that helps eurozone governments in trouble, said it would now be scrutinising the proposed handout.

"Following recent proposals by the Greek government to spend additional fiscal resources for pensions and VAT, our governing bodies have put their decisions temporarily on hold," a spokesman for the ESM said.

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IMF denies it is trying to force more austerity in Greece

by Jim Brunsden

Financial Times
December 12, 2016

Senior International Monetary Fund officials have rejected claims that the organisation is seeking to impose more austerity on Greece, in a sign of tension over whether the fund will join the eurozone’s €86bn bailout of the country.

In a blog post published on Monday afternoon, Poul Thomsen, director of the IMF’s European department, and Maurice Obstfeld, the fund’s chief economist, say that their main worries are that Greece is pursuing policies that are “unfriendly to growth” and that country’s debt is “highly unsustainable”.

The post lays bare the gulf between eurozone and IMF visions of what the Greek bailout programme should look like. It also shows the level of frustration at the fund over what is sees as misrepresentation of its stance by leading eurozone policymakers.

Recent discussions have “spurred some misinformation about the role and views of the IMF”, the officials said. “We have not changed our view that Greece does not need more austerity at this time.”

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The IMF is Not Asking Greece for More Austerity

by Maurice Obstfeld & Poul M. Thomsen

iMFdirect
December 12, 2016

Greece is once again in the headlines as discussions for the second review of its European Stability Mechanism (ESM) program are gaining pace. Unfortunately, the discussions have also spurred some misinformation about the role and the views of the IMF. Above all, the IMF is being criticized for demanding more fiscal austerity, in particular for making this a condition for urgently needed debt relief. This is not true, and clarifications are in order.

The IMF is not demanding more austerity. On the contrary, when the Greek Government agreed with its European partners in the context of the ESM program to push the Greek economy to a primary fiscal surplus of 3.5 percent by 2018, we warned that this would generate a degree of austerity that could prevent the nascent recovery from taking hold. We projected that the measures in the ESM program will deliver a surplus of only 1.5 percent of GDP, and said this would be enough for us to support a program. We did not call for additional measures to achieve a higher surplus. But contrary to our advice, the Greek Government agreed with the European institutions to temporarily compress spending further if needed to ensure that the surplus would reach 3.5 percent of GDP.

We have not changed our view that Greece does not need more austerity at this time. Claiming that it is the IMF who is calling for this turns the truth upside down.

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Greece Heads Toward New Crisis in Debt Saga as Support for Tsipras Slumps

by Nektaria Stamouli & Marcus Walker

Wall Street Journal
December 12, 2016

Greece’s crisis is approaching a potential breaking point after a year of relative calm, as a government with declining political stamina confronts creditors’ unyielding demands.

The ruling left-wing Syriza party, grappling with slumping popularity, is considering the option of calling snap elections in 2017, as it loses hope of winning concessions on debt relief or austerity from the eurozone and International Monetary Fund.

No decision for elections has been made, said Greek officials, who added that they would review the state of negotiations in January, after pressing creditors again to show more flexibility.

Elections would allow Syriza—if not Greece—to escape from the pressures of an unpopular bailout program whose strained math has eventually brought down every Greek government since the crisis began in 2009. Syriza’s leader and Prime Minister Alexis Tsipras, like his predecessors, is struggling to meet strict fiscal targets in a recession-scarred country weary of austerity.

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Greek Court Rejects Turkish Request for Extradition of Two Army Officers

by Nektaria Stamouli

Wall Street Journal
December 8, 2016

A Greek court rejected Turkey’s request to extradite the last two of eight military officers who fled to Greece in the wake of the failed coup attempt in their country, officials said.

This week, two sets of judges on the same court decided to extradite three of the soldiers while rejecting Turkey’s request for the extradition of the three others.

All decisions will be appealed to the country’s Supreme Court.

Turkey’s government has requested the rapid extradition of the men, whom it has described as traitors, to face charges of trying to overthrow the democratic constitution. Turkish prosecutors allege they belong to the network of U.S.-based Turkish imam Fethullah Gulen, who has been charged in absentia by Turkish prosecutors for leading a group Turkey lists as a terrorist organization. Mr. Gulen denies the claim.

The men have denied the charges and told the Greek court they fear for their lives if they are returned to Turkey. Greek and European laws don’t allow extradition to a country where the suspect will be in danger of torture or if his or her life is at risk.

The judges sitting on the Appeals Court on Monday and Thursday ruled that the officers’ lives will be in danger; they might be subject to torture and won’t get a fair trial, Greek officials said.

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Tsipras in Search of EU Allies as Workers at Home Strike

by Eleni Chrepa

Bloomberg
December 8, 2016

Greece is running out of friends in the European Union.

As Greek Prime Minister Alexis Tsipras faces workers protesting creditor demands for labor reform and new austerity measures, his key allies in southern Europe are fading from the political scene -- Italian Prime Minister Matteo Renzi resigned after a crushing referendum defeat and French President Francois Hollande has said he won’t seek a second term.

Renzi and Hollande have backed Tsipras’s calls against austerity as well as demands for more support on the refugee front, with the three of them joining forces to hold the first summit of Europe’s Mediterranean countries in Athens in September. With extreme right-wing parties and populists rising across Europe, Greece may need the pro-European German Chancellor Angela Merkel’s backing more than ever.

“Greece will keep having fewer allies,” said Aristides Hatzis, a professor of law and economics at the University of Athens. “Merkel is our only ally at the moment but even Merkel has her own limits as German elections are nearing.”

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Greece, Not Italy, Still Poses Biggest Challenge to Eurozone

by Simon Nixon

Wall Street Journal
December 7, 2016

Not for the first time this year, the doom-mongers have been confounded. The Italian referendum over the weekend resulted in a resounding defeat for Prime Minister Matteo Renzi, who promptly announced his resignation. Yet the sky didn’t fall in, the euro dipped and then rallied, and Italian bonds and bank stocks barely budged. Other European assets were also largely unmoved.

Why didn’t markets react how some had feared—and those who dream of the failure of the European project had hoped? One answer is that Mr. Renzi’s defeat was in the price: Markets had anticipated it. Another explanation is that the referendum, like the Brexit vote and the election of Donald Trump, doesn’t in itself change anything. Political consequences can and will follow from the decision, but it is too early to say what these will be and the markets will wait to assess them.

But the main reason Europe isn’t now in turmoil is that Italy’s problems are likely—for now, at least—to stay in Italy. These problems are hardly new and reflect a long-running crisis of domestic governance.

They became apparent in the years after Italy joined the euro and was no longer able to rely on frequent devaluations to maintain its competitiveness with Germany. These devaluations masked serious problems with its economic model: In a new world where goods, services, capital and people could move freely across the European Union, Italy’s high taxes, excessive bureaucracy, inefficient justice system and inflexible labor and product markets had made it uncompetitive, resulting in low investment, falling productivity and weak to nonexistent growth.

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Europe's Still Dithering Over Greece

Bloomberg
Editorial
December 7, 2016

This week, the European Union’s finance ministers granted some new debt relief to Greece. The new “short-term” measures are better than nothing -- but they’re less than a convincing solution to a problem that has dragged on far too long.

The deal, sketched out and agreed to in principle earlier this year, should help the Greek government convince voters to keep accepting much-needed domestic reform. That’s good. It isn’t enough, though, to put the country’s debts and budget plans on a sustainable footing. That’s why the International Monetary Fund, whose support will be necessary to achieve that larger goal, isn’t yet on board. After years of muddling through, the issue still isn’t resolved.

In the approach to the latest talks, French Finance Minister Michel Sapin acknowledged that “Greece has made huge efforts. This is the first Greek government in a long time that has implemented its commitments.” He said it was vital that Europe respond by recognizing its obligation to help ease the country’s debt burden, both as a reward and to encourage further improvements in the business climate.

All true. Greece can’t be accused of doing nothing to help itself. The banking system has stabilized after three bouts of recapitalization, and deposits are returning, albeit slowly. The economy is growing modestly. The country posted a primary budget surplus for the first 10 months of this year. State asset sales are proceeding slowly but surely.

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Greece and Its Creditors Get Back on a Collision Course

by Simon Nixon

Wall Street Journal
December 4, 2016

In a continent beset by multiple crises, Greece remains the cradle of European dysfunction. The country may have dropped out of the headlines in recent months, its multiple challenges seemingly buried under a tide of bailout cash. Yet it still presents the greatest risk to the survival of the eurozone. That is because Greece’s circumstances oblige the eurozone to do something it has so far appeared incapable of doing, except under conditions of extreme financial stress: take a collective political decision.

The first test of the eurozone’s decision-making capacity will come at a meeting of eurozone finance ministers in Brussels on Monday. On the face of it, the decision facing them appears straightforward: They need to complete the second review of Greece’s bailout, which will set the targets for the remaining two years of the program. That decision, in turn, will unlock the next tranche of funding. The outlines of this deal are already in place: Greece has more or less reached an agreement with its creditors—the International Monetary Fund, the European Commission and the European Central Bank—on what it must do to get the cash.

In fact, the situation is far from simple. Germany and the Netherlands have promised their parliaments that they won’t ask for more money for Greece unless the IMF also resumes lending to Greece. But the IMF says it won’t do this unless it is satisfied that Greece’s debt burden is sustainable. For the IMF, this is a question of institutional credibility. It has already put its name to two failed programs, and it is determined that it will only join a third program if it is convinced that Greece can return to the markets at the end of it, its financial sovereignty restored.

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If you build it, they will come: Greece’s new temple to high culture

by Kerin Hope

Financial Times
December 2, 2016

Even the most starry-eyed philanthropist might balk at spending €600m to build a temple of high culture in a country grappling with its worst financial crisis in memory.

Yet in 2006 when the Stavros Niarchos Foundation decided to build a new home for the Greek National Opera and the National Library, economic growth was accelerating and Greece looked set to become a beacon of prosperity in south-east Europe.

“Greece won the European football championship in 2004, it staged a successful Olympic Games, the economy was doing well,” says Andreas Dracopoulos, co-president of the New York-based foundation named for his late uncle, a Greek shipping billionaire.

“We thought Greece had turned the corner. If anyone had suggested otherwise at that time we’d have said ‘are you crazy?’” he adds.

In spite of the country’s financial collapse in 2010, followed by a succession of huge bailouts, construction of the Stavros Niarchos Foundation Cultural Centre went ahead as planned.

“I remember there was a dark night in New York when I and several colleagues had some internal questioning . . . ‘What are we doing? Greece is falling apart and we’re going to build an opera house and a library?’” he recalls. “Then I said we had to build it, this project will bring hope, we can’t let the Greeks down. And let’s do it all, not cut corners because of the crisis.”

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Tired of Syriza, Greece embraces a mainstream party

Economist
December 3, 2016

The headquarters of New Democracy, a centre-right political party, is in an unexpected part of Athens. The building, surrounded by warehouses, housed a branch of a Japanese technology firm before standing derelict for years. Few other political types are nearby. The rent, at €9,800 ($10,400) a month, is a tenth of what the party’s old office used to cost. Yet the relocation, which happened in August, is also symbolic. As the opposition party has moved to a cheaper part of town, so too does it hope that it can present itself to the public as a new, improved alternative to the Greek government. With Alexis Tsipras, the prime minister (pictured, on the left), growing less popular, New Democracy may well have a chance.

It has been a miserable year for Mr Tsipras and his left-wing Syriza government. A deal struck in March by the European Union and Turkey stemmed last year’s surge of migrants through Greece to northern Europe, but left 60,000 of them stuck in Greece in conditions that are often grim. Yet this is the least of the government’s problems. In May, after much squabbling, it pushed through €1.8bn of tax increases needed to qualify for the next chunk of cash in its current bail-out package from the EU, the third since the euro crisis began in 2010. In November Mr Tsipras reshuffled his cabinet, replacing hardline leftists with younger, pragmatic folk, seemingly in order to placate Greece’s creditors, who will meet on December 5th to tweak the latest bail-out programme.

Many of the government’s reforms have been widely hated. Business owners grumble at Scandinavian-level VAT rates of 24% and a series of new taxes. From next year self-employed professionals, such as lawyers and doctors, earning over €40,000 a year are being asked to pay tax in advance for the coming year, while their average pension contributions have tripled, says Constantine Michalos, the head of the Athens Chamber of Commerce and Industry. Many will be unable to bear the burden, and some have already moved their businesses to Cyprus or Bulgaria, he adds. “Uncertainty about taxes is the worst thing,” says Tina, who owns a betting shop in central Athens. “You don’t know what they’ll hit you with next.”

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