Constantine Mitsotakis, former prime minister of Greece, dies aged 98

by Kerin Hope

Financial Times
May 31, 2017

Constantine Mitsotakis, who has died aged 98, served briefly as prime minister of Greece between 1990 and 1993. But he wielded influence over its volatile politics for more than four decades as the head of a powerful political dynasty from the island of Crete.

Mitsotakis, a pro-western centrist, made the launch of unpopular market reforms his overriding priority as premier, following a decade of socialist rule. His New Democracy government carried out sweeping price liberalisations, overhauled the state pension system and set up the country’s first privatisation programme.

Back in opposition in 1994, he presciently warned the socialist government of Andreas Papandreou, the prime minister, that Greece would eventually have to seek help from the International Monetary Fund if further fiscal and structural reforms continued to be postponed.

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Greek privitisation agency accepts €1.5bn bid to extend Athens airport contract

by Kerin Hope

Financial Times
May 31, 2017

Greece’s privatisation agency TAIPED has accepted an improved bid worth €1.5bn from the state-controlled Athens International Airport company for a 20-year extension of its current operating concession.

The agreement opens the way for TAIPED (The Hellenic Republic Asset Development Fund) to sell its 30 per cent stake in the airport operator later this year.

The Syriza government is committed to privatising the airport, Greece’s largest, under the terms of the country’s €86bn third international bailout.

TAIPED said the airport company bid €600m to retain the operating concession until 2046, while the Greek state would receive an additional €890m in revenues over the 20-year period.

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Constantine Mitsotakis, Who Forged Greek-EU Ties, Dies at 98

by Eleni Chrepa

Bloomberg
May 29, 2017

Constantine Mitsotakis, the Greek prime minister who strengthened ties with the European Union and attempted unpopular cuts to state spending in the 1990s, has died. He was 98.

He died in the early hours of Monday morning, according to a statement from his family.

Mitsotakis became prime minister in April 1990 when his New Democracy party won the right to govern on its own after nine years in opposition or as a coalition partner. During his three-year tenure, he consolidated Greece’s membership in the EU, known as the European Communities at that time, by securing his country’s accession to the union during the Maastricht Summit in December 1991. As foreign minister, he oversaw Greece’s entry into the EU a decade earlier.

As the Cold War was coming to an end, the pro-American Greek leader improved relations with the U.S. in 1990 by becoming his country’s first prime minister in 27 years to visit the White House, during George H.W. Bush’s administration.

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Greece offers opportunities for investors willing to take risks

by Kerin Hope

Financial Times
May 28, 2017

An open-air cinema with a natural backdrop of twinkling city lights and the inky Aegean Sea is the latest attraction for shoppers at One Salonica, a mall in the Greek port of Thessaloniki.

The new screen is the eighth that Cineplexx, an Austrian investor, has opened at the mall in a low-income neighbourhood since the company came to Greece two years ago. Christof Papousek, chief financial officer and a partner in Cineplexx, says the investment has worked out well.

“We’re profitable there, we feel in a very comfortable position and we’re ready to expand in the Greek market,” he says.

Such confidence might seem barely conceivable. Greece has been gripped by economic crisis for years: indeed Cineplexx arrived in mid-2015 just as the country was falling off Europe’s investment map. Capital controls had been imposed, the leftwing Syriza government was locked in a dispute with international creditors and Greeks were bracing for an involuntary exit from the euro.

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Debt forgiveness is not the solution for Greece

by Daniel Gros

Centre for European Policy Studies
May 23, 2017

A superficially plausible narrative to the continuing problems besetting Greece is that it cannot recover because of a crushing debt burden. However, this narrative overlooks some basic facts and cannot explain why all the other peripheral countries that needed official support (Portugal, Ireland, Spain and Cyprus) are recovering.

The key to understanding Greece’s debt situation is that most of it is owed to the European institutions, which have already extended the maturity to over 30 years and are charging very low interest rates. Expenditure on interest now amounts to 3.2% of GDP, which is much less than what the Greek government had to spend on interest before the crisis and before the Troika! Interest expenditure is also lower for Greece than for Italy (3.9% of GDP) and much less than for Portugal (4.2% of GDP). Even the US government has to spend more on interest (3.8% of GDP) than the Greek government. But nobody argues that these countries need debt forgiveness to be able to grow.

An implicit conclusion from the fact that interest is not an important cost item despite high debt is that debt forgiveness makes little difference at low interest rates. Let us assume that the official European lenders were to forgive Greece €100 billion, undeniably a huge sum. What would this change? This huge concession would save the Greek government a little over €1 billion in interest payments each year, which represents less than 1% of the country’s GDP. Savings of this order of magnitude are unlikely to make much of a difference.

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Greece and the Troika – Lessons from international best practice cases of successful price (and wage) adjustment

by Ansgar Belke & Daniel Gros

Centre for European Policy Studies
May 23, 2017

This paper reviews cases of successful price and wage adjustment, which are often regarded as constituting best practice, in Australia, Latvia and the German new states and contrasts them with the Greek experience under the Troika programmes. Latvia stands out as having had the quickest adjustment in wages. By contrast, before the crisis, Greek wages appeared to have been largely insensitive to labour market conditions but this changed with the programme. We find that the reaction of wages to unemployment in Greece under the programme was similar to that observed in Germany and Portugal (a case that has attracted less attention). A priori, it is likely that the change in wage behaviour in Greece was due to the labour market reforms imposed under the programme. But this cannot be proven beyond doubt.

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Greece Has the Resources to Heal Itself

by Leonid Bershidsky

Bloomberg
May 23, 2017

The euro area's finance ministers again failed to come to an agreement on debt relief for Greece. No surprise there. Hammering out the details would force them to accept an uncomfortable reality: Greece won't be ready to tap private debt markets for years to come. In the meantime, if it wants to get off life support, it will have to find a way to cut tax evasion.

The unpopular Greek government of Alexis Tsipras keeps trying for a debt-relief deal. All its many concessions, which have made Greeks and everyone else forget this was once a rebellious, far-left cabinet, are geared toward that goal, and so is the mammoth, 245-page austerity bill passed last week. There are more pension cuts and more tax increases, all in the name of showing shareholders that Greece is willing to be frugal and so should be allowed to tap markets again. Starved of investment, the country is in recession again, the only euro-area member to report negative growth (minus 0.5 percent year-on-year) in the first quarter of 2017. Greece almost certainly won't meet the growth target set by the European creditors -- 3 percent in 2018; the Bloomberg consensus forecast for that year is just 1.9 percent.

A nominal haircut for official investors is, however, a red line Germany and other northern European countries won't cross, as the Eurogroup reiterated in its statement on Monday. Instead, the statement repeats the insistence that Greece maintain a primary budget surplus of 3.5 percent of gross domestic product for the medium term. The International Monetary Fund wants more specifics from Greece's creditors on how maturities and interest rates on the debt will change if it is to keep taking part in the Greek program. The Greek government wants a deal so it can explain to voters why they're expected to put up with continued austerity. The required specifics, however, can only emerge before the September election in Germany -- say, at the next Eurogroup meeting in June -- if the creditors incur no additional costs. Otherwise, Chancellor Angela Merkel's government will have to answer to conservative voters for her inability to stop paying Greece.

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Greek Creditors, IMF Seek to Bridge Differences Over Debt Relief

by Viktoria Dendrinou & Rainer Buergin

Bloomberg
May 22, 2017

Euro-area finance ministers gathered in Brussels on Monday, seeking a compromise with the International Monetary Fund on debt relief for Greece that could signal the final act in the seven-year-old drama for the continent’s most indebted state.

The IMF is reluctant to participate in a bailout unless the euro area ensures the country’s 315 billion-euro ($355 billion) debt load is sustainable. Some nations like Germany, which resists altering Greece’s debt profile, won’t release any new funds until the Washington-based fund joins the program. Athens needs the new aid installment before it has to repay about 7 billion euros to lenders in July.

“The starting positions are all rather wide apart,” French Finance Minister Bruno Le Maire told reporters before the gathering. “There’s a lot of work that needs to be done to bring the positions closer.”

The so-called Eurogroup meeting began after finance ministry deputies earlier in the day failed to resolve the outstanding issues, as disagreements between the IMF and Germany over Greece’s economic outlook and required debt relief persisted, according to two European Union officials with knowledge of the talks, who asked not to be identified because the discussion was private.

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Anarchists Fill Services Void Left by Faltering Greek Governance

by Niki Kitsantonis

New York Times
May 22, 2017

It may seem paradoxical, but Greece’s anarchists are organizing like never before.

Seven years of austerity policies and a more recent refugee crisis have left the government with fewer and fewer resources, offering citizens less and less. Many have lost faith. Some who never had faith in the first place are taking matters into their own hands, to the chagrin of the authorities.

Tasos Sagris, a 45-year-old member of the Greek anarchist group Void Network and of the “self-organized” Embros theater group, has been at the forefront of a resurgence of social activism that is effectively filling a void in governance.

“People trust us because we don’t use the people as customers or voters,” Mr. Sagris said. “Every failure of the system proves the idea of the anarchists to be true.”

These days that idea is not only about chaos and tearing down the institutions of the state and society — the country’s long, grinding economic crisis has taken care of much of that — but also about unfiltered self-help and citizen action.

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Athens calls on creditors to strike a deal

by Jim Brunsden

Financial Times
May 21, 2017

Greece is calling on its creditors to strike a deal that would allow it to honour billions of euros in debt repayments, arguing that it has upheld its side of the bargain by pushing through painful tax and pension reforms.

IMF officials and eurozone finance ministers will hold talks on Monday intended to pave the way for Athens’ next tranche of bailout aid so that it can make more than €7bn of debt repayments in July.

“Greece has done its bit, most would say more than its bit,” Euclid Tsakalotos, Greece’s finance minister, told the Financial Times.

He added that a deal would open the door to the country’s participation in the European Central Bank’s economic stimulus programme and provide “the signal to the markets that so many investors have been waiting for”.

The aid is dependent on bringing the IMF into the bailout programme as a financial partner.

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Greek parliament backs reform package

by Kerin Hope

Financial Times
May 19, 2017

Greece’s parliament has narrowly approved an omnibus reform package needed to unlock more than €6bn of bailout aid and open the way for the country’s international creditors to reach a deal on debt relief.

Lawmakers from the governing left-wing Syriza party and its coalition partner, the right-wing Independent Greeks, backed the bill in a late-night vote on Thursday.

The centre-right opposition New Democracy party, which holds a strong lead in opinion polls, voted against the package, even though it is committed to implementing reforms if it wins the next election.

Alexis Tsipras, prime minister, told parliament: ”Undoubtedly there are some difficulties [with the package] but we’ve got to the top of the ladder, and I’m confident we’re entering a period of stability and strong recovery.”

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Greeks walk out in national strike over austerity

by Kerin Hope

Financial Times
May 17, 2017

Greek unions staged a nationwide strike on Wednesday to protest against fresh austerity measures that parliament is being asked to approve as part of the country’s €86bn international bailout.

Civil servants and staff at state hospitals and public utilities took part in the 24-hour walkout, which disrupted international flights and other transport across the country.

The leftwing Syriza-led government of Alexis Tsipras, prime minister, signed up this month to a new €4.5bn package of medium-term fiscal and structural reforms in order to unlock bailout aid. Greece needs the aid to repay debt that matures in July.

Union leaders billed the strike as “a last chance” to influence the government ahead of Thursday’s vote on the measures, which are being debated as part of an omnibus reform bill under fast-track procedures in parliament.

Thousands of protesters holding banners and leftwing party flags gathered outside the parliament building, but the mood appeared subdued compared with angry anti-bailout demonstrations under previous governments.

“We’re betrayed by our own people. It’s the poor that are going to suffer this time more than any other group,” said Nassos Vardas, a retired construction worker and former official with the communist trade union PAME.

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Greece downgrades 2017 growth forecasts

by Kerin Hope & Claire Jones

Financial Times
May 14, 2017

Greece has unveiled a four-year budget proposal that assumes sharply lower growth rates after months of wrangling with international creditors over reforms needed to unlock further bailout aid and open the way for medium-term debt relief.

The Greek economy is projected to grow 1.8 per cent this year, against an earlier forecast of 2.7 per cent according to the proposal, which was presented to parliament late on Saturday alongside an omnibus bill containing scores of structural reforms.

Lawmakers are set to approve both bills by May 18, ahead of a meeting of the euro area finance ministers on May 22 where the issue of debt relief for Greece is due to be discussed.

The Syriza government’s revised growth projection for 2017 is more pessimistic than the European Commission’s forecast of 2.1 per cent, down from 2.7 per cent at the start of this year.

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IMF, euro zone say need more time to reach Greek debt relief deal

by Silvia Aloisi & David Lawder

Reuters
May 12, 2017

The International Monetary Fund and euro zone government lenders need more time to reach an agreement on debt relief for Greece because the euro zone is still not sufficiently clear in its intentions, IMF chief Christine Lagarde said on Friday.

Top euro zone officials and Lagarde met on Friday on the sidelines of a G7 finance ministers meeting in the Italian port city of Bari to discuss debt relief which the Eurogroup of euro zone finance ministers promised in May 2016, under strict conditions.

"We will carry on working on this debt relief package. There is not enough clarity yet. Our European partners need to be more specific in terms of debt relief which is an imperative," Lagarde told reporters on entering the G7 talks.

The Fund has made debt relief for Greece a condition for its participation in the latest bailout for Athens, the third one since 2010. Several euro zone governments, led by Berlin, want the IMF to participate for credibility reasons even though they disagree with the need for debt relief.

German Finance Ministers Wolfgang Schaeuble, also at the meeting in Bari, asked if he would be prepared to ease the conditions for debt relief, said:

"We are prepared to stick to what we have agreed in May 2016. That is the basis on which we are working ... I am still in favour of getting a solution, at least a political solution, in the Eurogroup on the 22nd of May."

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EU Passports for Sale in Sunny Cyprus Lure Rich Russians' Cash

by Yalman Onaran & and Vernon Silver

Bloomberg
May 11, 2017

In Limassol, on the southern coast of Cyprus, shop signs in Cyrillic outnumber those in Greek, the local language. Yachts emblazoned with Russian monikers fill berths in a newly built marina. And just past the office of radio station Russkaya Volna, restaurants lining the boardwalk serve pelmeni with, of course, vodka.

This Moscow-on-the-Mediterranean has blossomed as Russians and their money flock to the tiny European Union outpost to become, in a sense, not Russian. Long known as a hub for offshore Russian finance -- and more recently as a focus of investigations into Russian links to President Donald Trump’s entourage -- Cyprus has enabled a more sophisticated way to camouflage those funds: If you can’t launder a Russian’s cash, the scheme goes, launder the Russian himself.

The wave began after the government streamlined its money-for-passports program to help Cyprus recover from the 2013 collapse of its banking system and an ensuing recession. Now foreigners can become citizens in less than six months in exchange for investing at least 2 million euros ($2.2 million) in Cyprus property or 2.5 million euros in government bonds or companies.

Since then, the nation has issued about 2,000 passports, Finance Minister Harris Georgiades said in an interview in Nicosia last month. About half have gone to Russians, according to PricewaterhouseCoopers and other consultants who guide clients through the process. The impact has been profound, sparking about 4 billion euros of foreign investment last year -- equivalent to almost a quarter of the island’s annual economic output.

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Number of Chinese Tourists Visiting Greece to Rise 10-Fold

by Eleni Chrepa & Sotiris Nikas

Bloomberg
May 9, 2017

Fosun International Ltd., the Chinese conglomerate that’s part of a venture to transform the former Athens airport site into one of the biggest real-estate projects in Europe, is now turning its attention to Greek tourism.

Fosun wants to use its stake in tour operator Thomas Cook Group Plc to start building vacation packages specifically for the vast Chinese market, Senior Vice President Jim Jiannong Qian said in a May 4 interview in Athens. The Chinese government predicts 1.5 million of its citizens will start vacationing in Greece in the medium term.

Tourism accounted for over one-quarter of Greece’s gross domestic product in 2016, according to the Greek Tourism Confederation. Visitor numbers in 2016 reached 28.1 million, up 7.6 percent from 2015. Tourists generated 13.2 billion euros ($14.5 billion) in travel receipts, according to the Bank of Greece. Of these travelers, 150,000 came from China, Beijing says.

“Greece is a very safe place for visitors,” said Qian who is also president of Fosun’s Tourism and Commercial Group. There are also good opportunities for tourism investments in Greece, he said.

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What Democracies Can Learn From Greece's Failed Populist Experiment

by Stathis Kalyvas

The Atlantic
May 4, 2017

While the crisis in Greece no longer captures international headlines as it once did, the country’s troubles never went away. Greece remains the only Eurozone country still subject to a joint Eurozone-International Monetary Fund fiscal adjustment and structural reform program. In the long-running saga’s latest episode, the recent completion of a crucial compliance review paves the way for the release of $7.6 billion in bailout funds to Greece from its creditors in exchange for further budget cuts and tax increases.

Greece’s troubles date back to the implosion of its economy in 2010. Faced with a massive budget shortfall caused by a combination of overspending and undertaxing at a time of swelling global financial risk, Greece found itself unable to refinance its huge debt. As a member of the Eurozone and a debtor to several major European banks, it was able to elude outright default, securing a bailout from its European partners who, with the assistance of the IMF, demanded an onerous fiscal adjustment. With or without a bailout, an adjustment of such magnitude was both necessary and painful. But the hastily designed, poorly implemented program exacerbated Greece’s considerable economic distortions—a large and inefficient public sector and an uncompetitive private one—triggering a brutal economic depression accompanied by massive unemployment. Combined with the inevitable political turmoil that ensued, this crisis sparked a global scare about Greece’s imminent exit from the Eurozone, which carried dire implications for the survival of the common European currency.

All this made Greece fertile terrain for populism, long before Trump crashed onto the scene and a referendum brought us to the brink of Britain’s exit from the European Union. In fact, Greece’s experiment in populism—broadly pointing to political movements that emerge from the margins to challenge mainstream politicians in the name of the people, while preaching a gospel of sweeping change and scolding the “elites” as failed, corrupt, and responsible for most social ills—has a great deal in common with those in America and Britain.

By upending conventional political practice and highlighting their status as political outsiders, populists secure a political advantage in a time of crisis, change, and uncertainty. Yet, as Greece’s experiment showed, such disruption is very costly. Embracing their outsider status might deliver victory to populists, but does little to help them navigate a complex reality that requires serious, long-term planning, and compromise. If anything, reality sets populists up for costly failure.

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Greece’s Creditors Propose Debt Swap

by Jan Hildebrand & Martin Greive

Handelsblatt Global
May 4, 2017

Greece’s international creditors – the European Commission, the European Stability Mechanism, the European Central Bank and the International Monetary Fund – are preparing a debt-relief package for the country, Handelsblatt has learned from sources who have seen the proposal.

A central element of the proposal is a debt swap in which the European Stability Mechanism, or ESM, would purchase €13 billion of Greece’s IMF loans outstanding in 2019 and beyond, using funds likely to be untapped in Greece’s bailout program to make the purchase. The ESM would offer lower interest rates and a longer maturity, providing Athens with significant relief.

The German government is not opposed to the idea in principle, according to information obtained by Handelsblatt. Berlin views the proposal as one option among many, but a decision will not be made until after the current bailout program expires in the middle of the coming year.

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Greek Marathon Isn’t Over Yet

by Simon Nixon

Wall Street Journal
May 3, 3017

The eurozone is one big step closer to resolving its longest-running and most damaging crisis. But before anyone gets too excited, there is still a long way to go.

Greece this week finally agreed with its creditors on a package of reforms needed to unlock its next installment of bailout cash. With the economy stalling and major bond redemptions falling due in July, Athens badly needs the money.

But as things stand, it won’t receive a cent until the International Monetary Fund is satisfied that there is a credible plan in place to put Greece’s debt on a sustainable footing. Without this, the IMF won’t lend anything to Greece—and without the IMF on board, the German government has said it won’t give Greece any more money either.

The stage is therefore set for another difficult negotiation, this time pitting the IMF against Greece’s eurozone creditors led by Berlin. It could be a bruising fight.

The first argument will be over how much debt relief Greece is likely to need. That will hinge in part on what budget surpluses Greece’s creditors expect it to achieve in the medium term. The bailout program currently envisages Athens delivering a primary surplus in 2018 of 3.5%, before interest costs, and maintaining this for 10 years. But no one thinks this is realistic.

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Greece agrees deal with creditors on bailout reforms

by Kerin Hope

Financial Times
May 2, 2017

Greece has wrapped up a deal with creditors on details of reforms that must be enacted before the country can receive the next disbursement from its €86bn bailout programme.
The deal, which covers a wide range of fiscal and structural measures, from fresh cuts in pensions to liberalising Sunday trading, was completed during intensive talks over the past week after months of wrangling between Greek finance ministry officials and bailout monitors from the European Union and the International Monetary Fund.

Differences over the size of cuts to be applied in 2019 on pensions already reduced by over 40 per cent since 2011 held up an agreement, according to people involved in the negotiations.

“There is white smoke… the negotiation is finished with agreement on all the issues,” said Euclid Tsakalotos, the finance minister, after an all-night session of talks.

The further pension reduction was agreed at 18 per cent.

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Greece's Deal With Creditors Paves Way for Debt Relief Talks

by Eleni Chrepa & Sotiris Nikas

Bloomberg
May 2, 2017

Greece and its creditors from the euro area and the International Monetary Fund concluded months of negotiations regarding the second review of the country’s current bailout program after hours of final discussions that lasted until early Tuesday in Athens, unlocking discussions for the country’s debt relief.

Greece yielded to a number of demands set by its creditors, including pension cuts and a lower tax-free threshold of around 5,700 ($6,221) to 6,000 euros from 8,636 euros now. The agreement will also allow more shops to be able to work on Sundays in various areas throughout the country. “The discussion for an agreement that secures Greek debt’s sustainability now begins,” Greek Finance Minister Euclid Tsakalotos told reporters in Athens after the meeting.

If Greece beats its targets, the government will be able to implement a number of offsetting measures to ease the austerity burden, including subsidies for rent of as much as 1,000 euros per year, as much as 250 million euros in child support and lower contributions to medication for those of lower income, a Greek government official, who spoke on condition of anonymity said. Collective bargaining for Greek employees will be reinstated starting September 2018, the official said.

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