Europe Needs a Way to Prevent the Next Greek-Style Debt Crisis

by Ferdinando Giugliano

Bloomberg
November 29, 2017

If there was ever a textbook example of how not to handle a sovereign debt crisis, it was Greece. Nearly a decade since Athens first asked for help from its euro zone partners and the International Monetary Fund, the Greek economy is still struggling to recover. Even after a steep restructuring, sovereign debt remains unsustainable. If Greece is not to be crippled by its debt load, European governments will have to accept further debt-reducing measures, on top of the maturity extensions and the cut in interest rates they have already agreed to.

So it's no surprise that one of the key debates on the future of the euro zone relates to how sovereign debt restructuring should be made easier. There is little doubt that forcing losses on creditors at an earlier stage, as some propose, would increase the chance that a program of financial assistance is successful. However, the euro zone should be wary of automatic triggers; they risk bringing on the very crisis they are designed to avert.

The debate on the future of debt restructuring in the euro zone largely involves two positions. The first, which is widely shared in Germany, sees an orderly debt restructuring mechanism as an essential next step for the currency union. When a country applies for financial help from the European Stability Mechanism (ESM), creditors should face some form of debt restructuring immediately. This would ensure a better distribution of risks between debt-holders and the ESM. The threat of a haircut will make investors more discerning in their lending, contributing to fiscal discipline within the euro zone.

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Greece prepares to do away with compulsory sharia in Western Thrace

Economist
November 28, 2017

As part of a passionate campaign to solve an apparently non-existent problem, American state legislatures have been presented, over the past decade, with at least 120 bills that sought to outlaw the practice of sharia, the Islamic legal system, and 15 of them have been enacted. With or without these laws, America’s attachment to its own constitution and judicial and legal system seems pretty robust.

Things are not quite so clear-cut on the other side of the Atlantic. Thanks to a vagary of history, there is one little patch of the European Union where sharia has hitherto held sway, not as a self-imposed code of behaviour but as a system under which Muslim citizens have been pressured to regulate their business, especially involving inheritance. That region is Western Thrace, a part of Greece adjoining the land border with Turkey. Alexis Tsipras, Greece’s leftist prime minister, is about to introduce legislation that will change that odd state of affairs.

The situation has its roots in regional history. Back in 1923, when Greece and Turkey were negotiating a massive, compulsory swap of religious minorities, it was agreed that two communities would have an exceptional right to remain where they lived: the Greek community of Istanbul (defined rather narrowly) and the Muslims of Western Thrace, a majority of whom spoke Turkish. Each community numbered around 110,000. After the vicissitudes of the past century, the Greeks of Istanbul have dwindled to a few thousand, while the Muslim population in Thrace has remained roughly level. (It would be much higher had there not been widespread emigration.)

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Surge in Migrants Creates Abysmal Conditions on Greek Islands

by Nektaria Stamouli

Wall Street Journal
November 26, 2017

Three months ago, Shehab Kabalan, a 20-year-old from Syria, traveled in a small boat from Turkey to Greece in the hope of receiving asylum in Europe and starting a new life.

Instead he is trapped on the island of Samos, living in a flimsy tent among dozens of other migrants and refugees, prevented from traveling to the mainland and now bracing for a hard winter.

Earlier this month, he slashed his wrists. A doctor patched him up and sent him back to the tent camp. “I felt desperate,” Mr. Kabalan said. “We are dying slowly here.”

Greece’s migration crisis has faded somewhat from view since a March 2016 pact between the European Union and Turkey stanched the enormous flows of migrants crossing the Aegean Sea.

But a surge in recent months has created abysmal conditions here, sparking accusations that EU and Greek authorities are leaving thousands of migrants exposed to disease, cold weather and violence as a deterrent to other would-be refugees. Earlier this fall, 200 people were crossing to the Greek islands of Samos, Chios, Lesbos, Leros and Kos daily, a fourfold increase over the spring. Arrivals have declined in recent weeks but remain high despite the worsening weather.

“The EU-Turkey deal incorporates strong elements of deterrence,” said Gabriel Sakellaridis, head of Greek operations for Amnesty International. “No political considerations should tramp upon human rights like that.”

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The Refugee Scandal on the Island of Lesbos

by Giorgos Christides & Katrin Kuntz

Spiegel
November 24, 2017

Those wishing to visit ground zero of European ignominy must simply drive up an olive tree-covered hill on the island of Lesbos until the high cement walls of Camp Moria come into view. "Welcome to prison," someone has spray-painted on the walls. The dreadful stench of urine and garbage greets visitors and the ground is covered with hundreds of plastic bags. It is raining, and filthy water has collected ankle-deep on the road. The migrants who come out of the camp are covered with thin plastic capes and many of them are wearing only flipflops on their feet as they walk through the soup. Children are crying as men jostle their way through the crowd.

Welcome to one of the most shameful sites in all of Europe. Camp Moria was originally built to handle 2,330 refugees. But currently it is home to 6,489.

Omar Sherki crawls out of a tent set up against the outside wall of the camp, a thin, pale man who was studying to become an engineer in Syria and played guitar in a rock band. He lives with hundreds of other men in an orchard outside the walls because Camp Moria has become so dangerous. His mattress lies on a wooden palette, beneath which rainwater has collected.

Omar is waiting for aid workers to distribute food: rotten-smelling meatballs and a bowl of rice. "I left to escape one war and ended up in a new one," he says.

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Greece probes central bank head over alleged leak

by Kerin Hope

Financial Times
November 19, 2017

Greece’s central bank governor is under investigation by an anti-corruption prosecutor over the alleged leaking of an auditor’s report on Piraeus Bank, a troubled Greek lender accused of violating capital controls imposed at the height of the country’s financial crisis.

According to two people with knowledge of the case, Yannis Stournaras, the governor, is accused of “violating his duties” by leaking an internal document produced by the central bank’s audit team detailing irregular practices by former senior executives at Piraeus.

Mr Stournaras strongly denied wrongdoing. He also rebutted an allegation, made last week in Documento, a Greek newspaper, that the central bank “selectively leaked” the Piraeus report as well as an earlier report by the Single Supervisory Mechanism, the European Central Bank’s bank supervisory arm, detailing poor governance at Attica Bank, a small Greek lender.

“I have full confidence in the competence and the conduct of the Bank of Greece staff. There was absolutely no leak of the audit on Piraeus and not a word of the text has appeared in any media,” Mr Stournaras told the Financial Times.

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Struggling Greek businesses cling to recovery hopes

by Kerin Hope

Financial Times
November 19, 2017

Greek carpenter Vassilis Tsigas surveys the cavernous shop floor of his family’s woodworking business where a handful of employees are finishing balcony doors for a boutique hotel on an Aegean island.

His company, which produces high-quality wood fittings for homes and hotels, was once a flourishing business, but annual turnover has dropped from €9m during the building boom a decade ago to just €1.5m last year.

“We just about managed to hold on . . . We got export orders from a few Greek architects working abroad because we could offer cheaper prices,” Mr Tsigas says.

But for the first time since the crisis began almost a decade ago, things have begun to get better. In July, the Tsigas brothers landed a contract to provide fittings for a luxury hotel in Athens being renovated by foreign investors. It will provide enough work for the company to re-hire a dozen employees laid off during the crisis.

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Greece announces €1.4bn ‘social dividend’

by Jessica Dye

Financial Times
November 13, 2017

Greek prime minister Alexis Tsipras made an unscheduled television appearance on Monday night to announce a €1.4bn “social dividend” to be paid next month to more than 3m Greeks who have been hit hardest by the country’s seven-year recession.

The handout was approved by the country’s bailout creditors, the EU and International Monetary Fund, in a teleconference earlier in the day. It amounted to more than double a similar payment of €617m made last year without prior agreement with the creditors, prompting a clash with the left-wing Syriza government.

The premier said this year’s fiscal performance “exceeded our most optimistic forecasts with the primary budget surplus (before payments on the public debt) set to beat the target of 1.75 per cent of gross domestic product by a large margin.”

The primary surplus for 2017 could reach an unprecedented 3 per cent of GDP thanks to higher-than-forecast revenues from social security contributions and tax revenues, according to analysts in Athens.

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Beyond Mamma Mia! Hollywood courted as Greece vies for slice of movie millions

by Helena Smith

Guardian
November 13, 2017

Nikos Giannopoulos still vividly recalls the excitement that swept the people of Amorgos when French film-makers arrived to make The Big Blue three decades ago.

“Everyone wanted to be a part of it,” says Giannopoulos, the movie’s executive producer, as he takes in the remote island’s dramatic landscape.

“It was a game changer that helped put Amorgos on the map.”

Luc Besson’s film about two free divers was a huge commercial success that went on to become a cult classic, and tourist arrivals soared. But more than a decade would elapse before blockbusters were shot again in Greece, with star-studded casts descending on the islands of Cephalonia and Skopelos in 2001 and 2008 for Captain Corelli’s Mandolin and Mamma Mia!

Subsequent pleas by film-makers to exploit the country’s unique natural attributes – its distinctive light, rugged landscape and aquamarine sea – invariably fell on deaf ears. Repulsed by a cumbersome bureaucracy and lack of financial incentives, Hollywood turned elsewhere.

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Greek terrorist’s temporary release sparks fury

by Kerin Hope

Financial Times
November 9, 2017

A convicted terrorist from Greece’s extremist November 17 group released from an Athens prison on Thursday on a two-day furlough prompted a storm of protest from politicians and civil society against the leftwing Syriza government.

Dimitris Koufodinas’s request for parole was approved by the Korydallos prison council, which specified he must report to his local police station twice a day.

A leading member of N17, Koufodinas is serving a series of life sentences for killing 11 prominent Greeks and foreign officials between 1976 and 2000.

The council had rejected several of his previous requests, which were made under a regulation that allows short furloughs for prisoners serving life sentences once they have spent eight years in jail. Mr Koufodinas was sentenced in 2003 alongside 14 other members of N17.

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Greek notaries begin 2-month strike

by Kerin Hope

Financial Times
November 8, 2017

Greece’s notaries have begun a two-month strike aimed at blocking the leftwing Syriza government’s plan to launch electronic auctions of repossessed properties this month, as agreed in the country’s current bailout deal with the EU.

The notaries resorted to industrial action after their requests for protection from attacks by leftwing extremists protesting against foreclosures were ignored by the authorities, according to Giorgos Roskas, president of their union.

The walkout raises concerns that Greek banks will miss this year’s target for reducing non-performing loans, with potential knock-on effects for the outcome of stress tests that the European Central Bank will conduct in Greece early in 2018.

News of the strike prompted Mario Draghi, president of the European Central Bank, to call for a swift solution to the dispute during Monday’s meeting of euro area finance ministers. Mr Draghi also stressed the importance of tackling the issue of non-performing loans, according to a Greek official.

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