Is Greece Ready for a Ronald Reagan or Margaret Thatcher?

by Dan Mitchell

International Liberty
December 27, 2017

I’ve written that it’s theoretically possible for Greece to pay its debts and restore prosperity.

After all, it’s simply a matter of obeying fiscal policy’s Golden Rule and reforming a suffocating tax system.

But I’ve always figured none of that will happen because Greek voters would never vote for a government that favors Reagan-style or Thatcher-style economic reforms.

Simply stated, there are too may Greek people living off the state. But that’s just part of the problem. An even bigger obstacle to reform is that the people have decided that it’s morally acceptable to mooch off the government.

As a result, I’ve assumed that Greece has passed a tipping point because the moral foundation of Greek society has been corroded by dependency. And it’s very difficult to put that toothpaste back in the tube.

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Check, please: How much Alexis Tsipras's first months cost Greece

by Yiannis Mouzakis

MacroPolis
December 20, 2017

This time last year, Alexis Tsipras was in the awkward position of having missed his main objectives and found himself at odds with Greece’s creditors over his decision to hand out a 13th pension.

The conflicting interests of key stakeholders in Greece’s programme did not converge and the last Eurogroup of 2016 did not lead to the conclusion of the second review. Instead, it dragged on until June this year. Most critically, the main goal of being included in the European Central Bank’s QE programme was missed as the ECB required assurances about the country’s long-term debt sustainability and Germany was not willing to discuss even the medium-term debt relief measures, which were eventually pushed back to the end of the programme in 2018.

The months that followed were ridden with uncertainty and the economy slowed down. To seal a deal at last June’s Eurogroup, Tsipras agreed to additional fiscal measures worth 2 percent of GDP in the form of pension cuts and tax hikes for 2019 and 2020, mostly to appease the fiscal concerns of the International Monetary Fund.

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The Greek Experiment: Can an Economy Be Wiped Out by Taxation?

by Dan Mitchell

International Liberty
December 16, 2017

Greece has confirmed that a nation can spend itself into a fiscal crisis.

And the Greek experience also has confirmed that bailouts exacerbate a fiscal crisis by enabling more bad policy, while also rewarding spendthrift politicians and reckless lenders (as I predicted when Greece’s finances first began to unravel).

So now let’s look at a third question: Can a country tax itself to death? Greek politicians are doing their best to see if this is possible, with a seemingly endless parade of tax increases (so many that even the tax-loving folks at the IMF have balked).

At the very least, they’ve pushed the private sector into hospice care.

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Greek Bond Yields Fall to Lowest Since 2006

by Christopher Whittall

Wall Street Journal
December 15, 2017

The yield on 10-year Greek government bonds closed Friday below 4% for the time since 2006, the latest sign of investor optimism over the outlook for the formerly troubled economy.

The 10-year yield declined to 3.93% from 4.096% on Thursday, according to Tradeweb. Yields fall as prices rise. That compares to a high of 37% during the eurozone crisis in 2012 when Greece defaulted on its debt, and 7.86% in February.

Earlier this year, the Greek government reached a deal with its international creditors over its bailout package, sparking a sharp rally in the bonds. That enabled the country to return to capital markets in July with its first debt sale in three years. The rally has accelerated in recent sessions, with the yield dipping below 5% for the first time in years on Dec. 5.

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Erdogan wraps up tense Greece visit with trip to Thrace

by Kerin Hope

Financial Times
December 8, 2017

Turkish President Recep Tayyip Erdogan wrapped up a tense visit to Greece on Friday with a brief trip to the northeastern region of Thrace, the home of a Muslim minority of mainly ethnic Turkish descent.

“Erdogan, Erdogan, our leader,” shouted a crowd of several hundred people outside a mosque in Komotini where the Turkish leader attended midday prayers.

Later, Mr Erdogan addressed members of the minority at a Greek state highschool where most lessons are taught in Turkish. He also met with community representatives, including Muslim MPs from the governing left-wing Syriza party and Muslim religious leaders, before flying back to Ankara.

In Athens, Mr Erdogan on Thursday accused Greece of historic discrimination against the minority, asserting that the per capita income of the ethnic Turkish community was more than 80 per cent lower than that of other Greek citizens.

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Outspoken Erdogan shocks hosts on visit to Greece

by Kerin Hope

Financial Times
December 8, 2017

Greece has been left smarting after Recep Tayyip Erdogan used the first visit by a Turkish head of state in 65 years to make outspoken remarks on bilateral disputes between the two neighbours

During a two-day visit Mr Erdogan’s comments on minority rights, Cyprus and the treaty that defines the Greek-Turkish relationship visibly shocked Prokopis Pavlopoulos, his Greek counterpart, and put Alexis Tsipras, the prime minister, on the defensive at a joint news conference.

Mr Erdogan publicly rehearsed a series of bilateral grievances that at their most extreme have brought the two Nato allies and Aegean neighbours to the brink of war.

Athens had billed Mr Erdogan’s visit as an opportunity to consolidate bilateral ties and perhaps make progress towards reducing the continued flow of refugees and migrants from Turkey to the eastern Greek islands. While refugee arrivals have shrunk since last year’s deal between Ankara and the EU, Greek officials are concerned about an rise in numbers over the past six months.

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Greece Just Witnessed Something It Hasn’t Seen Since 2006

by Marcus Bensasson

Bloomberg
December 4, 2017

Greece’s economy expanded for a third straight quarter for the first time in more than a decade, providing a foundation for the country’s attempts to exit its bailout program next year.

Gross domestic product grew 0.3 percent in the three months through September after expanding a revised 0.8 percent in the previous quarter, the Hellenic Statistical Authority said in a statement on Monday. From a year earlier, GDP grew 1.3 percent.

Greece’s government and representatives of the country’s creditor institutions on Saturday agreed on a set of economic overhauls the country must undertake in exchange for fresh loans. The payout, supplemented by more bond market forays next year, will help the government build a cash buffer as it seeks to prepare for its bailout exit when the current program expires in August 2018.

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Greece’s Dangerous Budget Surplus

by Yannis Palaiologos

Wall Street Journal
December 3, 2017

At first glance, Greece’s traumatic 2015 bailout—its third in five years—appears to be working. The government’s budget is back in surplus, excluding debt service, after the years of deficits that contributed to the country’s first crisis in 2010. The radical leftist prime minister, Alexis Tsipras, now touts the “restoration of Greece’s fiscal credibility.” As recently as 2014 he savaged his predecessor, who achieved much lower surpluses, for “austerity.”

The only problem is that the bailout is not in fact working, if you think the goal should be to restore Athens to sound public finances and to offer Greeks economic hope for the future.

The European Commission’s autumn forecast predicts eurozone economic growth of 2.2% this year, the fastest in a decade. But Greece is falling further behind. It was originally projected to grow by as much as 2.7% in 2017. Six months ago, the EU’s number crunchers reduced that forecast to 2.1%. Last month they cut it further, to 1.6%.

This anemic performance is caused both by excessively demanding fiscal targets and by persistent structural impediments to investment. On both fronts, Greece’s creditors are complicit in the country’s continuing woes.

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Greek central bank chief cleared over personal assets statement

by Kerin Hope

Financial Times
December 3, 2017

Greece’s central bank governor has been cleared by a Greek parliamentary audit committee of charges that he made false statements about his personal assets while serving as finance minister between 2012 and 2014.

Yannis Stournaras last month requested a fresh audit of his asset statements made between 2012 and 2014 after Documenta, a pro-government weekly newspaper, revived an earlier accusation in Hot Doc, an investigative magazine, concerning his family’s summer home on the Aegean island of Syros.

Documenta wrote that Mr Stournaras failed in 2012 and 2013 to declare alterations carried out at his property on Syros that increased its value.

“The new audit showed that everything [concerning the Syros property] took place according to the law . . . There is no outstanding legal or political issue,” a person involved in the parliamentary procedure said on Sunday.

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Greece hopes reforms deal will smooth bailout exit

by Kerin Hope

Financial Times
December 3, 2017

Greece has reached agreement with its international creditors on reforms required to release the next loan tranche under its current bailout, boosting the leftwing Syriza government’s hopes of achieving a smooth exit from the €86bn programme next August.

“The [EU and IMF bailout monitors’] visit is completed, we have closed the [technical] agreement,” Euclid Tsakalotos, finance minister, said after the week-long talks ended on Saturday.

An EU statement confirmed that a deal — which includes energy sector reforms and fiscal and structural measures bringing Greece in line with eurozone counterparts — had been reached. It must be approved by eurozone finance ministers, who are due to meet on Monday.

Since the creditors’ third review of progress made by Athens was launched in October, the Syriza government has shown greater willingness than previously to make compromises.

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