Why Everybody’s in the Dark on Greece

by Simon Nixon

Wall Street Journal
June 14, 2015

Does Alexis Tsipras actually want to keep Greece in the eurozone?

Until recently, the answer seemed clear. The Greek prime minister fought an election promising to keep Greece in the single currency. Every survey of Greek voters showed strong support for euro membership. No one seriously doubts that a euro exit would be catastrophic for the Greek economy in the short term—and most likely in the long term too, given the potential for social and political turmoil. Sure, his Syriza party has been anti-euro as recently as 2012 and some of its leading figures have continued to argue for exit, but the bulk of the party seemed to have reconciled itself to membership.

Eurozone policy makers certainly always assumed that Mr. Tsipras was negotiating in good faith. They believed this even as he campaigned on a platform of tearing up the terms of the country’s bailout deal and reversing many of the key reforms; they continued to believe it even when he shunned the possibility of coalition with the centrist pro-euro To Potami party in favour of an alliance with the right-wing nationalist euro-skeptic Independent Greeks. They even kept their faith after he was elected when he provocatively began to follow through on campaign pledges to hire back sacked civil servants, cancel privatizations and make unfunded fiscal handouts.

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Greece: A Credible Deal Will Require Difficult Decisions By All Sides

by Olivier Blanchard

iMFdirect
June 14, 2015

The status of negotiations between Greece and its official creditors – the European Commission, the ECB and the IMF – dominated headlines last week. At the core of the negotiations is a simple question: How much of an adjustment has to be made by Greece, how much has to be made by its official creditors?

In the program agreed in 2012 by Greece with its European partners, the answer was: Greece was to generate enough of a primary surplus to limit its indebtedness. It also agreed to a number of reforms which should lead to higher growth. In consideration, and subject to Greek implementation of the program, European creditors were to provide the needed financing, and provide debt relief if debt exceeded 120% by the end of the decade.

The primary surplus in the program was to be 3% in 2015, and 4.5% next year. Economic and political developments have made this an unattainable goal, and the target clearly must be decreased. It also included a number of reforms aimed at increasing medium term growth, and making the fiscal adjustment easier. These also need to be reconsidered.

In this context, by how much should the primary surplus target be reduced? A lower target leads to a less painful fiscal and economic adjustment for Greece. But it also leads to a need for more external official financing, and a commitment to more debt relief on the part of the European creditor countries. Just as there is a limit to what Greece can do, there is a limit to how much financing and debt relief official creditors are willing and realistically able to provide given that they have their own taxpayers to consider.

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Greece has nothing to lose by saying no to creditors

by Wolfgang Münchau

Financial Times
June 14, 2015

So here we are. Alexis Tsipras has been told to take it or leave it. What should he do?

The Greek prime minister does not face elections until January 2019. Any course of action he decides on now would have to bear fruit in three years or less.

First, contrast the two extreme scenarios: accept the creditors’ final offer or leave the eurozone. By accepting the offer, he would have to agree to a fiscal adjustment of 1.7 per cent of gross domestic product within six months.

My colleague Martin Sandbu calculated how an adjustment of such scale would affect the Greek growth rate. I have now extended that calculation to incorporate the entire four-year fiscal adjustment programme, as demanded by the creditors. Based on the same assumptions he makes about how fiscal policy and GDP interact, a two-way process, I come to a figure of a cumulative hit on the level of GDP of 12.6 per cent over four years. The Greek debt-to-GDP ratio would start approaching 200 per cent. My conclusion is that the acceptance of the troika’s programme would constitute a dual suicide — for the Greek economy, and for the political career of the Greek prime minister.

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Greece locked in ‘last try’ talks with bailout negotiators

by Peter Spiegel & Kerin Hope

Financial Times
June 14, 2015

Talks between Athens and its international bailout creditors were expected to resume late on Sunday after Greek government officials were told to submit a final list of economic reforms in order to secure €7.2bn in desperately needed rescue aid.

The request came in a meeting in Brussels on Saturday between Nikos Pappas, aide-de-camp to Alexis Tsipras, Greek prime minister, and Martin Selmayr, chief of staff to Jean-Claude Juncker, the European Commission president who has played a central role in trying to broker an 11th-hour deal.

A spokesman for Mr Juncker would only say that talks would continue on Sunday. But others briefed on the talks said the meeting had been “difficult” and that senior eurozone officials were concerned whether a deal could be reached in time for Greece to access the aid before its bailout expires at the end of the month.

“Positions are still far apart,” said one EU diplomat. “It’s not certain there will be an outcome.”

Another senior eurozone official said the Greek team returned to Brussels on Saturday without new proposals and that Sunday’s evening session would be a “last try.”

“Greek movement [is] not discernible,” said the official. “I think they do not want a solution.”

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Greece running out of options to avoid capital controls

by Ferdinando Giugliano

Financial Times
June 14, 2015

Just a few months ago, the possibility that capital controls would be imposed in Greece still seemed distant.

But with the government fast running out of money — and nervous depositors pulling cash from the country’s banks — talk of such extraordinary measures is widespread and analysts are warning Athens may soon be forced to employ them.

“We are four to six weeks away from the possible imposition of capital controls,” said Daniel Gros, director of the Centre for European Policy Studies think-tank in Brussels. “There is always some temporary solution [eurozone politicians] can pull out of thin air, but now we are getting really close.”

Were Greece to default on a €1.5bn payment to the International Monetary Fund due at the end of June, the situation could spiral out of control, forcing the hand of policy makers. Greece could then be forced to repeat the experience of Cyprus and Argentina, which chose to intervene to stop their banks bleeding deposits in order to avoid insolvency.

But imposing capital controls would hardly be straightforward.

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Defiant Tsipras faces toughest decision yet of stormy premiership

by Kerin Hope

Financial Times
June 12, 2015

Hours after receiving an ultimatum from Greece’s creditors, Alexis Tsipras looked more relaxed than rattled. He was schmoozing with supporters at a late-night party in Athens to celebrate the relaunch of ERT, the state broadcasting channel shut two years ago by the previous centre-right government.

“ERT belongs to the people and we are making it truly a public broadcaster!” the prime minister enthused to applause from hundreds of employees who were reappointed this month, thanks to Mr Tsipras’ intervention.

To backers of his hard-left Syriza party, the reopening of ERT came as another long-awaited reversal of humiliating bailout reforms associated with the hated “troika” — the European Commission, the International Monetary Fund and the European Central Bank. Others include an unprecedented tax amnesty and the rehiring of several thousand civil servants made redundant last year.

The ERT fete provided a brief respite for a young leader facing the toughest decision of his stormy five-month premiership: whether to sign a new bailout deal in the next few days that would include more of the harsh austerity he campaigned against as opposition leader, or plunge Greece into a messy default and possible exit from the eurozone.

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Greece defies creditors’ demands for decisions on reform

Financial Times
June 12, 2015

Athens insisted on Friday that it was still negotiating with its creditors to unlock €7.2bn in desperately needed bailout aid, but showed little sign of acquiescing to their demands for concessions on economic reform.

A day after the International Monetary Fund pulled its officials out of talks and EU leaders said it was decision time for Greece, Athens said it had submitted a new plan that included debt restructuring but excluded cuts to pensions, elements rejected by bailout monitors earlier this week.

According to a Greek government official, the plan should also include “low” budget surplus targets this year and next; creditors have sought surpluses of 1 per cent of economic output this year and 2 per cent in 2016. Those levels are significantly below the current bailout programme’s targets, but higher than Athens has sought.

Negotiations between Athens and its creditors have ground to a halt just days before a critical meeting of eurozone finance ministers next week that officials believe may be the final chance for a deal to be struck to avoid a Greek default.

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Alexis Tsipras is approaching his Brest-Litovsk moment

by Tony Barber

Financial Times
June 12, 2015

As politicians with Marxist backgrounds and an affinity for Russia, Alexis Tsipras, Greece’s prime minister, and colleagues from his ruling Syriza party will know all about the Brest-Litovsk treaty of March 1918.

Or let us hope they do. For what Mr Tsipras’s government now faces, if it wishes to strike a deal with Greece’s creditors and avoid a debt default and possible exit from the eurozone, is nothing less than a 21st century version of Brest-Litovsk.

Under this treaty’s harsh terms, Vladimir Lenin and the Bolsheviks, who had seized power in Petrograd in November 1917, capitulated to Germany, signing away almost half imperial Russia’s European territory, including Ukraine and the Baltic states, and a quarter of Russia’s entire population.

The Bolsheviks ceded control of most of Russia’s coal mines, half of its other industry and more than a third of its most fertile agricultural land. Lenin accepted this Carthaginian peace for one simple reason — to survive in power, so that he could carry out a revolution at home.

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A split verdict on the blackmail and bullying over Greece

by Aristides Hatzis

Financial Times
June 11, 2015

There are two conflicting narratives about the deadlock in negotiations between Greece and its eurozone partners. According to the first, Greece is governed by populist radical leftists who blackmail the eurozone by threatening to explode the financial equivalent of a suicide bomb. According to the second, Greece is bullied by callous partners who are only interested in making an example of it. Both narratives are schematic but contain many elements of truth.

Despite his wooden language, Alexis Tsipras has matured more in the past few months than the rest of his party. The Greek prime minister understands the stakes and he knows his options. His problem is that they are all dreary. The brinkmanship cannot continue much longer. His government’s looming cash shortage is horrifying. If he finds himself unable to pay public servants, it will be the end of his career and his party.

Mr Tsipras cannot use “Grexit” — a Greek departure from the euro — as a bargaining chip, or he risks creating severe hardship in a country that imports such essential items as food, energy and pharmaceuticals. An exit would be detrimental economically but also socially. Any improvements in competitiveness will be annihilated by political turmoil and civil strife.

He cannot accept a new bailout agreement because that would signify that before the general election he was either mistaken, opportunistic or fooled. Even a watered-down version of the creditors’ proposal would embarrass him before the Greek people who gave him a clear mandate: no more austerity.

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IMF quits Greece talks amid ‘air of unreality’ as deal unravels

Financial Times
June 11, 2015

Only a week ago, officials on both sides of the negotiating table believed that a solution to Greece’s agonising stand-off with its creditors was mercifully at hand.

In a late-night meeting on the 13th floor of the European Commission headquarters in Brussels, Jean-Claude Juncker, the commission’s president, presented a five-page plan for Greece that had been hammered out days earlier among Europe’s most powerful leaders in private talks at the chancellery in Berlin.

If Alexis Tsipras, the Greek prime insister — who had flown in especially for the session — could accept the deal, or something close to it, the country would soon gain access to €7.2bn in bailout aid and avoid defaulting on its debts.

After the four-hour session, Mr Juncker thought he had a deal: Mr Tsipras had accepted new budget surplus targets that were tougher than Athens had hoped but lower than the existing bailout programme. Mr Tsipras disagreed with raising taxes on energy and many of the pension cuts, but agreed to return with a counter-proposal that would identify cuts elsewhere to make up the difference.

Since that moment last Wednesday, however, the putative agreement has fast unravelled.

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Creditors tell Greece it is time to decide over bailout

Financial Times
June 11, 2015

Greece’s creditors on Thursday issued their starkest warnings to Athens since the start of a five-month stand-off over the country’s soon-to-expire €172bn bailout, with the International Monetary Fund withdrawing its negotiating team and European leaders saying the time for compromise had ended.

The pointed language in public reflected growing private fears that Alexis Tsipras, Greek prime minister, had overestimated the amount of time he has left to cut a deal to release the bailout’s final €7.2bn aid tranche.

In a series of meetings in Brussels, Mr Tsipras was told his cash-strapped government must quickly decide whether to accede to more economic reforms or face bankruptcy.

“We need decisions, not negotiations, now. It’s my opinion that the Greek government has to be, I think, a little more realistic,” said Donald Tusk, the European Council president, who met Mr Tsipras privately on Wednesday.

“There’s no more space for gambling, there’s no more time for gambling. The day is coming, I’m afraid, where someone says the game is over.”

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IMF: Greek Bailout Talks Stopped Amid Lack of Progress

by Ian Talley

wall Street Journal
June 11, 2015

The International Monetary Fund has halted bailout talks with Greece after a failure to make progress in negotiations, the IMF’s top spokesman said Thursday.

“There are major differences between us in most key areas,” said IMF spokesman Gerry Rice.

“There has been no progress in narrowing these differences recently. Thus, we are well away from an agreement,” he said.

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A Greek Suicide?

by Anatole Kaletsky

Project Syndicate
June 11, 2015

The good news is that a Greek default, which has become more likely after Prime Minister Alexis Tsipras’ provocative rejection of what he described as the “absurd” bailout offer by Greece’s creditors, no longer poses a serious threat to the rest of Europe. The bad news is that Tsipras does not seem to understand this.

To judge by Tsipras’s belligerence, he firmly believes that Europe needs Greece as desperately as Greece needs Europe. This is the true “absurdity” in the present negotiations, and Tsipras’ misapprehension of his bargaining power now risks catastrophe for his country, humiliation for his Syriza party, or both.

The most likely outcome is that Tsipras will eat his words and submit to the conditions set by the “troika” (the European Commission, European Central Bank, and the International Monetary Fund) before the end of June. If not, the ECB will stop supporting the Greek banking system, and the government will run out of money to service foreign debts and, more dramatically, to pay Greek citizens their pensions and wages. Cut off from all external finance, Greece will become an economic pariah – the Argentina of Europe – and public pressure will presumably oust Syriza from power.

This outcome is all the more tragic, given that the economic analysis underlying Syriza’s demand for an easing of austerity was broadly right. Instead of seeking a face-saving compromise on softening the troika program, Tsipras wasted six months on symbolic battles over economically irrelevant issues such as labor laws, privatizations, even the name of the troika.

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Six Charts Show Six Months of Economic Unraveling for Greece

by Marcus Bensasson, Lorcan Roche Kelly & Nikos Chrysoloras

Bloomberg
June 10, 2015

Greece was in the early stage of an economic recovery when then-Prime Minister Antonis Samaras called a vote for a new president. The unraveling that followed shows just how fragile that recovery was.

Investors were the first to run for the hills, anticipating that the political stand-off would end in elections that would usher in Alexis Tsipras's anti-austerity Syriza party, and a confrontation with the country's bailout creditors.

Savers were not far behind, and with the economy drained of liquidity, Greece was officially back in recession by the end of March.

Already shorn of bond market access as Samaras's own efforts to seal deal to release more bailout funds floundered, the rout killed any lingering hopes that Greece could stand alone.

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The modern Greek tragedy

by Jeremy Bulow & Kenneth Rogoff

VOX
June 10, 2015

The conventional wisdom in Greece is that the nation has suffered years of excessive, Troika-imposed austerity in a short-sighted effort to extract maximum repayment. This column argues that, in fact, Greece was a net receiver of Troika funds from 2010 to mid-2014, with a modest reverse flow since Greece stalled on its reforms. Both sides have negotiated in their self interest – influenced by bargaining threat points that have had everything to do with the direct costs of default and little to do with Greece’s concern about its reputation for making repayments.

A European nation with a proud heritage, Greece is nevertheless still an emerging market in many respects, and its economy has suffered the kind of epic depression that entrenched high-income countries have managed to avoid, even in the Great Contraction. Greece’s per capita GDP (in dollars), which had risen from 41% of German levels in 1995 to 71% in 2009, was back to 47% by 2014. On a purchasing power basis the decline was nearly as significant, from 77% of German levels in 2008 to 57% in 2013.

The conventional wisdom, certainly in Greece, is that the country has suffered through five years of excessive austerity, imposed by the IMF and the EU (primarily led by Germany), in a misguided effort to repay the country’s private creditors and to suck cash out of Greece. This view, although often reinforced by some academic commentators, is wrong. The aim of this note is to lay out the facts as best as we can ascertain them. In doing so, we hope to help illuminate some of the underlying strategic bargaining issues in a way we hope will be of interest to both academics and to observers of Eurozone debt negotiations. (We look more directly at the theory of sovereign debt contracts, and how the Greece case might be illuminating, in a separate companion piece more narrowly directed at researchers.)

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‘Paperology’ continues, but mood darkens in Greece talks

by Peter Spiegel

Financial Times
June 9, 2015

Greece has submitted yet another last-minute economic reform proposal to its bailout creditors — and its creditors have once again dismissed it as lacking.

The back-and-forth was the latest document exchange between Athens and Brussels as Greece tries to break a months-long impasse and gain access to desperately needed bailout cash. The process has become numbingly familiar in recent weeks — so much so that the European Commission has even given it a name: “paperology”.

But the most recent exchange differed in one vital respect: the mood of cautious optimism that has surrounded the talks in recent weeks is rapidly giving way to fear and suspicion. Gone this time were the private reassurances that a deal would ultimately be concluded, allowing the Greek government to receive an infusion of euros before its bailout expires at the end of the month.

Instead, officials from various institutions involved in the talks now worry that Greece’s hard-left government is dangerously miscalculating. Athens, they believe, is intentionally prolonging the negotiations to the last minute in a belief that its creditors will eventually “blink” and agree to grant wholesale debt relief and new bailout cash with few strings attached.

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Greeks chose poverty, let them have their way

by Francesco Giavazzi

Financial Times
June 9, 2015

For more than five years, Greece has been Europe’s biggest concern. Instead of focusing on employment, or immigration, or the challenge of Vladimir Putin’s Russia, the continent’s attention has been on a country that represents 1.8 per cent of the eurozone’s economic output. It would be interesting to calculate how many hours Angela Merkel has dedicated to Athens in the past five years. Imagine President Barack Obama taking part in high-level talks for months on end, where little was on the agenda except the state of Tennessee. That, in effect, is what Europe’s heads of government have been doing.

In these five years the world has changed. China and India are undergoing profound transformations. The jihadis of the Islamic State of Iraq and the Levant (Isis) represent a new and serious threat to the west, as does Mr Putin’s revanchism. But European leaders, instead of devoting their summits to the question of how to best defend our economic and military interests, agonise over what to do about Greece.

Five years of negotiations that have achieved virtually nothing (the few reforms that had been adopted, like a small reduction in the inflated number of public sector employees, have since been reversed by the Syriza-led coalition). It is pretty clear that the Greeks have no appetite for modernising their society. They worry too little about an economy ruined by patronage.

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The Greek Trap

by Roger Cohen

New York Times
June 8, 2015

Trying to save Greece has become an exercise in the absurd. Greece is near-enough bankrupt. Most Greeks know that. It can never repay its debts, no matter how many deals with creditors are pulled out of a hat.

The country is now run by a radical left party whose ministers have close to zero executive experience. Their executive experience nonetheless exceeds their diplomatic experience. This stands at less than zero — and it shows. The party, Syriza, includes people who want to re-fight the Greek Civil War (1946-49) in the belief the Communists will triumph this time.

For now, the party’s main enemies are international creditors and of course the Germans, who want the Greeks to present a plan of some sort to balance their books before doling out more cash — about $8 billion in fact — as part of an enormous bailout program. The thing is, however, that Syriza was elected precisely to say foreign-imposed austerity had already done enough damage to Greece.

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G7 summit: Merkel says time is running out for Greece deal

BBC
June 8, 2015

German Chancellor Angela Merkel has warned that time is running out for a deal to keep Greece in the eurozone.

Speaking after the G7 summit in Germany, she said Europe would show solidarity but only if Greece "makes proposals and implements reforms".

Earlier, Greek Finance Minister Yanis Varoufakis said it was time to stop finger-pointing and find an agreement.

Other topics on the agenda at the G7 summit were climate change, countering extremism and the war in Ukraine.

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Greece and Creditors Head for the Brink

by Simon Nixon

Wall Street Journal
June 7, 2015

No one can be sure how the Greek drama will end, not least because it is no longer clear who, if anyone, is in control. Both sides have been bombarded for months by well-meaning advice to show flexibility and compromise to avoid an economic calamity in Greece and a geopolitical disaster for the eurozone and the world. Instead, positions have hardened to the point where the scope for compromise now looks vanishingly small.

Last week, Greece’s creditors offered what was effectively a take-it-or-leave-it deal to unlock Greece’s bailout cash before the program expires at the end of the month. Some eurozone officials had been hopeful that Prime Minister Alexis Tsipras would use a speech in the Greek Parliament to signal his willingness to accept the terms on offer. Instead, he called the proposal absurd and vowed to reject many of its key demands.

The creditors had clearly underestimated the scale of opposition to the proposals within Mr. Tsipras’s Syriza party and overestimated his willingness or ability to confront the party’s left wing. For his part, Mr. Tsipras appears to have overestimated how much flexibility he could expect from a process involving three independent, rules-based institutions with different mandates acting on behalf of 17 sovereign governments, each with its own political agenda. He called last week’s creditor proposal an “unpleasant surprise”—though the terms were broadly the same ones that the creditors have been demanding since June 2014, when the current bailout review began.

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A Defining Moment for Greek Leader

by Hugo Dixon

New York Times
June 7, 2015

What sort of man is Alexis Tsipras?

The next few days will define Mr. Tsipras, Greece’s prime minister. He will have to choose between saving his country and sticking with a bankrupt far-left ideology. If he is smart, he can secure a few more concessions from creditors and a goodish deal for Greece. If not, he will drag the country into the abyss.

For months, Mr. Tsipras has been trying to ride two horses simultaneously. He has wanted to stop Greece’s defaulting on its debts and quitting the euro, while increasing public spending and unwinding reforms that are making Greece more competitive.

The prime minister continued this tricky double act in a speech to the country’s Parliament on Friday. He dismissed proposals from the eurozone and the International Monetary Fund — calling them “irrational,” “illogical” or “absurd,” depending on who was doing the translating to English — while also saying Greece was ready to compromise and was closer than ever to a deal with its creditors.

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If You Think Greece’s Crisis Will End Any Time Soon, Think Again

by Ian Wishart, Nikos Chrysoloras & Andrew Mayeda

Bloomberg
June 8, 2015

Frustrated by Greece’s cat and mouse game with its creditors? Get used to it.

Even if Prime Minister Alexis Tsipras clinches the 7.2 billion euros ($8 billion) that creditors are withholding, he’s going to need another cash infusion shortly thereafter.

What will ensue is a renewed battle after almost five months of trench warfare. The beleaguered country requires a third bailout of about 30 billion euros, according to Nomura International Plc analysts Lefteris Farmakis and Dimitris Drakopoulos. Tsipras says any aid must be on his terms rather than those of governments whose taxpayers have forked out billions in the past five years to keep Greece in the euro.

“Any plausible deal at this stage is unlikely to do enough and it’s unlikely to be the end of the matter,” said Simon Tilford, deputy director of the Centre for European Reform in London. “This could just play out again and again.”

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Two dismal economic plans for Greece

by Wolfgang Münchau

Financial Times
June 7, 2015

There are now two proposals on the table — one from the creditors and one from Greece. What they have in common is that neither of them will fix the Greek economy. They do not even pretend. Both deserve to be rejected flat-out.

Whenever European technocrats enter long negotiations, they get lost in the technical detail and become constitutionally incapable of seeing the bigger picture. They can spend weeks discussing whether the 2016 primary surplus, before payment of interest on debt, should be 1.5 per cent or 2 per cent — seemingly unaware that the error margins of any of their projections exceed that small gap by a large multiple. The economic diplomats have lost sight of what this is all about — allowing Greece to survive, and eventually to prosper, within the eurozone.

There is a less charitable explanation. They might simply not care. Some of the creditors are only interested in keeping the show on the road come what may. In particular, they refuse to recognise officially that their loans to Greece will never be repaid. They know they misled their electorates about Greece, and do not want to be exposed, at least not while they are in office.

The main goal for Alexis Tsipras, Greek prime minister, meanwhile, is to stay in power. An agreement of the extend-and-pretend variety, which is the likely outcome of these negotiations if they end in success, may suit him. And thus the probability of a lousy deal that suits the negotiators but that will not help the Greek economy is high.

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Reform Is Not in Syriza’s Nature

by Takis Michas

Wall Street Journal
June 7, 2015

Greece’s negotiations with its creditors may finally come to a head this week. Last week Prime Minister Alexis Tsipras was presented with what creditors say is their best offer on revised terms for the bailout program, and Mr. Tsipras will soon meet with Germany’s Chancellor Angela Merkel and France’s President François Hollande. The hope is that Mr. Tsipras will face the reality that further concessions are unlikely to be forthcoming, and will accept somewhat lower targets for fiscal discipline in exchange for politically difficult pension reforms and other measures.

Mr. Tsipras may indeed be willing to strike such a bargain—for now. But no one should think that will be the end of the matter. Even if Greece’s governing Syriza party gives in to pressure and signs up for the demanded reforms, this doesn’t mean that they are going to be implemented.

The most likely outcome is that the reforms will be undermined by the ministers who are supposed to apply them. Then, after three or four months, the situation will once again reach crisis proportions, with Athens arguing that the program is not working and the creditors complaining that Syriza is not serious about implementing it.

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Greece takes one more step towards euro exit

Financial Times
Editorial
June 5, 2015

When a western European country delays repaying a loan to the International Monetary Fund using a mechanism previously employed by Zambia, it is safe to conclude that its economic governance has gone awry.

Greece announced this week that it would bundle together reimbursements to the IMF at the end of the month rather than meet the deadline for a single payment on Friday, a tactic last used by the southern African country 30 years ago.

This is not catastrophic. It does not mean the country is in general default to all its creditors. But it does underline that, with each passing week, Greece is heading closer towards rupture.

At best this means the imposition of capital controls; at worst it entails an irrevocable exit from the euro. This is neither inevitable nor desirable. Greece’s departure from the euro would damage its economy and weaken the long-term credibility of the currency union. Yet this is the primrose path down which Athens is heading.

Greece’s excuses are running out. This week, its creditors — the eurogroup of the currency’s member countries, the IMF and the European Central Bank — presented a more unified front than previously. In a paper, they proposed that Greece should increase VAT to improve a slipping fiscal position, commit to maintain deregulation of labour markets and enact cuts to its bankrupt pension system.

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Europe’s Last Act?

by Joseph E. Stiglitz

Project Syndicate
June 5, 2015

European Union leaders continue to play a game of brinkmanship with the Greek government. Greece has met its creditors’ demands far more than halfway. Yet Germany and Greece’s other creditors continue to demand that the country sign on to a program that has proven to be a failure, and that few economists ever thought could, would, or should be implemented.

The swing in Greece’s fiscal position from a large primary deficit to a surplus was almost unprecedented, but the demand that the country achieve a primary surplus of 4.5% of GDP was unconscionable. Unfortunately, at the time that the “troika” – the European Commission, the European Central Bank, and the International Monetary Fund – first included this irresponsible demand in the international financial program for Greece, the country’s authorities had no choice but to accede to it.

The folly of continuing to pursue this program is particularly acute now, given the 25% decline in GDP that Greece has endured since the beginning of the crisis. The troika badly misjudged the macroeconomic effects of the program that they imposed. According to their published forecasts, they believed that, by cutting wages and accepting other austerity measures, Greek exports would increase and the economy would quickly return to growth. They also believed that the first debt restructuring would lead to debt sustainability.

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Running Out of Options on a Deal With Greece

by Yannis Palaiologos

Wall Street Journal
June 4, 2015

After numerous false pronouncements of an imminent deal, negotiations between Athens and its creditors are now in the final stretch. By the end of next week we should know if an agreement is possible.

This week has seen the first substantive progress in some time, as the European Central Bank, European Commission and International Monetary Fund reached a consensus among themselves on the conditions they would demand from Athens in exchange for unlocking the remaining €7.2 billion ($8.11 billion) of aid from Greece’s 2012 bailout. Athens needs the cash to meet debt repayments due this month—and it needs an accord with creditors so that the ECB will continue to offer liquidity assistance to its struggling banks.

The offer represents a serious blow to Prime Minister Alexis Tsipras and his left-wing Syriza party, which rode to power in January promising to recast Greece’s relationship with its creditors. The only (not insignificant) success Mr. Tsipras can claim at this point is a reduction in the fiscal targets under the bailout. Creditors are proposing a budget-surplus target, excluding debt service, of 1% of gross domestic product in 2015, 2% in 2016, 3% in 2017 and 3.5% in 2018. The targets of the old program were 3% for 2015, 4.5% in 2016-7 and 4.2% in 2018. Mr. Tsipras signalled in Brussels early Thursday that he viewed the creditors’ proposal as positive on this front—and it is indeed quite close to the Greek proposal, which also rises to 3.5% in 2018.

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Alexis Tsipras grounded by dissent from within Syriza

by Kerin Hope

Financial Times
June 4, 2015

After four hours of discussions with EU leaders in Brussels on Wednesday night, Alexis Tsipras was planning to return on Friday in hopes of at last sealing a bailout deal with creditors.

But the Greek prime minister has been grounded by a torrent of anger and resistance from his Syriza party. Instead of flying to Brussels, he will on Friday be appealing to a restive parliament in Athens with his government — and the country’s financial future — on the line.

“The overwhelming sentiment in the [Syriza] parliamentary group will be one of rejection,” Antonis Kamaras, a Greek political commentator, said of the bailout terms being offered by creditors. “It’s hard to see how the leadership can prevail.”

Mr Tsipras had called Wednesday’s talks “constructive and friendly.” But a senior Greek official said the International Monetary Fund, which was not represented at the meeting, had imposed new conditions that had not been tackled in earlier negotiations in Brussels.

Back in Athens, Mr Tsipras later told aides: “Extreme proposals are not acceptable to the Greek government. We must all understand how much people have suffered in the last five years and games must stop being played at their expense.”

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An offer that Greece should not refuse

by Philip Stephens

Financial Times
June 4, 2015

Greece should take the deal. The country’s creditors have tabled what has all the appearances of a final offer. Alexis Tsipras’s government should accept it. Athens will not achieve better terms and the alternative of default and likely exit from the euro would be worse for the Greek people.

The signs are not encouraging. The creditors’ proposals were hammered out at a meeting hosted by Angela Merkel. For all the Greek brickbats hurled at Berlin, the German chancellor has been more anxious than many to keep it within the euro. She understands that the geopolitical consequences of its departure would reach well beyond the inevitable financial shock. A fair inference would say Ms Merkel has pushed the International Monetary Fund as far as it will go.

Greece’s immediate response has been that Mr Tsipras would be the one presenting what officials described as a “last, best offer”. A kind interpretation would be that the prime minister has to play the politics of managing anti-euro hardliners in his own party; a harsher one that he has still to realise it really is one minute to midnight.

When politicians promise the impossible, the odds are that they will be found out. That is what has happened to the Syriza government. It offered the voters a shortcut out of the country’s dire economic predicament. They could throw overboard fiscal retrenchment and tough economic reforms and keep the euro. Now it is evident Mr Tsipras cannot deliver. More than that: the pain is unavoidable with or without default, inside or outside the euro.

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The economic consequences of austerity

by Amartya Sen

New Statesman
June 4, 2015

On 5 June 1919, John Maynard Keynes wrote to the prime minister of Britain, David Lloyd George, “I ought to let you know that on Saturday I am slipping away from this scene of nightmare. I can do no more good here.” Thus ended Keynes’s role as the official representative of the British Treasury at the Paris Peace Conference. It liberated Keynes from complicity in the Treaty of Versailles (to be signed later that month), which he detested.

Why did Keynes dislike a treaty that ended the state of war between Germany and the Allied Powers (surely a good thing)?

Keynes was not, of course, complaining about the end of the world war, nor about the need for a treaty to end it, but about the terms of the treaty – and in particular the suffering and the economic turmoil forced on the defeated enemy, the Germans, through imposed austerity. Austerity is a subject of much contemporary interest in Europe – I would like to add the word ­“unfortunately” somewhere in the sentence. Actually, the book that Keynes wrote attacking the treaty, The Economic Consequences of the Peace, was very substantially about the economic consequences of “imposed austerity”. Germany had lost the battle already, and the treaty was about what the defeated enemy would be required to do, including what it should have to pay to the victors. The terms of this Carthaginian peace, as Keynes saw it (recollecting the Roman treatment of the ­defeated Carthage following the Punic wars), included the imposition of an unrealistically huge burden of reparation on Germany – a task that Germany could not carry out without ruining its economy. As the terms also had the effect of fostering animosity between the victors and the vanquished and, in addition, would economically do no good to the rest of Europe, Keynes had nothing but contempt for the decision of the victorious four (Britain, France, Italy and the United States) to demand something from Germany that was hurtful for the vanquished and unhelpful for all.

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Q&A: Greek pensions — deal or no deal

by Kerin Hope

Financial Times
June 4, 2015

After months of agonising bailout negotiations between Greece and its creditors, one issue has proven more fraught than the rest: pensions reform.

At the insistence of the International Monetary Fund, creditors are demanding that Athens tighten the screws on what they believe is an unaffordable system. Officials from Greece’s hard-left, Syriza-led government complain they have already made painful adjustments and are threatening to blow up the talks.

So how generous is the Greek pension plan? How does it compare to others in Europe?

Until the crisis struck, Greece’s pay-as-you-go state pension system offered some of the most generous benefits in the EU, with pensions in some sectors, such as banking, rising to more than 100 per cent of final salaries. Tales of public sector workers taking retirement as early as the age of 50 have angered citizens in Germany and other creditor countries.

Now, after eight cuts in four years, the situation looks very different. Main pensions have been slashed 44-48 per cent since 2010, reducing the average pension to €700 a month. Contributors to a supplementary scheme receive a top-up averaging €170 a month.

About 45 per cent of Greek pensioners receive less than €665 monthly — below the official poverty threshold.

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Chronicle of a struggle

Economist
July 6, 2015

Since taking office in January Greece’s radical-left government has been a model of inconstancy and incoherence. Yet one of its messages has been admirably consistent: that Greece’s problems belong to the entire euro zone. Over the past four months Greece’s creditors have become wearily accustomed to batting away grandiose proclamations by Alexis Tsipras’s band of merry men. But as their talks with the Greeks approach a crunch, this is a proposition they should take seriously.

Excluded from capital markets, Greece needs bail-out money to stay afloat. In exchange its creditors demand reforms and budget cuts designed, as they see it, to put Greece’s finances on an even keel. Elected to reject such austerity, the Syriza government began negotiations with smiles and good cheer. Yanis Varoufakis, the finance minister, toured Europe to explain that the euro zone would work for the benefit of all if only its leaders would abandon their self-defeating obsession with austerity. But as the mood has soured and talks have gone nowhere, the message has taken on a darker tone. In an opinion piece for Le Monde this week Mr Tsipras declared that the strategy adopted by Greece’s creditors risked “the split and division of the euro zone, and consequently of the EU”. Those who wish to maintain this approach, he suggested, should re-read Hemingway’s For Whom the Bell Tolls, a brutal account of the Spanish civil war.

It is understandable that the leader of a country staring into the abyss might be drawn to apocalyptic imagery. But Hemingway’s clipped sentences do not quite capture the absurdity that has marked the latest episode of the Greek saga. A better guide is surely Kafka. For the Greeks, the impenetrable “institutions” they have encountered, seemingly impervious to reason and answering only to their own mysterious laws, resemble the bureaucracy that breaks the spirit of Josef K in The Trial. Euclid Tsakalotos, a senior Greek negotiator who has a Marxist background, likens the creditors’ robotic insistence on demand-killing labour reform to the intransigence of Soviet pen-pushers.

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How Greece can cut a goodish deal

by Hugo Dixon

Reuters
June 4, 2015

Athens’ creditors haven’t quite delivered an ultimatum. But the latest bout of high-stakes diplomacy has left Greece with little wiggle room if it wants to avoid a messy default that unleashes economic and political chaos.

Alexis Tsipras, the prime minister, has the chance to go through one more round of negotiations. If he plays his cards well, he can probably secure somewhat less austerity from the euro zone and the International Monetary Fund, as well as an indication that the country’s debt burden will be relieved so long as it plays ball.

Tsipras would probably struggle to keep his radical left Syriza party united. But he should still sign the best deal he can negotiate. The consequences both for him and the country of not doing so would be terrible.

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Greece: Seeking a way forward

by Elias Papaioannou, Richard Portes & Lucrezia Reichlin

Vox
June 4, 2015

Greece seems to be on the verge of an agreement that would release much needed funds. This column argues that an agreement on completion of the second programme will not restore confidence, nor will it resolve the deep economic, financial and political uncertainties that confront Greece today. The focus should swiftly shift to the design of an efficient, realistic and truly reforming new programme.

Press reports suggest that Greece and the IMF, ECB, and European Commission (formerly known as the ‘troika’) may finally reach a tentative agreement on the completion of the final review of the current (second) economic adjustment programme. This would release funds that Greece needs to meet its obligations due over the next month. It would also allow the Greek government to make payments to suppliers that have been delayed over the past months.

While preferable to a descent into chaos, an agreement on completion of the second programme will not restore confidence, nor will it resolve the deep economic, financial and political uncertainties that confront Greece today. Policy mistakes and uncertainty have pushed the economy back into a recessionary spiral, with some evident increase in unemployment, deposit withdrawals, and a liquidity squeeze. Thus the focus should swiftly shift to the design of an efficient, realistic and truly reforming new programme.

Relations between Greece and its Eurozone partners and international lenders are fragile, marked by suspicion, distrust and polemical rhetoric. At the same time, within Greece there is rising polarisation of views on the country’s role in Europe. It is not helpful to assign blame for this situation, although there is quite enough to go around. Policymakers must look forward and must convince the citizens of Greece and its partners that the country has a viable future in the monetary union. Absent a credible long-term programme, even if only in outline form, whatever agreement may be reached now will not be fulfilled.

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A Speech of Hope for Greece

by Yanis Varoufakis

Project Syndicate
June 4, 2015

On September 6, 1946 US Secretary of State James F. Byrnes traveled to Stuttgart to deliver his historic “Speech of Hope.” Byrnes’ address marked America’s post-war change of heart vis-à-vis Germany and gave a fallen nation a chance to imagine recovery, growth, and a return to normalcy. Seven decades later, it is my country, Greece, that needs such a chance.

Until Byrnes’ “Speech of Hope,” the Allies were committed to converting “…Germany into a country primarily agricultural and pastoral in character.” That was the express intention of the Morgenthau Plan, devised by US Treasury Secretary Henry Morgenthau Jr. and co-signed by the United States and Britain two years earlier, in September 1944.

Indeed, when the US, the Soviet Union, and the United Kingdom signed the Potsdam Agreement in August 1945, they agreed on the “reduction or destruction of all civilian heavy-industry with war potential” and on “restructuring the German economy toward agriculture and light industry.” By 1946, the Allies had reduced Germany’s steel output to 75% of its pre-war level. Car production plummeted to around 10% of pre-war output. By the end of the decade, 706 industrial plants were destroyed.

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Greece seeking reparations

CBC
June 3, 2015

As Greece faces possible bankruptcy, it's demanding money from Germany for reparations for crimes committed by the Nazis.

Seeking compromise deal, Greece warns it might skip IMF payment

Reuters
June 3, 2015

Greece's international creditors signaled on Wednesday they were ready to compromise to avert a default even as a defiant Athens warned it might skip an IMF loan repayment due this week.

Prime Minister Alexis Tsipras agreed in a telephone call with German Chancellor Angela Merkel and French President Francois Hollande on the need for an immediate solution to the long-running debt negotiations involving a lower primary budget surplus target for Greece, a Greek official said.

Their third call in a week took place before Tsipras met European Commission President Jean-Claude Juncker in Brussels to hear the terms of a plan drawn up by the European Commission, the European Central Bank and the International Monetary Fund after a meeting of leaders chaired by Merkel on Monday.

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Spoiler alert: Greece won’t default. Not this week, at least.

by Matthew Karnitschnig

Politico
June 1, 2015

As Athens faces a Friday deadline to repay €301 million to the International Monetary Fund, the world is again on tenterhooks, waiting to see whether Greece wins another reprieve.

The spoiler answer is “yes.” After five years of rescue operations and hundreds of billions in aid, Europe is simply too vested in Greece to pull the plug now.

So the real question isn’t whether Greece gets a short-term lifeline this week, but what comes after. Athens may win enough money to get through June, but it will immediately need to secure a whole new bailout agreement to continue pay off its credit — far from a sure thing.

Europe’s heavyweights, in Berlin for a conference Monday, huddled at Angela Merkel’s chancellery late into the evening to craft a joint offer that could break the stalemate with Greek Prime Minister Alexis Tsipras. The group included French President François Hollande, ECB President Mario Draghi, IMF chief Christine Lagarde and European Commission President Jean-Claude Juncker. Lagarde and Draghi were surprise additions.

It “could well be that this is the most important evening in the last months,” a senior source said.

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Why Greece Will Cave—and How

by George Tsebelis

Foreign Affairs
June 2, 2015

Since the January 2015 election of a coalition government made up of the left-wing SYRIZA party and the right-wing ANEL (Independent Greeks) party, Greece has been in constant negotiation with the EU about reformulating the Greek bailout. Although Athens has often (but not always) denied it, any new deal will come with serious restrictions on the Greek people.

The negotiations are secret, but there are plenty of leaks on both sides. They traffic not in facts but in the impressions of people participating in, or close to, the talks. It is clear that the Greek government is relentlessly optimistic—it has been expecting an agreement “any day now” ever since the removal of Yanis Varoufakis, the Greek finance minister, from the chief negotiating position last month—whereas the rest of the EU cannot see striking a deal anytime soon.

In other words, the leaks and conflicting daily statements from participants offer little clarity about the real state of affairs. Beneath them, though, lie structural issues that imply the EU has the upper hand. In the negotiating game, the deck is stacked in the EU’s favor. In the Greek domestic game, it favors Greek Prime Minister Alexis Tsipras, who wants a compromise.

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How to Default on Sovereign Debt

by Odette Lienau

Project Syndicate
June 2, 2015

The financial brinkmanship over Greece’s debts has raised the question of whether (or when) the country will default. To be sure, it would be far better for Greece and its creditors to reach a negotiated solution. But that outcome is far from guaranteed. The Greek government barely managed to make a significant payment last month, and even larger payments fall due throughout the summer, starting in June with an installment of more than €1.5 billion on its liabilities to the International Monetary Fund.

As Greek officials consider their options, they would do well to bear in mind that there are better and worse ways to default on sovereign debt – especially given countries’ desire to reestablish their creditworthiness as soon as possible. In the coming weeks and months, the Greek government would be wise to consider three guidelines:

Don’t name-call: Default is painful, even if it does turn out to be the right choice in the long run. In the midst of all that pain, it is tempting to point fingers. But it is important to resist this urge. More likely than not, sovereign debtors will have to interact with the same creditors and international actors again. It is hard to know how much harm Argentina’s undiplomatic pronouncements during its default saga did to its efforts at navigating the United States’ legal system; what is clear is that its ill-considered official rhetoric did not help its case.

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What Happens if Greece Defaults on IMF Payments?

by Alen Mattich

Wall Street Journal
June 2, 2015

Greece’s creditors have hammered out a rescue deal to present Prime Minister Alexis Tsipras. Whether it gives enough ground to be acceptable to his anti-austerity Syriza government is another matter.

The timing is crucial.

If the Greek government agrees, its creditors will release the funds it needs to cover this summer’s raft of loan repayments. If not, the taps remain turned off and Greece will run out of money, possibly as early as Friday, when a €304 million ($334.4 million) International Monetary Fund loan falls due.

There is, however, a certain amount of flexibility.

There’s flexibility around just when the IMF would declare the loan in default. The process is outlined in the IMF’s 2014 guide to its Financial Operations.

Once the deadline passed, the relevant IMF executive director responsible for Greece would make contact with the Syriza government to urge prompt payment. At the same time, Greece wouldn’t be permitted to use any IMF resources or would any request be considered until the obligation is cleared.

If after two weeks the debt still hasn’t been repaid, IMF’s management make a direct appeal to Greek finance minister Yanis Varoufakis or his alternate, Yannis Stoumaras, making it clear how serious the situation is.

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Greece’s Creditors Reach Consensus on Deal Proposal to Athens

by Marcus Walker

Wall Street Journal
June 2, 2015

Greece’s creditors have reached a consensus on the terms of a proposed deal to put to the Greek government, according to two people familiar with the talks.

Officials representing European institutions and the International Monetary Fund on Tuesday morning completed the draft of an agreement to unlock bailout aid for Greece, after key European and IMF leaders met in Berlin late Monday to overcome differences between Greece’s creditors, they said.

Eurozone governments and the IMF have agreed to press Greece for far-reaching economic overhauls, while the IMF has softened its insistence that Europe offer explicit commitments to relieve some of Greece’s debt burden, the people said.

Greece’s high debt remains a contentious issue in the background between the IMF and European lenders, led by Germany, but isn't holding up the creditors’ proposal to Greece. IMF head Christine Lagarde warned at the Berlin meeting that debt restructuring will become necessary if Greece doesn’t enact thorough economic overhauls that improve its budget balance and lift its growth trajectory, these people said.

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The Bell Tolls for Greece, Too, Mr. Tsipras

by Marc Champion

Bloomberg
June 2, 2015

Greece and its creditors are running out of road to prevent a default. So a "J'accuse"-style article by Prime Minister Alexis Tsipras, in which he tries to pin blame for the impasse on the country's creditors and demands that they rethink their approach, is worth a careful read. There seems a good chance that it contributed to the decision of euro-area leaders to hold a top-level emergency meeting on Monday night.

The Op-ed in the French daily Le Monde appears to be part of a last-minute campaign by Greece's government to change the general perception that it has been a feckless negotiating partner, offering unserious proposals for economic reform while making equally unserious demands for Nazi war reparations from Germany, a major creditor. Tsipras also argues that the "the bell tolls" for the euro region and the International Monetary Fund if they don't stop making "absurd" demands. That threat, though, cuts both ways.

The core of Tsipras's argument is that, contrary to claims by Greece's negotiating partners that it routinely comes to the table "intransigent and without proposals," the Greek government has put forward a broad package of concrete reforms that has simply been ignored. So who is right? More importantly, who needs to do what if this slow-motion disaster is to be averted?

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Greek bailout monitors hold emergency summit

Financial Times
June 1, 2015

German chancellor Angela Merkel was on Monday evening hosting an emergency summit in Berlin over the Greek crisis to thrash out differences between the debt-laden country’s bailout monitors and to accelerate efforts to reach a deal with Athens.

Christine Lagarde, the managing director of the International Monetary Fund, and Mario Draghi, head of the European Central Bank, arrived secretly in Berlin on Monday to join France’s President François Hollande and European Commission president Jean-Claude Juncker, who were already in Berlin for a pre-arranged meeting with the German chancellor.

The hastily-called gathering comes amid mounting uncertainty about Greece’s capacity to keep paying its bills and tensions between the creditor organisations which are under intense pressure to release a desperately needed €7.2bn so that Greece can avoid a possible default and a rapid exit from the eurozone.

The long negotiations have seen differences emerging between the bailout monitors, and this summit was called to try and settle matters. The IMF has been holding to a tough line, out of respect for its own lending rules and regard for pressure from countries in other parts of the world, which say Athens has already enjoyed very favourable treatment.

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Greek ultimatum is a bad idea

by Hugo Dixon

Reuters
June 1, 2015

Should Greece’s creditors give the country an ultimatum? No. Not only is such a thing probably unnecessary, it could also play into the hands of Greek nationalists who would argue that foreigners were again bullying Athens. Besides, negotiations between Greece and its creditors are making progress, albeit still too slowly. Dictating to the Greeks would make any bust-up between the two sides particularly bitter.

Some take the opposing view. The Wall Street Journal’s Simon Nixon, for example, argued last week that talks between Athens and its lenders were going nowhere; so the euro zone and International Monetary Fund should present Greece with a take-it-or-leave-it offer, set a deadline, and say they would cut off its banks if it didn’t agree.

Even if such tactics made Athens come to heel in the short run, the government would have no ownership of the programme meaning there could be little confidence that it would implement it properly. Delivering on what is agreed is even more important than reaching a deal in the first place.

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Tsipras drops envoy to IMF amid pressure from Syriza hardliners

by Kerin Hope

Financial Times
June 1, 2015

Alexis Tsipras has cancelled the appointment of a controversial Athens economist as the country’s representative to the International Monetary Fund following pressure from hardline MPs in his increasingly restive Syriza party.

The Greek prime minister’s decision on Elena Panaritis, a former Panhellenic Socialist Movement (Pasok ) MP, social entrepreneur and World Bank analyst, signalled a heightening of political tension after Athens missed Sunday’s self-imposed deadline for a bailout agreement amid reports of creditors pushing for cuts in pensions and sharp rises in value-added tax, both rejected earlier by Mr Tsipras as “red lines” for the government.

If Greece fails to wrap up a deal this week to unlock €7.2bn of aid, it could run out of time to legislate and implement reforms before the bailout expires at the end of the month. In an article published in Le Monde on Monday, the premier claimed the EU and IMF had shrugged off substantial concessions made by Greek negotiators.

More than 40 Syriza lawmakers signed an open letter at the weekend demanding the immediate withdrawal of Ms Panaritis on the grounds she was not qualified to represent an anti-austerity government at the IMF.

“Her political background is completely at odds with the values, perceptions and policies which Syriza represents . . . This a wrong decision,” the letter said.

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Could a Parallel Currency Help Save Greece From Drowning?

by Peter Coy

Bloomberg
June 1, 2015

As Greece's financial plight worsens, an odd idea keeps popping up: a parallel currency alongside the euro that would circulate inside Greece and be used to pay for anything from taxes to food and clothing. Even German Finance Minister Wolfgang Schaeuble has said that Greece may need a parallel currency if talks with creditors fail, people familiar with his views told Bloomberg.

One version of the idea calls the second currency a TAN, for tax anticipation note. Another calls it a grec, for government reimbursement exchange credit. There's also the TCC, for tax credit certificate. In 2014, before becoming Greece's finance minister, Yanis Varoufakis pitched European governments on the FT-coin, where FT stands for future taxes and coin refers to bitcoin.

Details differ quite a bit, but the big idea is to free up euros to pay foreign debts and to juice economic growth by spreading more money around domestically. The money would be an IOU issued by the Greek government that could be passed from one person to another. The government could print a bunch of the new currency (or create electronic ledger entries if the currency is virtual) and spend it on whatever governments buy, including civil servants' salaries. People would in theory be willing to accept the money because it could be used to pay taxes.

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Greece: a clod of earth worth saving?

by Paul Mason

Channel 4
June 1, 2015

When prime ministers write articles they tend to be, like Tony Blair’s old speeches, full of soundbites designed to obfuscate meaning. But Alexis Tsipras is fighting for his political future.

Last week the Greeks thought they were tacitly offered a deal whereby, in return for some further concessions on austerity, they would get a much bigger long-term debt restructuring: a single deal placing common conditions on both the urgent and the long-term lending conditions. But they now fear that offer is unravelling.

The radical left government now faces being offered simply another extension of negotiations over the summer months, during which its banks will be drained of even more deposits and its weary population will lose faith some more.

So Tsipras has penned in the pages of Le Monde a detailed status update on the technical talks in Brussels between that hold the key to Greece avoiding default on Friday. Plus some Hemingway thrown in.

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Greece's endgame nears... really

Financial Times
June 1, 2015

On and on goes the Greek soap opera. Yet again, short-term bonds are swooning, and analysts are warning that we are reaching the end game. No, really this time.

Greek prime minister Alexis Tsipras and the monitors formerly known as the troika are clearly still not firm friends, judging from Mr Tsipras' latest in Le Monde.

The country's two-year bonds now yield 23.45 per cent, up by over a percentage point Monday. (Higher yields, of course, reflect lower prices.)

Bank analysts are sounding increasingly gloomy.

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Default and political survival in networked democracies since 1870

by Jeffrey Chwieroth, Cohen R. Simpson & Andrew Walter

Vox
June 1, 2015

Many fear that a Greek default would lead voters elsewhere in Europe to favour default over austerity. This column argues that it is more likely to have the opposite effect. Network interdependencies among countries affect the domestic politics of default because defaults are both rare and vivid. Foreign default increases the propensity for voters to punish their governments for failing to repay external private creditors.

Governments in Ireland, Portugal, and Spain have adopted a conspicuously hard line stance in negotiations with the new Greek government, partly out of concern that a Greek default would strengthen anti-austerity parties at home (Wyplosz 2015).1 How do we know if a default would have such an effect? Since most of the academic literature on the politics of debt default overlooks political and economic interdependence, it is not of much help in answering this question (Jackson et al. 2015). Our new research starts with the simple premise that interdependencies among different countries in economic networks are likely to have a profound impact on the politics of default (Chwieroth et al. 2015). Specifically, we provide evidence that foreign defaults tend to increase the propensity of voters to punish their own governments for failing to repay external private creditors.

Ultimately, our results suggest that a Greek default would be more likely to lower rather than to raise the political incentives for other European governments to default, contrary to the expectations of many commentators and political leaders.

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