Greek reforms on target for €2.8bn EU bailout

Jim Brunsden & Mehreen Khan

Financial Times
October 10, 2016

Eurozone ministers gave the go-ahead for Greece to receive €2.8bn in bailout money, as Athens met the deadline to implement reforms needed to unlock the funds.

Ministers meeting on Monday in Luxembourg confirmed that Greece has successfully met all the policy “milestones” in areas such as liberalising of the energy sector, pensions reform, bank governance and management of a new privatisation agency.

This marks a turnround compared with last month, when Greece’s finance minister, Euclid Tsakalotos, was chastised by eurozone counterparts for Athens’ slowness in implementing the measures needed to release the funds. At the time, Athens had completed only two of 15 reforms.

Speaking after the meeting, Pierre Moscovici, EU economic affairs commissioner, said “all remaining milestones have been completed”. Earlier he praised the “tremendous” work done by the government of Alexis Tsipras in implementing “difficult reforms for Greek society”.

The €2.8bn, which is a leftover from a larger tranche of money released earlier this year, had threatened to become a symbol of the euro area’s difficulties in getting Greece to comply with the conditions of its bailout programme.

More

Greece forecasts economic growth of 2.7% in 2017

by Helena Smith

Guardian
October 2, 2016

After more than half a decade of gruelling, austerity-driven recession, Greece has forecast economic growth in 2017, in what would be its first annual rebound in seven years.

Europe’s most indebted country will see growth of 2.7% next year partly as a result of an upsurge in tourism, according to the draft budget that Athens’s leftist-led coalition will table in parliament on Monday.

“We are at a turning point at which we can say, with certainty, that we are leaving the recession behind us,” the national economy minister, Giorgos Stathakis, said last week.

The blueprint, which officials hope will form the basis of talks when lenders begin a second review of the economy later this month, is expected to highlight better-than-expected tax revenues and renewed interest in investments under the country’s privatisation programme.

Insiders said Greece would easily meet its bailout goal of achieving a surplus – excluding debt-servicing costs – of 0.5% GDP this year. Its draft budget is projecting a 1.75% surplus for next year in line with last summer’s €86bn (£74bn) rescue programme.

More

Greece’s 2017 Budget Plan Sticks With Robust Growth Forecast

by Stelios Bouras

Wall Street Journal
October 3, 2016

Greece’s budget plan for 2017 sees the economy rebounding strongly after a seven-year slump, but analysts say continued austerity and tight credit conditions are likely to weigh on its recovery prospects amid uncertainty over the country’s public debt.

Finance Minister Euclid Tsakalotos submitted a draft copy of the budget to parliament on Monday that is expected to be finalized in coming weeks after the country resumes talks with lenders on its reform program.

The 53-page budget sticks with Greece’s previous forecasts that the economy is expected to contract by 0.3% this year before growing by 2.7% in 2017. Many see these targets as too optimistic, saying the economy is now entering a period of stagnation, rather than growth, having shrunk by more than 25% since the debt crisis erupted in 2010.

“Although there are some indications pointing to some stabilization in the economy, tight fiscal policy, difficult credit conditions and muted external growth are expected to limit the recovery in 2017,” said Diego Iscaro, senior economist at consulting firm IHS Global Insight. Mr. Iscaro projects the Greek economy will grow by 0.7% next year.

More

What’s Derailing Greece’s Plan to Sell State Assets? Its Own Government

by Nektaria Stamouli

Wall Street Journal
October 3, 2016

The day that Christos Spirtzis became responsible for much of Greece’s ambitious privatization program, he vowed to ensure it failed.

Greece’s leftist infrastructure minister has resisted every sale of roads, airports and trains, even though he and his government have promised to raise €50 billion from privatizations as part of the country’s international bailout.

“I hope the deal will not bear fruit,” the combative, chain-smoking former labor unionist said after his government, under pressure from Greece’s creditors, confirmed the sale of 14 regional airports to a German investor. He backed calls for local referendums to scuttle the deal. When he finally had to sign the contract, he did so “with a great deal of pain,” he told Greek radio listeners in a trembling voice.

The Greek government is at war with itself, and that is threatening to derail a key plank of Greece’s bailout, which consists of selling state assets to pay down debt and bring in foreign investment. Leaders in the ruling left-wing Syriza party are touring the world, from New York to Shanghai, lobbying investors to come to Greece and help kick-start its depressed economy. But Syriza’s roots in the Marxist, anti-globalization left make privatization a bitter pill.

More

Greece’s Least Wanted Man Lives in Maryland

by Robert Schmidt

Bloomberg
September 30, 2016

For 21 years, Andreas Georgiou worked in relative obscurity as an economist at the International Monetary Fund in Washington. When the European debt crisis hit and his home country of Greece began teetering toward bankruptcy, Georgiou felt a patriotic urge to help. In early 2010 he applied online to run a newly created office designed to clean up Greece’s much maligned economic statistics. He got the job, and in August 2010 he moved to Greece for a five-year term as president of the Hellenic Statistical Authority.

Six years later, rather than being seen as a hero who helped fix Greece’s broken finances, Georgiou is vilified there. His review of the country’s public accounting exposed years of bogus statistics and along the way made him a target for critics who blame him for the strict austerity measures Greece’s creditors imposed. Last year, Georgiou, 55, moved back to suburban Maryland and now faces a variety of civil and criminal charges in Greece, including one that could put him in prison for life. “This is beyond my wildest imagination,” says Georgiou, who says he feels at times as if he’s living in a Kafka novel. “This would be funny if it weren’t so tragic.”

After arriving in Greece, Georgiou quickly realized that entrenched forces were aligned against him. Within months he discovered his e-mail had been hacked after a member of the board that oversaw the statistics office, known by its acronym, Elstat, showed him a copy of a message he’d written. Although that board was later replaced, its members were especially upset, Georgiou says, that they didn’t get to vote on the stats before he released them. “I told the staff that we are going to draw a line in the sand,” he says. “I don’t care what you did before. We are going to go by the book.”

More

4.1 Miles

by Daphne Matziaraki

New York Times
September 28, 2016

When I returned home to Greece last fall to make a film about the refugee crisis, I discovered a situation I had never imagined possible. The turquoise sea that surrounds the beautiful Greek island of Lesbos, just 4.1 miles from the Turkish coast, is these days a deadly gantlet, choked with terrified adults and small children on flimsy, dangerous boats. I had never seen people escaping war before, and neither had the island’s residents. I couldn’t believe there was no support for these families to safely escape whatever conflict had caused them to flee. The scene was haunting.

Regardless of the hardship Greeks have endured from the financial crisis, for a long time my home country has by and large been a peaceful, safe and easy place to live. But now Greece is facing a new crisis, one that threatens to undo years of stability, as we struggle to absorb the thousands of desperate migrants who pour across our borders every day. A peak of nearly 5,000 entered Greece each day last year, mainly fleeing conflicts in the Middle East.

The Greek Coast Guard, especially when I was there, has been completely unprepared to deal with the constant flow of rescues necessary to save refugees from drowning as they attempt to cross to Europe from Turkey. When I was there filming, Lesbos had about 40 local coast guard officers, who before the refugee crisis generally spent their time conducting routine border patrols. Most didn’t have CPR training. Their vessels didn’t have thermal cameras or any equipment necessary for tremendous emergencies.

More

A New Twist on Greece’s Old-Style Dysfunction

by Yannis Palaiologos

Wall Street Journal
September 28, 2016

There’s been a lot of hand-wringing in Europe about the rise of right-wing populism, about the clampdown on media freedom and judicial independence in places such as Hungary and Poland. But Greece’s populist government, led by the hard-left Syriza party, seems to share many of the same authoritarian instincts of its formerly communist partners, whose values Syriza claims to abhor.

On Sept. 15, corruption prosecutors in Athens raided the advertising business of Lina Nikolopoulou-Stournara, whose husband, Yannis Stournaras, is the governor of Greece’s central bank. The raid was ostensibly part of an investigation into funds allegedly misused by KEELPNO, Greece’s centre for disease control.

But this raid had been ordered by the corruption prosecutor, Eleni Raikou, and not the magistrate responsible for the case, which is highly irregular. It occurred merely a few hours after Mr. Stournaras had notified the government that he was vetoing its picks for key positions, including the CEO and chairman, of the board at Attica Bank. Attica is a troubled lender closely linked to the construction sector. Mr. Stournaras further declared that until the leadership question was resolved (as it since has been, on his terms), all lending by Attica Bank would be frozen.

Mr. Stournaras has long been the villain in Syriza’s version of the Greek crisis. Their first skirmishes came when, as minister of development in the country’s caretaker government from May to June 2012, Mr. Stournaras tried to push through a number of major investments. Syriza accused him of attempting a “political coup d’etat.”

More

Fatigued Investors Want Draghi to Buy Greece Before They Do

by Nikos Chrysoloras

Bloomberg
September 28, 2016

Michel Danechi isn’t buying the Greek turnaround story just yet.

As Greek business leaders and government officials presented to investors last week in London a list of reasons why valuations of the country’s assets make them attractive, Danechi’s Duet Asset Management took note. But what he wants to see is for Greece to show it can make good on pledges made to euro-area creditors so it can be included in the European Central Bank President Mario Draghi’s quantitative easing program.

“Valuation is there, but few believe that this government can deliver,” said Danechi, who helps oversee $1.5 billion in emerging-market assets at Duet. “If Greece goes into the QE program then the mood would turn automatically.”

Investors are in no rush to pour money into a market where the value of stock and bond holdings has been repeatedly crushed. In dozens of meetings at the annual Athens Stock Exchange roadshow, Greek executives were bombarded with well-worn questions about political risk, delayed reforms, lack of liquidity, excessive corporate taxes and an unfavorable business climate.

More

Athens approves fund to speed up privatisation programme

by Kerin Hope

Financial Times
September 27, 2016

The Greek parliament has approved a fresh package of structural measures required to unlock another €2.8bn slice of bailout funding, including the establishment of a controversial fund to accelerate the country’s lagging privatisation programme.

The ruling leftwing Syriza party and its rightwing coalition partner, the Independent Greeks, won Tuesday night’s vote by a comfortable margin, with hard-left MPs backing the government even though some had decried the sale of public utilities and transport companies as a “crime”.

Among the other measures legislated were additional pension system reforms and further liberalisation of the electricity market. Several other reforms, including sweeping board changes at Greek banks, will be enacted by decree.

Privatisation is an especially sensitive issue for the Syriza-led government, which has been reluctant to complete a series of sales agreed by the previous centre-right government, despite having endorsed them last year as part of Greece’s €86bn third rescue package.

Several extreme-left Syriza cabinet ministers attempted to delay specific deals, among them a €1.2bn concession agreement with Germany’s Fraport to operate 14 regional airports and the €370m sale of a controlling stake in Athens’ port of Piraeus to the China Cosco Shipping group.

More

EU's Dombrovskis: Greece government populism made adjustment worse

Reuters
September 26, 2016

Greece has had to go through tougher austerity than it would have otherwise been necessary, because of the populist stance of the left-wing government of Alexis Tsipras in 2015, European Commission Vice-President Valdis Dombrovskis said on Monday.

Tsipras, who took power in January 2015, rejected belt-tightening in public finances requested by lenders in exchange for emergency loans and reversed some of the reforms introduced by the previous Greek governments.

As new loans were frozen, Greece defaulted on the International Monetary Fund in July 2015 and had to introduce capital controls to prevent its banking system from collapse.

"Populism doesn't solve problems. Populism creates problems," Dombrovskis told a round-table in Riga in a discussion on the growing support for populist parties in many EU countries.

More

Plan to Let Migrant Children Attend School Enrages Many Greeks

by Niki Kitsantoni

New York Times
September 25, 2016

Mariya bint Loqman Abdlkarim is 9. She arrived in Greece in February after fleeing Syria with her family and crossing from Turkey in a rickety boat. Since then, she has been living in a shabby state-run camp, her future uncertain, her present reduced to the bare necessities.

Not long ago, the Greek government decided to give her a shot at something closer to a normal life: Along with 22,000 other refugee children, she would be allowed to attend public school starting in October.

But as with many aspects of Europe’s effort to cope with the huge numbers of migrants who have come to its shores, the plan quickly ran into intense opposition, in this case from parents in a number of communities near camps in northern Greece. The refugee children, the parents said, might have contagious diseases. Cultural differences, they said, might disrupt learning.

Last week, an association representing the parents of schoolchildren in the small town of Filippiada in western Greece sent a letter to local officials and the Education Ministry, saying “explicitly and categorically that we will not accept, under any circumstance and without any compromise, that the children of so-called irregular immigrants” attend local schools, referring to migrants entering the country illegally.

“They come from another continent with completely different diseases and health conditions,” the letter said, adding that the refugees have a “different outlook regarding the role of the family, of women, of religion.” Their presence would “alter the Greek character of the schools,” the letter said, adding, “We will not allow religious fanaticism.”

More

Greece: Staff Concluding Statement of the 2016 Article IV Mission

International Monetary Fund
September 23, 2016

A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF's Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.

The authorities have consented to the publication of this statement. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.

1. Greece has made significant progress in unwinding its macroeconomic imbalances, but growth has remained elusive and risks are high. Greece has managed to reduce its fiscal primary and current account deficits from double digits to around zero over the last six years. This is an impressive adjustment for a country belonging to a currency union, where policy levers are limited. The initial fiscal adjustment was based on important reforms. However, it has become increasingly reliant on one-off and ad-hoc adjustments that could not be sustained, denting policy credibility. Recurrent political crises and confidence shocks associated with the inability to sustain the reform effort resulted in a high cost for society, with output having declined by 25 percent and still stagnating, and unemployment and poverty rates remaining much higher than before the crisis. Looking forward, growth prospects remain weak and subject to high downside risks, and unemployment is expected to stay in the double digits until the middle of the century.

More

The Firefighter’s Lament

by Marcus Walker

Wall Street Journal
September 22, 2016

The Greek debt crisis is one of the great economic debacles of modern times. A country’s sins caught up with it in 2009. A continent dithered and fluffed its response. A spreading panic threatened the euro and the world’s recovery from the Great Recession.

Seven years on, the effects linger. Greece is stuck in the deepest depression in a developed economy since the 1930s. Southern Europe is suffering a lost decade. The European Union has become a byword for economic pain, making it an easy target for both the anti-capitalist left and the nationalist right. The euro has survived, but as an unhappy marriage with prohibitive divorce costs. How many European countries would choose it again?

What went wrong is still hotly disputed. Clashing popular narratives stress the laxity of Mediterranean debtors or the coldness of German-led creditors. Experts variously blame the euro’s inherent flaws or avoidable policy errors.

Getting the story right matters for finding a better ending, not least in Greece. For years leading up to 2009, Greece’s governments burned through money and hid the fact. Today much of the country has forgotten the arsonists who laid the fire and blames instead the firefighters who tried, albeit haplessly, to put it out.

Game Over: The Inside Story of the Greek Crisis tells the tragedy of a firefighter overwhelmed by the scale of the blaze. George Papaconstantinou, a British-educated economist whose career in politics proved short, will forever be remembered as the finance minister who signed “the memorandum” in May 2010: Greece’s €110 billion bailout deal, worth $144 billion at the time, with the German-led eurozone and the International Monetary Fund. The deal was German tough love: It saved Greece from bankruptcy but at the cost of drastic austerity that deepened its slump and broke its morale. The economy lost a quarter of its jobs and output.

More

Syriza lifts block on €8bn tourist project at old Athens airport

by Kerin Hope

Financial Times
September 22, 2016

Construction on an €8bn private project to redevelop a sprawling coastal site south of Athens as a tourism and leisure hub has been cleared to begin this year after Greece’s parliament gave its backing on Thursday.

The leftwing Syriza-led government dropped its opposition to the scheme after the privatisation agency, Taiped, tightened the terms of a sale-and-lease agreement that the previous centre-right led administration had signed with an international investor consortium.

Alecos Flambouraris, minister for co-ordination and a senior Syriza member, told parliament before Wednesday’s vote to ratify the project: “We are [still] against privatisation but we are in favour of the development of publicly owned real estate.”

It would be the most ambitious development project ever undertaken in Greece. Few in Athens believed it would go ahead even with pressure from bailout creditors, given the snail-paced progress of privatisation under successive governments.

More

In interview, Tsipras sketches out path for Greece to exit crisis

by Arshad Mohammed & Lesley Wroughton

Reuters
September 23, 2016

Greece's prime minister on Tuesday sketched out a path he hopes will finally allow his country to exit its seven-year-old economic crisis, holding out the possibility of positive growth this year and a partial return to the bond markets in 2017.

Alexis Tsipras told Reuters in a rare interview that government revenues and tourist flows have been strong and that Greece could grow by 0.2 to 0.4 percent this year, well above Eurostat's forecast for a 0.3 percent contraction.

Asked if he thought Greece could meet or exceed Eurostat’s forecast of 2.7 percent growth for next year, Tsipras noted that it had exceeded the predictions so far this year and said that he expected "the same" for 2017. However, he said this would depend on the messages sent to the financial markets and whether there is a return of foreign investment.

He also said he hoped Greece could within the next six months be included in the European Central Bank's quantitative easing (QE) programme from which it has so far been excluded because of its low credit rating.

If that happens, it could then test markets’ appetite for Greek debt next year. "I think that will be a strong message we will be ready to prepare the procedure to issue bonds," he said.

More

Tsipras Defeat in Attica Battle Bolsters Bank of Greece Governor

by Marcus Bensasson

Bloomberg
September 21, 2016

Advantage Yannis Stournaras.

In the battle of wits between Greece’s central bank governor and Prime Minister Alexis Tsipras, the former seems to have won the latest round, giving him a leg up should he harbor any ambitions of a return to politics.

Stournaras, a former finance minister, threatened to put Attica Bank under administration if it didn’t appoint his nominee as chief executive officer. The move ruffled feathers in the government, which sees Attica -- majority owned by state-backed pension funds -- as a vehicle of influence over the financial sector as the only lender falling outside the European Central Bank’s direct regulatory purview. Faced with Stournaras’s threat, Attica shareholders backed his nominee on Tuesday, bolstering the Bank of Greece governor who has questioned Tsipras on everything from his tax-heavy fiscal policies to his dealings with creditors.

“There’s a cold war going on between the two that occasionally flares into skirmishes,” said Aristides Hatzis, a professor of law and economics at the University of Athens. “In Syriza and the government there are a lot of voices that want to see Stournaras’s head roll, but the leadership understands it can’t do that because he has the ECB’s backing.”

More

Fire at Lesbos migrant camp highlights mounting despair

by Kerin Hope

Financial Times
September 20, 2016

A fire that swept through an overcrowded camp for refugees and migrants on the Aegean island of Lesbos serves as a stark reminder of the worsening conditions faced by more than 60,000 asylum seekers stranded across Greece.

Tensions were running high in the Moria camp even before Monday night’s blaze, which broke out after a clash between Afghans and Pakistanis over food distribution, engulfing scores of tents and containers that provided shelter for about 4,500 people in facilities designed for around 2,500.

More than 3,000 asylum-seekers were evacuated, a Greek police official said. There were no casualties but the UN High Commission for Refugees, which has a presence at the camp, said more than 30 people with light injuries were treated at a local hospital.

The fire also burnt nearby farmland and olive groves, further angering local residents who have grown increasingly resentful of the asylum seekers over the summer as foreign tourist arrivals plunged and Greek visitors also stayed away.

More

Brunnermeier, James & Landau, "The Euro and the Battle of Ideas"

The Euro and the Battle of Ideas
Markus K. Brunnermeier, Harold James & Jean-Pierre Landau
Princeton University Press, 2016

Why is Europe’s great monetary endeavor, the Euro, in trouble? A string of economic difficulties in Greece, Ireland, Spain, Italy, and other Eurozone nations has left observers wondering whether the currency union can survive. In this book, Markus Brunnermeier, Harold James, and Jean-Pierre Landau argue that the core problem with the Euro lies in the philosophical differences between the founding countries of the Eurozone, particularly Germany and France. But the authors also show how these seemingly incompatible differences can be reconciled to ensure Europe’s survival.

As the authors demonstrate, Germany, a federal state with strong regional governments, saw the Maastricht Treaty, the framework for the Euro, as a set of rules. France, on the other hand, with a more centralized system of government, saw the framework as flexible, to be overseen by governments. The authors discuss how the troubles faced by the Euro have led its member states to focus on national, as opposed to collective, responses, a reaction explained by the resurgence of the battle of economic ideas: rules vs. discretion, liability vs. solidarity, solvency vs. liquidity, austerity vs. stimulus.

Weaving together economic analysis and historical reflection, The Euro and the Battle of Ideas provides a forensic investigation and a road map for Europe’s future.

Markus K. Brunnermeier is the Edwards S. Sanford Professor of Economics at Princeton University and Director of Princeton's Bendheim Center of Finance. He has written extensively on financial crises and monetary policy. Harold James is professor of history and international affairs and the Claude and Lore Kelly Professor of European Studies at Princeton University. His books include Making the European Monetary Union and Europe Reborn. Jean-Pierre Landau is former deputy governor of the Banque de France and executive director of the International Monetary Fund and the World Bank. He is associate professor of economics at Sciences Po in Paris.

Greek Government, Central Bank Seek to Defuse Tension over Lender

by Stelios Bouras & Marcus Walker

Wall Street Journal
September 18, 2016

Greece’s government and central bank sought to defuse a power struggle over a troubled lender, which has reignited tensions between the central bank and the ruling left-wing Syriza party.

Prime Minister Alexis Tsipras met with Bank of Greece Governor Yannis Stournaras on Saturday in a bid to smooth a row over who should run Attica Bank, a lender that finances public-works contractors, 57% of whose loans are nonperforming.

“There is no plan to sideline me,” Mr. Stournaras told reporters, responding to suggestions that the government was seeking to weaken the independent central bank. A senior government official said there were “no shadows” over relations with the Bank of Greece.

The spat escalated in recent days when police raided a business owned by Mr. Stournaras’s wife, the morning after Mr. Stournaras had told the government he wouldn’t approve its preferred candidate for chief executive of Attica Bank.

More

Greek prosecutors raid offices of central bank chief’s wife

by Kerin Hope

Financial Times
September 15, 2016

Greek prosecutors have raided an office belonging to the wife of Yannis Stournaras, the central bank governor, as part of an anti-corruption investigation allegedly linked with the consulting company she owns, a bank official said.

The probe concerns an EU-funded advertising campaign for a Greek state organisation in which Mindwork Business Solutions, a consulting company owned by Lina Nicolopoulou, the governor’s wife, took part as a subcontractor.

Documents and electronic material belonging to Ms Nicolopoulou and her team were seized, according to Proto Thema, a Greek news website that first reported the raid.

Officials at the Athens prosecutor’s office and the government’s anti-corruption department could not be reached for comment.

Ms Nicolopoulou strongly denied wrongdoing. “The real target is my husband who is being attacked in order to serve specific political purposes,” she said.

More

Greek foot-dragging on reform hampers rise of EU’s ‘Club Med’

by Tony Barber

Financial Times
September 12, 2016

Just when his government’s indolent attitude to economic reform is again exasperating Greece’s eurozone partners, Alexis Tsipras presided over a mini-summit of southern European leaders that was the diplomatic equivalent of a poke in the eye to Germany and other creditors.

Friday’s seven-nation meeting in Athens, to which the leftwing Greek premier invited representatives of Cyprus, France, Italy, Malta, Portugal and Spain, produced a familiar list of rather unfocused demands for EU economic policies, putting the accent on growth and employment instead of austerity.

In the eyes of Germany, the Netherlands and other northern eurozone nations, the mini-summit was more significant for giving an unwelcome foretaste of how a caucus of southerners might emerge as a vocal lobby in the EU after Britain’s departure reduces the bloc to 27 members.

Markus Ferber, a conservative Bavarian deputy in the European Parliament, voiced concern that “the ‘Club Med’ group, after Britain’s exit, will possess a blocking minority, with which they will obstruct all the laws that don’t suit them”. Mr Ferber described this group as “a strong coalition of reform-resistant redistributors”.

More

Tsipras relying on 'political theater'

CNBC
September 12, 2016

Wolfango Piccoli, co-president at Teneo Intelligence, says that Greek Prime Minister Alexis Tsipras' disagreements with financial authorities are unhelpfully "wasting time."

Greece’s Alexis Tsipras Seeks to Revive his Political Fortunes on Economic Promises

by Nektaria Stamouli & Marcus Walker

Wall Street Journal
September 12, 2016

Greek Prime Minister Alexis Tsipras, languishing in polls, sought to reboot his premiership over the weekend. But his economically depressed country has largely given up hope on the imminent change he is promising.

Europe’s most electorally successful populist has become nearly as unpopular as the Greek political establishment he ousted almost two years ago. A recent survey showed only 19% of Greeks view him favorably and 85% are dissatisfied with his government.

Such low approval ratings—familiar to Europe’s least-popular establishment politicians, such as French President François Hollande—reflect how the star of the eurozone’s antiausterity movement has come down to earth.

Because of its deep economic crisis, Greece was ahead of the rest of Europe in the revolt against mainstream centrist parties. Elsewhere, antiestablishment populists of the anticapitalist left and the nationalist right are now on the rise. In Greece, they have been partners in government since early 2015, in a coalition led by Mr. Tsipras’s left-wing Syriza party, and their appeal is on the wane.

More

Tsipras seeks influence for Mediterranean states

by Kerin Hope & Jim Brunsden

Financial Times
September 9, 2016

The leaders of five Mediterranean EU member states convened in Athens in the hope of cementing a political alliance that will allow them to exercise more influence over European policymaking on economic growth, regulating flows of asylum seekers and tackling social inequality.

“Our countries were hardest hit by the economic crisis . . . and are now on the front line of the migrant inflows . . . We need a common approach, common positions,” said Alexis Tsipras, the Greek prime minister, who hosted Friday’s gathering of heads of state and government of France, Portugal, Greece, Cyprus and Malta.

For Mr Tsipras himself, who first proposed the idea of an EU “southern front”, with the backing of François Hollande, the French president, the summit was an opportunity to play a new role.

The Greek premier has recast himself within days from radical opponent of austerity policies to a European statesman committed to building a broad-based regional initiative.

Left-of-centre leaders across the continent, many of them hit by falling approval ratings, seized on Mr Tsipras’s proposal. It was first aired two weeks ago in Paris, where Mr Tsipras was attending a meeting of European socialist leaders as an observer.

Yet Greece’s lacklustre record on economic reform suggests that Mr Tsipras may lack credibility in his new role.

More

Syriza Strains Greece’s Credibility

by Yannis Palaiologos

Wall Street Journal
September 7, 2016

Independent institutions remain anathema to the government in Greece. Two cases that have dominated the headlines in recent weeks demonstrate how the country’s populist government, led by the hard-left Syriza party, continues to put politics before reform and refuses to learn the right lessons from the country’s recent past.

The criminal case against economist Andreas Georgiou returned to the spotlight last month when it was reopened by the country’s Supreme Court. A longtime official with the International Monetary Fund, Mr. Georgiou had been appointed six years ago to head the independent Hellenistic Statistical Authority, or Elstat. The prime minister at the time, George Papandreou, created Elstat as a response to the discovery that the government under his predecessor, Costas Karamanlis, had underreported the country’s fiscal deficit.

After an exhaustive review, Mr. Georgiou revised the 2009 deficit figure upward to 15.4% of gross domestic product from 13.6%. Elstat’s European Union counterpart, Eurostat, fully accepted the result, as it did all subsequent figures produced by Elstat during Mr. Georgiou’s five-year term. The age-old practice of putting asterisks of doubt next to Greece’s budget numbers ceased after 2010.

More

‘Game Over’ by George Papaconstantinou

by Peter Spiegel

Financial Times
September 5, 2016

George Papaconstantinou had already resigned as Greece’s finance minister and was holidaying with his Dutch wife’s family near Amsterdam when he received the news: the so-called Lagarde list of wealthy Greeks with secret Swiss bank accounts had allegedly been interfered with. Three names had been deleted. They were all Papaconstantinou’s relatives. The implications were clear.

“Certain moments in life are kept in the memory for ever, in every vivid detail,” he writes of accusations he tampered with the list while in office. “I still remember the shock and disbelief, the dizziness, the anger.”

For the next two years, the UK and US-educated economist would be at the centre of the highest-profile Greek political show trial in a generation. Ultimately, a special court would acquit him of all but a misdemeanour charge after investigators found the tampered USB stick was not the one he handed to Greek financial investigators. But the trial, concluded last year, is sadly relevant once again.

Game Over, Papaconstantinou’s memoirs of the six-year debt crisis, became a bestseller when published in Greece this year. The arrival of the English-language edition could not be better timed: Athens is again gripped by the impending trial of a political figure blamed for dragging the country into its pernicious eurozone bailout. Now in the dock is Andreas Georgiou, a former International Monetary Fund economist hired by Papaconstantinou in 2010 to set up a statistics agency as part of an effort to bring discipline to the government books.

More

The Hidden Costs of Volunteering in Greece

by Jacqueline Kantor

Pacific Standard
August 31, 2016

It’s been weeks since Heidi Liedtke left Greece, and still she dreams about the run-down room in an abandoned hospital where she taught English to a group of pregnant teenagers from Aleppo. Even now, her Facebook feed remains a constant stream of updates from Athens, most of her notifications from volunteer groups. Almost every day, she messages her friends back in Greece to make sure they’re all right and safe. Though Liedtke keeps looking up airfare to return, she knows going back will make it harder to leave a second time.

One month after graduating from American University, Liedtke flew to Greece in search of an opportunity to use her Arabic skills and understanding of the Middle East to help, in any way, with one of the biggest humanitarian crises of our time. As one of thousands of independent volunteers, she found herself in one of the most unusual aid situations to date, one that has led to under-qualified individuals handling complex issues.

People come to Greece in search of the opportunity to make some sort of dent in an issue that seems limitless; weeks later, when they emerge from the insular world of refugee volunteering, they find themselves out of their element and out of support.

“Typically I don’t talk about it [to family] because there’s so much to say that I don’t know where to begin,” Liedtke says. “What do I prioritize? The time I distracted a group of children’s attention from a fight on the other side of a caravan? The issues with voluntourism? I can’t sum it up in one conversation.”

More

Greece Auctions Off Broadcast Licenses

by Nektaria Stamouli & Marcus Walker

Wall Street Journal
August 31, 2016

Greece was auctioning off broadcast licenses on Wednesday in a move the left-led government says will clean up a corrupt media sector but that critics say is a bid for political control of TV.

Gathered in a government building in the Greek capital, executives from eight companies started the auction early Tuesday, with offers beginning at €3 million ($3,341,250) and increasing in increments of €500,000.

The sale, which will reduce the number of national private television stations from seven to four, was expected to continue until late Wednesday or early Thursday. Existing broadcasters who don’t win a license are required to go off the air within three months, the government has said.

Under the country’s bailout plan with international creditors, the government promised to auction broadcast licenses for the first time. Licenses have been granted without charge since Greece first allowed private broadcasting in 1989.

The decision by the ruling left-wing Syriza party to license only four channels, however, has outraged Greek media officials and the opposition, who accuse Prime Minister Alexis Tsipras of seeking to forge political alliances with favored business groups.

More

Greece May Face Aid-Payout Delay as EU Warns on Backsliding

by Jonathan Stearns

Bloomberg
August 29, 2016

Greece’s finance chief said the next international aid payout to the country may be delayed as the European Union stepped up warnings about domestic political meddling in the Greek state.

Finance Minister Euclid Tsakalotos raised the possibility of the government in Athens failing to qualify on time for a 2.8 billion-euro ($3.1 billion) disbursement due in September from the euro area. That’s what remains of a 10.3 billion-euro tranche that finance ministers approved in principle three months ago.

“If there is a delay, it’ll be days not weeks,” Tsakalotos told Bloomberg News in Brussels on Monday before a meeting with EU Economic Affairs Commissioner Pierre Moscovici. “Part of the reason for the meeting is to discuss the process to ensure there aren’t delays.”

Slipping timetables have been a regular feature of loan payouts to Greece since it first turned to the euro area and the International Monetary Fund for a rescue in 2010. Now in it’s third bailout, the country faces continued creditor warnings about backsliding on overhauls that are a condition for aid.

More

Former Greek chief statistician gets backing from Brussels

by Arthur Beesley

Financial Times
August 24, 2016

Brussels has urged Athens to repudiate claims that Greece’s national statistics agency produced false data under its former chief, intervening in a domestic criminal case that has angered the country’s international lenders.

The European Commission’s call for Greece to back Elstat, the country’s statistical body, has also raised questions over its bailout loans. Athens is required to uphold public support for the country’s statistics as a condition for international aid.

The commission stopped short of demanding a halt to criminal proceedings against Andreas Georgiou, who faces trial over allegations that Elstat inflated deficit figures, which supported the case for years of harsh austerity in a succession of bailouts. Mr Georgiou has denied any wrongdoing.

“The commission and Eurostat continue to have full confidence in the quality and reliability of the data delivered by Elstat during the term of office of Mr Georgiou,” the commission said in a letter to Athens on Wednesday.

More

Former Greek Statistics Chief Embattled at Home but Backed by EU

by Viktoria Dendrinou & Nektaria Stamouli

Wall Street Journal
August 24, 2016

The European Union urged Greece’s government to do more to protect the independence of its statistics agency, saying the country’s fiscal data in recent years had been accurate.

The row goes back to a case that lay at the heart of Greece’s economic and financial crisis. Greece has pledged repeatedly to ensure the statistics agency’s independence as part of its bailout programs in recent years. Failure to follow through on those commitments could potentially endanger future bailout payments.

In August, Greece’s Supreme Court ruled that Andreas Georgiou, the former head of statistics agency Elstat, should face trial over charges that he had artificially inflated figures for Greece’s 2009 budget deficit. The upward revision of the deficit numbers forced the government to undertake even deeper austerity measures as part of its 2010 bailout package

If convicted, Mr. Georgiou faces a prison sentence of up to 10 years. He has vigorously denied the allegations, saying he simply applied EU accounting standards.

More

Turkish soldiers asylum case strains Athens and Ankara relations

by Kerin Hope and Mehul Srivastava

Financial Times
August 19, 2016

The first of eight Turkish military officers who fled the country after a failed coup appeared before a Greek asylum committee on Friday in a case that has strained relations between Athens and Ankara — and within the ruling Syriza party.

The officers flew a military helicopter across the border after the attempt to topple President Recep Tayyip Erdogan last month.

Turkey is ratcheting up pressure on Alexis Tsipras, the Greek prime minister, to return the junior officers. While Turkish officials have pushed ahead with a formal extradition demand for the soldiers, they have not made any public statements criticising Greece.

This is in stark contrast to its near-daily attacks on the US for its refusal to extradite Fethullah Gulen, the self-exiled preacher blamed for the coup.

It is not known when the formal extradition hearings will be held, but two Turkish officials said this week that the return of the soldiers would show that Greece and the EU were serious about helping Turkey find the perpetrators of the coup. But the officials also made clear that their return was a symbolic issue, rather than a requirement to complete the investigation.

More

Greek Villagers Rescued Migrants. Now They Are the Ones Suffering.

by Liza Alderman

New York Times
August 17, 2016

Stratis Valamios revved the motor on his small white boat and steered under a thumbnail moon out of the harbor of this fishing village, perched on the northern tip of Lesbos, Greece’s third-largest island.

Skies were clear enough to see the purple mountains of Turkey a short distance across the Aegean Sea. It would be easy on this tranquil evening to catch calamari. These days, he needed a good haul to make ends meet.

A year ago, he and other fishermen in the tiny village, Skala Sikaminias, were making a more unusual catch: thousands of sea-drenched asylum seekers who streamed across the Aegean to escape conflict and poverty in the Middle East and Africa.

As one of the landfalls in Greece that is closest to Turkey, Skala Sikaminias, with its 100 residents, fast became ground zero for the crisis, the first stop in Europe for people trying to reach Germany in a desperate bid to start new lives.

“I’d be in the middle of the sea, and I would see 50 boats zigzagging toward me,” Mr. Valamios said, gazing across the narrow channel. “I would speed toward them, and they would throw their children into my boat to be saved.”

More

James Angelos, "The Full Catastrophe Travels Among the New Greek Ruins"

Penguin, 2015

A transporting, good-humored, and revealing account of Greece’s dire troubles, reported from the mountain villages, idyllic islands, and hardscrabble streets that define the country today

In recent years, small Greece, often associated with ancient philosophers and marble ruins, whitewashed villages and cerulean seas, has been at the center of a debt crisis that has sown economic and social ruin, spurred panic in international markets, and tested Europe’s decades-old project of forging a closer union.

In The Full Catastrophe, James Angelos makes sense of contrasting images of Greece, a nation both romanticized for its classical past and castigated for its dysfunctional present. With vivid character-driven narratives and engaging reporting that offers an immersive sense of place, he brings to life some of the causes of the country’s financial collapse, and examines the changes, some hopeful and others deeply worrisome, emerging in its aftermath. A small rebellion against tax authorities breaks out on a normally serene Aegean island. A mayor from a bucolic, northern Greek village is gunned down by the municipal treasurer. An aging, leftist hero of the Second World War fights to win compensation from Germany for the wartime occupation. A once marginal group of neo-Nazis rises to political prominence out of a ramshackle Athens neighborhood.

The Full Catastrophe goes beyond the transient coverage in the daily headlines to deliver an enduring and absorbing portrait of modern Greece.

Why the fate of Greece’s chief statistician matters

Financial Times
Editorial
August 15, 2016

No one loves the messenger who brings bad news. The sentiment expressed by Sophocles is as much in evidence as ever in Athens, where Andreas Georgiou, the former chief of Greece’s statistical agency, faces criminal charges of “undermining the national interest” — because he applied EU rules to produce an accurate calculation of the country’s budget deficit. The figures were validated by EU statisticians, but his critics accuse him of colluding with Eurostat to inflate the debt, and say Greece was forced to accept bigger loans and harsher austerity as a result.

There are many people at fault in this latest twist in the Greek debt crisis but Mr Georgiou is not among them.

First and foremost is the government led by Costas Karamanlis from 2004 to 2009 — responsible for the worst excesses of over-borrowing in the run-up to the global financial crisis, and for its persistent under-reporting. The campaign against Mr Georgiou looks like a vindictive attempt to shift the blame for Greece’s financial collapse from a discredited political class that still hopes to make a comeback.

The socialist government that succeeded Mr Karamanlis showed a similar suspicion of Mr Georgiou’s work. They appointed him to head Elstat, an independent statistical agency set up as a condition of Greece’s first bailout, but also installed two political appointees on its board to keep him in check — one of whom will soon go on trial charged with hacking Mr Georgiou’s computer.

Alexis Tsipras, the prime minister, pledged to reform Greece’s corrupt political system when he brought his radical Syriza party to power but he too appears content to see the case against Mr Georgiou go ahead. The statistician, who spent more than two decades at the International Monetary Fund, is too convenient a scapegoat for a party ideologically opposed to all the IMF represents. Above all, Mr Georgiou’s prosecution reflects a political culture in which facts and figures are a matter of negotiation and convenience, and not of objective reality. If statistics can be massaged and manufactured, then an unwelcome number must be an act of hostility — and it becomes easy to believe that a former IMF official implementing European rules is serving the interests of Greece’s creditors.

More

Greek statistician Andreas Georgiou hits back at criminal charges

by Kerin Hope

Financial Times
August 14, 2016

Statistics experts are open to criticism if the numbers fail to add up. But Andreas Georgiou, former chief of Greece’s statistical agency, says he is living in an upside-down world where he is being prosecuted for consistently getting them right.

Mr Georgiou and two colleagues are to face trial on criminal charges of undermining the “national interest”, according to a ruling last week by the Greek supreme court overturning their acquittal by a lower court.

The charges concern the alleged “inflation” of the budget deficit and debt figures for 2009, the year in which Greece plunged into an unprecedented financial crisis that prompted the first of three bailouts by the EU and the International Monetary Fund.

The case has sparked outrage from economists and statisticians worldwide who believe Mr Georgiou has become a scapegoat for Greece’s political class, which refuses to accept responsibility for the country’s financial collapse or take ownership of a bitterly contested seven-year programme of fiscal and structural reform.

More

Aid and Attention Dwindling, Migrant Crisis Intensifies in Greece

by Liz Alderman

New York Times
August 13, 2016

As her young children played near heaps of garbage, picking through burned corn cobs and crushed plastic bottles to fashion new toys, Shiraz Madran, a 28-year-old mother of four, turned with tear-rimmed eyes to survey the desolate encampment that has become her home.

This year, her family fled Syria, only to get stuck at Greece’s northern border with Macedonia in Idomeni, a town that had been the gateway to northern Europe for more than one million migrants from the Middle East and Africa seeking a haven from conflict. After Europe sealed the border in February to curb the unceasing stream, the Greek authorities relocated many of those massed in Idomeni to a camp on this wind-beaten agricultural plain in northern Greece, with promises to process their asylum bids quickly.

But weeks have turned into months, and Mrs. Madran’s life has spiraled into a despondent daily routine of scrounging for food for her dust-covered children and begging the authorities for any news about their asylum application. “No one tells us anything — we have no idea what our future is going to be,” she said.

“If we knew it would be like this, we would not have left Syria,” she continued. “We die a thousand deaths here every day.”

More

A year after the crisis was declared over, Greece is still spiralling down

by Helena Smith

Observer
August 13, 2016

In a side street in the heart of Athens, two siblings are hard at work. For the past year they have run their hairdressing business – an enterprise that was once located on a busy boulevard – out of a two-bedroom flat. The move was purely financial: last summer, as it became clear that Greeks would be hit by yet more austerity to foot the bill for saving their country from economic collapse, they realised their business would go bust if it continued operating legally.

“We did our sums and understood that staying put made no sense at all,” says one sibling. “If we didn’t [offer] receipts, if we avoided taxes and social security contributions, we could just about make ends meet.”

They are far from being alone. A year after debt-stricken Greece received its third financial rescue in the form of international funding worth €86bn, such survival techniques have become commonplace. For a middle class eviscerated by relentless rounds of cuts and tax rises – the price of the country’s ongoing struggle to avert bankruptcy – the draconian conditions attached to the latest bailout are invariably invoked in their defence. Measures ranging from the overhaul of the pension system to indirect duties – slapped on beer, fuel and almost everything in between – and a controversial increase in VAT are similarly cited by Greeks now reneging on loan repayments, property taxes and energy bills.

Against a backdrop of monumental debt – €320bn, or 180% of GDP, the accumulation of decades of profligacy – fatalism is fast replacing pessimism on the streets. “Our country is doomed,” sighs Savvas Tzironis, summing up the mood. “Everything goes from bad to worse.”

More

Greek Crisis, the Book. Or Actually Several of Them.

by Landon Thomas Jr.

New York Times
August 10, 2016

In May last year, James K. Galbraith, a left-leaning American economist, sent an email to Greece’s finance minister, Yanis Varoufakis, in which he argued that an exit from the eurozone would benefit Greece.

Mr. Galbraith, who was advising Mr. Varoufakis at the time, made the case that a new currency would wash away the country’s debts, solve Greece’s competitiveness problem and ultimately create what he called a “good society.” Though the step was opposed by most Greeks, he had drawn up a contingency plan for Greece under Mr. Varoufakis’s direction, in the event the country was forced to leave the currency zone by its creditors.

In the end, there was not a so-called Grexit. One year ago this month, after the polarizing finance minister left his post, Greece agreed to its third bailout with Europe, accepting yet another round of brutal austerity measures as the price for a new round of loans.

Mr. Galbraith’s vision of a sun-kissed utopia of powerful unions, small businesses and cultural exchanges was published in June in his book of essays, speeches and assorted memorandums (Welcome to the Poisoned Chalice; Yale University Press) describing the five months he spent as an unofficial member of Mr. Varoufakis’s inner policy circle.

More

N. Christodoulakis, "An Economic Analysis of Conflicts With an Application to the Greek Civil War 1946-1949"

Springer, 2016

This book provides a quantitative framework for the analysis of conflict dynamics and for estimating the economic costs associated with civil wars. The author develops modified Lotka-Volterra equations to model conflict dynamics, to yield realistic representations of battle processes, and to allow us to assess prolonged conflict traps. The economic costs of civil wars are evaluated with the help of two alternative methods: Firstly, the author employs a production function to determine how the destruction of human and physical capital stocks undermines economic growth in the medium term. Secondly, he develops a synthetic control approach, where the cost is obtained as the divergence of actual economic activity from a hypothetical path in the absence of civil war. The difference between the two approaches gives an indication of the adverse externalities impinging upon the economy in the form of institutional destruction. By using detailed time-series regarding battle casualties, local socio-economic indicators, and capital stock destruction during the Greek Civil War (1946-1949), a full-scale application of the above framework is presented and discussed.

The Greek crisis: An autopsy

by Pierre-Olivier Gourinchas, Thomas Philippon & Dimitri Vayanos

Vox
August 5, 2016

The Greek crisis is one of the worst in history, even in the context of recorded ‘trifecta’ crises – the combination of a sudden stop with output collapse, a sovereign debt crisis, and a lending boom/bust. This column quantifies the role of each of these factors to better understand the crisis and formulate appropriate policy responses. While fiscal consolidation was important in driving the drop in output, it accounted for only for half of that drop. Much of the remainder can be explained by the higher funding costs of the government and private sectors due to the sudden stop.

For its sheer intensity and duration, the Greek crisis has been quite unprecedented. One measure says it all – real income per capita declined every single year between 2007 and 2013, a cumulated drop of 26%. Since then, it has barely risen.

To put the Greek crisis in perspective, we compare it in Figure 1 with the sample of all ‘Trifecta crises’ since 1980 – the combination of a sudden stop with output collapse, a sovereign debt crisis, and a lending boom/bust. This is the who’s who of financial crises, a distinguished group that includes Argentina and Turkey in 2001, Ecuador in 1999, Indonesia and Russia in 1998, Chile and Uruguay in 1983, and Mexico in 1982. Greece's drop in output was significantly more severe and protracted than any of these episodes.

Figure 1 Greece versus the universe of all `Trifecta crises’ since 1980

More

Feeding Greece’s Tax Addiction Is Starving Its Economy

by Yannis Palaiologos

Wall Street Journal
August 4, 2016

The relative calm in Greece this summer compared to last year’s chaos may lead outside observers to believe that the country’s financial problems are on their way to being resolved. After all, the national government, led by the far-left Syriza party, seems committed to implementing the bailout program it signed last year. And negotiations are already under way for a deal on debt relief.

But these negotiations will likely take a long time. No one expects a meaningful restructuring of Greece’s debt before the next German government is formed at the end of 2017. Until that happens, Athens will labor under requirements for budget surpluses that will suffocate the economy.

This has made a bad situation on the ground even worse. The combination of overambitious fiscal targets and widespread tax evasion has led, throughout the bailout period but especially under Syriza, to constantly rising tax and insurance-contribution rates, which leave even law-abiding, relatively well-off Greeks unable to meet their obligations.

According to calculations recently released by the Kathimerini newspaper, once the full array of new tax and insurance-contribution increases come into effect early next year, real-estate owners who rent out their property may be forced to pay more than 100% of the income they earn in personal and property taxes. Self-employed individuals who make as little as €10,000 ($11,195) a year will have to pay 60% to 74% of it in taxes and insurance contributions. Private-capital firms—a new category of company, introduced during the recent crisis and designed to boost entrepreneurship—will have to hand over 43% to 60% of their profits to the state, even for earnings as low as €5,000 a year.

More

Greece to press ahead with criminal trial for ex-statistics chief

Financial Times
August 2, 2016

The former chief of the Greek statistics agency is to face criminal trial for undermining the “national interest” after he allegedly overstated the country’s budget deficit.

Greece’s supreme court ruled that Andreas Georgiou should face charges that carry a prison term of up to 10 years despite concern inside Greece that the radical left government is politicising independent institutions.

The case has also prompted concern among officials at the European Commission and the European Central Bank, who accepted without reservation the accuracy of data produced by Elstat, an agency set up in the wake of Greece’s first international bailout.

“The situation is clear. It is not a pleasant case. The commission and ECB have been watching this and have reacted very negatively to the case,” said a high-level eurozone official.

More