Greece - A last minute deal? No referendum in Greece? LATEST NEWS

There seem to be last minute attenpts at reaching an agreement between Greece and its creditors...

Tuesday 30 June 2015, 15h35 : La Grèce propose un accord de financement sur deux ans
La Grèce a proposé mardi à ses créanciers de conclure avec le Mécanisme européen de stabilité (MES) un accord sur 2 ans permettant de couvrir ses besoins financiers tout en restructurant sa dette, a indiqué le bureau du Premier ministre Alexis Tsipras.
Le gouvernement explique « rester à la table des négociations » en dépit de l’organisation dimanche d’un référendum sur les discussions avec les créanciers.

Tuesday 30 June 2015 15.32 - "Greece proposes two-year debt restructure with EU"
Greece has submitted to creditors a new two-year aid proposal calling for parallel debt restructuring, the office of Prime Minister Alexis Tsipras has said, in what seemed like a last-ditch effort by Athens to resolve an impasse with lenders.
The statement came hours before Athens was set to default on a loan to the International Monetary Fund. It was unclear how creditors would respond.
"The Greek government proposed today a two-year deal with the ESM (European Stability Mechanism) to fully cover its financial needs and with parallel debt restructuring," the government said in a statement.
"Greece remains at the negotiating table," the statement said, adding that Athens would always seek a "viable solution to stay in the euro."

Wednesday 1 July 2015, 10:44. And here the news of this morning, on Wednesday, in Le Monde - L"Athènes pourrait annuler le référendum en échange de concessions sur la dette grecque" :

Le premier ministre grec, Alexis Tsipras, est-il prêt à abandonner son projet de référendum du 5 juillet sur les propositions des créanciers de la Grèce si l’Eurogroupe décidait de répondre positivement à ses nouvelles demandes d’aide financière, comme le laissaient entendre, mardi soir, certaines sources européennes ?

Lire aussi : Alexis Tsipras a fait de nouvelles propositions de réformes

L’intéressé, à ce stade, n’a donné aucune indication. Mais, selon nos informations, son bras droit, le ministre des finances, Yanis Varoufakis, qui maintenait jusque-là une ligne très dure, a proposé de revenir sur la décision d’organiser un référendum contre des concessions des créanciers concernant la dette grecque. Un coup de poker qui pourrait changer la donne, alors que les ministres des finances de la zone euro doivent se retrouver mercredi à 17 h 30 pour une nouvelle réunion de l’Eurogroupe consacrée au dossier grec.


The Wednesday (12:53) latest news

Wednesday 1 July 2015, 12:53 - "Grèce: vers un accord Tsipras/UE avant le référendum?"

Tsipras prêt à sortir de l'impasse

Selon le Financial Times qui a pu consulter la lettre envoyée par Tsipras mardi soir, le Premier ministre grec serait ainsi prêt à accepter les propositions des créanciers moyennant quelques menues modifications. Sur la base du document envoyé par la Commission en fin de semaine dernière, à savoir un réexamen de la dette de la Grèce en échange d'un nouveau train de mesures pour le pays, Alexis Tsipras serait enclin à trouver une sortie à cette impasse, après avoir poussé assez loin le clash avec le président de la Commission européenne, Jean-Claude Juncker.

Voir l'image sur Twitter

Yanis Varoufakis' intervention at 27 June 2015 Eurogroup meeting

In my post of June 27, 2015, I copied a video in which Varoufakis explained what happened in the historic Eurogroup meeting of that day. However, I forgot to include the intervention at the meeting by Varoufakis, which he put himself on his blog, "As it happened - Yanis Varoufakis' intervention during the 27th June 2015 Eurogroup Meeting", preceded by a short introduction. Here is the first part of it: 

The Eurogroup Meeting of 27th June 2015 will not go down as a proud moment in Europe’s history. Ministers turned down the Greek government’s request that the Greek people should be granted a single week during which to deliver a Yes or No answer to the institutions’ proposals – proposals crucial for Greece’s future in the Eurozone. The very idea that a government would consult its people on a problematic proposal put to it by the institutions was treated with incomprehension and often with disdain bordering on contempt. I was even asked: “How do you expect common people to understand such complex issues?”. Indeed, democracy did not have a good day in yesterday’s Eurogroup meeting! But nor did European institutions. After our request was rejected, the Eurogroup President broke with the convention of unanimity (issuing a statement without my consent) and even took the dubious decision to convene a follow up meeting without the Greek minister, ostensibly to discuss the “next steps”. 
Can democracy and a monetary union coexist? Or must one give way? This is the pivotal question that the Eurogroup has decided to answer by placing democracy in the too-hard basket. So far, one hopes.

Intervention by Yanis Varoufakis, 27^th June 2015 Eurogroup Meeting
Colleagues,
In our last meeting (25^th June) the institutions tabled their final offer to the Greek authorities, in response to our proposal for a Staff Level Agreement (SLA) as tabled on 22^nd June (and signed by Prime Minister Tsipras). After long, careful examination, our government decided that, unfortunately, the institutions’ proposal could not be accepted. In view of how close we have come to the 30^th June deadline, the date when the current loan agreement expires, this impasse of grave concern to us all and its causes must be thoroughly examined.
We rejected the institutions’ 25^th June proposals because of a variety of powerful reasons. The first reason is the combination of austerity and social injustice they would impose upon a population devastated already by… austerity and social injustice. Even our own SLA proposal (22^nd June) is austerian, in a bid to placate the institutions and thus come closer to an agreement. Only our SLA attempted to shift the burden of this renewed austerian onslaught to those more able to afford it – e.g. by concentrating on increasing employer contributions to pension funds rather than on reducing the lowest of pensions. Nonetheless, even our SLA contains many parts that Greek society rejects.
So, having pushed us hard to accept substantial new austerity, in the form of absurdly large primary surpluses (3.5% of GDP over the medium term, albeit somewhat lower than the unfathomable number agreed to by previous Greek governments – i.e. 4.5%), we ended up having to make recessionary trade-offs between, on the one hand, higher taxes/charges in an economy where those who pay their dues pay through the nose and, on the other, reductions in pensions/benefits in a society already devastated by massive cuts in basic income support for the multiplying needy.
Let me say colleagues ... (for remainder, see "As it happened - Yanis Varoufakis' intervention during the 27th June 2015 Eurogroup Meeting")

The power of Greek oil and gas

I sometimes read Hellenic Shipping News, an online newspaper on Hellenic and international shipping. In today's edition there is an interesting article, "The Aegean Oil and Gas potential and the Greek national debt".

The author of the article, Jack J. Grynberg, president of Grynberg Petroleum Company, argues that Greece's oil and natural gas fields would guarantee repayment of its debt and boost the Greek economy :

"The revenues from such development, and the potential of additional oil discoveries in the Aegean Sea, would not only guarantee repayment of the massive loans that Greece owes its creditors but also give a strong sustainable boost to the Greek economy."

Greece has more "hidden" powers as you can read here:"Greece and Iran: two old friends can change the geopolitics of energy in Europe".

From this article I quote one para :

"Greece is aspiring to become a major energy player in the region, by becoming a transit country as well as a producer of natural gas for the European market. This would allow Greece to take up the role of gate keeper of the South East EU natural gas imports, coupled with potential domestic production. The country intends to achieve this in the following ways."

Greece's tragedy is a warning for Australia

I just read an interesting article about Greece written by an Australian of Greek origin: "Why Greece's economic tragedy is a warning for Australia".

I quote the last two paragraphs and the bio at the end of the article:

Ultimately the Greek crisis is a social struggle for independence and self-respect. It is about the right of a poor nation to be kind to its citizens. This is about the right to maintain safety nets for all. Sound familiar?
The present crisis is a turning point in Greek history. In 1941, Greece said "No" to the Axis powers and delayed the advance of Hitler to Russia. In a few days Greek citizens will be in a position to decide their fate with a "Yes" or a "No". Do they capitulate and sell their soul or do they suffer hardship and preserve their freedom? There is an old Greek saying that is quite apt for every Australian: "Better one hour of freedom than 40 years of slavery".
James Athanasou is a psychologist of Greek-Australian background and whose father came to Australia in 1923. He is an Adjunct Professor of Education, University of Technology, Sydney.

The US wants debt relief for Greece

Just as Paul de Grauwe and others have said time and again, creditors need to restructure the debt of Greece or, in other words, to grant debt relief.

The United States thinks the same, as you can read in, e.g., this article Greek crisis: US urges Europe and IMF to find way to keep Greece in eurozone or may have read already -- for example, Obama's earlier plea fot debt relief to Greece.

Why is the US putting pressure on Germany and Ms Lagarde (a former finance minister of France)?

The answer is simple, and complex. But that's for a next post.

Paul de Grauwe: "EU finance ministers should start facing the reality"

Paul de Grauwe

Paul de Grauwe warned five months ago, before Syriza won the elections on 25 January 2005, in an article "Debt relief is necessary to avoid a crisis in the Eurozone", that EU finance ministers lived in a cocoon, "failing to take into account the political and social implications of the intense austerity programmes they imposed in countries like Greece (but also in other countries of the periphery)."

Here are the last six paragraphs of Paul de Grauwe's article of 11 January 2015 :

"It is appalling to see that the European political elite has been living in a cocoon, failing to take into account the political and social implications of the intense austerity programmes they imposed in countries like Greece (but also in other countries of the periphery). This political elite still has not learned the lessons. The first reaction of the German minister of finance after the announcement of new elections in Greece was that the discipline needed to be continued rigorously.
What is to be done? Much will depend on the election results in Greece. The far-left party, Syriza, seeks to weaken the intensity of the austerity programmes and to negotiate a debt restructuring with the European authorities.
It is quite surprising to find out that these demands, in fact, are based on a correct analysis of the Greek problem. Despite the austerity, that has been extraordinarily intense, the Greek public debt has increased and now exceeds 170 per cent of GDP. The burden of this debt is so high that future Greek governments will not be able to continue to service it.
Instead of denying this reality the EU finance ministers should start facing it. They should begin to think about how they can ease the debt burden of Greece. Denying this reality condemns Greece to many more years of misery and will encourage extremist political movements in the country even further.
The risk today is that the political leaders of the Eurozone refuse to relieve the Greek debt (and that of other countries of the periphery). In that case, a fundamental crisis in the Eurozone is inevitable. Even if Syriza does not make it at the coming election, extremist parties will gain the upper hand in future elections. This will be very disruptive for the Eurozone as a whole.
History teaches us that after a debt crisis a balance must be found between the interests of creditors and debtors. The unilateral approach that has been taken in the Eurozone in which the debtors have been forced to bear the full weight of the adjustment almost always leads to a revolt of these debtors. That is now underway in Greece. It can only be stopped if creditors dare to face this reality."

Will Greece give in to Troika manipulation? Strauss Kahn's proposal and Varoufakis' explanation

The purpose of the Troika's last offer and threats to Greece is clear: it wants to divide and rule.

The creditors of Greece hope that by offering 15.5 billion dollars in exchange for prolonging the "rescue" of Greece by another 5 months, they will succeed in dividing Syriza and rip the Tsipras government of its already vanished glamour as an alternative to Troika's policies.

Will Tsipras succeed in countering this strategy with a referendum?

The answer will depend on a number of factors including the wisdom, endurance (stamina) and sentiments of Greek citizens.

Proposal by Dominique Strauss Kahn

Former IMF managing director Dominique Strauss Kahn proposed on Saturday a "radically new direction" in the negotiations between Greece and its creditors:

"Greece should get no more new financing from the EU or the IMF but it should get a generous maturity extension and significant nominal debt reduction from the official sector (OSI). Insisting on a frontloaded fiscal adjustment in the current economic environment is both economically and politically irresponsible. Providing more assistance to simply repay existing official creditors is simply insane." (underlining by me)  

"Forcing the Greek government to cave in would set a tragic precedent for European democracy and could set in motion an incontrollable chain reaction." (underlining by me)

Yanis Varoufakis explained what happened

"Why is the IMF so hard on Greece?" And what says Paul Krugman?

Christine Lagarde, managing director IMF

Here is an interesting article on "Why the IMF is so hard on Greece".

On the same topic it's worthwile to read (again) an article by Frances Coppola in the journal Forbes to which I referred in my post of June 15, 2015 : "Greece, the EU and the IMF Are Dancing with Death".

And it's also useful to read the following excerpt from an article by the journal Les Echos of 24 June 2015, "Grèce : la tension jusqu'au bout":

"Christine Lagarde critique dans une interview au magazine « Challenges » à paraître jeudi «  cette légende d’un FMI à la grand-papa, intransigeant et inhumain », sur fond de vives tensions entre l’institution qu’elle dirige et Athènes. Elle était interrogée sur des propos remontant à quelques jours du Premier ministre grec Alexis Tsipras, s’en prenant à la « responsabilité criminelle du FMI ».
« L’invective et les insultes ne font pas avancer le débat », a dit la directrice générale du Fonds monétaire international dans cet entretien réalisé le 18 juin, en défendant son institution qui « a résolu des crises dans le monde entier depuis soixante-dix ans ».
Christine Lagarde, qui indique par ailleurs « considérer » un deuxième mandat de directrice générale si les membres du FMI « souhaitent que je continue à servir », avait déjà indirectement critiqué l’attitude grecque en réclamant de discuter « avec des adultes » après une réunion ratée au Luxembourg, jeudi dernier."

You may also want to read what Paul Krugman said today about the IMF and Greece: Breaking Greece

"Greece's crisis today could well be our crisis tomorrow"

This is an interesting article from Ireland:

Greece's crisis today could well be our crisis tomorrow

Is Europe destroying Greece's economy and political example?

I have to de-greece. What do I mean by that?

Rather than continuing my daily thirst for more and more news and analyses about the conflict between Greece and its creditors (a conflict telling us in succinct and exemplary way what is at stake in politics and economics), I should return to my normal hunger for news and analyses about what is going on in the world including Greece.

But just before de-greecing (how many posts did I write the last couple of months about the case of Greece?) and resuming my general interest in world politics and economics, let me discuss two pressing issues in Greece's conflict with its creditors that will remain: 

• the "real" conflict between the Tsipras government and the Troika (EC, ECB and IMF)
• the future of Europe and Greece.

In my view, the "real" issue at stake in the conflict between Tsipras and the Troika is that the latter wants to destroy the sex appeal and example of the new Greek government and the social forces that elected it, just as in the 1970s those who were against the Allende/Unidad Popular government in Chile (1970-1973) did everything possible to destroy the appeal and example of a government that took social democracy seriously and tried to change power relationships.

When Tsipras was elected in January 2015, he was an example for citizens and politicians in other European countries (in particular in Spain and Portugal) who hope that other policies than the current neoliberal ones would be possible. I am afraid the Troika has succeeded in undermining or decreasing that hope. But I hope I am wrong.

The future of Europe and Greece lies in the hands of both its citizens and its political leaders. Or more in the hands of its citizens?

Sure, Tsipras is also a political leader. But he is a political leader who, in the view of "serious" and "reasonable" Troika leaders (an image of themselves successfully propagated through mass media) should become as soon as possible an "adult" and "normal" leader, that is, one who does not try to defend the interests of "the" people until the end but one who accomodates his public statements of defending the interests of "the" people with his/her special  interest in defending the interests of those who have power.

Politics and democracy is about power and so the conflict between Greece and its creditors will remain an interesting case to follow for those who are concerned with democracy and the conditions in which people live, suffer and die (unnecessarily).

Among the many analyses about Greece I read this morning, there is one, published by the Washington Post, that I would like to recommend: "Europe is destroying Greece's economy for no reason at all".

Key points in Greece's proposals

Painting by Aafke Steenhuis.

In the Sydney Morning Herald I read this morning (Tuesday) the "Key points in Greece's cash-for-reform proposals" which I copy below in addition to the list of key points in French mentioned in my previous post:

"Greece presented new reform proposals on Monday which its euro zone partners cautiously welcomed as a possible basis for an agreement to unlock bailout funds needed to avert a possible debt default.

Here is a summary of the proposal as spelled out by Greek government officials:

Pensions

Early retirement to be curbed gradually from 2016 to 2025, but exemptions for some specific categories to be maintained, including for arduous professions and mothers with disabilities.
A special benefit for some low-income pensioners, amounting to between €57 to €230 ($83.63 to $337.47) a month to remain but to be replaced from 2020 by new protection framework for low pensions. This is a key point of friction between Greece and its lenders, who wanted it scrapped.

VAT

Greece to keep three value added tax rates of 23 per cent, 13 per cent and 6 per cent. Electricity and restaurants to be taxed at 13 per cent instead of being raised to 23 per cent, as lenders had demanded, while medicines to be cut to 6 per cent rather than raised to 11 per cent as sought by lenders. Officials said lenders were asking for two rates of 11 per cent and 23 per cent.

Tax hike for high earners

Solidarity tax for higher income earners (revenues above €50,000 to be increased, while lowering the tax for revenues below 30,000 euros. It introduces a solidarity tax of 8 percent on revenues above €500,000.

Corporate, luxury tax hikes

Tax plans to include: a) a special levy of 12 per cent on businesses that post a profit of over €500,000; b) Increases in luxury tax on pools, planes, big cars and private boats over 10 metres; c) a tax on gambling slot machines (VLTs).

Privatisations

Privatisations to impose a minimum amount of investment, a commitment by investors to promote the local economy and a participation of public equity.
The transfer of Greece's state equity in Greek telecoms operator to the country's privatisation agency will not be part of the lenders' prior actions.
Greece will not privatise its power grid operator (ADMIE) nor its dominant power utility PPC, as requested by creditors.

Public sector wages

No cuts to public sector wages from levels at end-2014.

Spending cuts

Cut defence spending by €200 million.

Primary budget surplus

Primary budget surplus of 1 per cent in 2015 and 2 per cent in 2016, compared with 3 per cent and 4.5 per cent agreed to by previous Greek governments.

Bonds

Greece repeated demand for euro zone to lend it money to buy back €27 billion of its bonds from European Central Bank - in effect rolling over the debt on more favourable terms.

Investment

Greece wants deal to include financing of infrastructure and new technologies through an investment package from the European Commission and the European Investment Bank.

Numerical targets

According to leaked proposals on Greek websites, Greece also planned to increase pension contributions to cash in €605 million this year and €1.56 billion next year.
Spending cuts and tax revenues would produce budget measures equivalent to €2.69 billion or 1.51 per cent of GDP this year and €5.2 billion or 2.87 per cent of GDP in 2016, up from €1.99 billion or 1.1 per cent of GDP and €3.58 billion or 2 per cent of GDP previously."
Reuters

Dijsselbloem: Chance of agreement with Greece this week

The French journal Le Figaro says today at 12:00 that Jeroen Dijsselbloem sees the possibility of reaching an agreement with Greece this week (last line of the article below):

à 12:01

Les nouvelles propositions de la Grèce

Les propositions de réformes présentées par la Grèce constituent un document "raisonnable" susceptible de servir de la base à une vraie discussion et même si un accord définitif entre la Grèce et ses créanciers est peu probable ce lundi, la journée pourrait marquer une étape vers un accord dans les prochains jours, ont déclaré lundi des responsables de l'Union européenne.

Les retraites

Dans la version révisée de ses dernières propositions transmises lundi matin à Bruxelles, le gouvernement grec propose de porter progressivement l'âge de la retraite à 67 ans en revenant sur un certain nombre de régimes d'exemptions, a précisé une source européenne. Sur les retraites, la suppression des mécanismes de pré-retraite interviendrait dès le début de 2016 et non pas progressivement. Les retraites complémentaires supérieures à 1.000 euros, peu nombreuses, seraient réduites.

La TVA
Selon les informations du journal financier grec Naftemporiki, également rapportées par ses confrères Ta Nea et Ethnos, la Grèce serait prête à faire passer le taux de TVA sur l'hôtellerie -un taux clé pour le tourisme- de 6,5% à 13%, tandis que le passage de 13% à 23% dans le secteur de la restauration n'est pas tranché. La Grèce maintient à 13% le taux sur l'électricité, une "ligne rouge" du gouvernement. Athènes aurait en revanche accepté de n'appliquer le taux de TVA le plus bas (6%) qu'aux médicaments, livres, places de théâtre.

La TVA réduite dans les îles
La réduction de TVA dont bénéficient traditionnellement les îles (-30% par rapport aux taux du continent), dont les créanciers souhaitent la suppression, est également dans la balance. Selon Ethnos (centre-gauche), l'offre grecque est de supprimer cet abattement pour les îles dites "riches" comme Mykonos, Santorin ou Rhodes. Mais le ministre de la Défense Panos Kammenos, dirigeant du petit parti de droite souverainiste ANEL et partenaire de gouvernement de Syriza, a affirmé lundi sur la chaîne Mega qu'il avait reçu l'assurance du gouvernement que cette exception ne serait pas supprimée. Il a ajouté que ce sujet conditionnait son soutien à l'accord éventuel et au gouvernement.

Des taxes supplémentaires
Une nouvelle hausse des taxes, après cinq ans d'augmentation continue, serait également proposée: taxe extraordinaire sur les bénéfices des entreprises supérieurs à 500.000 euros, et non un million comme proposé au départ, hausse de la taxe sur la solidarité pour les revenus supérieurs à 30.000 euros.

La lutte contre la corruption
Comme dans les propositions précédentes, un chapitre important est consacré aux mesures pour améliorer la collecte de la TVA et des impôts, lutter contre la corruption.

Les nouvelles propositions faites par Athènes pour éviter un défaut de paiement ont reçu un satisfecit du patron de l'Eurogroupe, Jeroen Dijsselbloem, qui y a vu "une chance en vue d'un accord cette semaine".
_________________________________________________

A few hours later today, at 14:27 (one hour ago) Le Figaro reported on divergence of views between the French and German minister of finance:

à 14:27

Divergences d'opinion entre Paris et Berlin «Un travail de qualité» pour Michel Sapin, «des propositions qui ne sont pas substantielles» pour son homologue allemand Wolfgang Schaüble. Visiblement, Paris et Berlin ne partagent pas le même avis quant aux réformes proposées par la Grèce.  

"Without an agreement we give Greece to Putin"

According to German newspapers of this Monday morning an agreement between Greece and  its creditors may be imminent as the Greek government has made proposals that come close to the Troika's demands. "EU Commission praises Reform List from Greece" was the heading of Die Zeit.

A clear sign that geostrategic interests are at play in the negotiations is the heading of an article in the Frankfurter Rundschau which says "Without Agreement we give Greece to Putin":

Schuldenkrise Griechenland 

"Ohne Einigung schenken wir Putin Griechenland"

 Von Kerstin Prosch

The Frankfurter Rundschau reports:

9.16 Uhr: Die linksliberale Turiner Tageszeitung «La Stampa» warnt am Montag vor den Folgen eines möglichen Austritts Griechenlands aus der Eurozone: "Wenn man die Schwierigkeiten in der Türkei bedenkt, die Schwere der Krise im Mittelmeer und die weiter bestehende Zerbrechlichkeit der Balkan-Region, wäre es ein Luxus, den Europa sich nicht erlauben kann und die USA für unvernünftig halten, jetzt auch noch Griechenland zu verlieren und es damit de facto Wladimir Putin zu schenken." 

Two scenarios for Greece and its creditors

There are two scenarios:

• creditors and Greece will reach an agreement
• creditors and Greece will NOT reach an agreement.

What scenario do you prefer?

You may answer: "It depends..."

It depends on what?

You may say: "On what will be best for the Greek people."

Or you may say: "On what will be best for the creditors." (Obviously, creditors' interests go beyond Greece paying its debts. Creditors do take into account how financial markets will react to the different outcomes in this endgame between Greece and its creditors -- see, eg, this article for investor sentiment: "The opportunity in Greece crisis". They also take into account (geo)political consequences -- see, eg, "Geopolitics Will Trump Economics in Greece".)

However, I doubt that what is considered to be the best outcome for the creditors (that Greece accepts its conditions) really is the best outcome for the creditors.

What is best for the creditors?

You may answer: "That they get their money back." (However, creditors may have other objectives as, for instance, this article suggests: "Grèce : la nouvelle stratégie des créanciers".)

When should they get their money back?

You may say: "As soon as possible."

The full amount of debt outstanding?

You may say: "Well, that's something we can negotiate..."

But is that not exactly what the Greek government is asking for?

"Yes," you may say, "but we want them to accept our conditions." (Clive Crook wrote a witty and sharp column on the sense - or nonsense - of these conditions: "What happens if Greece agrees to impossible terms".)

Why do you want them to accept the creditors' conditions?

Well, dear reader, I leave it to you to answer that last question. In answering it, you may take into account, or not, that the Audit Committee on Greece's debt recently concluded that Greece's debt is "Illegal, Illegitimate and Odious" -- for an executive summary of the Committee's report click HERE. And you may take into account, or not, what Yanis Varoufakis recently has proposed to the creditors -- "Here's the complete list of reforms from Greece that its creditors don't want to hear". 

Austria's chancellor Faymann: "I stand on the side of the Greek people"

Werner Faymann, chancellor of Austria

In the midst of a crisis you have to stay calm. I think Greece's creditors are now more nervous than the Greek government.

The prime minister (chancellor) of Austria, Werner Faymann, sides with Greece in its debt row with creditors. Referring to creditors' demands (conditions), Fayman said in a radio interview :

"High joblessness, 30-40 per cent (with) no health insurance and then raising VAT on medicines. People in this difficult situation cannot understand that." 

Faymann added: "I stand on the side of the Greek people who in this difficult position are being proposed more things detrimental to society."

Greece will win battle against its creditors

Frances Coppola

Although many people think Greece is in a weak position vis-à-vis its creditors, I think it is in a strong position, both intellectually and politically. Not that I think it will suddenly get the support it deserves but that, in the end, the Greek government will be backed because it is in the self-interest of the creditors. (I will explain in a next post.)

My view is supported by Frances Coppola, who wrote recently the following in Forbes:

(...) The 2012 “private sector involvement” (PSI) restructuring wrote down up to 80% of the net present value of Greece’s private sector debts. But much of the debt had already been transferred to the public sector, not only as a result of the 2010 bailout but also through subsequent IMF and EU loans and ECB support of Greece’s banks. The PSI restructuring reduced Greece’s debt to just over 150% of its GDP. Everyone knew that this was inadequate. Everyone knew that the official sector would have to suffer a haircut as well, and the longer it was delayed, the more costly it would be. But the EU governments and institutions did not wish to accept a haircut, and the IMF didn’t want to force them to. So they played “extend and pretend”.
A Memorandum of Understanding was prepared, underpinned by a detailed IMF program. The structural “reforms” agreed between the EU, the IMF and the then Greek government were supposed to reduce Greece’s debt/GDP to 120% of GDP by 2020. Although this forecast was founded on hilariously unrealistic assumptions regarding growth, inflation and tax revenues, it was dubbed “sustainable”. On that basis – and despite further objections from emerging-market representatives — the IMF contributed new funds to the Greek bailout program.
The continuing depression in Greece has caused the debt burden to increase, not because nominal debt has increased much (Greece has managed to bring its budget into primary balance, more-or-less) but because GDP has collapsed. Debt is now around 175% of GDP and probably rising, which is where it was when the PSI was agreed. Greek debt is unsustainable. Everyone knows it is. The only question is when, and how, it will be restructured.
So the IMF is now in a difficult position. It cannot lend more to Greece, because to do so would be to admit that the EU’s measures to eliminate systemic risk have failed. But it can’t call for debt restructuring and relaxation of budget targets without raising the possibility that it may have to take a haircut itself. And the board members who originally opposed the deal are now vociferously saying “we told you so”. (...)

Germany owes Greece €350bn in war reparations

Zoe Konstantopoulou, speaker of the Greek Parliament.

A woman to look at is Zoe Konstantopoulou, speaker of the Greek Parliament. "While Tsipras, Yanis Varoufakis and their negotiators have been trying to get the country’s debt reduced via the IMF and ECB, Ms Konstantopoulou has been working to get it declared invalid," I read recently in a blog post by Paul Mason.
 

"Ms Konstantopoulou’s debt truth committee, set to report on 18 June, is said to be on the point of finding some of Greece’s original bailout debt, from either 2010 or 2011, was unlawfully contracted. In addition, Ms Konstantopoulou is armed with a finding from experts that Germany owes Greece €350bn in war reparations – more than the whole of its debt to Europe," Paul Mason added.

In another article, "Zoe Konstantopoulou: Each child in Greece owes 32,500 euros", I read:

"Speaker of the House of Greek Parliament, Zoe Konstantopoulou, took the podium at the Forum European des Alternatives taking place in Paris on May 30-31.
'The battle Greece is giving is a battle for all nations of Europe for democracy, freedom and dignity,' she said. 'And it is a battle that must be won!'
She underlined that austerity measures and memorandum-styled policies have created an unprecedented humanitarian crisis in Greece with dizzying unemployment figures, especially young women. She underlined the consequences of policies that have increased the numbers of homeless people, increasing poverty and social exclusion.
'Austerity kills society and democracy,' she said. 'We should stop before we kill hope for the younger generation. Each child born in Greece owes 32,500 euros and that is a huge injustice.'"

Greece: the trap set by creditors

Painted by Aafke Steenhuis.

I just read a very good and detailed article that explains step by step (measure by measure, condition by condition) why the Greek government should not give in to its creditors and, I would add: why citizens in European countries who are concerned about the future of Europe should become or remain critical to the policies that Greece's creditors (European governments) try to impose: "Grèce : le piège tendu par les créanciers" - Greece: the trap set by creditors.

I quote the last two paragraphs of this excellent article (of which a translation in English is HERE):

Le piège des créanciers

Le plan des créanciers est donc clairement un plan « politique. » Il entend maintenir une stratégie qui a échoué pour pouvoir mettre à genoux politiquement le gouvernement grec effacer le vote grec contre l'austérité du 25 janvier. Aucune logique économique ne peut réellement soutenir un tel plan. Même la volonté de « prendre des garanties » pour le remboursement futur des dettes ne tient pas. L'affaiblissement de la croissance grecque ne peut en aucun cas constituer une quelconque garantie. Les deux restructurations de 2011 et 2012 le prouvent. De surcroît, on a vu qu'Alexis Tsipras acceptait des concessions qu'il a, lui-même, qualifié de « douloureuses » (on pourrait aussi évoquer l'acceptation d'une partie des privatisations). Les créanciers ont déjà obtenu beaucoup et Alexis Tsipras aura déjà bien du mal à redresser le pays avec ces concessions.

Apprentis sorciers

Mais le maximalisme des créanciers, leur volonté d'imposer les erreurs du passé, prouvent qu'ils ne visent pas un objectif financier ou économique. En réalité, ce plan des créanciers n'est qu'un piège. En l'acceptant, Alexis Tsipras retomberait dans l'erreur de ses prédécesseurs. Pris dans le cercle vicieux des objectifs et d'une croissance faible, voire négative, il devrait passer sous les fourches Caudines des coupes budgétaires. La politique « alternative » prônée par l'exécutif grec deviendrait impossible. Si le gouvernement de Syriza ne tombe donc pas immédiatement, il subira le sort de tous les gouvernements de gauche « gestionnaires de l'austérité » et le parti disparaîtra comme le Pasok, dont le maintien à la Vouli est désormais incertain. Resteront alors face à face les partis assumant la sortie de l'euro (Parti communiste et Aube Dorée) et les « amis » de l'Europe de Bruxelles de Nouvelle Démocratie. Le but est de prouver qu'il n'y a pas d'alternative aux politiques d'austérité budgétaire. Cette tactique de la « terre brûlée » fait des créanciers aujourd'hui des apprentis sorciers bien dangereux pour l'avenir de l'Europe.

Drawing by Aafke Steenhuis.

Greece and its creditors - How much time and money has been wasted? Who made a calculation?

Drawing by Aafke Steenhuis

The conflict between Israel and Palestinians is a waste of precious time, energy and money. I don't know if someone has ever made a calculation of the time and costs involved of journalists, readers, tv and computer screen watchers, policymakers, political analysts, NGOs, hospitals, armament industry, etcetera.

In a similar vein, the conflict between Greece and its creditors is a waste of precious time, energy and money.

One difference between the Isreal-Palestinians conflict and that of Greece and its creditors is that the first lingers on for years and years, while the second lingers on for months and months.

Both conflicts are men made and could have been prevented or resolved more quickly.

PS: Obviously, besides costs there are and have been benefits in both conflicts - journalists, policymakers and others making a living of it and banking and armaments and other industries making a profit.

The front and rear battle of Greece and its creditors

Looking ahead allows you to determine whether Greece and its creditors are waging a front or a rear battle.

I think they are engaged in a front battle because:

1. national democracy is at stake
2. equality within and between nations is at stake
3. national economic policy is at stake
4. the future of Europe (euro) is at stake
5. the future of the world is at stake.

Are these too big words for a small battle?

I think Greece and its creditors are, at the same time, waging a rear battle because:

1. neoliberal capitalism is nearing its end
2. the role of money/finance will decrease
3. the relationship between creditors and debtors will change
4. debt reduction is inevitable
5. the legitimacy (power) of European authorities will decrease.

Are Greece and its creditors waging a front or rear battle?

Are Greece and its creditors waging a front or rear battle? I think both and will explain in a next post why.

I wonder if you think the same.

Están Grecia y sus acreedores luchando una batalla de vanguardia o retaguardia? Creo ambas y explicaré en un siguiente post por qué.

Me pregunto si ustedes/vosotros piensan/pensáis lo mismo.