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Tag: international monetary fund
Thomas Piketty: Germany’s Position On Greek Debt A ‘Huge Joke’

Thomas Piketty: Germany’s Position On Greek Debt A ‘Huge Joke’

Thomas Piketty is calling out Germany. The French economist who rose to prominence with the publication of his 2013 treatise on income inequality, Capital in the Twenty-First Century, gave a candid interview to German newspaper Die Zeit, in which he described Germany’s hard line on Greece’s debt as hypocritical and a “huge joke.”

In a 61-to-39 public vote Sunday, Greeks rejected a bailout proposal from European Union leaders that would have kept the country afloat but increased austerity measures, which have already taken a severe toll on the economy since they were imposed in 2010.

The critically indebted country is currently in a standoff with the other 18 eurozone nations, among which Germany is the most prosperous and populous, and has been in a position of de facto leadership in Brussels’ debt negotiations with Athens. At stake is Greece’s continued membership in the European Union, which German chancellor Angela Merkel has said she wants to preserve, but “not at any price.”

That Germany is in a position to dictate terms at all, Piketty claims, is owed largely to the rest of Europe forgiving that country’s own debts after World War II.

“When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke!” Piketty said in the interview, first published in German and translated into English by Medium’s Gavin Schalliol (who took down the post due to copyright concerns). “Germany is the country that has never repaid its debts. It has no standing to lecture other nations.”

Piketty further accused Germany of “profiting from Greece as it extends loans at comparatively high interest rates.” Among eurozone nations, Germany is Greece’s largest creditor. According to the AP and Open Europe, the eurozone holds 60 percent of Greece’s total debt, the International Monetary Fund holds 10 percent, and the European Central Bank 6 percent

Piketty continued:

[A]fter the war ended in 1945, Germany’s debt amounted to over 200 percent of its GDP. Ten years later, little of that remained: Public debt was less than 20 percent of GDP. Around the same time, France managed a similarly artful turnaround. We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece.

“Those who want to chase Greece out of the eurozone today,” he warned, “will end up on the trash heap of history.”

You can read excerpts from the interview in English here and the original on Die Zeit

ViaQuartzandMedium

File photo: Thomas Piketty in October 2014 (blu-news.org via Flickr)

Germans See Dim Prospects For Reaching New Greece Bailout Deal

Germans See Dim Prospects For Reaching New Greece Bailout Deal

By Carol J. Williams and Amro Hassan, Los Angeles Times (TNS)

BERLIN — German Chancellor Angela Merkel flew off to Paris on Monday to consult with French President Francois Hollande a day after Greek voters rejected Merkel’s signature strategy for getting their heavily indebted country’s finances in order.

As leader of the eurozone’s largest and most prosperous country, Merkel has been the key architect of eurozone bailouts that have forced tough austerity measures on Greece in exchange for loans enabling it to remain part of the 19-nation common currency club.

Merkel has long said she wants to see Greece remain in the eurozone, but “not at any price.” And the Sunday vote by Greeks to reject their creditors’ formula for repayment of $270 billion in bailout loans sent that price skyrocketing.

The German chancellor is widely resented in Greece for her preference for imposing budget cuts on Athens rather than investing in job creation and growth. At the same time, her support for austerity is applauded by politicians across a wide spectrum in Germany and other prosperous eurozone states.

The result leaves Merkel confronted with competing pressures: Holding the Greeks’ feet to the fire means risking the first failure of the European Union’s common currency experiment, marring her tenure as its de facto leader.

During five years of imposed austerity, the Greek economy has contracted by 25 percent and more than a quarter of the working-age population is unemployed. Grinding poverty and an eroding social safety net induced voters to reject their creditors’ demands for more belt-tightening with a 61 percent “no” vote in Sunday’s referendum.

Greek Prime Minister Alexis Tsipras, whose leftist government had urged voters to say no to more austerity, spoke with Merkel by telephone Monday and said he would bring new proposals to an emergency meeting of the eurozone finance ministers in Brussels on Tuesday, a Greek government official told reporters in Athens.

But with both voters and the government having spurned what was presented as a final offer by the European Central Bank, the International Monetary Fund and the European Commission — the major creditors _ there was nothing left on the table to talk about, in the opinion of many influential European leaders.

Merkel made no public comment on the Greeks’ convincing “no” vote, but her spokesman, Steffen Seibert, told reporters at a Berlin news conference that she “takes notice” of the rejection and respects it as the will of the voters.

“However, in light of the decision by the Greek citizens, the conditions to start negotiations on a new aid program are not met yet,” Seibert said, adding that Berlin would “wait and see what the Greek government makes of it.”

Seibert said the German government was “stressing the principle that solidarity is inseparable from (a country’s) own efforts,” implying that the attempt by Athens to get a significant write-down on its debts was not in the offing.

Technically, the proposals put forward by the creditors nearly two weeks ago expired with the end of the previous bailout program on June 30. That was also the deadline for Athens to make a $1.8 billion payment on its loans from the IMF, a bill that still needs to be paid before talks can begin on a new bailout package.

Time is now ticking away on the next loan installment due July 20, a $3.9 billion payment owed the European Central Bank and one with far more dire and immediate consequences for Greece if it is missed than was the case with the IMF default.

Greek banks have been closed for more than a week since the European Central Bank froze emergency cash infusions to prevent their collapse after depositors, fearful of the coffers being emptied, began pulling out their savings.

Greek banks are reported to have only $555 million left in their vaults, or the equivalent of about $50 per person in the country of 11 million. With the banks shuttered, Greeks have been limited to daily withdrawals of about $66.

The European Central Bank has already pumped about $99 billion into Greek banks in recent weeks to prevent their collapse. The stewards of the European financial system were expected to wait for direction from the Eurogroup finance ministers after Tuesday night’s meeting on whether to resume the cash infusions to prevent what could be a destabilizing collapse of banking and the government’s inability to pay public sector salaries and pensions.

The eurozone supporters of holding Greece to its previous commitments exuded frustration and an approaching end to their patience after the referendum rejecting their terms for getting Greek finances in order and the country’s debts repaid.

While Merkel may be reluctant to see the integrity of the eurozone breached, her conservative colleagues in the grand coalition that governs Germany are of the view that the Greek “no” vote may well be a prelude to the country’s exit from the eurozone.

The referendum was a clear signal that Athens refuses to be beholden to its creditors, said Markus Ferber, who oversees euro policy for the Christian Social Union, the Bavarian sister party to Merkel’s Christian Democratic Union.

“The country and the government have knocked away the helping hand” of its eurozone colleagues, Ferber said. “The only chance for Greece now is to leave the euro.”
Opposition political forces in Germany also signaled their willingness to take no for an answer from the rebellious Greeks.

“Now Merkel and the others (of the European creditors) must organize a Grexit, with all the cushions and upheavals that will result as a consequence,” said Alexander Graf Lambsdorff of the Free Democratic Party, employing the shorthand for a Greek exit from the eurozone.

The Economist Intelligence Unit, an independent forecasting and advisory service of the Economist Group, put the chances of a Greek exit from the eurozone at 60 percent.

But there were also calls for making yet another stab at keeping the eurozone intact and finding a solution to the standoff with Greece.

“The basis of a dialogue is on the table, but it’s up to Greece to show us that it takes the dialogue seriously and that it knows it can stay in the euro, and that there are decisions to make,” French Finance Minister Michel Sapin said, urging eurozone colleagues to approach Tuesday’s gathering with an open mind.

(Special correspondent Hassan reported from Berlin and Times staff writer Williams from Los Angeles.)

(c)2015 Los Angeles Times. Distributed by Tribune Content Agency, LLC.

Photo: Journalists wait for a statement from Greece’s Prime Minister Alexis Tsipras on July 6, 2015 in front of Presidential palace in central Athens, Greece. Greece’s finance minister has resigned following Sunday’s referendum in which the majority of voters said “no” to more austerity measures in exchange for another financial bailout. (Kay Nietfeld/DPA/Abaca Press/TNS)

IMF Sees Modest, Uneven Growth In Global Economy

IMF Sees Modest, Uneven Growth In Global Economy

By Don Lee, Tribune Washington Bureau (TNS)

Global economic growth is likely to remain modest and highly uneven, and the longer-term prospects are even more sobering, according to the International Monetary Fund.

The IMF, in its latest outlook released Tuesday ahead of its spring meeting in Washington later this week, sees the U.S. economy expanding at a robust 3.1 percent this year, up from 2.4 percent last year.

That’s less optimistic than the IMF’s forecast in January, which predicted U.S. growth at 3.6 percent this year; the downgrade reflects the weak first quarter and strong dollar that is weighing on American exports.

The U.S. is still expected to be the main locomotive for the world economy, which is projected to grow 3.5 percent this year, up just a notch from 3.4 percent in each of the last two years. By global standards, these are moderate rates and well below pre-recession levels.

During the 2008 financial crisis and in its immediate aftermath, it was the sluggish performance of advanced economies like the U.S. that weighed on the world, while developing countries led by China pushed ahead. The tables have since turned.

Economic output in rich countries is expected to accelerate to 2.4 percent this year and next, up from 1.8 percent this year. By comparison, the IMF said growth in the developing world will weaken to 4.3 percent this year from 4.6 percent last year and 5 percent in 2013.

One big factor in the divergent trends is energy and other commodities. The steep fall in prices of oil and metals such as copper is generally a plus for the U.S. and Europe, but are taking a toll on big exporting nations such as Russia, Brazil, and Nigeria.

Meanwhile, growth in China, the world’s largest developing nation, is likely to keep sliding as authorities move to tamp down excessive investments in real estate. The IMF reckons China will expand 6.8 percent this year, down from 7.4 percent last year, and then slide further to 6.3 percent next year.

The IMF’s projections for the U.S. are more bullish than other forecasts, including that of the Federal Reserve. Besides the strong dollar, risks to the American economy include geopolitical instability and the uncertainty of monetary policy as the Fed prepares to hike interest rates for the first time in nearly a decade.

Longer term, the IMF’s latest World Economic Outlook paints a picture of lowered expectations.

The lender of last resort warned that the world’s potential growth, or the maximum speed of economic activity before inflation heats up, will be lower than in the past. That’s partly because of the lingering effects from the financial crisis, but has more to do with longer-term trends such as slowing productivity and population growth.

“More subdued growth prospects lead, in turn, to lower spending and lower growth today,” Olivier Blanchard, the IMF’s chief economist, said Tuesday.

The IMF’s managing director, Christine Lagarde, said this “new mediocre” threat could be the “new reality” for the global economy, unless nations act with structural reforms and policies that boost infrastructure spending.

But, Lagarde said in a speech last week, “frankly, in too many countries, these reforms have been lagging.”

(c)2015 Tribune Co., Distributed by Tribune Content Agency, LLC

Photo: Sebastian Alvarez via Flickr

Prosecutors Leak: We May Have Screwed Up The DSK Case

The New York Times, which had owned the story of IMF Head Dominique Strauss-Kahn’s arrest on rape charges and had been a favored venue of damaging leaks from police and prosecutors, reported a different kind of leak late Thursday night: the Manhattan District Attorney’s office now believes its case is falling apart because problems with the credibility of Strauss-Kahn’s accuser:

According to the two officials, the woman had a phone conversation with an incarcerated man within a day of her encounter with Mr. Strauss-Kahn in which she discussed the possible benefits of pursuing the charges against him. The conversation was recorded.

That man, the investigators learned, had been arrested on charges of possessing 400 pounds of marijuana. He is among a number of individuals who made multiple cash deposits, totaling around $100,000, into the woman’s bank account over the last two years. The deposits were made in Arizona, Georgia, New York and Pennsylvania.

The investigators also learned that she was paying hundreds of dollars every month in phone charges to five companies. The woman had insisted she had only one phone and said she knew nothing about the deposits except that they were made by a man she described as her fiancé and his friends.

In addition, one of the officials said, she told investigators that her application for asylum included mention of a previous rape, but there was no such account in the application. She also told them that she had been subjected to genital mutilation, but her account to the investigators differed from what was contained in the asylum application.

Today, the defense is expected to successfully win more lenient bail conditions for Strauss-Kahn. It’s a major blow for the prosecution — and lends a bit more credence to those French complaints that we vulgar Americans were rushing to judgment.