Tag: greek debt crisis
New Greek Bailout Talks Start, Creditors Seek More Action

New Greek Bailout Talks Start, Creditors Seek More Action

By Francesco Guarascio and Renee Maltezou

BRUSSELS/ATHENS (Reuters) – Talks between Greece and its international creditors on a third bailout began in Athens on Monday but the lenders want to see more reforms turned into law before they disburse the first loans to keep the near-bankrupt country afloat.

The government of Prime Minister Alexis Tsipras has pushed two packages of measures through parliament this month as conditions for starting negotiations on a three-year loan program worth up to 86 billion euros ($95 billion) to keep Greece in the euro zone.

A spokeswoman for the European Commission said teams from the creditor institutions were now in Athens. “Work has started, meaning that the institutions are talking to the Greek authorities,” she said.

The talks had been due to start last Friday, but were delayed because of organizational and security issues.

“Negotiations on a Memorandum of Understanding should now progress as swiftly as possible,” Commission spokeswoman Mina Andreeva told a news briefing. Both sides say they want a deal concluded before Aug. 20.

Greece came close to the brink during a long stand off between the government and its creditors, with Athens missing a debt repayment to the International Monetary Fund and forced to close the country’s banks for three weeks.

Voters angered by years of austerity demanded by the creditors rejected an earlier bailout offer in a referendum, but Tsipras later agreed in Brussels to the lenders’ terms as the crisis deepened.

The institutions involved in the talks are the European Commission, the European Central Bank and the IMF, as well as the euro zone’s rescue fund, the European Stability Mechanism (ESM).

EU officials said the heads of mission of the Commission and the ECB were already on the ground and the new IMF mission chief was due in Athens by Friday to hold talks on a political level.

Andreeva said Greece had delivered “in a timely and overall satisfactory manner” on promises made at a euro zone summit on July 13 of prior legislation to enable the negotiations.

“More reforms are expected from the Greek authorities to allow for a swift disbursement under the ESM. This is also what is being discussed right now,” she said.

The banks have re-opened after the ECB increased emergency funding but capital controls remain in place. Doubts also persist about whether a severely weakened Greek economy can support another program after a six year-long slump that has cut national output by a quarter and sent unemployment over 25 percent.

Among politically sensitive measures held back from the initial package were curbs on early retirement and changes in the taxation of farmers to close loopholes that are highly costly for the Greek state. A source close to the talks said these reforms were expected to be enacted by mid-August.

However, touching pensions is sensitive with Tsipras’s left-wing Syriza party, which has already suffered a substantial revolt over the Brussels agreement, and the main opposition New Democracy party opposes ending tax breaks for farmers.

ACCESS PROMISED

EU officials played down the logistical and security issues that have dogged talks between the creditors and Greece since Tsipras’s radical government took office in January, promising to free Greeks from humiliation and imposed austerity.

An EU official said access for the negotiators to ministries and all relevant government bodies had been agreed. An ECB official said part of the talks would take place at the Athens Hilton Hotel.

The talks will mostly cover a reform program that Greece must implement to receive phased disbursements of loans, money it needs to meet its debt service obligations and help recapitalize the banks. However, an ECB policymaker said they would also cover debt relief for Athens.

ECB Executive Board member Benoit Coeure said in a newspaper interview published on Monday that the euro zone no longer questions whether to restructure Greece’s debt but rather how best to go about it.

All euro zone countries wanted Greece to remain in the shared currency bloc and were prepared to offer “unprecedented financial solidarity” as long as Greece carried out reforms, Coeure told the French daily Le Monde.

“In truth, the question is not whether to restructure Greece’s debt but rather how to do it so that it would be really useful for the country’s economy,” he said.

“That’s why it’s important to make this restructuring, whatever form it takes, conditional on the application of measures that reinforce the economy and ensure the sustainability of Greek public finances,” he added.

Coeure defended the ECB in the face of criticism about its handling of Greece, notably the rationing of liquidity to Greek banks, saying it had always stuck to its mandate during the crisis.

Five months of acrimonious negotiations had caused huge economic and financial costs for Greece, and exposed how deeply flawed the euro zone’s decision-making was, he said, urging more integration in order to take tough decisions effectively.

Germany’s finance minister proposed at the height of the crisis that Greece take a five-year “time out” from the currency bloc if it could not meet the conditions.

“The genie of euro zone exit has escaped in the Greek crisis and won’t easily get back in the bottle,” Coeure said.

(Additional reporting by Alexander Saeedy and Philip Blenkinsop in Brussels and Leigh Thomas in Paris; Writing by Paul Taylor; editing by David Stamp)

People walk in the early morning at the Plaka area in Athens, Greece July 27, 2015. REUTERS/Ronen Zvulun  

Euro Zone Strikes Greek Deal With Tough Conditions

Euro Zone Strikes Greek Deal With Tough Conditions

BRUSSELS (Reuters) – Euro zone leaders made Greece surrender much of its sovereignty to outside supervision on Monday in return for agreeing to talks on an 86 billion euros bailout to keep the near-bankrupt country in the single currency.

The terms imposed by international lenders led by Germany in all-night talks at an emergency summit obliged leftist Prime Minister Alexis Tsipras to abandon promises of ending austerity and could fracture his government and cause an outcry in Greece.

“Clearly the Europe of austerity has won,” Greece’s Reform Minister George Katrougalos said.

“Either we are going to accept these draconian measures or it is the sudden death of our economy through the continuation of the closure of the banks. So it is an agreement that is practically forced upon us,” he told BBC radio.

If the summit had failed, Greece would have been staring into an economic abyss with its shuttered banks on the brink of collapse and the prospect of having to print a parallel currency and exit the European monetary union.

“The agreement was laborious, but it has been concluded. There is no Grexit,” European Commission President Jean-Claude Juncker told a news conference after 17 hours of bargaining.

He dismissed suggestions that Tsipras had been humiliated even though the summit statement insisted repeatedly that Greece must now subject much of its public policy to prior agreement by bailout monitors.

“In this compromise, there are no winners and no losers,” Juncker said. “I don’t think the Greek people have been humiliated, nor that the other Europeans have lost face. It is a typical European arrangement.”

Tsipras himself, elected five months ago to end five years of suffocating austerity, said he had “fought a tough battle” and “averted the plan for financial strangulation”.

Greece won conditional agreement to receive a possible 86 billion euros ($95 billion) over three years, along with an assurance that euro zone finance ministers would start within hours discussing ways to bridge a funding gap until a bailout – subject to parliamentary approvals – is finally ready.

That will only happen if he can meet a tight timetable for enacting unpopular reforms of value added tax, pensions, budget cuts if Greece misses fiscal targets, new bankruptcy rules and an EU banking law that could be used to make big depositors take losses.

German Chancellor Angela Merkel said she could recommend “with full confidence” that the Bundestag authorize the opening of loan negotiations with Athens once the Greek parliament has approved the entire program and passed the first laws.

The secretary-general of Merkel’s conservatives said the Bundestag was likely to vote on Greece on Friday.

VERSAILLES IN BRUSSELS?

Asked whether the tough conditions imposed on a desperate Greece were not similar to the 1919 Versailles treaty that forced crushing reparations on a defeated Germany after World War One, Merkel said: “I won’t take part in historical comparisons, especially when I didn’t make them myself.”

The deterioration of the Greek economy since Tsipras won office in January, and particularly in the last two weeks, had led to a much higher financing need, she said.

One senior EU official calculated the cost to the Greek state of the last two weeks of political and economic turmoil at 25 to 30 billion euros. A euro zone diplomat said the full damage might be closer to 50 billion euros.

Tsipras accepted a compromise on German-led demands for the sequestration of Greek state assets worth 50 billion euros – including recapitalized banks – in a trust fund beyond government reach, to be sold off primarily to pay down debt. In a gesture to Greece, some 12.5 billion euros of the proceeds would go to investment in Greece, Merkel said.

The Greek leader had to drop his opposition to a full role for the International Monetary Fund in the next bailout, which Merkel had insisted on to win parliamentary backing in Berlin.

In a sign of how hard it may be for Tsipras to convince his own Syriza party to accept the deal, Labour Minister Panos Skourletis said the terms were unviable and would lead to new elections this year.

Six sweeping measures including spending cuts, tax hikes and pension reforms must be enacted by Wednesday night and the entire package endorsed by parliament before talks can start, the leaders decided.

In almost the only concession after imposing its tough terms on Tsipras, Germany dropped a proposal to make Greece take a “time-out” from the euro zone that many said resembled a forced ejection if it failed to meet the conditions.

Tsipras was subjected to a 17-hour browbeating by leaders furious that he had spurned their previous bailout offer on more favorable terms in June and held a referendum last week to reject it. Only France and Italy worked to try to soften the terms being imposed on Greece.

HARD BARGAIN

Some diplomats questioned whether it was feasible to rush the package through the Greek parliament in three days. Tsipras is set to sack ministers who did not support him and make dissident Syriza lawmakers resign their seats, people close to the government said.

Even if this week’s rescue succeeds, many EU diplomats question whether an unstable Greece will stay the course on a three-year program.

Merkel, whose country is the biggest contributor to euro zone bailouts, said from the start that she would drive a hard bargain against a backdrop of mounting opposition at home to more aid for Greece.

The final sticking point was Germany’s insistence on an independent external trust fund to control state assets for privatization. Berlin initially wanted to use a structure in Luxembourg managed by its own national development bank, KfW, but eventually relented.

One diplomat said that was tantamount to turning Greece into a “German protectorate”. But Merkel declared the matter a “red line” for Germany.

Euro zone finance ministers were tasked with finding sources of immediate bridge funding for Greece if it passed the laws, to prevent it defaulting on a key payment to the ECB next Monday.

Finance ministers said Greece needed 7 billion euros of funding by July 20, when it must make a crucial bond redemption to the ECB, and a total of 12 billion euros by mid-August when another ECB payment falls due.

The ECB maintained emergency funding for Greek banks to keep them just afloat this week, a banking source said. But the finance ministry in Athens said the banks would remain shut for now.

(Reporting by Alastair Macdonald, Andreas Rinke, Tom Koerkemeier, Philip Blenkinsop, Julia Fioretti, Alexander Saeedy, Robert-Jan Bartunek and Julien Ponthis in Brussels, George Georgiopoulos and Lefteris Karagiannopoulos in Athens; Writing by Paul Taylor; editing by Anna Willard and Giles Elgood)

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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’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)