The big fat Greek blame game
Hollande: Debt relief for Greece won't be decided in the coming days
Hollande
- Debt relief for Greece won't be decided in the coming days
- Greek debt rescheduling would be a second step, not part of discussion for now
- Sees no need to defer agreement beyond June 30
Good
We are going to have this circus till the end of year
'Kiss of Death': Experts Critical of Greece's Creditors' Demands
"The troika plan for the Greek economy has already failed twice, and it will fail for a third time if the economically illiterate plan being foisted on Athens is adopted. Greece requires growth and debt relief, but the proposals currently being discussed provide neither," is a common theme among experts' views.
The International Monetary Fund (IMF) assumed at the beginning of the Greek debt crisis in 2010 that the Greek economy would experience a painful but relatively short recession under the austerity program imposed by creditors. There would be a 6% contraction in the economy and it would bottom out in 2011, the creditors predicted.
By the time the IMF approved its second bailout package for Greece in March 2012, the economy was already in freefall. Even so, the IMF predicted that the decline would end that year before returning to growth.
The result: the Greek economy shrank a staggering 25% and unemployment reached 28% (2013). Now analysts and economists warn against using the same medicine again in an attempt to cure the ailing country.
Nobel prize winner Joseph Stiglitz, French economist Thomas Piketty, former Italian PM Massimo D’Alema, and America’s Jamie Galbraith in a letter published in the Financial Times: "It is wrong to ask Greece to commit itself to an old programme that has demonstrably failed, been rejected by Greek voters, and which large numbers of economists (including ourselves) believe was misguided from the start... (The solution is) "a rapid move to a positive program for recovery in Greece (and in the EU as a whole), using the massive financial strength of the euro zone to promote investment, rescuing young Europeans from mass unemployment with measures that would increase employment today and growth in the future."
Michael Hewson, chief market analyst at CMC Markets UK: "Since the beginning of the year the Greek economy has been in contraction as investment and tax revenues have dried up.This has resulted in the unemployment rate moving back above 25% with youth unemployment still well north of 50%. This rise has been driven by the closure of thousands of small and medium sized businesses as consumers have reined back on spending decisions to focus on the day to day necessities."
Given these facts, it beggars belief therefore that either the Greek government, or the creditors for that matter, can believe that raising VAT and employment taxes will somehow close a fiscal gap of about €2 billion, give or take.The special tax of 12% on companies with a turnover of €500 million is bad enough, but to introduce also a surcharge on social security contributions on the employer and employee is hardly likely to encourage companies to grow and take on new people. The hiking of VAT in the food service from 13% to 23% is also not likely to go down well either given previous examples that VAT hikes in the UK and Japan. If anything it could well see further job losses and company closures.
Even a basic knowledge of economics should tell you that raising taxes when demand is shrinking is like squeezing the juice out of an already juiced lemon."
Larry Elliott, Economics Editor, the Guardian: "Greece has a number of severe economic problems. It suffers from a lack of demand, and a five-year slump has pushed it into deflation. Falling prices have added to the real, inflation-adjusted burden of the government’s debt, which currently stands at 175% of GDP.
A fresh dose of austerity will make all these problems worse....The troika, though, will continue with policies that have failed before in the hope that they will succeed this time. Einstein had a definition for this - insanity."
Matt O'Brien, Wonkblog, published in the The Washington Post: "There's only one reason to make Greece do more austerity, and it makes no sense at all. That's to try to make it pay back what it owes. Indeed, one European official said that the entire point of this was that they "want to get our money back some day... Greece's "debt should have been written down in 2010, but it wasn't because it was "bailed out" to the extent that it was given money to then give to French and German banks. The longer Europe pretends this new debt will be paid back, the longer Greece's depression will go on. Now, it's true that Europe has lowered the interest rates and extended the maturities on Greece's debt so far out that, for now at least, it's like a lot of it doesn't exist. But eventually it will, and at that point they'll either need to extend-and-pretend some more or hope that Greece has returned to growth...(Greece) keeps trying to resist these pointless budget cuts that just keep it in a perpetual state of high unemployment, but then gives in at the last minute."
Francesco Papadia, the former director General for Market Operations at the European Central Bank, on Twitter: We are closer to an agreement on Greece, but what about its quality? All on fiscal correction, nothing on structural and debt alleviation.
Thanassis Papanikolaou, Head of the association of restaurant chains (SEPOA) in Greece: “We have the experience from 2011 when the increase from 13% to 23% in food service brought the shutdown of 4,500 enterprises and the loss of 40,000 jobs. A return of the value-added tax on food service to 23% from the current 13% would amount to a kiss of death for the sector.
Tiny Greece’s Threat to Currency Credibility Is Why It Matters
To understand why Europe is investing so much time and effort on keeping Greece in the euro area, look no further than Mario Draghi’s celebrated speech three years ago.
At the height of the euro area’s sovereign-debt crisis in July 2012, the central bank president’s pledge to do whatever was needed to keep the region together underscored the principal at the heart of the currency bloc -- that membership is irreversible.
The risk of undermining that message may explain why a country that accounts for less than 2 percent of the bloc’s output has such a hold on policy makers and officials. It may also protect Greece, which has a population smaller than that of Ohio, from the risk of default and a euro-area exit.
“There’s a lot of political capital invested in the euro area to keep it whole,” said Elwin de Groot, a senior market economist at Rabobank International in Utrecht, Netherlands. “Indeed, when we allow Greece to get out of this, in a way it makes it clear to the market that the euro zone is no longer whole, it can be changed and is no longer irreversible.”
What’s at stake may also explain the relative lack of panic in financial markets even as talks on Greece’s future fail to make a decisive breakthrough. The euro was little changed against the dollar on Thursday and Italian and Spanish government bonds managed to eke out some gains by market close.
Conversely, a failure to keep Greece in the 19-member currency union would risk investor speculation that other nations could leave in the future, posing an existential threat to the euro project. Just as happened before Draghi’s speech in 2012, investors may demand higher yields to own countries’ bonds, threatening their economic recovery.
Marine Le Pen of the National Front party, a frontrunner in France’s 2017 presidential election, said Tuesday that she supports an orderly breakup of the common currency.
Negotiating Table
Differences over pensions, sales-tax rates, debt relief and corporate taxes have left Prime Minister Alexis Tsipras’s government and his country’s creditors struggling to find common ground before the June 30 expiry of Greece’s euro-area bailout. With no follow-on financing in place, Greece may be unable to make a payment due the same day to the International Monetary Fund.
The message from the markets is that there is simply too much at stake for Greece and its partners to allow the the worst-case scenario to become the reality.
“The fact that they are at the negotiation table is a positive signal,” said de Groot.
Saturday night and it's really all over says Dijsselbloem
Perhaps he's got a hot date or tickets for the new Minions movie
- Deal still needs a strong reform package
- Greek deal is still possible
- Greek deal needs more reforms than cuts
- We need a deal that brings Greece back on track
Perhaps he's got a hot date or tickets for the new Minions movie
- Deal still needs a strong reform package
- Greek deal is still possible
- Greek deal needs more reforms than cuts
- We need a deal that brings Greece back on track
I don't think he was too happy when he heard about the referendum
Troika is cornered - they are outplayed. No the "poor guy" can get drunk together with Juncker and Lagarde
Sad day for Europe : calling a referendum of one nation a sad day for Europe is clearly sending just one message : "You people are sheeple that exists only to agree with what we - the rulers of the EU that were never elected to be rulers on any election - tell". They should read a book or two about democracy instead of using that word for mouth washing (it is nothing but a word for them)
Technocrats are always like that : they think that people matter only when they are useful for them. Other name for technocrats could easily be fascists, and it never stopped for the last 80 years
We haven't heard nothing yet
Juncker To Greece: "Don't Commit Suicide Just Because You Are Afraid Of Death"
In as brash an instance of lying propaganda as we have seen recently EU President Jean-Cleaude "when it's serious you have to lie" Juncker unleashed 6 minutes of unabashed falsehoods this morning as the fearmongering and blame-shame-game for Greece begins. He proclaimed that "pension cuts were not in the creditors proposals" which as many pointed out is a total lie and then said: "You shouldn’t commit suicide because you're afraid of dying. You should say 'yes' regardless of what the question is." Got that Greek Grandmas - Vote YES no matter what you think - that's how EU democracyu works...
The European Commission appealed on Monday to the Greek people to vote “yes” in a referendum on its international bailout, warning that a risk of the rupture of the European Union was real.
They report that Jean-Claude Juncker, the commission’s president, said: “I love you deeply - You shouldn’t commit suicide because you’re afraid of dying. You should say ‘yes’ regardless of what the question is.”
A “no” vote in the referendum “will mean that Greece is saying no to Europe,” Mr. Juncker said.
Mr. Juncker rejected the argument by Greek Prime Minister Alexis Tsipras saying that a “no” vote by Greeks on July 5 would give the government a better negotiation position in the rescue talks.
"The whole planet would consider a Greek 'no' to the question posed... as meaning that Greece wants to distance itself from the euro zone and from Europe." he told a news conference.
Juncker said he still believed a Greek exit from the euro zone was not an option, but cautioned that he alone could not necessarily protect Athens from other leaders who may disagree.
At a rare emergency news conference at the Brussels headquarters of his European Commission, Juncker ran through what he said was a fair offer made to Greece, which was socially fairer than the government had sought - effectively appealing over the head of Prime Minister Alexis Tsipras.
"Playing off one democracy against 18 others is not an attitude which is fitting for the great Greek nation," Juncker said.
The Commission president said he felt deeply distressed and betrayed, believing until late on Friday that both sides were pushing towards a deal.
But with lies so blatant, we would be surprised if any Greek believed any word he ever said again.
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If Greece collapses, there will be giant dollops of blame to go round. The biggest ones will stick on whoever behaves most unreasonably in the standoff between Athens and its creditors, which could easily end in default and disaster.
This linkage between the blame game and the game of chicken is one reason to hope the Greek crisis might, even at the 11th hour, have a satisfactory conclusion. Both sides have an incentive to accommodate each other’s reasonable positions; otherwise, they will be lambasted for failing to prevent an avoidable catastrophe.
In calling euro zone leaders to a summit this Monday evening, Donald Tusk, the European Council president, made a similar point: “The game of chicken needs to end, and so does the blame game.”
In the worst scenario, Greece could become a failed state if the two sides cannot reach a satisfactory accommodation. The rest of Europe will also suffer a body blow.
The recriminations, which will then fly, will be so bitter that they will inflict a second round of damage. The principal actors need to act responsibly over the next few days to avoid the worst of the backlash.
Of these, Alexis Tsipras, the Greek prime minister, has the most to lose. If he turns down an honourable compromise, he may be hounded from office.
But the creditors have a huge amount at stake too. If the euro zone is seen to have undermined a democratically elected government by making unreasonable demands, the sense that it is a benign community of nations will be damaged. The International Monetary Fund, the junior creditor, will also be in the firing line for lending its credibility (and money) to a programme that spectacularly failed.
As things stand, everybody deserves a share of the blame. Greece cooked the books to get into the euro in the first place. The country was riddled with corruption, inefficiency and tax evasion. It then lived beyond its means, racking up giant fiscal and trade deficits.
After the crisis hit, Athens dragged its heels on implementing needed deep-seated reforms – unlike other troubled countries in the euro zone such as Portugal, Ireland, Cyprus and Spain, which are now recovering.
Despite all the agony, Greece was beginning to turn the corner early last year. But then, following the European Parliament elections, the government of Antonis Samaras succumbed to populism and stopped implementing reforms leading to a standoff with the country’s creditors.
This, though, was nothing compared to Tsipras’ wild election promises. Since taking power in January, the Greek prime minister and his finance minister, Yanis Varoufakis, then exacerbated the problem by wasting time and making inflammatory comments about the country’s creditors.
The euro zone has a lot to answer for too. Its cardinal sin was its refusal, at the insistence of the European Central Bank, to let Greece default on its debt at the start of the crisis back in 2010.
At the time, Athens owed money to private creditors, who should have faced a “haircut”. Instead, the euro zone countries and the IMF lent Greece a huge amount of money, the bulk of which was used to pay off the private creditors.
The result has been to turn what would have been a dispute between Athens and a group of banks and pension funds into a poisonous battle between Europe’s nations. The IMF went along with this, against its better judgment.
The creditors’ second error was to focus too much on fiscal austerity and too little on deep-seated reforms. After its pre-crisis binge, the Greek economy was bound to shrink but it didn’t need to lose a quarter of its output.
So much for where the balance of blame lies. Provided everybody gives ground, it is still possible to reach a deal which unlocks cash from the creditors and so stops Athens going bust.
Such an agreement would have two essential elements: Greece would implement a series of reforms, in particular to its unsustainable pension system; and the euro zone would agree to negotiate in good faith on a subsequent deal to cut the country’s debt burden.
Tsipras would not have to accept any cuts in low-income pensions. But he would have to phase out early retirement schemes rapidly and cut supplementary pensions.
Greece would not have to produce a big budget surplus this year. But it would have to implement reforms now to tax collection, the public sector and value-added tax that would help sustain its finances in the medium term.
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