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Greek eurozone crisis: is time running out for Syriza? by Paul Mason Channel 4 News, England, June 15 http://blogs.channel4.com/paul-mason-blog/greek-crisis-greece-enters-crunch-week-talks/3854 The Greek crisis ramped up a gear last night when, at the start of supposed “last chance” talks in Brussels, EU negotiators told the Greek delegation that “negotiations were over” and that they had no mandate to offer anything new. The Greeks had prepared a new submission, accepting demands to close 4/5ths of the so called fiscal gap with direct new tax measures, and asking the EU and IMF to sign off austerity measures amounting 0.6 per cent of GDP to be achieved by anti-corruption measures. This was rejected and the Greeks left the talks 45 minutes after they went in, triggering an intense final phase of the crisis. In Greece, according to my sources, there is now acceptance within a pro-compromise wing of Syriza’s leadership that even if they wanted to try and force through a surrender deal, it would not pass either the party or in parliament. And as the days go by, with one ultimatum after another from lenders, the voices within Syriza urging a “deal at any cost” have grown weaker. Yesterday the IMF’s chief economist, Olivier Blanchard, went publicly further than the Fund has gone in these negotiations in spelling out: to achieve the current austerity targets set by the EU – 1 per cent this year and 1.75 per cent next year – will need Greek debt to be rescheduled so that it matures later and its interest rates fall. Any further deterioration in the Greek economy, and any higher austerity target, he said, would need the debts to be partly written off. This is a milder version of what Syriza’s finance minister Yanis Varoufakis has been saying since he took office – and what the EU cannot accept. There are three possible outcomes to this week. One, a last minute deal in Brussels. But it would have to be more favourable to the Greeks than the ultimatum presented last week, and would have to include both debt relief and a large dollop of structural funding aid from the Commission, or Tsipras cannot sell it. The second is, no deal on Thursday night and the Greeks signal their intention to default on the IMF and ECB debt coming due this summer. That would probably – but not automatically – trigger the ECB pulling all its support from the Greek banking sector, and need capital controls imposed inside Greece. The third is a nine month delay, with the IMF/ECB paying themselves their own debts, which would suit both Angela Merkel and François Hollande but would be presented in Greece as a victory for Syriza. It’s hard not to conclude that default is getting more likely with every breakdown of talks. Not a hard and vindictive default demanded by the far left within Syriza, with pre-emptive bank nationalisations and border closures, but a default that throws the ball back into the court of Greece’s lenders, who would stand to lose €320bn. Do they then force Greece out of the Euro, and take action to collapse its banks, or do they save both the country and the banks with a debt restructuring offer? Though a default will unleash temporary chaos in the financial markets, few understand what it would do inside Greece. Up to now Syriza’s dominant narrative has been: Greece versus the world. It’s a narrative that fits comfortably into the ideology of Greek left, including the old social democratic party Pasok. But there is another narrative inside both Syriza and Greek society that the six months of confrontation have suppressed: class against class. You get a reflection of it on the Twittersphere. But to fully understand it you have to speak to Syriza members, and that vast array of people to the left of them who always mistrusted the party. They’ve had to bite their tongues for six months, watching all the action happen in the corridors of power, or in Brussels. That’s not their element. What’s coming, many of them believe, is their element. They believe the entire negotiating strategy of the ex-Troika has been aimed at achieving “regime change” – just as Merkel and Nicolas Sarkozy got rid of George Papandreou and Silvio Berlusconi in 2011. But regime change has to involve domestic conflict as well as international pressure, and those I speak to in the organising networks of Syriza and the grassroots beyond it: they now have quite a strong appetite for domestic conflict, above all against the “oligarchs” much of Syriza’s election rhetoric focused on. Tsipras hardens Greek stance after collapse of bailout talks by Marcus Bensasson & Patrick Donahue I Kathimerini, Athens, June 15, [Bloomberg] <http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_15/06/2015_551051> Greece and its creditors swapped recriminations over who was to blame for the breakdown of bailout talks, as each side hardened its position after a last- gasp attempt to bridge differences collapsed in acrimony. With markets plunging in Asia and in Europe, Prime Minister Alexis Tsipras portrayed Greece as the torchbearer of democracy faced with unrealistic demands, while the caucus leader of Chancellor Angela Merkel’s parliamentary bloc said Greeks had to “finally reconcile themselves with reality.” “One can only read political motives in the creditors’ insistence on new cuts to pensions after five years of plundering them under the memorandum,” Tsipras was cited as saying in a statement in Efimerida Ton Syntakton newspaper on Monday. “We will wait patiently for the institutions to move toward realism.” The euro dropped in early trading after the European Commission said negotiations in Brussels had broken up on Sunday after just 45 minutes with the divide between what creditors asked of Greece and what its government was prepared to do unbridged. The focus now shifts to a June 18 meeting in Luxembourg of euro-area finance ministers that may become a make-or-break session deciding Greece’s ability to avert default and its continued membership in the 19-nation euro area. “In the end, this is not the kind of situation where you can have a mechanical agreement for some kind of numbers, where you meet in the middle or something similar,” Valdis Dombrovskis, European Commission vice president for euro policy, said on Latvian television Monday. “To reach an agreement Greece has to do the work that is necessary.” The Stoxx Europe 600 Index fell 0.8 percent as of 9:16 a.m. in Berlin, while the euro weakened 0.3 percent. The latest failed attempt to find a formula to unlock as much as 7.2 billion euros ($8.1 billion) in aid for the anti- austerity Syriza-led government brings Greece closer to the abyss. With two weeks until its euro-area bailout expires and no future financing arrangement in place, creditors had set June 14 as a deadline to allow enough time for national parliaments to approve an accord. “If some interpret the government’s honest willingness to reach compromise and the steps it has taken to bridge the differences as weakness, they should consider this: we don’t just carry a heavy history of struggles,” said Tsipras. “We’re carrying on our backs the dignity of a people, but also the hopes of the people of Europe. It’s too heavy a burden to ignore. It’s not a question of ideological stubbornness. It’s a question of democracy.” Varoufakis rules out 'Grexit', deal possible if Merkel takes part by Erik Kirschbaum I Kathimerini, Athens, June 15 [Reuters] <http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_15/06/2015_551045> Greece Finance Minister Yanis Varoufakis said he could rule out a 'Grexit' because it would not be a sensible solution to the Greek debt crisis and in a German newspaper interview on Monday also said a debt restructuring was the only way forward. "I rule out a 'Grexit' as a sensible solution," Varoufakis told mass circulation Bild newspaper, referring to a possible Greek exit from the eurozone. "But no one can rule out everything. I can't even rule out a comet hitting earth." Talks on ending the deadlock between Greece and its international creditors broke up in failure, with European leaders venting frustration as Athens stumbled towards a debt default that threatens its future in the euro. Varoufakis said he believed it could be possible for Greece to reach an agreement with creditors quickly. He said the only way Greece would be able to repay its debts was if there was a restructuring and a deal could be possible if Chancellor Angela Merkel took part in the talks. "We don't want any more money," he told the German daily that has been especially critical of the rescue efforts, adding Germany and the rest of the eurozone had already given Greece "far too much" money. "An agreement could be reached in one night. But the chancellor would have to take part." He said the austerity programme had failed. "There's no way around it: We have to start all over again. We have to make a clean sweep," Varoufakis said. He added that his government wanted to prevent a 'Grexit' but needed "a restructuring. That's the only way possible that we can guarantee and also afford to repay so much debt." He added he would say 'yes' immediately to any such agreement with a debt restructuring and Greece would forego any further aid if the European Central Bank, the IMF and the European Union would offer a debt haircut. On top of that Greece needs an "extension" of the terms. EU officials blamed the collapse of the talks on Athens, saying it had failed to offer anything new to secure the funding it needs to repay 1.6 billion euros to the IMF by the end of June. Greece said it was still ready to talk, but that EU and IMF officials said they were not authorised to talk further. Athens said it would not give in to demands for pension and wage cuts. "We don't want a single cent for wages, pensions or debt repayment," Varoufakis told Bild. He said that the Greek government would have trouble collecting taxes if creditors forced it to raise them too high. Athens has proposed VAT rates of 7, 14 and 22 percent in an effort to redistribute the tax impact and lighten the burden on lower income groups. But lenders want rates of 11 and 23 percent and are pressing for an increase in VAT on energy to 23 percent. "You know what our problem is with the VAT?" he said. "We're not able to collect it." He said if Greece is forced to raise VAT to 23 percent "then there will be less tax revenues. "It sounds crazy but that's the way it is: the higher the tax rate, the less (willing) people (are) to pay, they then feel entitled not to pay more." Markets slide as Greece demands end to creditor 'looting' Collapse in talks with creditors heightens fears of default as Greek stock market slumps almost 7% on early trading and Germany warns time is running out by Graeme Wearden and Helena Smith in Athens Reuters Monday 15 June 2015 <http://www.theguardian.com/business/2015/jun/15/markets-slide-as-greece-demands-end-to-creditor-looting> Fears that Greece is close to defaulting on its debt swept European trading floors on Monday morning, after talks between Athens and its creditors collapsed on Sunday. The Greek stock market slumped by almost 7% in early trading, as traders showed alarm that a deal will not be reached before the country’s bailout programme expires on 30 June. Despite growing pressure, the Greek prime minister, Alexis Tsipras, is refusing to accept new spending cuts and tax rises to achieve the budget surpluses demanded by Greece’s lenders. “One can only see a political purposefulness in the insistence of creditors on new cuts in pensions after five years of looting under the bailouts,” Tsipras told Greek newspaper Ton Syntakton on Monday morning. “We will wait patiently until the institutions accede to realism,” he said. “We do not have the right to bury European democracy at the place where it was born.” The war of words between the two sides continued, with Jens Weidmann, the head of Germany’s Bundesbank, warning that time is running out for Greece. Greek financial shares were routed this morning, with Piraeus Bank tumbling by 18% and Eurobanks down 15%, dragging the Athens market to its lowest point since mid-April. The Athens stock market over the last three months Photograph: Thomson Reuters The biggest fallers on the Athens stock market this morning. Photograph: Thomson Reuters The price of Greek two-year government bonds fell sharply, as investors raced to sell up in case Athens should default on its debts. Analysts warned that the collapse of negotiations on Sunday, after just 45 minutes, has pushed Greece closer to default and a potential exit from the single currency. “Even if the parties involved do reach a deal in the near future it will likely be a short-term one only,” said Gary Jenkins of LNG Capital. “Indeed the lack of trust suggests that funds will be drip-fed to Greece and that a longer-term agreement will be very difficult to reach.” According to local media Tsipras has called an emergency meeting with top ministers to discuss the situation, including chief negotiator Euclid Tsakalotos, deputy prime minister, Yannis Dragasakis, and state minister, Nikos Pappas. Talks are now in limbo until Thursday, when eurozone finance ministers meet for their scheduled Eurogroup meeting. That is probably the last chance for Greece to negotiate a deal to unlock the €7.2bn of bailout funds that have been frozen for months, says Peter Rosenstreich, head of market strategy at online bank Swissquote. “We expect markets will feel the heat this week as the odds of a Greek default have increased considerably,” Rosenstreich added. All the main European markets fell on Monday morning, with Germany’s DAX index down 1.1%. In London, the FTSE 100 index of blue-chip shares was down 37 points or 0.5% at 6746. . . . Greek priority is paying wages and pensions: party spokesman Reuters, June 15 <http://www.reuters.com/article/2015/06/15/eurozone-greece-pensions-idUSA8N0YJ00V20150615> ATHENS - Greece's priority is to pay the wages and pensions of its workers, but paying back debts to its international creditors would depend on the two sides reaching a deal, a parliamentary spokesman for the ruling Syriza party said on Monday. Talks on ending a deadlock between Greece and its creditors failed on Sunday, with European lenders venting their frustration as Athens stumbled closer towards a debt default that threatens its future in the euro. (Reporting by George Georgiopoulos; editing by Matthias Williams) Greece isn't any old troubled debtor by Robert Peston, Economics editor BBC, June 15 <http://www.bbc.com/news/business-33132595> What is very striking - and important - about the agonised talks between Greece and its creditors is that no European leader has tried to bind the feuding sides together with a call to European solidarity, or with any emotive rhetoric about how this great monetary project is all about prosperity and peace for all eurozone citizens. Actually that is not quite true. The maverick Greek finance minister, Yanis Varoufakis, has repeatedly tried to play the "we-are-all-in-it-together" card. But he's been viewed by his eurozone peers as though he farted in the negotiating room. There have been no great vision speeches by Angela Merkel or Francois Hollande or even Jean-Claude Juncker, no heart-rending empathy with the penury of Greek people, whose incomes have fallen by a quarter since they first started tightening their belts to meet the austerity requirements imposed on Greece by the initial bailouts. Nor has any great sense been conveyed that maintaining the wholeness and integrity of the eurozone is a matter of passionate principle. Instead the public and private debate has been couched in the language of national interests, rather than the imperative of keeping the so-called great European project on the road. Probably the clearest and starkest manifestation was last night's enlightening blog by the chief economist of the IMF, Olivier Blanchard. This French technocrat made it explicit that what is dividing the two sides is both simple to understand and - apparently - impossible to deliver in practice. The creditors - eurozone nations, the European Central Bank and the IMF - have reduced the scale and pace of austerity that they insist on from Greece, but they still want greater cuts, equivalent to about 0.5% of GDP per year for the next three years, than Athens is prepared to deliver. And the reason, according to Blanchard, is simply that every notch down in the budget surplus promised by Greece is a notch up in the quantity of the loans already provided to Greece that will eventually have to be written off. This is how Blanchard puts it: "any further decrease in the primary surplus target, now or later, would probably require, however, haircuts". And what he means, just to remind you, is a brutal short-back-and-sides for Greece's official debts of €320bn, equivalent to 180% of its stagnating GDP. To be clear, not all economists would accept that more austerity will improve the sustainability of the existing debts: some would argue that in an economy which is contracting once more, cuts will further undermine the recovery and make the debt burden even harder to bear. And some of them would say the creditors are in self-harming denial, by not cracking on with debt write-offs today, to give Greece a chance to climb out from under the deadening burden of its massive indebtedness. The nub of the whole mess is captured when Blanchard says "there is a limit to how much financing and debt relief official creditors are willing and realistically able to provide given that they have their own taxpayers to consider". Or to put it another way, Mrs Merkel and Mr Hollande don't want the backlash from their own citizens of being seen to let the Greeks off what they owe. Now it is not just the quantum of austerity that divides Athens from its creditors, it is also the method of execution. So the eurozone and IMF want further pension cuts and an increase in VAT on electricity (inter alia). These measures are toxic for the Greek Syriza government because they are regressive, they disproportionately hurt the poorer Greeks who elected Syriza. So "why insist on pensions?", says Blanchard. His answer is that pension expenditure in Greece is 16% of GDP, and "transfers from the budget to the pension system are close to 10% of GDP". Now here in Britain we would think that public spending on pensions of close to a tenth of GDP is incredibly lavish: the equivalent figure for the UK, and indeed for most anglophone countries like the US and Canada, is much lower (at around 6% of GDP in Britain, according to the GDP). But in the UK, US and Canada, private pension saving is much higher than on the continent of Europe. And Greece's government spending on pensions, as a share of GDP, is very much in the ballpark of spending in the rest of the eurozone: on the basis of the last official OECD figures, which admittedly are five years old, Greece spent less than Italy, France and Austria on pensions and only a bit more than Germany. And there is another thing: in 2009 the OECD calculated that Greek government cash spending on old-age and survivors benefits was 13% of its GDP. If the equivalent figure today is 10%, which is what Blanchard seems to suggest, that implies the outlay on pensions has already been reduced by around 40%, given that Greece's GDP has shrunk by a quarter. That said, on the basis of the last Eurostat figures, which are for 2012, Greece's old-age outlay - including disability and incapacity payments - was considerably higher than the euro area average. So the stats are murky. But it is worth pointing out that Greece has proportionately more old people than the eurozone average, and more poor people (thanks to five years of slump). In other words, it is not obvious that there is outrageous excess in the Greek pension system (and there certainly isn't in comparison with provision in Blanchard's French home). But to get back to where I started, which is the impression created that what is going on in Brussels is qualitatively the same as the kind of matter-of-fact talks that take place when a big indebted business gets into trouble, rather than a profound debate about the nature of economic and social ties between eurozone members. If those talks collapse, and Greece defaults on its debts - and then is on a path to exit from the euro - that would probably lead to a revolution in perceptions about what the euro is all about. At that point, monetary union will have been shown to be a question of economic convenience for its members, rather than profound supra-national destiny. To state the obvious, which seems however to be lost on the leaders of the eurozone, once the euro is not forever for any member, it is not forever for all members. And once that clonking penny drops for global investors, the notion that the whole project will fall apart - not tomorrow, but one day - will increasingly become the default view. Greece: A Credible Deal Will Require Difficult Decisions By All Sides by Olivier Blanchard iMFdirect, June 14 <http://blog-imfdirect.imf.org/2015/06/14/greece-a-credible-deal-will-require-difficult-decisions-by-all-sides> The status of negotiations between Greece and its official creditors – the European Commission, the ECB and the IMF – dominated headlines last week. At the core of the negotiations is a simple question: How much of an adjustment has to be made by Greece, how much has to be made by its official creditors? In the program agreed in 2012 by Greece with its European partners, the answer was: Greece was to generate enough of a primary surplus to limit its indebtedness. It also agreed to a number of reforms which should lead to higher growth. In consideration, and subject to Greek implementation of the program, European creditors were to provide the needed financing, and provide debt relief if debt exceeded 120% by the end of the decade. The primary surplus in the program was to be 3% in 2015, and 4.5% next year. Economic and political developments have made this an unattainable goal, and the target clearly must be decreased. It also included a number of reforms aimed at increasing medium term growth, and making the fiscal adjustment easier. These also need to be reconsidered. In this context, by how much should the primary surplus target be reduced? A lower target leads to a less painful fiscal and economic adjustment for Greece. But it also leads to a need for more external official financing, and a commitment to more debt relief on the part of the European creditor countries. Just as there is a limit to what Greece can do, there is a limit to how much financing and debt relief official creditors are willing and realistically able to provide given that they have their own taxpayers to consider. How should the initial set of reforms be reassessed? Greek citizens, through a democratic process, have indicated that there were some reforms they do not want. We believe that these reforms are needed, and that, absent these reforms, Greece will not be able to sustain steady growth, and the burden of debt will become even higher. Here again, there is a trade off: To the extent that the pace of reform is slower, creditors will have to provide more debt relief. Here again, there is a clear limit to what they are willing to do. The offer made to the Greek government last week reflected these considerations and these tradeoffs. It proposed to lower the medium term primary budget surplus target from 4.5% of GDP to 3.5%, and give Greece two more years to achieve that target—so the target for this year was reduced to 1%—and it asked for a more limited set of reforms. For a deal along these lines to be effective and credible however, two conditions must be satisfied. On the one hand, the Greek government has to offer truly credible measures to reach the lower target budget surplus, and it has to show its commitment to the more limited set of reforms. We believe that even the lower new target cannot be credibly achieved without a comprehensive reform of the VAT – involving a widening of its base – and a further adjustment of pensions. Why insist on pensions? Pensions and wages account for about 75% of primary spending; the other 25% have already been cut to the bone. Pension expenditures account for over 16% of GDP, and transfers from the budget to the pension system are close to 10% of GDP. We believe a reduction of pension expenditures of 1% of GDP (out of 16%) is needed, and that it can be done while protecting the poorest pensioners. We are open to alternative ways for designing both the VAT and the pension reforms, but these alternatives have to add up and deliver the required fiscal adjustment. On the other hand, the European creditors would have to agree to significant additional financing, and to debt relief sufficient to maintain debt sustainability.We believe that, under the existing proposal, debt relief can be achieved through a long rescheduling of debt payments at low interest rates. Any further decrease in the primary surplus target, now or later, would probably require, however, haircuts. These are tough choices, and tough commitments to be made on both sides. We hope that agreement can be achieved along these lines. _________________________________________________________ Full posting guidelines at: http://www.marxmail.org/sub.htm Set your options at: http://lists.csbs.utah.edu/options/marxism/archive%40mail-archive.com
