Category: European Debt Crisis

Greece: A Case Study in Capital Controls

WSJ/Nektaria Stamouli/06-15-17

When Greece imposed capital controls in the summer of 2015, the measures were a critical bulwark for banks left teetering after fears of a Greek exit from the European Union caused citizens to pull billions of euros in deposits.

Two years later, the country is a case study in capital controls. The measures prevented a collapse in the banking system, and predictions they would throw grit into the wheels of the economy haven’t materialized. Instead, controls have produced some surprising results, including helping Greece combat tax evasion, a perennial scourge.

As Greece’s creditors prepared to approve Thursday the final payment in the country’s up-to-€86 billion ($96.5 billion) bailout, there was no talk of lifting the measures—a reflection of the continued fragility of its battered economy.

PG View: So what pray tell happens when Greece runs through the last of the bailout money and is still a fiscal train-wreck?

Share
Posted in European Debt Crisis |

Greek economy sinks back into recession

BBC/05-16-17

Greece has fallen back into recession for the first time since 2012, official figures from Eurostat show.

The country’s gross domestic product (GDP) fell by 0.1% in the first three months of the year after shrinking by 1.2% in the final quarter of 2016.

The figures come as Greek unions begin two days of industrial action against cuts to pensions and tax rises insisted on by creditors.

Greece is still struggling to secure a new bailout from international lenders.

Share
Posted in Economy, Europe, European Debt Crisis |

Greece Reaches Bailout Deal with International Creditors

NYT/Niki Kitsantonismay/05-02-17

Greece and its international creditors said on Tuesday that they had reached a preliminary deal allowing the country to receive crucial bailout payments in exchange for promises to raise taxes and to further cut pensions and social spending.

The agreement — the culmination of months of talks — paves the way for the transfer of more than 7 billion euros, or about $7.6 billion, of emergency funds to Athens. It also comes before a series of elections in France, Britain and Germany in the coming days and months, with European officials eager to avoid giving fuel to far-right parties.

Under the terms of the agreement, which is subject to the approval of eurozone finance ministers and the Greek Parliament, Athens will make changes to its labor and energy markets, cut pension payouts, and increase taxes.

PG View: Let the countdown to the next next bailout begin . . . Meanwhile the people of Greece are treated to more austerity and higher taxes.

Share
Posted in European Debt Crisis |

Greece strikes deal with EU creditors over reforms

FT/Jim Brunsden/04-07-17

Greece has struck a deal with its creditors on reforms the country must carry out in exchange for continuing to receive money from its €86bn bailout programme.

The deal, which encompasses pension cuts, a widening of the tax base, and other reforms has been months in the making and was closed during intensive talks this week.

…Further difficult hurdles must still be cleared, however, before the IMF will join the programme, notably political sensitive negotiations on debt relief, meaning it’s still not clear when Greece will get the next tranche of bailout aid.

Share
Posted in Europe, European Debt Crisis |

As Greece’s Bailout Moves Forward, Significant Hurdles Remain

Bloomberg/Nikos Chrysoloras/02-22-17

Greek bond yields plunged to the lowest level in almost a month after creditors reached an agreement that would allow auditors of the nation’s bailout to continue negotiations for the release of another emergency loan payment.

…After Monday night’s meeting, the Greek government agreed to legislate structural reforms demanded by the International Monetary Fund that will lower the threshold of tax-free income and amend the pension system. These changes will come into effect by 2019. Until now, such measures were a red line Prime Minister Alexis Tsipras had said he wouldn’t cross. Its color has now faded.Watch movie online The Transporter Refueled (2015)

PG View: There’s no deal, just relief that the negotiating will continue.

Share
Posted in European Debt Crisis |

Greece is as sick as ever and its agony goes on and on

FT/Tony Barber/02-13-17

In May, Greece will start its eighth year as a patient in the hospital for financially wounded eurozone countries. Having joined Europe’s currency union in January 2001, and having received the first of three rescues worth a combined €260bn in May 2010, the country is on course for a fourth aid transfusion next year. Barring wholly improbable changes in the politics of European crisis management, Greece will earn the unwanted distinction by late 2019 of having spent more of its eurozone existence in an intensive care unit than outside.

Share
Posted in European Debt Crisis |

Greece’s Never-Ending Fiscal Drama


WSJ/Simon Nixon/02-09-17

No one wants another Greek debt crisis, least of all just ahead of a series of knife-edge elections in Europe. No one this time is trying to push Greece out of the eurozone. No one thinks what Greece needs now after eight years of acute depression is another dose of austerity. Nor does anyone seriously think Greece’s current debt burden is sustainable. So why is Greece once again back in the headlines, its future in the eurozone again called into question amid yet another standoff with its creditors?

The official explanation is that Greece’s bailout program is being held up by a dispute over the country’s fiscal targets. Under the deal struck in 2015, Greece is supposed to achieve a primary surplus before interest payments in 2018 of 3.5% and maintain this surplus for the medium term. Germany says medium term should mean 10 years; the European Commission would prefer it to mean one or two years. This matters because Germany has said it would only continue to fund Greece’s bailout if the International Monetary Fund puts money in too—and the IMF will only participate if the numbers add up. The lower the surplus target, the bigger the debt relief needed to make the numbers add up. That is a problem for Germany.

Share
Posted in Europe, European Debt Crisis |

Greek bonds suffer ‘violent reaction’ as IMF bailout decision looms

FT/Mehreen Khan/01-31-17

Greece’s benchmark government bond yields have hit their highest level in two months amid concerns the International Monetary Fund is poised to exit its involvement in the country after more than six years of bailouts.

…Investors are dumping the bonds after a leaked IMF report laid bare the schism between the fund and the EU over Greece’s economic health after 2018.

…The Washington-based fund has a far more pessimistic outlook on the health of the Greek economy, warning of “explosive” debt dynamics if the EU does not provide a major debt restructuring for the country.

PG View: If the IMF pulls the plug, one has to wonder what the EU and the ECB will do . . . Will the term Grexit come to the fore once again?

Share
Posted in Europe, European Debt Crisis |

Greece Bailout Deadline Looms Ahead of Busy EU Election Schedule

Bloomberg/Eleni Chrepa and Nikos Chrysoloras/01-25-17

Greece has less than a month to iron out disagreements with its creditors over how to move forward with a rescue package that has been keeping the country afloat since 2010.

Euro-area finance ministers meeting in Brussels on Thursday will discuss how to complete a stalled bailout review, assure the involvement of the International Monetary Fund and unlock additional financial aid. A deal must be struck by the end of February, before as many as five European nations hold elections that will make negotiations politically difficult, according to an EU official familiar with the talks.

…Something has to give: EU officials involved in the talks said they hope for political intervention to the IMF so that it aligns its projections with those of European creditors and appeases its doubts about the sustainability of the program’s targets and Greece’s debt.

PG View: And let’s not forget the Greek bailout is an ongoing fiasco dating back to 2010.

Share
Posted in European Debt Crisis |

IMF and EU policymakers take Greece bailout spat online

15-Dec (FT) — Tensions between the International Monetary Fund and eurozone policymakers over a Greek bailout erupted into a full online showdown on Thursday, raising questions over whether the IMF will join the latest €86bn rescue.

[source]

PG View: Lest we forget: Greece is still being bailed out . . .

Share
Posted in Europe, European Debt Crisis |

A split euro is the solution for Europe’s single currency

by Joseph Stiglitz
That Europe, and especially the eurozone, has not been doing well since the 2008 crisis is beyond dispute. The single currency was supposed to bring prosperity and enhance European solidarity. It has done just the opposite, with depressions in some countries greater than the Great Depression.

To answer the question about what is to be done, one has to answer another: what went wrong. Some claim that policymakers made a set of mistakes — excessive austerity and poorly designed structural reforms. In other words, there is nothing wrong with the euro that could not be fixed by putting someone else in charge.

I disagree. There are more fundamental problems with the structure of the eurozone, the rules and institutions that guide and constitute it. These may well be insurmountable, raising the prospect that the time has come for a more comprehensive rethinking of the single currency, even to the point of unwinding it.

[source]

PG View: Without the misguided and unconditional support of the IMF, the single currency may well have already collapsed by now.

Share
Posted in European Debt Crisis |

Greece bailout: Eurozone deal unlocks €10.3bn

25-May (BBC) — Greece has agreed a deal to unlock a further 10.3bn euros ($11.5bn; £7.8bn) in loans from its international creditors, after talks in Brussels.

Eurozone finance ministers also agreed on debt relief for Greece, extending the repayment period and capping interest rates.

Greece needed this tranche of cash to meet debt repayments due in July.

The Greek government owes its creditors more than €300bn – about 180% of its annual economic output (GDP).

The International Monetary Fund (IMF) has been at odds with the Eurogroup of eurozone finance ministers for months over the issue of debt relief for Greece.

The IMF considers debt relief essential, but Germany in particular was opposed.

…Wednesday’s deal does not reduce the amount Greece will have to repay. Instead, debt relief will be phased in from 2018, after Germany’s general election late next year. As such, the deal is being seen by many as a compromise intended to buy time.

[source]

PG View: How many Greek bailouts is that now?

Share
Posted in European Debt Crisis |

Greek Parliament Approves Fresh Austerity Measures to Secure Bailout Cash

22-May — Greece’s parliament approved a raft of fresh taxes and austerity measures that the country must legislate to unlock further rescue loans, as the country’s most influential creditors—Germany and the International Monetary Fund—remain deadlocked over debt relief.

The measures were backed by the 153 lawmakers from the ruling Syriza party and its junior coalition partner, the Independent Greeks, securing the majority in the 300-seat parliament late Sunday.

But Syriza lawmaker Vasiliki Katrivanou voted against two of the measures included in the bill. Early Monday, Mrs. Katrivanou announced her resignation from parliament. Another Syriza candidate from the prior elections, George Kyritsis, will run in her stead.

Parliamentary approval could pave the way for eurozone finance ministers meeting on Tuesday to clear the next disbursement of funds to Greece. But that could be complicated as the IMF and eurozone governments and especially Germany remain at odds over when Greece should get debt relief and how deep it should be.

“European leaders get the message tonight that Greece meets its obligations,” Prime Minister Alexis Tsipras told lawmakers ahead of the vote. “Starting from tomorrow it remains that the other side meets its own and I think this will happen.”

[source]

PG View: Remember when Tsipras and Syriza got elected on the platform of no more austerity? Good times . . .

Share
Posted in Debt, European Debt Crisis |

Spain’s debt now worth more than value of the economy

18-May (AP, via CNBC) — Bank of Spain figures show that the country’s public debt is now worth more than the value of the economy.

The bank said Wednesday that Spain’s public debt stockpile stood at 1.09 trillion euros ($1.23 trillion) in the first quarter of the year. That represents 101 percent of the country’s annual GDP — 1.08 trillion euros — in 2015.

The government estimates the debt ratio will be 99.1 percent of GDP at the end of 2016.

Spain’s public debt has risen consistently since the beginning of the country’s economic crisis in 2008.

[source]

PG View
: I’m going to go out on a limb here and suggest to Spain that the solution to a debt crisis is not more debt. All they did is borrow some time, but I’m afraid this won’t end well . . .

Share
Posted in Debt, European Debt Crisis |

Greece’s Five Ticking Time Bombs

07-Dec (Bloomberg) — Remember the Greek crisis? Last time we checked in, a newly mandated Greek government reached an agreement with creditors and the country was on its way to recovery, or at least stability. Well, not exactly.

Several days in Athens spent talking with investors, business leaders and government officials last week made it clear to me that the chances of a fatal misstep remain high. While Prime Minister Alexis Tsipras got approval for his 2016 budget — narrowly, after 153 lawmakers backed the budget, with 145 parliamentarians voting against and two abstentions — the challenges ahead make his previous Houdini acts (especially ignoring the result of his own referendum) look easy.

The budget calls for selling state-owned assets, reforming public-sector wages, dealing with bad loans at the nation’s banks and fixing a broken pensions system. Any one of these could prove unpalatable to the Greek parliament and trigger a renewed crisis. Trying to pin officials down on precise dates for implementing these reforms is an exercise in futility. So here are five ticking time bombs that lie ahead for Greece in the coming weeks.

[source]

PG View: Just a reminder that the most recent Greek deal, like all the “deals” before it, was nothing more than a kick of the can . . .

Share
Posted in European Debt Crisis |

First Greece, now Portugal – are we heading for another eurozone crisis?

12-Nov (MoneyWeek) — Europe has fallen out of the headlines somewhat since the start of the year.

With the Sisyphean cycle of Greek electioneering out of the way, the hope was that the newly elected government would now be able to make enough progress to allow Brussels to release the bailout money.

Fat chance. The pace of Greek reform is moving too slowly for its creditors, who are delaying the release the first chunk of bailout cash.

Meanwhile, the idea that Europe’s uncompromising approach to Greece would deter other countries from making the same ‘mistake’ doesn’t seem to be working.

Now an anti-austerity coalition is taking power in Portugal.

So are we heading for a fresh bout of euro panic?

As usual, Europe’s most immediate problem is Greece.

Earlier this week, the Eurogroup (Greece’s creditors) met to discuss Greece’s progress. They’re concerned by – surprise, surprise – the failure to pursue key reforms.

[source]

PG View: Surprise, surprise indeed! This was widely anticipated, right? If it all weren’t so tragic, you almost have to laugh.

Share
Posted in European Debt Crisis |

ECB reveals capital hole in Greek banks as unpaid loans soar

31-Oct (Reuters) – Greece’s banks need to raise more than 14 billion euros ($16 billion) of extra capital to cover mounting unpaid loans, the European Central Bank said on Saturday as it announced the results of stress tests intended to rehabilitate Greek lenders.

The capital hole has emerged chiefly due to the rising number of Greeks unable or unwilling to repay their debt, after a dispute over reforms between the leftist government and international lenders almost saw Greece leave the euro.

As controls on cash withdrawals have squeezed the economy, loans at risk of non-payment have increased by 7 billion euros to 107 billion euros.

That is roughly half of all the credit given by the country’s four big banks, according to the ECB. Almost 57 percent of the loans made by Piraeus Bank, the bank which fared worst, are at risk.

[source]

PG View: The Greek crisis comes in and out the market’s consciousness, but never really goes away.

Share
Posted in European Debt Crisis |

Juncker: Greece cannot be kept in the euro at all costs

09-Sep (Telegraph) — Jean Claude-Juncker has warned Greece’s third government in four years that it will have no flexibility over the terms of its new €86bn bail-out plan and could still face the prospect of a disorderly eurozone exit.

Addressing parliamentarians in his annual “State of the Union” speech in Strasbourg, Mr Juncker defended his personal role in seven months of crisis talks with Athens.

“It was important that [the Greeks] understood that they would not be saved at any cost,” he said of the third bail-out agreement, reached in August.
Mr Juncker said any new government would have to fully abide by the punishing conditions laid out by its creditors to keep Greece in the euro for at least another three years.

[source]

PG View: Juncker fires a shot across the bow of the next Greek government . . . reneging on the terms of the bailout deal will not be tolerated.

Share
Posted in European Debt Crisis |

The Latest Poll Shows Greek Elections Are on a Knife Edge

02-Sep (Bloomberg) — The latest poll from Greece shows that the country’s Sept. 20 election is too close to call.

Alexis Tsipras’s Syriza party would get 23 percent of the total vote if elections were held now, compared with 22.6 percent for the main opposition party, New Democracy, a voting-intentions survey by Alco published on Newsit.gr website shows. The lead is much smaller than what previous polls showed, as Tsipras struggles to contain the fallout from a rift within his party.

No party would get enough votes for an outright majority in the next parliament, according to all surveys published so far, meaning that Europe’s most indebted state could face thorny coalition talks after the ballot. Those could have the effect of delaying or derailing the implementation of its bailout clauses.

[source]

PG View: If the Tsipras gambit to consolidate power backfires, the entire 4th bailout could get nullified.

Share
Posted in European Debt Crisis |

Greece’s Syriza to win election but face setback, poll shows

Former Greek Prime Minister Alexis Tsipras’ leftist Syriza will emerge as the biggest party after next month’s election but without the sizeable margin it was hoping for, the first major opinion poll since he resigned last week showed.

The survey also found that almost two thirds of voters felt Tsipras should not have sought a fresh mandate and that his favored coalition ally would not make it into parliament.

That suggested his gamble to call early elections to consolidate his power base could backfire, though over quarter of voters remained undecided, making the final outcome far from clear.

[source]

Share
Posted in European Debt Crisis |

Greece crisis: Syriza rebels form new Popular Unity party

21-Aug (BBC) — Rebels from Greece’s governing left-wing Syriza are to break away and form a new party.

Prime Minister and Syriza leader Alexis Tsipras stood down on Thursday, paving the way for new elections.

The move came after he lost the support of many of his own MPs in a vote on the country’s new bailout with European creditors earlier this month.

Greek media reports say 25 rebel Syriza MPs will join the new party, called Laiki Enotita (Popular Unity).

The party will be led by former energy minister Panagiotis Lafazanis, who was strongly opposed to the bailout deal, reports say.

At a press conference in Athens, Mr Lafazanis said he was ready to respect the result of a referendum held in July, in which 61% of Greeks said they would not support the terms of the bailout.

If it is necessary for us to cancel the memorandum, we will follow the course of exiting the euro,” he is quoted by Kathimerini newspaper as saying.

[source]

PG View: Just when you thought Greece was back-burnered . . .

Depending on how the snap-elections play out, the Grexit threat could be right back at the fore.

Share
Posted in European Debt Crisis |

Greek PM to resign, seek snap election in September

20-Aug (Reuters) — Greek Prime Minister Alexis Tsipras will resign on Thursday to pave the way for early elections on Sept. 20, government officials said, hoping to quell a rebellion in his leftist Syriza party and seal support for a bailout program.

Tsipras’s decision to return to the ballot box after seven bruising months in power deepens political uncertainty on the very day Greece began receiving funds under its third bailout program with foreign creditors.

But a snap election should allow Tsipras to capitalize on his popularity with Greek voters before the toughest parts of the program begin to bite, and may allow him to return to power in a stronger position without anti-bailout rebels in his radical left Syriza party to slow him down.

[source]

PG View: Alternatively, the anti-austerity crowd could rally support, given that Tsipras utterly and entirely caved on the promises he made during his last campaign. If that happens, the whole deal could crumble and Greece is right back on the verge of bankruptcy and possible Grexit.

Share
Posted in European Debt Crisis |

Tsipras Meets Aides Amid Speculation Over Early Greek Elections

20-Aug (Bloomberg) — Greek Prime Minister Alexis Tsipras is meeting with members of his cabinet in Athens amid speculation that he is poised to call early elections in a bid to return to power with his authority strengthened.

Greek stocks and bonds dropped on Thursday as Tsipras met with allies to plan his next move after the approval of a bailout of 86 billion-euro ($96 billion) from the European Stability Mechanism rescue fund.

Tsipras, who was elected in January on an anti-austerity platform, approved sweeping economic overhauls attached to the bailout at the cost of seeing his own Syriza party split. A Greek government official said last week that Tsipras might hold a vote of confidence in his administration soon after the Aug. 20 deadline for a debt repayment, a move that could trigger early elections as soon as September.

The refusal of 44 Syriza party rebels to back the bailout in an Aug. 14 parliament vote meant Tsipras effectively lost his governing majority, Energy Minister Panagiotis Skourletis said in an ERT TV interview on Thursday. “There’s no getting around that,” he said.

Tsipras is seeking to shed unhelpful members of his own party before Greece faces an October review of progress in meeting the rescue terms and the need for more disbursements of international aid.

[source]

Share
Posted in European Debt Crisis |

Greece Gets Nearly $14.4 Billion to Pay E.C.B. and I.M.F.

20-Aug (New York Times) — Greece received new aid from other eurozone countries on Thursday, allowing it to meet the deadline for a crucial payment to the European Central Bank and to narrowly avoid defaulting on its debt.

The release of 13 billion euros, or nearly $14.4 billion, is part of €86 billion in new aid to Greece that cleared the last remaining political hurdles on Wednesday, including approval by the German Parliament.

The European Stability Mechanism, the agency responsible for administering aid money on behalf of the 19 countries in the eurozone, said in a statement on Thursday that it had approved giving Greece €13 billion immediately in order to meet obligations to the central bank and the International Monetary Fund.

Greece must pay €3.2 billion that is due on Thursday on government bonds held by the European Central Bank. Failure to pay would have put Greece into default and provoked another crisis.

Most of the €86 billion in new aid will be used to repay existing debt rather than to rebuild the shattered Greek economy, leading to criticism that eurozone creditors are repeating the same austerity policies that delivered six years in a row of recession in Greece.

[source]

PG View: Let’s recall that Greece already defaulted back on 30-Jun. Even if they are now fully caught-up with the IMF, there was still a default.

Share
Posted in European Debt Crisis |

Greece bailout: German MPs back deal after Schaeuble appeal

19-Aug (BBC) — German MPs have voted by a large majority to approve a third bailout deal for Greece.

In total 453 members of parliament voted in favour, while 113 rejected the bailout and 18 abstained.

German Finance Minister Wolfgang Schaeuble earlier warned MPs that it would be “irresponsible” to oppose the €86bn ($95bn; £61bn) package.

Chancellor Angela Merkel’s centre-right conservative bloc has been divided over the deal.

Prior to the vote nearly 60 of her own MPs had indicated they would vote against the rescue package.

…Despite being one the harshest critics of Greece’s left-wing Syriza government, Germany’s finance minister told MPs before the vote that they should give Greece the opportunity of a new start.

Mr Schaeuble told parliament: “There is no guarantee that all of this will work and there can always be doubts.

“But considering the fact that the Greek parliament already approved most of the measures, it would be irresponsible not to seize this chance for a new beginning in Greece.”

[source]

PG View: Seems like this will be the third “new beginning” for Greece in the last 5-years. How will Germans feel when it comes time for the fourth “new beginning”.

Share
Posted in European Debt Crisis |

German lawmakers debate Greek bailout, Merkel faces rebellion

18-Aug (Reuters) — German lawmakers broke off their holidays on Tuesday to debate Greece’s third bailout plan before approving it, though Chancellor Angela Merkel faces a rebellion in a vote shaping up as her last chance to keep Athens in the euro zone.

Up to a quarter of Merkel’s conservatives could vote against the 86-billion-euro ($95 billion) package, sending the government a clear warning not to return to parliament again to ask for more aid.

Support from parties including the Social Democrats (SPD), Merkel’s junior coalition partner, and the opposition Greens means approval is not in doubt. But a rebellion by a large number of her allies would be a blow for Merkel, who remains highly popular after 10 years in office.

Merkel and Finance Minister Wolfgang Schaeuble will make the case for backing the bailout plan in party meetings on Tuesday.

[source]

PG View: I thing everyone realizes that this third bailout does nothing but delay the inevitable bankruptcy of Greece, unless of course there is massive debt forgiveness.

Share
Posted in European Debt Crisis |

EU Said to Have ‘Serious Concerns’ on Greece Debt Sustainability

13-Aug (Bloomberg) — European institutions voiced “serious concerns” about Greece’s ability to repay its debt, putting pressure on Germany as the main creditor to offer debt relief as part of the next aid program, documents show.

Greek debt will peak at 201 percent of gross domestic product next year, before dropping to 160 percent in 2022, according to the “baseline” scenario of European institutions in a document obtained by Bloomberg News.

The International Monetary Fund in the past has wanted to see debt levels closer to 120 percent before putting its own money on the line. In talks over Greece’s third bailout, it has rankled Germany by calling for more debt relief.

While the European estimates “point to serious concerns regarding the sustainability of Greece’s public debt,” the document said that problem can be solved without resorting to a nominal haircut.

[source]

Share
Posted in European Debt Crisis |

Germany Poses Threat to Greece’s Bailout Agreement

12-Aug (GreekReporter) — Germany poses a potential threat to Greece’s bailout agreement as the cash-strapped country rushes to complete it in order to get disbursement of funds before August 20.

German Chancellor Angela Merkel faces resistance from within her party to hold a lower-house vote on Greece early next week, according to a Bloomberg report citing two party officials who preferred to remain anonymous because the legislative process is still under discussion.

If Germany delays, then other national parliaments will delay as well and Greece’s timeline will be lost. Athens needs an urgent disbursement of funds as it has a 3.4-billion-euro bond payment due to the European Central Bank (ECB) on August 20. If Greece misses that deadline, then a bridge loan will be needed to meet its obligation to the ECB.

[source]

PG View: Greece’s third bailout is not yet a done deal.

Share
Posted in European Debt Crisis |

Greece’s banks are dying, and fast

06-Aug (WashingtonPost) — Greece is finding out that you can’t have an economy without banks, but you can’t have banks without an economy, either. Or at least one where businesses aren’t allowed to buy the things they need to stay in business.

Now, Greece’s banks have fallen victim to a classic blunder. The most famous of which is “never start a land war in Asia,” but only slightly less well-known is this: “never set up shop in a country that’s been forced into mega-austerity and capital controls as a result of the currency union it’s a part of.” In other words, they didn’t lend money to people they shouldn’t have or lose money on their own bad bets. Greece’s banks just made the mistake of being banks in Greece.

…It’s only a slight exaggeration to say that this has made Greece go from having not much of an economy to having not one at all. Greek companies haven’t been able to pay foreign suppliers since they can’t send money out of the country, so their factories have run out of supplies. Everything has come to a standstill. Greece’s Purchasing Mangers Index, which measures manufacturing activity, just collapsed from a sickly 46.9 to a deathly 30.2. Anything less than 50 means that the manufacturing sector is shrinking.

[source]

Share
Posted in all posts, European Debt Crisis |

Tsipras Challenges Party Rebels With Threat of Snap Greek Ballot

29-Jul (Bloomberg) — Greek Prime Minister Alexis Tsipras took on dissenters within his own party, warning he’ll call an election unless backbenchers who oppose his deal with creditors fall into line or give up their seats.

“I’m the last person who would want elections,” the 41-year-old premier said in an interview Wednesday with Sto Kokkino, a radio station linked to his party. “If I don’t have a parliamentary majority, though, we will be forced to head to a snap vote.”

After five years of austerity, two bailouts, and the deepest recession in more than half a century, the premier is asking voters and lawmakers to extend the budget restrictions that he himself had pledged to end when he came to power in January. Greece has no other viable option to but to accept the demands of its creditors, he says.

…According to Piccoli, the internal quarrel within the governing party could derail talks between Greece and its creditors, as the two sides rush to seal an agreement before a payment on bonds held by the European Central Bank comes due, on August 20.

“The risk of unforeseen intra-Syriza developments that could delay, and at worst derail, the ongoing talks between Athens and its international creditors cannot be discarded,” Piccoli said.

[source]

PG View: If Greece ends up with a new government the deal could be off and the whole negotiation process may have to start all over. Unfortunately, the timeline is likely far too short to allow for a new agreement to be struck before the country defaults yet again.

Share
Posted in European Debt Crisis |