We begin with the latest Grexit news, starting with a declaration by the head of the eurozone’s money ministers and a consensus of dismal scientists, and a call by Goldman Sachs.
The Germans are saying their usual contradictory things, with Merkel partisans say the Iron Chancellor make bend for modifications, a denial by the finance minister, and a couple of pleas for rhetorical mercy.
Government debt soared again, while some Reuters scribe suggest its time for a eurobank haircut, the coalition strategizes for a memorandum stall, and food prices are rising.
Mayors are speaking out against racism, human rights groups are voicing their alarm, Syriza’s speaking out, and the coalition’s ju nior partners are feeling the heat.
Eurominister says Grexit off the table
Grexit rumbles are flying about the eurosphere on a daily basis.
The latest, from the head of the finance ministers’ group, is that rare example of the “ain’t gonna happen” genre, though with the usual qualification.
From Nathalie Thomas of the London Telegraph:
Jean-Claude Juncker, leader of the eurozone finance ministers’ group, said he believes Greece will not leave the single currency as he prepares for talks in Athens next week.
Mr Juncker, also Prime Minister of Luxembourg, told an Austrian newspaper that a Greek exit from the eurozone “won’t happen” as he is confident the country will “redouble its efforts” to meet austerity targets.
The Eurogroup chief will meet Greek Prime Minister Antonis Samaras in Athens on Wednesday amid speculation that Greece will seek more time to implement austerity cuts.
“It won’t happen,” Mr Juncker told Austria’s Tiroler Tageszeitung, when he was asked about the likelihood of a Greek exit from eurozone.
“If Greece refused budget consolidation and structural reforms outright then we would have to consider this question (of a Greek exit).
“But because I believe that Greece will try to redouble its efforts to meet its targets there is no reason to expect this exit scenario will become relevant.”
Economists say the Grexit less likely
That’s according to a poll of practitioners of the dismal science by India’s leading financial paper.
From India’s Economic Times:
Successive debt bombshells from Greece have so far failed to blow apart the political bonds that hold it in the euro zone, persuading growing numbers of economists to change their minds and conclude that the country’s fate lies inside the currency union rather than out.
Reuters polls over the last few months suggest Greece’s euro zone membership has become more secure, in spite of the daily torrent of dismal economic news from Athens, and perhaps even because of it.
The sheer magnitude of Greece’s slump has contributed to a growing sense that little remains, in economic terms, that would force lenders to cut off funding to Greece and boot it out the euro zone.
For economists, Greece’s future in the euro zone is no longer an economic question but one of political willpower, which remains firm in Athens and Brussels, in spite of opposition from politicians in Germany.
There is now a strong consensus that Greece will still be in the euro zone in 12 months, with 45 out of 64 economists polled last week in agreement. Even as recently as May, opinion was fairly divided.
In other words, the economists are convinced the Grexit’s a dead issue because the country’s so deep in hock that it’s creditors have to keep it going.
That’s reassuring, isn’t it?
Is Merkel mulling modification
In light of the economists’ poll, perhaps her motive is protecting the cash Germany’s already invested in their troubled eurozone partner.
Chancellor Angela Merkel is considering easing Greece’s bailout terms, fanning tensions with members of her coalition who oppose giving the Greek government any more concessions, two German lawmakers said.
Ms Merkel’s government is torn between showing some leniency toward Greece as it struggles to meet the terms of its rescues and insisting that prime minister Antonis Samaras delivers on his promises, Klaus-Peter Willsch and Frank Schaeffler, both of whom have voted against Ms Merkel’s euro crisis policies in parliament, said in separate telephone interviews.
“The sensitivities among many more than just the 27 coalition members who voted ‘no’ last time are well known” to Ms Merkel, “so the official line is to stay tough” on Greece, said Mr Willsch, a member of Ms Merkel’s Christian Democratic Union party. “But at the same time, some are being sent forward to test the waters on how this tough line can be abandoned.”
Given the increasingly polarized anti-bailout rhetoric coming from her conservative partisans, Merkel’s putting herself in an interesting position.
And you’ve got to love the quote on folks “being sent forward to test the waters” from someone doing just that.
But with every German pro comes the con
And it comes from a highly placed member of her cabinet.
German Finance Minister Wolfgang Schaeuble said on Saturday that there were limits to the aid that could be granted to Greece and said the crisis-stricken country should not expect to be granted another programme.
“It is not responsible to throw money into a bottomless pit,” Schaeuble said at a government open day in Berlin. “We cannot create yet another new programme.”
Schaeuble also stressed that the euro was a stable currency and said there were no signs of inflation.
Many questions remain. Here’s one: Was he speaking on behalf of the cons in Merkel’s party or as finance minister? And where’s the Bundesbank stand, an institution to which Merkel is closely attuned?
A German plea for rhetorical mercy
The voice belongs to the former chancellor, whose party is out of power.
Former German chancellor Gerhard Schroeder has repeated calls for politicians in Germany to stop making negative comments about Greece.
Schroeder accused FDP leader Phillip Roesler and other of trying to make political gains in Germany by victimizing Greece.
“This is totally wrong, I hope Chancellor [Angela] Merkel will make it clear that this is not acceptable,” he said in an interview Germany’s ARD TV on Thursday.
“This stance is putting at risk Europe’s future and the Greeks do not deserve this treatment,” he added.
On Wednesday, Schroeder urged Berlin to show more solidarity with Greece during an interview with the Greece’s state TV, NET.
“Germany has proven its solidarity” with Greece, “but I was hoping for more,” Schroeder said in comments from the southeastern Greek island of Kos, where he said he was on holiday to show support for Greeks.
“If Greece moves forward with its reforms, it must be given more time,” the former German leader added.
Yet another German voice calls for mercy
The speaker is a member of Roesler’s own party.
German MEP Jorgo Chatzimarkakis has told Skai TV called on eurozone member states to stop Greece being turned into a scapegoat for the single currency’s problems.
“Germany is looking for a scapegoat, someone it can punish and Greece is the victim,” said Chatzimarkakis, a member of the pro-business Free Democratic Party (FDP).
Chatzimarkakis wondered why Greece was the center of attention, when its debt represents less than 3 percent of the total owed by eurozone countries.
Last month, the MEP challenged his own party leader, Phillip Roesler, also Germany’s economy minister, after he speculated about a Greek euro exit. Chatzimarkakis slammed Roesler’s comments as “reckless” and pondered: “What planet does he live on?”
Goldman Sachs says no Grexit for a year
They’ve got or will get enough cash to make it another year, says the Wall Street giant — an outfit with some fairly good sources in high places.
[F]or Goldman Sachs, the remaining resources of Greece’s current bailout package are already sufficient to keep the county funded and avert a systemic collapse until at least end 2014.
“This is the case even if Greece does not manage to raise any funds from privatizations and also fails to create primary surpluses over this period. Furthermore, if the ECB were to roll currently held bonds into new longer term bonds, resources would be released to keep Greece funded until late 2015. After that, an extra €38bn would be required to carry Greece to end 2016,” Goldman adds.
So, how Greece would manage to keep funded for that long time? Goldman outlines two reasons for that: 1) the large scale restructuring of debt redemptions and interest payments following the PSI process last February and 2) the significant amount of funds earmarked for the second Greek bailout package.
Government debt soars again
The biggest chunk came from the eurozone rescue fund, secured by signing away so much on the memorandum’s bottom line.
From Athens News:
Central government debt reached 303.53 billion euros as of June 30, rising by 23.2 billion from March 31, finance ministry data showed on Friday.
Central government data differ from general government debt figures, which are used to calculate the country’s debt-to-GDP ratio under eurozone rules.
According to the figures, the overwhelming part of borrowing in the first six months of the year was from the government’s official creditors – 76.7 percent from the European rescue fund EFSF and 3.4 percent from the IMF – although 19.9 percent was raised via short term treasury bills.
The ministry said that 96.7 percent of the central government’s 303.53 billion euro debt load was denominated in euros. Just 45 percent of the debt was tradable. The figures do not include 20 billion euros of government-guaranteed debt.
Eurobank needs a haircut?
Not only would it ease the burden on Greece, it would also be just, write Paul Carrel and Noah Barkin of Reuters:
By taking a loss on its Greek bond holdings, the European Central Bank could both help Athens and calm investors who fear they will take a hit from its new bond-buying plans, but a voluntary writedown faces fierce resistance from within.
Greece is far from meeting the terms of a second bailout, and while euro zone officials are growing impatient, they are also worried a Greek exit from the 17-member bloc would inflame market pressure on Spain and deepen the debt crisis, Reuters reported.
At a stroke, the ECB could ease the debt burden on Athens by taking a writedown on its Greek bond holdings, while addressing investors’ concerns that when the ECB buys bonds, as it could do soon to ease funding pressure on Spain and Italy, other creditors get pushed down the pecking order.
When private creditors took big writedowns from a restructuring of Greek debt earlier this year, the ECB didn?t share their pain. Now they fear that in any future restructuring in the euro zone, they will again carry the can, while the ECB gets off scot-free.
To show it really means business with its plans for a new program to buy bonds – probably in Spain and Italy – the ECB could take losses on its Greek debt and forgo its ‘senior’ bondholder status, putting it on a level with private investors.
They make a reasonable argument for a temporizing measure. But any real solution has to strike much deeper, in ways outside the bounds of mainstream political discourse.
Coalition sets out memorandum extension strategy
Justifiably desperate to forestall the inevitable chaos of immediate implement of all those Troika-demanded cuts, the coalition has to do everything it can to win some concessions.
ANSAmed reports on the leaked blueprint:
Greek government sees three stages in its negotiating strategy in view of its key contracts and consultations with the country’s European partners in the next two weeks, according to daily Kathimerini, while the ultimate goal is for Greece to obtain a two-year extension to the timetable for bringing down its deficit below 3% of GDP and seek an additional funding package for the extra period. Finance Minister Yannis Stournaras will probably accompany Prime Minister Antonis Samaras in his meetings with German Chancellor Angela Merkel in Berlin (on August 24) and French President Francois Hollande in Paris the following day.
The three-stage plan provides for: I) The presentation of a credible package for saving 11.5 billion euros over the next two years. The list of measures for the savings is reportedly almost complete. Ministers will hold intensive meetings over the next few days in order to finalize the package. II) Approval of the disbursement of the next bailout installment of 31 billion euros. . .Stournaras is expected to argue that a positive response by Europe toward the package should put an end to speculation of a Greek exit from the eurozone and improve the investment climate in the local economy. III) The two-year extension to the fiscal stabilization program. Sources say the government has drawn up a scenario for the development of the deficit and GDP if the extension is granted, aiming to show that the plan is realistic and will lead to better results.
More on the government’s strategy from Greek Reporter’s Andy Dabilis:
Hoping to press the case that Greece needs more time to hit fiscal targets demanded by international lenders, a report from the country’s Finance Ministry said that a possible recovery could be spurred by allowing two more years for new reforms and cuts to be imposed.
The report said the debt-stricken country’s economy will recover faster and its debt be more sustainable if it is given two more years to reduce its budget deficit, the Greek newspaper Imerisia reported. Before he heads out to meet Merkel and Hollande, Samaras will host Eurozone chief Jean-Claude Juncker, overseer of the 17 countries including Greece which use the euro.
The latest estimate cited calculations by unnamed Finance Ministry officials who worked out that a two-year extension would help the economy shrink at a slower pace in 2013 and rebound quicker from 2014. Under such a scenario, the economy would shrink by 1.5 percent in 2013 and grow by 2 percent in 2014, the newspaper said. If no extension was granted, the economy would contract by up to 4.5 percent next year and not recover before 2015, it said.
Adding to the misery quotient: Food prices to rise
And the chamber or commerce has a corporate solution.
From Greek Reporter:
Greek traders are forecasting price rises for basic foodstuffs in the months ahead as a result of hikes in the cost of farm produce internationally, as daily Kathimerini reported. As a remedy, the National Confederation of Greek Commerce, (ESEE), is proposing a return to the cultivation of farmland and the commercial management of Greek produce, which it said would also contribute to a recovery of the economy.
Sharply reduced rainfall in the U.S., Russia, Kazakhstan and Ukraine is leading to steep rises in the prices of cereals, which is also seen affecting the price of animal feed. In Greece, cereal production has been reduced this year, while the sharp rise in the price of soya and corn, by 100% and 60% respectively, is expected to cause a new wave of price hikes, cutting further into the purchasing power of Greek households who’ve already seen big pay cuts, tax hikes and slashed pensions, and as food producers are having getting getting loans from banks.
According to ESEE, Greek poultry farmers are now selling their products at a loss and it said that Greek enterprises must now tap the growing turn of consumers toward local produce to help change the productive mode of the economy.
Mayors cry out against racism
Once again, the reminder: Economic catastrophe is the soil in which racism thrives.
Greece has witnessed the rise of a neo-Nazi party, whose members have imitated their Brownshirted predecessors by attacking despised immigrants, and the mayors to two cities are calling on the public to resist the gospel of violence and its adherents.
The mayors of Athens and a town in northeastern Greece where Muslims and Christians have lived peacefully for many years warned Thursday that their communities had to stand up to extremist thugs who have been targeting minorities and immigrants.
“When fellow human beings are being stabbed on an almost daily basis, society has to be alert and the state has to lead the perpetrators to justice,” said Athens Mayor Giorgos Kaminis.
An Iraqi man was stabbed to death in the capital last weekend in a suspected racist attack. The Migrant Workers’ Union claims that more than 500 immigrants have been injured in racially motivated attacks over the last six months.
“The rule of law is the only guarantee to exit this crisis of violence, which is prompted by the large number of illegal migrants entering the country and the attempts of motorcycle-riding fascist gangs to take the law into their own hands,” said Kaminis.
Stylianos Hatzievangelou, the mayor of Topeiro, near Xanthi, said that “extremists” had been harassing Muslims in the town. “We have put a lot of effort into ensuring our residents are treated as equal citizens and we are not going to let this pass unchallenged,” he told Kathimerini.
Human rights group decry roundups, violence
The impulse to roundup the unwanted isn’t restricted to Greece. In France, “Socialist” President François Hollande has followed the practice of predecessor Nicolas Sarkozy of rounding up Roma and deporting them back to Eastern Europe, and Turkish and other immigrants have long been the targets of German neo-Nazis.
But human rights group are singling out Greece of late.
The latest from Fragkiska Megaloudi of Greek Reporter:
Human rights groups have condemned recent police crackdowns in Greece on undocumented migrants, inhumane detention conditions, and hate crimes committed with impunity.
The Greek authorities began a crackdown on irregular migrants in the capital, Athens, in early August, when the police arrested 7,754 migrants, 1,656 of whom were taken to detention centres for being in the country illegally.
“Greece has the right to enforce its immigration laws and after a fair process, to deport people with no legal basis to stay in the country,” said Benjamin Ward, deputy director of the Europe and Central Asia division of Human Rights Watch. “But it doesn’t have the right to treat people like criminals, or to presume irregular immigration status just because of their race or ethnicity.”
In the first quarter of 2012 some 64 percent of all irregular migrants in the European Union (EU) entered through illegal border crossings from Greece, according to the European Agency for the Management of Operational Cooperation at the External Borders of the Member States of the European Union (FRONTEX).
In 2010 irregular migrants made up almost 10 percent of Greece’s population of 11 million – some 810,000 people – according to government figures and the Organization for Economic Cooperation and Development (OECD).
“As Greece seems to be the easier door to Europe, more and more people will try to pass here,” commented Nikitas Kanakis, director of the Athens-based NGO, Médecins du Monde (MDM), which runs a free health clinic for undocumented migrants in the capital. “But the combination of the lack of services and a [restrictive] immigration policy, with the deep economic and social crisis [in Greece]… creates an unsafe environment for migrants.”
Most of the irregular migrants in Greece are stranded there because they do not have the money to move on, and a “dysfunctional” system for processing asylum seekers, according to the UN Refugee Agency (UNHCR). Only 2,860 of the more than 10,000 applications for asylum and 47,000 appeals filed in 2010 were successful.
Syriza lays into coalition’s bailout stance
The charge: Samaras’s coalition doesn’t have the stuff to push through a memorandum renegotiation.
Greece’s main opposition party, SYRIZA, launched a strong attack on the government’s stance regarding the country’s bailout terms and sparred with New Democracy after one of the leftist party’s officials suggested that default is a “weapon for the weak.”
SYRIZA, which had adopted a relatively low-key approach to the debate about the loan agreement with the European Union and the International Monetary Fund over the last few days, roared back to life Thursday with fierce criticism of Prime Minister Antonis Samaras, who it accused of having no interest in negotiating better bailout terms when he holds talks with European leaders next week.
“The continuation of the same memorandum policies, which focus on the reduction of wages, pensions, social spending and the sale of public wealth, prove that he is totally subservient to Greece’s lenders,” SYRIZA said in its statement. The party added that unless neoliberal policies are reversed, the crisis in Greece and the rest of Europe would deepen.
Samaras’s party, however, was more enraged by a comment from SYRIZA’s parliamentary spokesman, Panayiotis Lafazanis, in relation to bankruptcy. “Default, in general — I don’t say it as an answer to the Greek problem — is not something that is necessarily catastrophic,” he told Alpha Radio.
“Default is a weapon for the weak when they reach a point they cannot pay their debts. Look at what is happening on a daily basis in our economy and society. So we shouldn’t present it as a bogeyman.”
New Democracy called Lafazanis’s comment “shameful” and accused him of “wishing the country would default.”
Coalition partners feel the heat
PASOK and Democratic Left rank and file are putting pressure on the leaders of the coalition’s junior partners, forcing their leaders to do some rhetorical distancing from Antonis Samaras and his New Democracy.
The question is whether or not the heat will finally force a shattering of the coalition, leading to yet another parliamentary election.
Media reports suggest that coalition leaders Evangelos Venizelos and Fotis Kouvelis, although continuing to support the government, they need to demonstrate that they do not identify with the Prime Minister, as they are under pressure from their own parties and also would like to maintain room for communication maneuvers in view of the politically difficult September. Labour reserve in the public sector, cuts in wages and pensions and the privatization of public enterprises remain issues of disagreement in the coalition government.
As protothema.gr writes, Samaras is preparing to present Juncker the package of measures and the plan for privatizations and a smaller public sector. Maximos Mansion believes that a good meeting with Juncker will prepare the ground for the meetings with Merkel and Hollande. The PM’s discussions will affect the Troika report, as they will return in late August, and will also shape the climate for the September Eurogroup to discuss the tranche of EUR 31.5 billion. By then Samaras will have met with the director of ECB and the head of IMF.
The government’s target is clear: “The country should stand upright within the euro as well, until the implementation of critical decisions about managing the debt crisis in the Eurozone. Samaras will take all necessary steps in consultation with the partners in order to restore confidence in the country, whatever the political cost at home.” In his meetings, Samaras will describe the difficult situation within the country and request the extension of the fiscal adjustment programme.