Thursday, August 29, 2013

Kos Island - An Exotic Greek Island Vacation

Thursday, August 22, 2013

Greece Needs a 21st Century Marshall Plan

At their White House meeting last week, U.S. President Barack Obama assured Greek Prime Minister Antonis Samaras of his support as Greece prepares for talks with creditors on additional debt relief amid record-high unemployment.

The U.S. should also endorse a new blueprint for recovery based on one of the most successful economic assistance programs of the modern era: the Marshall Plan.

It is clear by now that the European Union’s policies in Greece have failed. Projections that government spending cutbacks would stop the economy’s free-fall proved to be wildly optimistic. The 240 billion euro ($319 billion) bailout from the euro area and International Monetary Fund has shown little sign of success, and Greece is experiencing its sixth year of recession.

The spending cuts and tax increases, along with the dismissal of huge numbers of public-sector employees, demanded as a condition of the loans and assistance have only deepened the economic pain.

Instead of changing course, however, euro-area economists have responded to bad news by revising their forecasts to reflect lower expectations. Those numbers document a staggering record of mistaken assumptions that has led to today’s failure.  More.....

by Dimitri B. Papadimitriou


December 12, 2013

Tuesday, August 6, 2013

Greece Is Warned of New Aid Gap

Greece faces an additional financing shortfall of nearly €11 billion ($14.6 billion) by the end of 2015, the International Monetary Fund said on Wednesday, warning that the gap could be bigger if growth falls short of estimates.

That figure is higher than earlier euro-zone projections, and combined with the IMF's estimate of the amount of debt relief Athens needs, would force Europe to cover any extra financing needed to keep Greece afloat, including potential write-offs of rescue loans extended to Greece over the past three years, in order to make the country's debt load sustainable.

That puts the IMF at odds with the euro zone's strongest member, Germany, where the government is avoiding talk of debt reductions and new Greek loans ahead of elections in September.

Without additional euro-zone financing, the IMF said, Greece might not be able to pay back its loans to the fund. That would it make it even more difficult for Athens to tap private financing or attract investment needed to spur growth. As Greece repeatedly risked defaulting on its loans over the past several years, officials throughout Europe openly discussed the possibility of a Greek exit from the currency union.

In turn, it could then fuel financial problems throughout the currency union, starting in Portugal, Spain and Italy, but spreading to the core economies such as France, which are vulnerable to ailing members.

Wall Street Journal
August 1, 2013

Monday, August 5, 2013

The IMF and Greek Losses

The International Monetary Fund has been playing tough with Greece and the euro zone for a while, and the Fund's latest review of the bailout program, released Wednesday, keeps the bad-cop act going.

The IMF now predicts that an €11 billion funding gap will emerge after next summer, which the Fund previously hadn't expected before 2015. The IMF also says Greece's longer-term debt targets can't be met without further write downs on some of that debt, which these columns have long endorsed as the only moral way out of the country's bailout hell.

Yet in pushing the European Union and the European Central Bank to forgive some of what Greece's government owes them, the IMF is making a very different kind of case. The IMF wants Athens to stiff Brussels and Frankfurt so that Athens can fully pay back . . . the IMF.

This is rich. The Fund report notes fearfully that "if the program were to go irretrievably off-track and euro area member states did not continue to support Greece, the capacity to repay the Fund would likely be insufficient."

The IMF is responsible to its stakeholder governments, including the U.S. government, which has stood behind the Greek program. Other countries are growing sceptical  however. Paulo Nogueira Batista, who represents Brazil and 10 other nations on the IMF executive board, issued a statement Wednesday decrying the "delusion" underpinning the Fund's debt analysis. These 11 countries abstained from approving the latest €1.8 billion disbursement to Greece earlier this week.
Mr. Batista is right about the Fund's "over-optimistic" assumptions about Greece's growth and recovery. But it's only because he and other IMF chiefs previously accepted these mostly fictional debt outlooks that the Fund and Greece's other "rescuers" now stand to lose money. The IMF took on its Greek role willingly, with the support of its executive board. In joining the Greek bailout in May 2010, the Fund even tossed out its own rule against lending to countries whose debt isn't "sustainable in the medium term."
In its forecasts and analyses, the Fund repeatedly gave the Greek program the imprimatur of its vast research staff and its many decades in the payments-crisis business. Even Wednesday's report manages to seem both bleak and sanguine. After declaring the need for additional debt relief, the report notes modestly: "Risks remain to the downside, however, mainly from lower growth and potential fiscal and privatization slippages."
The Greek government, as Wednesday's report emphasizes, is responsible for failing in almost every instance to hold up its end of the bailout. The Fund now expects privatizations of state assets to yield €22 billion through 2020, less than half as much revenue as was predicted in March 2012.
Yet there's no erasing the complicity of Greece's international creditors—all of them—in shaping the rescue's ruinous outcome. The projections in Wednesday's IMF report show that starting next year Greece will each year pay back more to the Fund than it borrows. The country's total net obligation to the Fund is expected to peak this year at 16.9% of GDP, an amount Athens is supposed to spend the next 13 years paying down.

If there is another restructuring of Greece's bonds, euro-zone governments will naturally be first in the line of fire. But the IMF, for its own role in Greece's plight, deserves to play a part too.
Wall Street Journal
July 31, 2013

Monday, July 29, 2013

Greek Aid Slice Gets Green Light From Euro Zone

The euro zone on Friday approved the payment of a €2.5 billion ($3.32 billion) installment from Greece's international bailout, ensuring the first victim of the bloc's debt crisis won't run out of money over the summer.

Euro-zone governments will also transfer an additional €1.5 billion in profit from the European Central Bank's bond-buying program to Athens once all national approval procedures have been fulfilled on Monday, said Simon O'Connor, a spokesman for the European Commission.

Senior aides to euro-zone finance ministers held a conference call Friday morning to determine whether Athens had fulfilled all the commitments it made earlier this month in order to receive the payment. Germany and a handful of other countries still need their parliaments to sign off on the aid.

Officials believe the approval of this aid payment will stave off further complicated discussions over Greece's bailout program until the fall, after federal elections are held in Germany. After that, many expect a divisive debate to ensue on how to cut Greece's massive debt mountain—more than 160% of gross domestic product—and whether the euro zone should forgive Athens some of the money it is owed.

Friday, July 19, 2013

Greece’s civil service cull heralds break with the past-is it the end of 'rousfetia'?

Four thousand state employees, from teachers and broadcasters to municipal police officers and janitors, face dismissal by December in the first official cull of Greece’s overstaffed civil service in more than six decades.

After missing a June 30 deadline set by international lenders, the governing coalition must this week push legislation through parliament enabling the sackings or risk losing a critical €6.8bn tranche of bailout aid. The vote in parliament takes place on Wednesday.

Resistance to a reform that deals a blow to Greece’s clientelistic political system remains strong, however. On Monday more than 200 mayors across the country shut down municipal services, including rubbish collection, to protest against the sackings. Public sector unions called a one-day nationwide general strike for Tuesday and a march to parliament.

The measure has angered lawmakers in both the centre-right New Democracy and Panhellenic Socialist Movement (Pasok), the coalition partners, many of whom rely on “rousfetia” – carrying out political favours – for their constituents to win re-election.

Yet some state employees recognise the game is up. Twenty-four-year-old Paris, who declined to give his second name, says he expects to be among the first to be fired. A high-school drop-out  he joined the Athens municipal police thanks to a family connection with a former mayor.


Financial Times
July 15, 2013

Tuesday, July 16, 2013

Austerity: European democracies against the wall

The crisis in the euro-zone has had a dramatic impact on the economic and social fabric of European countries. However important it may be, the economic dimension is only the symptom of a broader problem. The crisis is primarily political in nature. Lorenzo Bini Smaghi argues in this book that the crisis reflects the inability of western democracies to solve problems that have been building for over two decades. He finds that democratically elected officials are loathe to take unpopular decisions that could jeopardise their re-election. Emergency thus becomes the engine of political action, and the justification for corrective measures vis-à-vis the voters. As a consequence, the cure in the form of austerity, administered belatedly and under pressure from the markets, becomes even more painful and unpopular, giving rise to populist movements and endangering democracy itself.

Lorenzo Bini Smaghi served as a member of the Executive Board of the European Central Bank from 2005 to 2011. He is currently visiting Scholar at the Weatherhead Center for International Affairs at Harvard University and at the Istituto Affari Internazionali in Rome.

by Lorenzo Bini Smaghi

Centre for European Policy Studies

July 2013

Download his book.....