Sunday, October 7, 2012

Has Europe's Moment Arrived?

Kathimerini reports, Troika talks prolonged:
Greece is to resume talks with the troika after Monday’s meeting of eurozone finance ministers in negotiations that may last another two weeks despite both sides noting progress on Saturday.

Finance Minister Yannis Stournaras met with officials from the European Commission, European Central Bank and International Monetary Fund for more than three hours on Saturday but said that talks would have to continue next week as there was no final agreement on the details of the 13.5-billion-euro austerity package demanded by Greece’s lenders.

“The talks will go on as there is some divergence on certain issues,” said Stournaras after meeting Prime Minister Antonis Samaras on Saturday. He insisted that the differences that needed to be bridged were fiscal rather than political.

“There are no political solutions to be sought; there are simply negotiations with the troika,” he said, adding that the visiting officials would also be at Monday’s Eurogroup meeting to brief finance ministers on the talks in Athens.

Greece is hoping that following the briefing, eurozone finance ministers will issue a statement confirming that there has been progress in the negotiations. Speaking in Riyadh on Saturday, IMF Managing Director Christine Lagarde said talks in Athens had been “very good and productive.” EU Monetary Affairs Commissioner Olli Rehn said talks had “moved on” and that an agreement might be just a matter of days away.

Stournaras is also set to present the outline of the package, which sees about 9 billion euros’ worth of measures being implemented next year and 4.5 billion in 2014. The troika is likely to tell the Eurogroup that these measures will mean Greece will just about wipe out its primary deficit next year and that the target of a 4.5 percent primary surplus for 2014 will only be achieved in 2016.
If the ministers do not approve this shift in targets then it is likely that the troika will return to Athens to demand further cuts. This would complicate negotiations and further delay the disbursement of Greece’s next loan tranche.

Meanwhile, ECB executive board member Joerg Asmussen dealt another blow to Greek hopes of rolling over the bonds held by the central lender. “We can neither extend the maturities for Greek bonds nor lower the interest rates,” he told Bild newspaper. “Both would be a form of debt relief and so direct financing of the Greek state, which the ECB is not legally allowed to do.”
Rolling over Greek bonds to extend maturities isn't the solution. The time for meaningful reforms has come and Greek politicians know it. They can no longer fund the public sector beast by breaking the back of an entire population which has already suffered enough harsh austerity measures.

Of course, Greek media doesn't want to cut off public sector funding because that's the hand that feeds them. They prefer focusing on the so-called 'Lagarde list' which got the green light on Friday:
Financial crime prosecutors Grigoris Peponis and Spyros Mouzakitis ruled Friday that there are no legal obstacles obstructing authorities from making use of a list of nearly 2,000 Greeks suspected of tax evasion as the document was given by former French Finance Minister Christine Lagarde to her Greek counterpart Giorgos Papaconstantinou in 2010 in an official capacity.

As soon as they received the so-called “Lagarde list” -- a list of 1,991 Greeks with total deposits of 1.5 billion euros in a Geneva branch of HSBC -- the two prosecutors asked the Financial Crimes Squad (SDOE) to investigate each of the depositors for suspected tax evasion and other financial crimes, Kathimerini understands. According to the document sent to SDOE by the two prosecutors, a separate charge sheet must be drawn up for each individual found to have committed a crime.

The prosecutors, who are conducting a preliminary investigation into the list, are expected to summon as witnesses political figures who handled the data, including former Finance Minister Evangelos Venizelos and Papaconstantinou. Parliament has also requested a briefing on the list.

Meanwhile, SDOE chief Stelios Stasinopoulos briefed Supreme Court deputy prosecutor Nikolaos Pantelis on his agency’s investigation into corruption among politicians. Stasinopoulos is said to have denied the existence of an official list of 36 politicians leaked to the media last week without denying the fact that SDOE is investigating politicians. Responding to a letter from New Democracy MP Nikitas Kaklamanis, in which the ex-minister allegedly asked if his name was on the list, Stasinopoulos said there was no such document and that any presented as an official one was “the product of criminal activity.”

Pantelis is to start examining the list on Monday and will ask SDOE to conduct a further investigation if it deems that the agency did not follow the right course in its probe, Kathimerini understands. The documents given to Pantelis from SDOE were classified as strictly confidential following the suicide on Thursday of former Deputy Interior Minister Leonidas Tzanis who was on a list of politicians leaked to the media last week.
According to Kathimerini, up to 60 politicians are being investigated by SDOE, Greece’s financial crimes squad, for suspected tax evasion and other financial crimes. Great, it's about time they investigate all these politicians who built villas in Mykonos and Santorini 'out of thin air'. Doubt anyone will go to jail but don't confuse issues.

The main issues plaguing Greece aren't tax evasion, fraud and political bribes. Those issues need to be addressed but the main problem lies in the explosive growth of the Greek public sector over the last 30+ years under successive PASOK and New Democracy governments, buying votes through public sector, debt-financed growth.

And now that there is no more money to fund this bloated public sector, Greek politicians are scrambling to negotiate whatever they can from their lenders. It's actually pathetic and I blame these politicians and troika for inflicting so much misery on so many innocent Greeks who had nothing to do with years of corruption and mismanagement.

I will repeat what I've often stated. If Greek politicians had the courage to make drastic cuts in the public sector right from the beginning of the crisis, it would have been bad but nothing like the depression we're witnessing now. In fact, GDP for 2011 was found to be lower:
The recession in 2011 was in fact even deeper than previously thought, as revised data released on Friday by the Hellenic Statistical Authority (ELSTAT) showed that the country’s economy shrank by 7.1 percent in real prices on an annual basis. The previous ELSTAT calculation had been for a 6.9 percent contraction.

Greece’s gross domestic product came to 206.4 billion euros last year. In 2010, GDP had amounted to 222.2 billion euros.

The change was made in the context of the revision of the GDP figures for the period 2006 to 2011, taking into account the definitive data for economic indices for those years.

The greater decline in last year’s GDP means the targets for the 2013 draft budget that was tabled in Parliament on Monday will have to be revised. This first draft sees Greece’s gross domestic product shrinking to 200.9 billion euros this year and to 193 billion in 2013. Once the revised figures for 2011 are factored in, the estimates will also drop further, rendering the picture of the country’s economy even bleaker than before.
All this just proves to me that austerity isn't working in Greece and it won't work elsewhere. The problem isn't just with austerity, which any credible economist knows exacerbates a downturn, but with the way austerity was implemented in Greece.

Instead of cutting the public sector albatross that has weighed the country down for years, implementing sensible reforms like liberalizing certain professions and spurring investments, Greek politicians and troika 'negotiated' these ridiculous measures cutting wages and pensions across the board to appease powerful public sector unions (I call them modern day thugs!).

Importantly, if you go back and compare job losses in the public sector vs. those lost in the private sector since the crisis erupted, you'll be shocked to see almost no jobs were lost in the public sector. Sure, they also suffered cuts in wages and pensions, but job losses were overwhelmingly concentrated in the private sector. It's a scandal and Greeks I speak with are sick and tired of political charades from all parties pandering to public sector unions.

But most Greeks, sick and tired of austerity, are now looking for a scapegoat. Dina Kyriakidou and Noah Barkin of Reuters report, Merkel to face protests on first crisis visit to Greece:
German Chancellor Angela Merkel will tell Greeks she wants to keep their country in the euro when she visits Athens this week, but she faces a hostile reception from a people worn down by years of austerity and recession.

Many Greeks blame Merkel, who has publicly chastised them for much of the past three years, for the nation's plight. Opponents, some of whom have caricatured her as a bullying Nazi, have promised protests on Tuesday during her first visit to Greece since the euro zone crisis erupted there in 2009.

"She does not come to support Greece, which her policies have brought to the brink. She comes to save the corrupt, disgraced and servile political system," said Alexis Tsipras, who leads the opposition Syriza alliance. "We will give her the welcome she deserves."

About 6,000 policemen will be deployed in the capital for her 6-hour visit, turning the city centre into a no-go zone for protest marches planned by labour unions and opposition parties.

"We don't want her here," said Yannis Georgiou, 72, who has seen his pension cut by one third. "We will take to the streets against austerity and against the government. Maybe Merkel will hear something and see what we're going through."

Merkel's visit is a sign of Germany's support for the coalition government of Prime Minister Antonis Samaras as it struggles to agree new budget cuts with international lenders, overcome the objections of reluctant coalition partners and cope with rising public anger.

After toying with the idea of a Greek exit from the euro zone in the first half of 2012, Merkel has come full circle and decided the risks of the country leaving are too high, especially with a German election looming next year.

The trip is a sign of German solidarity, a message to the Greek leadership and people that Berlin does not want to cut them loose, and a signal to the members of Merkel's coalition who want Greece out that it's not going to happen soon.

At the same time, the trip shows Merkel's trust in Samaras. Aides to the chancellor say they have been positively surprised by his commitment to reform. One reason for not visiting Greece before was frustration with progress under his predecessors, technocrat Lucas Papademos and Socialist George Papandreou.

"In our view Samaras is really trying to get things done," one German official said, requesting anonymity. "Nobody should see this trip as a sign that all is perfect. But we recognise things are moving in the right direction."

The Greek government was ecstatic about the news, promising to treat Merkel with the honours befitting the leader of a great nation. Greek officials credited Samaras's charm offensive in Berlin in August for Germany's change of heart.

"Samaras showed a real will to change things. He stressed what Greece had to do, not what others had to do for Greece," a Greek government official told Reuters on condition of anonymity.

Merkel is scheduled to meet Samaras, President Karolos Papoulias and representatives of Greek industry.

In a measure of tension between Athens and Berlin earlier this year, Papoulias accused Merkel's Finance Minister Wolfgang Schaeuble of insulting the country by likening Greece to a bottomless pit.

BRACING FOR TROUBLE

Opposition parties, from the radical leftist Syriza to the right-wing Independent Greeks, have planned protests and police officials said they were bracing for violence.

For years, banner headlines and cartoons in the press have portrayed Germany as a bully and protesters burned Nazi effigies on the central Syntagma Square outside parliament.

The tone was more subdued in the newspapers on Sunday. To Proto Thema ran a "HEIL" headline but most others called on Merkel to take a hard look at the suffering of Greek people during her visit.

"Tell Merkel the truth," wrote Nikos Hatzinikolaou in Real News. "With unemployment at 25 percent and recession at 7 percent, for a fifth year, can lenders expect the country to survive and pay back its debts?"

The visit gives Merkel a chance to get a first-hand view of a country that could have a major influence on her own re-election hopes.

Greece is stuck in tough negotiations with inspectors from the "troika" of the International Monetary Fund, European Commission and European Central Bank over a fresh wave of 11.5 billion euros in cuts for the next two years, a condition for getting an installment of the 130 billion euro bailout which is keeping the country afloat.

As difficult as these talks are, lenders are now realising Greece needs more time, money or both. The IMF wants official lenders such as Germany to take a "haircut" under which the value of the Greek debt they hold would be radically reduced. Private bondholders have already swallowed such a hit but EU partners prefer other measures than to suffer more losses.

In order to avoid going back to parliament to request a third rescue for Athens - a step Merkel allies acknowledge could be political suicide for her - Germany will probably have to agree to other concessions to plug a hole in Greece's finances.

These could include giving Samaras an extra two years to make painful cuts and agreeing to a reduction in the interest rates Athens pays on its EU loans.

Before making concessions that are sure to provoke a backlash at home, Merkel will want to look Samaras in the eye and make clear to him that she has done all she can - that it is now up to him. Politically, she will have next to no room to give the Greeks more before next year's German vote.

"She has to lay it on the line and make clear to the Greek government what the options are," Michael Fuchs, a senior lawmaker in Merkel's Christian Democrats (CDU) told Reuters. "Whether the conditions for additional help are met depends not on Germany, but on the Greek government alone."
Schnell, Frau Merkel, your time is up too. It's time you admit to German taxpayers that the Greek bailout was nothing more than corporate handouts to insolvent German banks. It's time you realize that if Greece exits the eurozone, Spain, Italy and Portugal will follow, sending shock waves around the world, spelling the end of the European dream. This will cripple the German and French economies.

Below, Eva Kaili, Greek MP for PASOK party, discusses the Greek plight and wider European debt woes on RT. And euro skeptic, Nigel Farage, rails against Barroso and the EU project, stating: "In the end,  you'll have to face the reality that even France and Germany cannot survive in the same economic and monetary union."