Europe’s Greek Test

JAN. 30, 2015

Paul Krugman

The New York Times

In the five years (!) that have passed since the euro crisis began, clear thinking has been in notably short supply. But that fuzziness must now end. Recent events in Greece pose a fundamental challenge for Europe: Can it get past the myths and the moralizing, and deal with reality in a way that respects the Continent’s core values? If not, the whole European project — the attempt to build peace and democracy through shared prosperity — will suffer a terrible, perhaps mortal blow.

A major step towards a Greek compromise

- Finance Minister Varoufakis’s proposal provides a good basis to start discussions

by Zsolt Darvas on 3rd February 2015

 Bruegel.org

Following a week of fright after the Greek elections, during which various statements by the new Greek government have raised the spectre of Grexit, Finance Minister Varoufakis made a surprising proposal yesterday: the government will no longer call for a headline write-off of Greece’s public debt, but instead proposes to change the terms of current European loans to Greece, to aim for a primary surplus (much) smaller than the Trokia target and fight against tax evasion.

Greek Finance Minister Heads to Germany After Retreating From Tough Stance

By James Hertling

 (Bloomberg) -- Greek Finance Minister Yanis Varoufakis arrives in Germany with the wind at his back: the biggest rally in stocks since the days of the drachma and a plunge in the week-old government’s borrowing costs.

All he had to do was drop a demand for a debt writedown, retreating from a central campaign promise.

France Offers Support, but No Debt Relief, to Greece

By LIZ ALDERMANFEB. 1, 2015

The New York Times

PARIS — French officials said Sunday they would support the new Greek government’s efforts to get the country back on its feet after five years of crushing austerity, but warned that there would be no write-down of Greece’s debt and pressed Athens to continue with reforms that are still needed to help mend the country’s economy.

“France is more than prepared to support Greece,” Michel Sapin, the French finance minister, said during a news conference after a two-day visit by Yanis Varoufakis, his new Greek counterpart. “Greece needs time to put things to work,” he said. But he added, there was “no question” of forgiving Greek debt.

Closed businesses in Athens. The European Central Bank will meet this week to discuss emergency loans for some Greek banks.For Greece, Bank Trouble Looms Again as New Government Takes ShapeFEB. 1, 2015

Mr. Varoufakis was beginning the first of a series of visits to European capitals this week after the leftist Syriza party won power in elections last month in a populist backlash against austerity. He said that although Athens was “desperate” for money, it would not seek a 7 billion euro installment on its 240 billion euro international bailout package because that would require the nation to adhere to austerity terms.

Economists say Greece needs the money to cover looming funding needs and debt obligations, and to help a recovery after the economy contracted around 25 percent in five years.

“We have resembled drug addicts craving the next dose. What this government is all about is ending the addiction,” Mr. Varoufakis said, adding it was time to go “cold turkey.”

President Barack Obama, in his first remarks on the situation since the Syriza government came to power, cast doubt on the soundness of Europe’s austerity policies during an interview with CNN that aired on Sunday.

“You cannot keep squeezing countries that are in the midst of a depression,” he said of Greece. “At some point, there has to be a growth strategy in order to pay off their debts and eliminate some of their deficits.”

Mr. Obama added: “More broadly I’m concerned about growth in Europe. Fiscal prudence is important, structural reforms are necessary in many of these countries. But what we’ve learnt in the U.S. experience is that the best way to reduce deficits and restore fiscal soundness is to grow.”

France Supports Greece in EU Debt Battle

Sympathy in Paris for Athens Adds to Pressure on Berlin

The Wall Street Journal

By MARCUS WALKER,  INTI LANDAURO and  ANDREW ACKERMAN

Updated Feb. 1, 2015 4:42 p.m. ET

8 COMMENTS

PARIS—France expressed sympathy for the new Greek government’s hope of renegotiating the tough terms of its bailout, amid growing international calls for Germany to rethink its austerity-heavy approach to the debt crises in Greece and Europe.

Greece's Crazy Leftists Have a Good Idea

172 JAN 27, 2015 12:01 AM EST

By The Editors

 Bloomberg

Amid the populist rhetoric that propelled the far-left Syriza party to victory in Greece's parliamentary elections, there's one idea that Germany in particular should take to heart: revive growth in the euro area by giving the hardest-hit countries a break on their debts.

Greece: Think Flows, Not Stocks

 JANUARY 26, 2015 7:26 PM

Paul Krugman

The New York Times

How should we think about the bargaining that may or may not now take place between the new Greek government and the troika? (No bargaining if the troika basically says no concessions.) Most discussion is framed in terms of what happens to the debt. But as both Daniel Davies and James Galbraith point out — with very different de facto value judgments, but never mind for now — at this point Greek debt, measured as a stock, is not a very meaningful number. After all, the great bulk of the debt is now officially held, the interest rate bears little relationship to market prices, and the interest payments come in part out of funds lent by the creditors. In a sense the debt is an accounting fiction; it’s whatever the governments trying to dictate terms to Greece decide to say it is.

Lessons from the 2012 Greek debt restructuring

Miranda Xafa 25 June 2014

The 2012 Greek debt restructuring was the largest one in the history of sovereign defaults. This column discusses the lessons from this historically unprecedented episode. Delaying the restructuring implied that externally held debt remained higher than it would have been otherwise. Supportive crisis management is necessary for smooth restructuring to take place in a currency union.

http://www.voxeu.org/article/greek-debt-restructuring-lessons-learned

Greek political fallout a worry, but financial contagion seen limited

BY JAN STRUPCZEWSKI

BRUSSELS Wed Dec 17, 2014 4:03am EST

(Reuters) - Five years after Greece sparked a sovereign debt crisis that threatened the euro's survival, the country again has the potential to rattle its currency partners if Greeks have to elect a new government next month.

Fed Completes Rule Limiting Banks’ Size

Bars Acquisitions That Result in a Firm Holding Over 10% of Financial-Sector Liabilities

By SCOTT PATTERSON and  VICTORIA MCGRANE

Updated Nov. 5, 2014 3:52 p.m. ET

The Wall Street Journal

WASHINGTON—Bank regulators took a step toward curbing the ability of large financial institutions to get bigger as Washington continues trying to lessen the risk giant firms pose to the U.S. economy and taxpayers.

The Federal Reserve on Wednesday finalized a rule, mandated by the 2010 Dodd-Frank financial law, that generally prohibits banks and other financial firms from buying or merging with rivals if the deal would result in the combined firm holding more than 10% of all liabilities in the financial system.

Timothy Geithner Book 'Stress Test' Defends Financial-Crisis Decisions

Former Treasury Secretary Recounts Difficult Period; A Few Regrets

By DEBORAH SOLOMON

May 10, 2014 4:34 p.m. ET

The Wall Street Journal

WASHINGTON—Former Treasury Secretary Timothy Geithner, whose time in Washington was often colored by accusations he was too close to Wall Street and did little to help Main Street, uses his 538-page book "Stress Test" to largely defend and explain the decisions he made during the financial crisis.

"The inconvenient truth of financial-crisis response is that the actions that feel right are often wrong," he writes.

Mr. Geithner, who was tapped by President Barack Obama to lead the Treasury and before that was president of the Federal Reserve Bank of New York, says he was right to avoid the populist push for blood, including refusing to upend bonus payments to employees of American International Group Inc. AIG +1.09%  And he says there was little reason to take a tougher approach to the big banks by nationalizing them and handing the reins to the government.

At the same time, Mr. Geithner says the U.S. should have done more to save Lehman Brothers and criticizes members of Congress for polluting the 2010 Dodd-Frank law with unwise provisions.

'Great Stretch' to secure Greek debt return

BY PAUL TAYLOR

PARIS Sun Apr 13, 2014 3:55am EDT

(Reuters) - Call it the Great Stretch.

Two years ago, Greece's debt crisis almost brought the euro zone crashing down.

Now European partners are preparing to ease Athens' debt burden without writing off their loans but by stretching them out into the distant future, extending maturities from 30 to 50 years and further cutting some interest rates, EU officials say.

Greek Sovereign Debt Rating Held at B- by S&P

By Marcus Bensasson  Mar 21, 2014 8:16 AM GMT+0200

Bloomberg

Greece’s credit rating was maintained at six steps below investment grade by Standard & Poor’s, which said the country’s debt remains large even as its government’s fiscal performance improves.

The country’s long-term local currency debt was kept at B-, with a stable outlook, S&P said in a statement.

Irish Bonds Rise, Yields Drop to Record in Market Return

By Lucy Meakin  Mar 13, 2014 3:47 PM GMT+0200  0 Comments  Email  Print

Bloomberg

Ireland’s 10-year yield fell to a record as the nation auctioned government bonds for the first time since 2010, the latest sign the euro region’s financial woes are abating.

Italy’s bonds also advanced as the Treasury in Rome sold 7.75 billion euros ($10.8 billion) of debt due between 2016 and 2037. The average yield to maturity on securities from Greece, Ireland, Italy, Portugal and Spain fell to the lowest in the history of the euro area this week, according to Bank of America Merrill Lynch indexes, as investors return to markets they shunned during the region’s debt crisis.

Debt Exceeds $100 Trillion as Governments Binge

By John Glover  Mar 10, 2014 5:42 PM GMT+0200

Bloomberg

The amount of debt globally has soared more than 40 percent to $100 trillion since the first signs of the financial crisis as governments borrowed to pull their economies out of recession and companies took advantage of record low interest rates.

The $30 trillion increase from $70 trillion between mid-2007 and mid-2013 compares with a $3.86 trillion decline in the value of equities to $53.8 trillion, according to the Bank for International Settlements and data compiled by Bloomberg. The jump in debt as measured by the Basel, Switzerland-based BIS in its quarterly review is almost twice the U.S. economy.

Greek leftist seeks negotiated debt write-off

Tue, Feb 4 2014

By Paul Taylor

PARIS, Feb 4 (Reuters) - Greece would seek to negotiate an international write-off of about one-third of its debt if the leftist Syriza opposition party won a general election, its leader said on Tuesday.

Alexis Tsipras, who is leading a Communist-backed pan-European leftist list in European Parliament elections in May, said his country's problems could not be solved by more loans, which just went to service past debts and shore up the banks.

"The solution isn't more loans. The solution is fewer loans and less debt," Tsipras, whose party leads Prime Minister Antonis Samaras' conservative New Democracy in opinion polls, told the Europresse association on a visit to Paris.

Analysis: Greece hopeful, but any debt relief likely to be symbolic

BY JAN STRUPCZEWSKI

BRUSSELS Tue Jan 14, 2014 9:55am EST

(Reuters) - Greece expects the euro zone to provide some debt relief to Athens later this year but the impact on its vast liabilities will be little more than symbolic.

The magic bullet for Greece would be the writing-off of some portion of the 240 billion euros in loans it has received from the euro zone since 2010. But Athens is adamant it does not want that and the euro zone is not willing to provide it.

Instead, what Greek officials seek is some combination of at least three measures: a further lowering of interest rates on existing loans, an extension of the maturities and pay-back schedule, and some relief on financing EU structural funds.

UPDATE 1-Greek budget predicts higher surplus, maintains growth target

Thu Nov 21, 2013 5:19am EST

Nov 21 (Reuters) - Greece more than doubled its forecast for a budget surplus before interest payments this year and confirmed it will emerge from a six-year recession next year, hinting there is light at the end of the tunnel for its battered economy.

After nearly going bankrupt and crashing out of the euro zone last year, Athens has been buoyed by more positive economic news in recent months as tourism revenues rise and it makes progress in bringing its finances back on track.

Greece's NBG nears deal to sell property unit: sources

BY GEORGE GEORGIOPOULOS

ATHENS Sun Nov 17, 2013 12:15pm EST

(Reuters) - National Bank of Greece, the country's largest lender, is close to clinching a deal to sell a majority stake in its fully-owned real estate arm Pangaia to private equity firm Invel Real Estate, two bankers close to the deal told Reuters on Sunday.

The sale is part of restructuring efforts by National Bank (NBG) (NBGr.AT) aimed at boosting its capital base.

Greece's top four banks are implementing restructuring plans agreed with the European Commission as part of conditions imposed for their bailouts. The plans involve job cuts, branch closures and asset sales.

Athens's Love Affair With the Euro Persists

The Wall Street Journal

Nov 3 2013

“…The current crisis may be Greece's last opportunity to turn itself into an effective modern state…”