Hitting the ground running—backwards

Greece and the euro

http://www.economist.com/news/leaders/21643139-unless-syriza-changes-course-greece-inexorably-heading-out-euro-hitting-ground

The Economist

Unless Syriza changes course, Greece is inexorably heading out of the euro

WHEN the far-left Syriza party won the Greek election last month, the hope was that the new prime minister, Alexis Tsipras, would moderate his demands so as to compromise with his country’s creditors. After all, he (like the vast majority of Greeks) wants to stay in the single currency. But even as he prepared to meet fellow European Union leaders for the first time this week, he was making a Greek exit from the euro ever more likely.

Argentina’s Lessons for Greece

Raquel Fernández

(Raquel Fernández is Professor of Economics at New York University. )

Jonathan Portes

(Jonathan Portes is Director of the National Institute of Economic and Social Research.)

Read more at http://www.project-syndicate.org/commentary/greece-lessons-from-argentina-by-raquel-fern-ndez-and-jonathan-portes-2015-02#1AQmWPCTlxsfb6aH.99

NEW YORK – Thirteen years ago, Argentina was in dire straits. Its peso was pegged to the dollar at a level that far exceeded its value. Its external debt was unsustainable. And political pressure from the United States prevented its weak government from renegotiating a bailout program that even the International Monetary Fund knew was unrealistic.

The Greek Austerity Myth

FEB 10, 2015 23

Daniel Gros

BRUSSELS – Since the anti-austerity Syriza party's victory in Greece's recent general election, the “Greek problem" is again preoccupying markets and policymakers throughout Europe. Some fear a return to the uncertainty of 2012, when many thought that a Greek default and exit from the eurozone were imminent. Then as now, many worry that a Greek debt crisis could destabilize – and perhaps even bring down – Europe's monetary union. But this time really is different.

 One critical difference lies in economic fundamentals. Over the last two years, the eurozone's other peripheral countries have proven their capacity for adjustment, by reducing their fiscal deficits, expanding exports, and moving to current-account surpluses, thereby negating the need for financing. Indeed, Greece is the only one that has consistently dragged its feet on reforms and sustained abysmal export performance.

Syriza Isn’t Giving the Greeks the Whole Story

Elevated talk may bolster the Tsipras government’s domestic support, but it does nothing to inform voters about Europe’s political reality.

The Wall Street Journal

By YANNIS PALAIOLOGOS

Feb. 10, 2015 2:28 p.m. ET

Athens

The moment of truth has arrived. The six days starting with Wednesday’s meeting of eurozone finance ministers in Brussels will determine the ability of Greece’s new government to come to terms with its European partners and avoid a catastrophic Greek exit from the currency bloc.

Greece to Propose a Debt Compromise Plan to Creditors

By LIZ ALDERMAN and NIKI KITSANTONISFEB. 9, 2015

The New York Times

ATHENS — Hoping to defuse a standoff that has set Europe and financial markets on edge, Greek officials intend to propose a detailed compromise plan at an emergency meeting with creditors on Wednesday in Brussels, a finance ministry official here said on Monday.

UK planning for possible Greece exit from the eurozone

Robert Peston

Economics editor

BBC

The prime minister this morning chaired a meeting of senior officials to discuss the impact on the UK of possible Greek exit from the eurozone - and to take steps to ensure British banks and companies would not be excessively damaged.

Η λιτότητα και ο θάνατος

ΠΟΛΙΤΙΚΗ 08.02.2015 : 18:11

Του Πάσχου Μανδραβέλη

Εφημερίδα Καθημερινή

Η αλήθεια είναι πως σχεδόν όλοι -πλην κάποιων ψυχασθενών- είμαστε κατά του θανάτου. Ευτυχώς, η πρόταση περί κατάργησης του αναπόφευκτου δεν υπήρξε ποτέ σε προεκλογικό πρόγραμμα, έτσι ώστε να βρεθεί κάποιος κυβερνήτης που θα έλεγε «σκέφτομαι να πρωτοτυπήσω και να εφαρμόσω όσα προεκλογικά εξήγγειλα». Αναφέρουμε τη λέξη «κυβερνήτης» διότι κάποιος που θα επιχειρηματολογούσε πειστικά ότι «θα καταργήσει τον θάνατο» θα είχε ισχυρότατη λαϊκή εντολή. Πάνω από 90% θα τον ψήφιζαν, αλλά το ποσοστό αυτό μάλλον δεν θα ήταν και ιδιαίτερα πειστικό επιχείρημα απέναντι στον Χάρο.

Europe Weighs the Costs Of Casting Greece Aside

Officials Debate the Financial and Strategic Consequences of a Greek Exit

By STEPHEN FIDLER

Updated Feb. 5, 2015 5:16 p.m. ET

How much does Greece matter to Europe? It’s a question being asked by European officials as the brinkmanship over the country’s bailout program intensifies.

The answer is important because it will help determine how far governments will go to accommodate the economic demands of new Greek Prime Minister Alexis Tsipras, and whether they will be willing to court an outcome that could lead Greece to leave the euro and possibly the European Union.

Why Greece’s leftist Syriza will bow down to market pressures

COMMENTARY by  Nicholas Economides  FEBRUARY 5, 2015, 12:21 PM EST

http://fortune.com/2015/02/05/why-greeces-syriza-party-will-bow-down-to-market-pressures/

As talks break down between Greece and international lenders, it’s clear there are few options left for the country’s economy to stay afloat.

Greek stocks and bonds plunged on Thursday after the European Central Bank said that it would stop accepting Greek bonds as collateral for central bank loans. Greek Finance Minister Yanis Varoufakis had pleaded with ECB chairman Mario Draghi to allow Greek banks to buy $11.4 billion more in Treasury bills so that Greece is financed for a few more months. Draghi refused and deferred it to the Council of Finance Ministers of the Eurozone. If the ECB objection stands, the Greek government may ask depositors to directly buy 3- and 6-month Treasury bills, a plan very unlikely to succeed. Therefore, Greece could run out of money as soon as March.

Greece and the ECB

The enforcer

How the European Central Bank can dictate terms to the Greek government

The Economist

AS PART of his campaign to present a more conciliatory face to Greece’s European creditors, Yanis Varoufakis, the new Greek finance minister, dropped by the European Central Bank (ECB) in Frankfurt on February 4th. He met Mario Draghi, its president, in an encounter Mr Varoufakis described as “fruitful”. But there are sweet fruits and bitter ones. After his visit, the ECB’s governing council served up a bitter variety by deciding to make life tougher for Greek banks, already beset by big outflows of deposits. The decision was a warning shot to the new government over its unwillingness to abide by Greece’s bail-out arrangements.

ECB cancels soft treatment of Greek debt in warning to Athens

BY JOHN O'DONNELL AND JAN STRUPCZEWSKI

FRANKFURT/BRUSSELS Thu Feb 5, 2015 5:03am EST

(Reuters) - The European Central Bank abruptly canceled its acceptance of Greek bonds in return for funding on Wednesday, shifting the burden onto Athens' central bank to finance its lenders and isolating Greece unless it strikes a new reform deal.

The move, which means the Greek central bank will have to provide its banks with tens of billions of euros of additional emergency liquidity in the coming weeks, was a response to what many in Frankfurt see as the Greek government's abandoning of its aid-for-reform program.

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.

How Greece could accidentally stumble out of the euro

CNN Money

In less than four weeks the international lifeline that has kept Greece afloat for five years is due to expire. Debt repayments are looming and the country is running out of funds.

Lenders won't forgive Greece's huge debts so Prime Minister Alex Tsipras must negotiate a compromise, or put Greece's future in the eurozone at risk.

After a shaky start, his government has begun to suggest solutions. But the standoff with creditors is fueling uncertainty, shaking Greece's fragile banking system, and could tip the economy back into recession.

Syriza Shouldn't Underestimate Merkel

18 FEB 2, 2015 10:52 AM EST

By Leonid Bershidsky

Bloomberg 

It's widely assumed that the European Union will cave to Greek demands to write off some of Greece's debt. What, however, if it doesn't? A Greek exit from the euro and even the European Union is not the only alternative: The fall of the far-left Syriza government in Greece is another distinct possibility. The EU's ponderous, compromise-prone decision-making machine can be tough when challenged by mavericks -- just ask David Cameron or Plamen Oresharski.

What Is Plan B for Greece?

Kenneth Rogoff

http://www.project-syndicate.org/columnist/kenneth-rogoff

TOKYO – Financial markets have greeted the election of Greece’s new far-left government in predictable fashion. But, though the Syriza party’s victory sent Greek equities and bonds plummeting, there is little sign of contagion to other distressed countries on the eurozone periphery. Spanish ten-year bonds, for example, are still trading at interest rates below US Treasuries. The question is how long this relative calm will prevail.

Greece’s fire-breathing new government, it is generally assumed, will have little choice but to stick to its predecessor’s program of structural reform, perhaps in return for a modest relaxation of fiscal austerity. Nonetheless, the political, social, and economic dimensions of Syriza’s victory are too significant to be ignored. Indeed, it is impossible to rule out completely a hard Greek exit from the euro (“Grexit”), much less capital controls that effectively make a euro inside Greece worth less elsewhere.

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.”

Europe Should Call Greece's Bluff

FEB 2, 2015 2:00 AM EST

By Guy Hands

Bloomberg

In November 2011, I hosted a dinner for senior German bankers that was dominated by heated debate over the continuing Greek financial crisis. They were adamant that Greece should not again be rescued by Germany and its European partners or the International Monetary Fund. I argued that a further bailout was the only option.

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.