Grexit for the Good of the Eurozone

Posted: 02/23/2015 8:28 pm EST Updated: 02/23/2015 8:28 pm EST

Russell Green Become a fan

Will Clayton Fellow for International Economics at Rice University's Baker Institute for Public Policy

http://www.huffingtonpost.com/russell-green/grexit-for-the-good-of-th_b_6737680.html

If the Greeks leave the Eurozone, it would be awful. Both Greece and the remainder of the euro area would experience damaging volatility and uncertainty. But "Grexit" does not have to be all bad. In fact, if the Eurozone countries use the crisis to push through long-needed reforms, they could wind up in a much stronger position in the long run.

Greece Delays Submittal of Its Overhaul Plans

By NIKI KITSANTONIS and JAMES KANTERFEB. 23, 2015

The New York Times

ATHENS — Greece on Monday delayed the submission of the proposed reforms that European creditors have made a condition of the country’s financial aid.

European and Greek officials spent much of the day exchanging drafts of the proposals paring back austerity and ensuring Greece can still meet its budget targets. While they underscored the progress made, Athens will now present the list Tuesday morning, after the original deadline of Monday night.

Eurogroup statement on Greece

 (http://www.consilium.europa.eu/en/press/press-releases/2015/02/150220-eurogroup-statement-greece/)Original document

_______________________________________________________________________________

The Eurogroup reiterates its appreciation for the remarkable adjustment efforts undertaken by Greece and the Greek people over the last years. During the last few weeks, we have, together with the institutions, engaged in an intensive and constructive dialogue with the new Greek authorities and reached common ground today.

The Eurogroup notes, in the framework of the existing arrangement, the request from the Greek authorities for an extension of the Master Financial Assistance Facility Agreement (MFFA), which is underpinned by a set of commitments. The purpose of the extension is the successful completion of the review on the basis of the conditions in the current arrangement, making best use of the given flexibility which will be considered jointly with the Greek authorities and the institutions. This extension would also bridge the time for discussions on a possible follow-up arrangement between the Eurogroup, the institutions and Greece.

The Greek authorities will present a first list of reform measures, based on the current arrangement, by the end of Monday February 23. The institutions will provide a first view whether this is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review. This list will be further specified and then agreed with the institutions by the end of April. 

Only approval of the conclusion of the review of the extended arrangement by the institutions in turn will allow for any disbursement of the outstanding tranche of the current EFSF programme and the transfer of the 2014 SMP profits. Both are again subject to approval by the Eurogroup.

In view of the assessment of the institutions the Eurogroup agrees that the funds, so far available in the HFSF buffer, should be held by the EFSF, free of third party rights for the duration of the MFFA extension. The funds continue to be available for the duration of the MFFA extension and can only be used for bank recapitalisation and resolution costs. They will only be released on request by the ECB/SSM.

In this light, we welcome the commitment by the Greek authorities to work in close agreement with European and international institutions and partners. Against this background we recall the independence of the European Central Bank. We also agreed that the IMF would continue to play its role.

The Greek authorities have expressed their strong commitment to a broader and deeper structural reform process aimed at durably improving growth and employment prospects, ensuring stability and resilience of the financial sector and enhancing social fairness. The authorities commit to implementing long overdue reforms to tackle corruption and tax evasion, and improving the efficiency of the public sector. In this context, the Greek authorities undertake to make best use of the continued provision of technical assistance.

The Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and timely.

The Greek authorities have also committed to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement. The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.

In light of these commitments, we welcome that in a number of areas the Greek policy priorities can contribute to a strengthening and better implementation of the current arrangement. The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.

On the basis of the request, the commitments by the Greek authorities, the advice of the institutions, and today's agreement, we will launch the national procedures with a view to reaching a final decision on the extension of the current EFSF Master Financial Assistance Facility Agreement for up to four months by the EFSF Board of Directors. We also invite the institutions and the Greek authorities to resume immediately the work that would allow the successful conclusion of the review.

We remain committed to provide adequate support to Greece until it has regained full market access as long as it honours its commitments within the agreed framework.

Greek reform list to comprise mainly structural actions: government source

BY RENEE MALTEZOU

ATHENS Sat Feb 21, 2015 12:41pm EST

(Reuters) - Greece's list of reforms to be submitted to the euro zone on Monday comprises pledges on structural issues such as tax evasion and corruption over the next four months without specific targets, a government official said on Saturday.

Athens clinched a last-minute deal late on Friday to avoid a banking collapse by accepting a conditional extension of its bailout program. The accord requires Greece to submit by Monday a letter to the Eurogroup listing all the policy measures it plans to take during the remainder of the bailout period.

Tsipras declares victory as Greece dodges financial ruin

BY GEORGE GEORGIOPOULOS AND KAROLINA TAGARIS

ATHENS Sat Feb 21, 2015 3:13pm EST

(Reuters) - Greek Prime Minister Alexis Tsipras declared victory on Saturday after agreeing a conditional financial rescue deal with Europe and despite making big concessions to avert a banking collapse within days.

German-Led Bloc Willing to Let Greece Leave Euro, Scicluna Says

by Paul TugwellNikolaos Chrysoloras

11:34 AM EET

February 20, 2015

(Bloomberg) -- Germany and its allies are ready to let Greece leave the euro unless Prime Minister Alexis Tsipras accepts the conditions required to extend his country’s financial support, according to Malta’s finance minister, Edward Scicluna.

Has Greece's 'Lehman moment' finally arrived?

Matt Clinch     | @mattclinch81

2 Hours Ago

A key week for Greece's economic future drew to a close on Friday with the country facing the very real threat that it's running out of money and key analysts warming to the idea that it could be on its way out of the euro zone.

Euro zone finance ministers are set to meet Friday to discuss Greece's latest proposals to extend its loan agreement. But with Germany already rejecting the plan, there is very little hope that an agreement will be announced. Another meeting in Brussels for next week was already being touted before Friday's meeting even began. The main problem for the fiscally disciplined countries like Germany is that, despite the ground Greece has given up in the last week, it is still asking for the bailout loan without all of the strict austerity conditions that come with the money.

Greek economist Elena Panaritis, former member of the Greek Parliament and the World Bank, drew comparisons with the collapse of the Lehman Brothers in 2008. As with the fall of the big U.S. bank, market-watchers feel euro zone policymakers want to show the world they will only be pushed so far — with the result being Greece would be allowed to exit the euro zone.

Panaritis thought there was a "political statement as well as economic statement" being made during the negotiations. Randy Kroszner, a former U.S. Federal Reserve governor and the professor of economics at the University of Chicago Booth School of Business, agreed that there were comparisons between the two events.

"I think there a parallel, but the tools exist if the European Union wants to keep Greece in and if Greece is willing to stay in," he told CNBC Friday. "Even though it may be quite ugly, the likelihood of complete chaos is much lower. So that gives policymakers more willingness to say 'Hey, we'll take that risk'."

http://www.cnbc.com/id/102441576#.

Varoufakis Meets Euro Partners as Greece Seeks to Avoid Default

by Paul TugwellMarco Bertacche

11:34 AM EET

February 20, 2015

(Bloomberg) -- Greek Finance Minister Yanis Varoufakis returns to Brussels for a third meeting in two weeks with his euro-area counterparts in an effort to strike a deal that will let Europe’s most-indebted country avoid default.

This is the eurozone risk investors are ignoring

Published: Feb 20, 2015 3:21 a.m. ET

Financial contagion gives way to political contagion

http://www.marketwatch.com/story/this-is-the-eurozone-risk-investors-are-ignoring-2015-02-19

NEW YORK (MarketWatch) — Greece, as you may have heard, is hurtling toward potential default and a potential exit from the eurozone. Investors are largely taking it in stride.

Opinion: Why the U.S. will have to bail out Greece

Marketwatch.com

By MATTHEW LYNN

Published: Feb 18, 2015 4:00 a.m. ET

Fighting has flared up again in the Ukraine. The Egyptians are sending soldiers into Libya as another North African state collapses into chaos. The militants of Islamic State are spreading their influence across the region. You’d think Barack Obama might have bigger foreign policy issues to worry about than a small state of 10 million people on the eastern edges of the Mediterranean.

Syriza’s scattergun

Feb 21st 2015

Greece had a chance to make the euro zone work better. It blew it

http://www.economist.com/news/europe/21644237-greece-had-chance-make-euro-zone-work-better-it-blew-it-syrizas-scattergun?fsrc=scn/tw/te/pe/ed/syrizasscattergun

CLIP-CLOPPING around Europe over the past few weeks, Yanis Varoufakis, Greece’s dashing finance minister, has urged the euro zone to chart a new course. Endlessly forcing new loans upon indebted countries like Greece in the pretence that they will one day be repaid, he argued, was a strategy for depression and deflation. “The disease that we’re facing in Greece,” he told the BBC, “is that a problem of insolvency for five years has been treated as a problem of liquidity.”

Greece requests euro zone loan extension, offers big concessions

BY RENEE MALTEZOU AND JAN STRUPCZEWSKI

ATHENS/BRUSSELS Thu Feb 19, 2015 6:13am EST

(Reuters) - Greece formally requested a six-month extension to its euro zone loan agreement on Thursday, offering major concessions as it raced to avoid running out of cash within weeks and overcome resistance from skeptical partners led by Germany.

With its EU/IMF bailout program due to expire in little more than a week, the government of leftist Prime Minister Alexis Tsipras urgently needs to secure a financial lifeline to keep the country afloat beyond late March.

Euro zone finance ministers will meet on Friday afternoon in Brussels to consider the request, the chairman of their Eurogroup, Jeroen Dijsselbloem, said in a tweet.

Greece expected to seek loan extension from skeptical euro zone

BY LEFTERIS PAPADIMAS AND JAN STRUPCZEWSKI

ATHENS/BRUSSELS Wed Feb 18, 2015 5:07pm EST

(Reuters) - Greece is expected to ask on Thursday for an extension to its "loan agreement" with the euro zone as it faces running out of cash within weeks, but it must overcome resistance from skeptical partners led by Germany.

With Greece's bailout program due to expire in little more than a week, the government of leftist Prime Minister Alexis Tsipras urgently needs to secure a financial lifeline to keep the country afloat beyond late next month.

Financial markets rallied after Athens said on Wednesday it would submit a request to extend the loan agreement for up to six months, hoping this signaled a last minute compromise to avert a Greek bankruptcy and exit from the euro zone.

Η ρητορεία της «πλατείας»

Του Πάσχου Μανδραβέλη

Καθημερινή

http://www.kathimerini.gr/804137/opinion/epikairothta/politikh/h-rhtoreia-ths-plateias

«Πώς κυβερνούνται οι χώρες και οδηγούνται στον πόλεμο;» είχε αναρωτηθεί στις αρχές του περασμένου αιώνα ο μεγάλος Αυστριακός συγγραφέας Καρλ Κράους. «Οι διπλωμάτες λένε ψέματα στους πολιτικούς και όταν τα διαβάζουν τα πιστεύουν και οι ίδιοι». Ελπίζουμε ότι δεν ισχύει το ίδιο για τις χρεοκοπίες, αλλά πρέπει να ανησυχήσουμε από το γεγονός ότι το επιχείρημα που φέρνει η κυβέρνηση για το αδιέξοδο στις διαπραγματεύσεις είναι όσα λένε κάποιοι στις «πλατείες», δηλαδή σε συγκεντρώσεις τις οποίες αφανώς διοργανώνει ο ΣΥΡΙΖΑ, όπως κατήγγειλε στη Βουλή η κ. Αλέκα Παπαρήγα. Οι «πλατείες» όμως έχουν τη δική τους δυναμική. Δεν πιέζουν τους εταίρους· σιγά μην πιεστούν 18 κυβερνήσεις της Ευρωζώνης από 10.000 άτομα στο Σύνταγμα. Εγκλωβίζουν την κυβέρνηση σε αδιέξοδα και μεγάλα λόγια. Για να ικανοποιηθούν οι «πλατείες», η κυβερνητική και παρακυβερνητική ρητορεία κατά των ετέρων χτύπησε κόκκινο και αυτό είναι αυτεπίστροφο. Το κλίμα κατά της Ελλάδος έχει επιβαρυνθεί πάρα πολύ, σε σημείο που πρέπει να ανησυχούμε μην υπογραφεί τελικώς συμφωνία και αυτή να κολλήσει σε κάποιο Κοινοβούλιο ευρωπαϊκής χώρας.

THE TWO WORDS DIVIDING GREECE AND THE EUROGROUP

Posted by Frances Coppola on Feb 17th 2015,

http://www.pieria.co.uk/articles/greece_the_two_words_that_ended_the_eurogroup_meeting

The meeting of Eurogroup financial ministers broke up suddenly yesterday amid Greek accusations that the Eurogroup had moved the goalposts. The Greek delegation leaked to the press a draft communique that the Eurogroup had apparently presented to the meeting, saying that it contained things that they could not possibly agree to. Reuters published the full text here.

Europe and Greece Are at War Over Nothing

FEB 19, 2015 12:01 AM EST

By The Editors

Bloomberg

Even by the demanding standards of European dysfunction, the continuing standoff between Greece and the other euro countries is impressive. On substance, the distance between the two sides has narrowed almost to nothing -- yet the stalemate and the risk of a new financial crisis drag on as if it were vast. The EU is staking the future of its monetary union not on principles but on semantics.

Why Greek Exit From The Euro Would Be A Very Bad Idea

2/17/2015 @ 7:50PM

Frances Coppola

http://www.forbes.com/sites/francescoppola/2015/02/17/why-greek-exit-from-the-euro-would-be-a-very-bad-idea/

Ever since the election of the Syriza government, there has been growing talk of Greece leaving the Euro. Markets are jittery: fears of Greek default and exit are forcing up Greek bond yields, and the Greek stock market is on a roller-coaster ride, falling with every piece of news that suggests rising exit risk then bouncing back when exit doesn’t happen and everyone calms down. There is a silent run on Greek banks as depositors fearful of re-denomination losses remove their funds to safe havens.

And it’s easy to see where those funds are going. German claims on the Target2 settlement system are rising fast, leading uber-hawk Professor Hans Werner Sinn to demand capital controls be imposed to end capital flight from Greece. Exactly why he thinks capital controls are a good idea at this stage is not entirely clear: he seems to fear that the rest of the Eurozone will be forced to bail out the Greek central bank, which is providing liquidity through the ELA scheme to enable those funds to be moved without bankrupting Greek banks.

Greece Poised to Request Six-Month Loan Extension

by Jonathan StearnsPatrick Donahue

7:57 PM EET   February 17, 2015

(Bloomberg) -- Greece may request an extension of its loan agreement for six months, according to a person familiar with the matter, a step that could ease a standoff with creditors over the country’s future financing.

Prime Minister Alexis Tsipras’s government intends to make the request on Wednesday, the person told reporters in Brussels, asking not to be named as the deliberations are private. Talks are continuing between Greece and its international creditors on the conditions that would be attached to the extension of the loan accord, the person said.

Tsipras Needs to Rethink His Timetable

FEB 17, 2015 5:00 AM EST

By Mohamed A. El-Erian

http://www.bloombergview.com/articles/2015-02-17/el-erian-tsipras-needs-to-slow-his-timetable-for-greece

Less than a month into its tenure, the Greek government is finding that it will be very difficult to fulfill electoral promises to rapidly change the country’s economic management and its relations with its European partners.

The approach taken by Alexis Tsipras, Greece's charismatic new prime minister, and his finance minister, Yanis Varoufakis, an economist with strong communication skills, has been bolstered by broad recognition that their nation is unlikely to regain economic dynamism and financial stability without a revision of its existing mix of austerity, structural reform and debt relief.

Greek Euro Exit Risk Increases as EU Delivers Ultimatum

 by Karl Stagno Navarra and Mark Deen

(Bloomberg) -- Greece edged closer to a euro exit after the currency region’s finance ministers said there will be no more talks on financial support unless the Greek government requests an extension of its existing bailout program.

After three weeks of sparring since Prime Minister Alexis Tsipras’s election victory, finance chiefs hardened their positions as negotiations in Brussels ended abruptly on Monday night with Greek Finance Minister Yanis Varoufakis refusing to bow to European demands.