Why Greece's spillover across euro area will probably be contained this time

Greece bailout: Varoufakis lashes deal as ‘new Versailles treaty’
THE AUSTRALIAN JULY 14, 2015 9:05AM

Jared Owens

Reporter
Canberra

Lessons learned at Greece's expense

Tsipras ‘bows to Versaille treaty’Former Greek Finance Minister Yianis Varoufakis warns his party’s surrender to the major eurozone powers would boost support for the Neo-Nazi Golden Dawn party. Source: AFP
Former Greek finance minister Yanis Varoufakis has lashed Europe’s latest bailout deal as a “postmodern occupation” of his country, accusing his leader Alexis Tsipras of capitulating to the “new Versailles treaty”.

In his first interview since resigning from cabinet last week, Dr Varoufakis warned his party’s surrender to the major eurozone powers would boost support for the Neo-Nazi Golden Dawn party.

“This is the politics of humiliation,” Dr Varoufakis, a former Sydney University economics lecturer, last night told ABC Radio.

“They will make (Mr Tsipras) eat every single word that he uttered in criticism of the troika over the last five years. Not just these six months we’ve been in government, but in the years prior to that.

“This has nothing to do with economics. It has nothing to do with putting Greece on the way to recovery. This is a new Versailles Treaty that is haunting Europe again, and the prime minister knows it. He knows that he’s damned if he does and he’s damned if he doesn’t.”

The Versailles Treaty, signed in the aftermath of the First World War, imposed tough economic and military sanctions on Germany and led to widespread resentment upon which Adolf Hitler’s Nazi Party grew support.

“If we betray this hope and bow our heads to this new form of postmodern occupation, then I cannot see any other possible outcome than the further strengthening of Golden Dawn. They will inherit the mantle of the anti-austerity drive, tragically,” Dr Varoufakis said.

Dr Varoufakis claimed there was an “air of defeat” in the Greek government after voters followed their recommendation to reject austerity at a referendum.

‘I entered the prime minister’s office elated. I was travelling on a beautiful cloud pushed by beautiful winds of the public’s enthusiasm for the victory of Greek democracy in the referendum. The moment I entered the prime ministerial office, I sensed immediately a certain sense of resignation — a negatively charged atmosphere. I was confronted with an air of defeat, which was completely at odds with what was happening outside.

“I jumped more than I was pushed,” Dr Varoufakis said.

“At that point I had to put it to the prime minister: ‘If you want to use the buzz of democracy outside the gates of this building, you can count on me. But if on the other hand you feel like you cannot manage this majestic ‘no’ to an irrational proposition from our European partners, I am going to simply steal into the night’.”

Dr Varoufakis said the government had commissioned a secret planning group to prepare to print drachmas in anticipation of leaving the euro.

“Of course, there is a conundrum here. Once this plan begins to be implemented, once you go from five people working on it to 500 — which is the minimum you need to implement it — it becomes public knowledge. The moment it becomes public knowledge, the power of prophecy creates a dynamic of its own,” Dr Varoufakis said.

“We never made that transition from five to 500. We never felt we had a mandate to do it. We never planned to do it. We had the design on paper but it was never activated.”

Dr Varoufakis said he would remain in politics and was enjoying life as a backbencher, where he had “a lot more room to manoeuvre and speak the truth”.

Two historical observations. The first is from the Trojan War. the Trojans thought they had won when the Greeks appeared to give up and go home. The celebrations were premature. Secondly, the Germans have a history of brilliant tactical success, winning most of the battles, only to lose the war due to strategic miscalculation. So why did a cunning operator like Tsipras suddenly surrender abjectly, and give in on all issues? Any chance he is buying time, getting as much money (in Euros) out of the ECB as possible, and quietly planning Grexit? He could suddenly replace the Euro in all bank balances and debts with New Drachma at 1:1. Allowing the ND to float, it would quickly fall to 1/2 or 1/3 of a Euro. Greeks have vast amounts of Euro salted away under the mattress and in foreign accounts, giving a big buffer to cover imports. Foreign creditors could have to accept ND or go whistle for their money - effectively writing down the debt. The big foreign creditors - such as the ECB and Germany, would have to take big hits. Revenge indeed.

He knows Greece cannot have their printing machine ready to print their own currency. And he needs to feed his people with Euro$ to even buy food to eat immediately. He also needs to buy some time to procure printing machines and setup processes as Greeks will likely take much longer time than other countries to setup. And he needs money to buy machine and material to print. That's why he agreed to EVERYTHING, get more money from EURO which he has not intention to pay at all. If he is smart, he will secretly let word out to all the political parties on his plan. If so, it will easily pass Greece parliament. That's my GUESS. I could be totally WRONG but ...

Jul 14 2015 at 5:18 PM Updated Jul 14 2015 at 5:18 PM

Greece's financial woes boost stock of private islands for sale


Buck Island, in the British Virgin Islands. Greece's economic woes are likely to boost the stock of private islands for sale, Knight Frank's latest Island Report says.

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by Michael Bleby
Greece's tortuous economic reforms and increasing austerity measures are likely to benefit one marginal constituency – buyers of private islands.

The stock of property on sale at a site like privateislandsonline.com – which includes the 17.4-hectare Isle of Gaia for £3m ($4.8m) and the 34.8ha Northern Aegean Island (just 30 minutes from Athens by speedboat) for £28m – is likely to rise as the country treads the painful path to economic recovery, according to Knight Frank's latest Island Review 2015.

"As the long-term ramifications of Greece's financial bailout play out more fire-sales of Greek islands are expected," the report says. "In 2014, Greece introduced its first permanent property tax which for some owners has made private island ownership more burdensome."

Island ownership is a dream, but also a costly reality. Prices of Greek Islands had already fallen 30 per cent from their pre-global financial crisis levels, with families such as that of shipping tycoon Aristotle Onassis already selling off long-standing family holdings, the Wall Street Journal reported in December.

Even among buyers of island properties, as opposed to entire islands, Greece is already drawing attention. The number of private flights to Greek islands doubled between 2004 and last year NetJets figures cited by the report show.

But while ultra-high net worth individuals are obvious buyers in the current shake-up of private island stock, they represent a colourful, but shrinking proportion of owners, the Knight Frank report says. The biggest owners of private islands by title deed are governments, NGOs and conservationist groups, whose collective ownership has near-quadrupled in the decade to 2014.

"Most of these acquisitions are ring-fenced by governments and land banked for political or conservation reasons," it says.

By no means all of the "good quality" islands for sale – being easily accessible, with utilities such as electricity and sanitation already in situ, belonging to a country with a stable political regime and being within easy access of medical facilities – carry the sort of price tag that makes them only accessible to Russian oligarchs. Over half of the private islands currently on sale are going for less than $US500,000 ($674,000), the report says.

"Private islands off the West Coast of Scotland and Ireland continue to change hands for as little as £300,000," it says. "Some, in parts of Canada, Fiji and Belize, go for significantly less."

IMF doubts Greece can deliver on bailout promises
IAN TALLEY THE WALL STREET JOURNAL JULY 15, 2015 2:27PM


Alexis Tsipras: “I assume responsibility for a text I do not believe in, but which I signed to avoid disaster for the country.” Source: AFP

The International Monetary Fund has questioned the ability of Greece to deliver on promised bailout overhauls and warned in its starkest language yet that the eurozone must commit to debt restructuring to ensure the program will work.

“The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date and what has been proposed by” eurozone authorities, the IMF said in its latest assessment of Greece’s economy.

The IMF has repeatedly warned eurozone officials in recent days that Greece will need more debt restructuring than originally thought as capital controls asphyxiate the already-weakened economy.

Under the tentative eurozone deal reached on Monday, officials say they will consider debt maturity extensions and rate reductions if Greece delivers on promised economic overhauls and budget cuts.

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But the IMF says that even extending debt maturities out deep into the second half of the century may not be enough to put Greece’s debt back on a sustainable path after the ravages of capital controls.

In a three-page paper circulated to eurozone officials over the weekend and published more broadly today, the IMF said one option is “a very dramatic extension” of Greece’s debt. Cutting rates and delaying the grace periods of the entire stock of European debt, including new assistance by 30 years, could kick Greece’s debt burdens well into the second half of the century, when a new generation of Greeks would bear the costs of the current era.

Borrowing at anything but the cheapest rates in the near term “will bring about an unsustainable debt dynamic for the next several decades,” the IMF warned.

“Other options include explicit annual transfers to the Greek budget or deep upfront haircuts” the IMF said. “The choice between the various options is for Greece and its European partners to decide.”

A debt writedown is a political non-starter for fiscal hawks such as Germany, however. The IMF’s dour debt assessment is a clear warning that the fragile bailout accord hasn’t removed the risk of a Greek exit from the eurozone and that the IMF needs a strong commitment for debt restructuring from the eurozone to participate. It could also bolster German Finance Minister Wolfgang Schäuble’s argument that a Greek exit from the eurozone may be a better alternative than the bailout as Berlin considers whether to back another round of emergency financing.

Eurozone leaders say they will, if Greece moves forward with budget cuts and economic overhauls, consider extending debt maturities and reducing the interest rate.

If the eurozone fails to provide the IMF assurance that it will reduce Greece’s debt burden to levels the fund believes is sustainable, it could jeopardize the emergency-lender’s involvement in the program. Fund rules largely prohibit the IMF from lending to countries without sustainable debt profiles.

Eurozone members want to keep the IMF in Greece for two reasons: To help cover the country’s estimated €85 billion ($US93.5 billion) cash needs over the next three years, and to lend the program economic credibility.

Still, even though some analysts say the IMF is trying to reclaim some of the credibility it lost in the original Greek bailout, the fund could simply rely on Europe’s promises to consider debt relief rather than require a fully detailed restructuring vow, as it did in 2012.

In 2010, the IMF’s growth forecasts were widely criticised as far too optimistic. But they allowed the IMF to say Greece’s debt was sustainable and didn’t need restructuring, paving the way for the fund to join Europe’s bailout and help the region contain its financial troubles.

The eurozone leaders’ statement, however, doesn’t promise debt relief. Rather, it largely reiterates its 2012 agreement to consider debt relief “if necessary.”

To help Europe’s case, the fund in recent days changed the way its measures debt sustainability. That gives the fund more room to support additional financing without breaching its sustainability rules, and relieves the IMF of some of the responsibility of pushing Europe to write down the value of Greece’s debt, a political nonstarter to Germany and other fiscal hawks in the eurozone.

But even with the IMF’s new debt-sustainability gauge, the IMF’s outlook is particularly sobering as it highlights risks to the new bailout proposal, such as the ability of Greece to deliver on budget surplus targets. The IMF also cautioned that creditors may need to contribute even more cash than the latest €85 billion proposal. It said the country’s banking system may need even more capital injections and Athens would need to commit to strong new economic overhauls to meet their “ambitious” growth targets.

The IMF report came after Greek Prime Minister Alexis Tsipras, forced into a humiliating climbdown on his country’s bailout deal, unveiled his strategy for political survival: He and his allies want Greeks to rally around him and the agreement to spite the country’s creditors.

Thanks to strong support from the opposition, Greece’s parliament is expected to approve the deal announced on Monday, which requires Athens to carry out deep austerity and free-market economic overhauls that contradict all of his Syriza party’s core left-wing policies.

The big question is whether the 40-year-old premier can maintain the backing of his own party and stay in office long enough to see the agreement completed — his toughest political test since he swept to power in January on an antiausterity ticket.

Under pressure from European leaders who made clear they felt prepared for a Greek exit from the euro, Mr Tsipras made an abrupt about-face, agreeing to public-spending cuts that were tougher than measures rejected by Greek voters in a July 5 referendum.

Party officials are now urging their outraged fellow politicians to vote for the deal on the grounds that a split in Syriza over the harsh bailout terms and a fall of the government is just what the creditors want.

“Here we will support the Greek government in its effort to defend the rights of the Greek people,” Nikos Filis, leader of Syriza’s parliamentary caucus, told reporters. “It is important that … we move ahead with the taking of measures that we are forced to adopt to save the Greek economy from a coup.”

Greece’s parliament has to enact many of its tough fiscal measures by tonight (AEST), before formal talks to draw up a financing package with Europe can begin. European leaders insisted on the prior passage of fiscal measures to repair their trust in Greece, which they say is badly damaged by Syriza’s resistance to their economic policies.

In a Greek television interview, Mr Tsipras said he couldn’t rule out the possibility of Greece exiting the eurozone until the country signed the rescue agreement with the country’s international creditors. Still, he conceded that MPs would be voting on a plan he felt was too harsh.

“It is a difficult and bad agreement,” he said. “I believe that this plan is not correct. We reached a pointed where we could go no further.”

There is widespread opposition inside Syriza to the bailout deal, which would force Greece to cut pensions, raise value-added taxes, put €50 billion ($US55 billion) of public assets up for sale and grant veto powers over much legislation to international inspectors. The leader of the party’s dissenters, energy minister Panagiotis Lafazanis, called on Mr Tsipras to renounce it.

“The so-called partners, and first of all the German regime, behaved like our country is their colony and like brutal blackmailers and economic murderers,” Mr Lafazanis said. “Greece had and has alternatives to the agreement,” he added, without specifying them.

Up to 30 Syriza MPs, including two cabinet ministers and the speaker of parliament, are expected to vote against the deal. A rebellion on that scale would leave Mr Tsipras’s coalition, made up of Syriza and the right-wing nationalist Independent Greeks, short of a majority in the 300-seat parliament. Mr Tsipras will rely on support from the opposition to comfortably get over the hurdle the plans needs for approval.

But the splintering of Syriza raises doubts about how long the government, and Mr Tsipras, can survive without forming a broader coalition or calling new elections. A government that couldn’t command its own party’s loyalty in parliament and relied repeatedly on opposition votes to pass laws would lose credibility with the public.

Fresh political turmoil in Athens could knock Greece’s latest bailout deal off track before the ink is dry.

Mr Tsipras aims to keep his coalition together for at least a couple of months — even if it no longer controls a majority and needs opposition support, government officials say.

Once the deal with creditors is completed in several weeks, Mr Tsipras might take the country to elections some time in the fall, these officials say.

The government’s longevity could hinge on how Mr Tsipras handles Syriza dissenters. A cabinet shake-up is likely after the vote, a government official said. Several ministers, including anyone who opposes the bailout deal, could be replaced with people who are more likely to help the prime minister implement the measures required as part of the rescue agreement, the official said.

The Greek premier is also widely expected to expel politicians who vote against the government. That would leave them with a choice of resigning their seat, in line with Syriza’s code of conduct, or carrying on as independents. The former outcome would allow Mr Tsipras to replace them, while the latter scenario would weaken his power.

During his Tuesday television interview, Mr Tsipras vowed he would do whatever was possible to keep his Syriza party united. “I do not plan to escape from my responsibilities,” he said.

Wall Street Journal

IMF’s Lagarde sees hope for Greek debt
AFP JULY 16, 2015 9:08AM


IMF managing director Christine Lagarde says there are “more positive noises” over Greek debt restructuring. Source: AFP

International Monetary Fund managing director Christine Lagarde says Greece’s EU creditors are moving more closely to the idea of restructuring the country’s massive debt.

“I have some hope, because as late as a couple of hours ago, I understand that there were some more positive noises towards that principle of debt restructuring,” she told CNN International in an interview.

Her comments came before Greece’s parliament voted to approve harsh reforms demanded by their European partners in order to begin talks on a third bailout of up to €86 billion ($US94 billion).

The IMF made it clear yesterday that it could not participate in a third bailout plan for Greece unless its debt is restructured to drastically reduce the medium-term financial burden on the country.

“What we have said to all of them is that no matter what form it takes ... one way has to be found in order to release the burden and allow that country to demonstrate that it can be back on a sustainable path,” Ms Lagarde said.

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Still, she cautioned there are still “difficult negotiations” ahead as officials try to secure sufficient debt relief from Europe and economic overhauls in Athens.

“What I very much hope is that we can all keep to a very tight timetable and we can respond to a challenge that is colossal,” Ms Lagarde said.

In a study of Athens’s financial situation presented to European Union leaders on the weekend and released publicly yesterday, the IMF said the country would never reach a point where its debt was “sustainable” — that it will over time be able repay its loans — without a substantial restructuring by official EU creditors.

The IMF suggested three options: Stretching out debt repayments over decades, with a 30-year grace period; sending cash regularly to Athens to repay the debts; or writing down some of the current value of the debt via a ‘haircut’.

Ms Lagarde indicated on CNN that lengthening the payment period was the likely choice, saying she understood direct payments or a haircut are “not on the cards ... from the political point of view.”

Eurozone finance ministers will hold a conference call tonight (AEST) to discuss the latest developments in Greece, after Athens voted this morning on tough reforms in return for a bailout, a Eurogroup spokesman said.

“Confirmation just went out: Eurogroup teleconference tomorrow at 10am (6pm AEST today),” the spokesman for the Eurogroup head and Dutch Finance Minister Jeroen Dijsselbloem said on his Twitter account.

Mr Dijsselbloem called the meeting of eurozone finance ministers as street violence erupted in Athens, where Greek MPs were preparing to vote on the bailout reforms.

Even with the laws passed, the 19 finance ministers from the eurozone will not be in a position to formally begin official bailout talks, with parliaments in several member states still to give the green light to the negotiations.

EU powerhouse Germany’s Bundestag is set to vote on the plan on Friday and tough talks to finalise the bailout, expected to take much of the summer, would only begin after that.

If a deal is reached, eurozone governments will contribute between 40 and 50 billion euros, the IMF will contribute another chunk and the rest will come from selling off state assets and from financial markets, a European official said.

Greek premier Alexis Tsipras is facing a revolt over the reforms from his radical left ruling Syriza party, which came to power in January on anti-austerity promises.

But the bills nevertheless looked likely to pass though parliament with the support of pro-European opposition parties.

AFP, Dow Jones

The Greek PM has made it...

Greek parliament approves bailout measures as Syriza fragments

ATHENS - The Greek parliament passed sweeping austerity measures demanded by lenders to open talks on a new multibillion-euro bailout package to keep Greece in the euro, but dozens of hardliners in the ruling Syriza party deserted Prime Minister Alexis Tsipras.

The package was approved with 229 votes in the 300-seat chamber. There were 64 votes against it and six abstentions. But Tsipras required the support of pro-European opposition parties to push the measure through, leaving a question over the future of his government.

Tsipras said there was no alternative to the package, which he acknowledged would cause hardship, but he stood by the decision. "I am the last person to shirk this responsibility," he said.
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http://www.todayonline.com/business/debt...r-deadline

haha Tsipras bopian, have to go for the easiest solution and play the blame game on the Europeans for austerity.

Austerity also pain, Defaults also pain, would rather they had chosen default.

After all, short pain is not as bad as long pain.

Got this kind of PM,

"I don't want this bailout"
"this bailout is not fair"
"I do not believe it will help Greece"
"Please vote NO in referendum"

but

"Please vote yes for this bailout"

???

(16-07-2015, 10:20 AM)yeokiwi Wrote: Got this kind of PM,

"I don't want this bailout"
"this bailout is not fair"
"I do not believe it will help Greece"
"Please vote NO in referendum"

but

"Please vote yes for this bailout"

???

got, is called the bulls**t type loh Similar to some of the PM in countries around Singapore.

I am surprised they got the vote for bailout through the parliament, it seems like all the politicians there are only interested in kicking the bucket down the road....