Too early for good news from Greece

Greek finance minister Yiannis Stournaras.

Πηγή: New Statesman
By YIANNIS BABOULIAS
May 10 2013

"Greece has turned a corner" is the general message Yannis Stournaras, the Greek Finance Minister, has been trying to spread in the past few months. Not only "The IMF has praised improvements to Greece's much-maligned tax collection procedures," as the Greek media have been reporting lately, but also, as Stournaras said, "Greece could return to international debt markets by next May." This same line has been at play since late last year, when the Bank of Greece Governor Giorgos Provopoulos stated in an interview with the Financial Times that the worst is over. "Greece could return to the markets in 2014," Stournaras went on. "We've turned a corner".

The international media have tried their hand at this, with Reuters columnist Hugo Dixon writing in his piece The Gloom Around Greece is Dissipating:

Athens now seems on course to achieve 'primary balance' this year. In other words, it will not have a budget deficit before interest payments. That means it probably will not have to implement another round of austerity next year, so the economy will not be struggling against that obstacle.

One might notice there is a quite big maybe in there, standing out. In the same spirit, Yannis Stournaras commented last week in an interview with NET that "this year we managed to make up for two thirds of the fiscal gap, without cutting pensions". Again, Stournaras seems to only be speaking about part of the money Greece will need within 2013 in order to avoid cutting deeper into pensions and public spending, while at the same time admitting that 2013 will be a very difficult year. His view is that unemployment will start falling in 2014.


There are several problems with this, and the unavoidable question arises: is Greece really doing better or is Stournaras simply spinning a positive vibe to soothe the markets and maybe help Merkel and co. look good ahead of the German elections in September? The first issue here would be a whopping €8.2bn the country owes to private companies and contractors. Greece has only managed to make its overall finances look good by stopping payments towards the domestic market. Part of the bailout funds will have to be used in order for this debt to be paid off, but a sense of "too little, too late" is in the air as this delay has strangled many businesses in the past 3 years. A "possible return to the markets" is more like a "necessary exit" as bailout funds run dry next April and additional aid looks unlikely to arrive. Any issues we might face on the road there, lie exclusively with the coalition's financial strategy.

The government's decision to increase taxation on heating oil did not only leave many Greeks unable to heat their homes last winter, but also caused general revenue from taxes to drop by €291m, after consumption fell by 68.7 per cent. Since the beginning of the year, due to this and other tax hikes, tax revenues were lower than the targets set by the government and the Troika in the first three months of 2013.

The most terrifying prospect Greece faces in the next few months though, is the devastating unemployment. Overall unemployment in Greece is now 27 per cent while it goes up to 28.7 per cent in certain regions. In the 18 to 25 age group, unemployment stands at a staggering 64 per cent. To give some perspective, unemployment stood at 21.9 per cent last January, and has more than tripled since the crisis began in 2008. It is likely that it will touch 30 per cent by the end of the year, despite the cuts in wages that now sees those making the minimum wage earning no more than €440 per month after taxes.

It is easy to assume that in his statement, Yannis Stournaras means that unemployment will start falling once it reaches the dreaded 30 per cent. This does little to comfort Greeks. Despite the numbers the government chooses to stress in order to support its position of "light at the end of the tunnel", the very real problems of unemployment, dwindling consumption and political instability are felt by ordinary Greeks. New cuts in wages and pensions are still on the table if Greece doesn’t achieve a primary surplus this year or if, let's be honest, this primary surplus is achieved on shaky grounds and new taxes await within the year.

We've yet to see the Greek government clash and cut its ties with the Greek oligarchs that have refused so far to pay their fair share of the burden. Ship-owners still enjoy scandalous tax-exemptions, while the same people who often found themselves facing charges for cheating the state out of millions (and still owe tens of millions according to the data released by the ministry of finance) appear to still be in business with the ruling New Democracy party. This only stands proof that the government will opt to put even more of that burden on the backs of those already finding themselves in dire position because of this unwillingness.

The ruling coalition and the Troika's spin dominates public discourse in Greece. According to a recent report, the government takes up 63.4 per cent of the time allocated to political parties, while the Troika and its representative’s statements take up 57.2 per cent of the rest. This may be helpful for the financial climate to improve at a superficial level and to make Angela Merkel and Wolfgang Schauble look good while elections draw near (a courtesy Schauble looks unwilling to grant Greece), but it does little in the way of truth.

A harsh summer that will bring hikes in electricity bills will find Greeks once again in discomfort, this time battling the predicted heatwave without access to air-conditioning. Health issues will inevitably arise. And that's only one part of the problem. No matter how much the Greek government wants us to believe things are bound to get better, it does to little to help those who actually need it: the people. If only wishful thinking and PR could replace reality…

Greek debt to badly miss target - euro zone official

Greece's Finance Minister Yannis Stournaras (C) listens to reporters' questions as he leaves the Prime Minister's office in Athens October 25, 2012.

Πηγή: Reuters
By Jan Strupczewski
Oct 26 2012

Greek debt will be above the target of 120 percent of GDP in 2020, a preliminary report by the IMF showed on Thursday, and Athens will need more reforms before emergency credit from international lenders can start flowing again.

"It is clear that Greece is off track and there is no chance they will cut the debt to 120 percent of GDP in 2020 as envisaged. It will be rather 136 percent, and this would be under a positive scenario of a primary budget surplus, a return to economic growth, and privatisation," a euro zone official, who insisted on anonymity, said.

"New prior actions will be needed, on top of the existing 89," the official said, referring to a list of already agreed reforms that need to be in place before any new tranches of euro zone and IMF emergency loans to Greece can be paid.

Apart from the debt projections, representatives of the IMF, the European Commission and the European Central Bank - known as the troika - have been calculating how much more money Athens will need if it is given until 2016 rather than 2014 to reach a primary surplus of 4.5 percent, as agreed in February.

A primary surplus or deficit is the budget balance before the government services its debt. In Greece's case, it would mean government tax revenues exceeding spending, meaning Athens is beginning to get on top of its budget-deficit problems.

The two extra years would give the fast-contracting Greek economy some welcome respite, allowing it to return to growth sooner and therefore increasing the chances the country would eventually be able to make its debt sustainable.

"Additional financing needs for Greece are now seen at around 30 billion euros (24 billion pounds)," the official said after the EWG meeting. Estimates from various officials since July varied from 13 billion to 30 billion and on Thursday another official estimated the financing needs at 16-20 billion euros.

The critical question is where the additional money would come from.

"The IMF is pushing for OSI (Official Sector Involvement) in Greece, Germany is strictly against. And they are not the only ones," the euro zone official said.

The IMF has long advocated that the euro zone should restructure the loans that euro zone governments extended to Greece, in what is called OSI, to reduce the debt servicing costs for Athens.

The restructuring could take the form of a further reduction of the interest rate on existing loans to Greece and an extension of their maturities, but while that would reduce financing costs, alone it would not fill the funding gap.

Another option is to bring forward some payments from the IMF that would be granted to Greece at a later date, thereby bridging its immediate funding gap, but again that is not be fully sufficient.

Also under consideration to reduce the Greek debt pile, and its servicing cost, is a debt buy back, taking advantage of the deep discount Greek debt is currently trading at.

But more direct funding for Greece from euro zone member states looks inevitable.

Any new money would have to come from the euro zone's permanent bailout fund, the European Stability Mechanism, and is likely to face opposition from countries such as Finland, the Netherlands and Germany.

ECB ASSISTANCE NEEDED

The euro zone official said that further assistance from the ECB, in the form of new liquidity support to Greek banks, would be needed. Greece will be further discussed at the next EWG meeting on Monday.

Apart from the funding issue, talks on granting Athens the two-year extension on its primary surplus target are hindered by the opposition of some parties in the ruling Greek coalition on labour market reforms, seen as necessary by the Troika.

Greek Finance Minister Yannis Stournaras told parliament on Wednesday that Greece had already been granted the two-year extension, but several top euro zone officials, including European Central Bank President Mario Draghi and German Finance minister Wolfgang Schaeuble, said they were not aware of that.

If an agreement with Athens is reached in time, a decision on the extra money could be taken at the next meeting of euro zone finance ministers in Brussels on November 12.

Despite disagreements over how it will be done, it has become clear in recent days that a two-year extension will be granted and therefore some way will be found to finance it.

Greece drops demand to ease bailout terms

Given that elections are past with the phrase “renegotiation of the memorandum” chanted by all major political parties, now “Mr. Euro” seems to back off stating that “The programme is off-track and we can’t ask for anything from our creditors before we get it back on course”.

Πηγή: FT
By Kerin Hope
July 5 2012

Greece’s new government has dropped a plan to seek softer terms for its second bailout following warnings that it would be rejected by international lenders.

Yannis Stournaras, finance minister, said the governing coalition would have to accelerate reforms before asking for modifications in a €174bn programme agreed in February with the European Union and the International Monetary Fund.

“The programme is off-track and we can’t ask for anything from our creditors before we get it back on course,” Mr Stournaras told the Financial Times.

“There is light at the end of the tunnel but it is a long tunnel,” he added.

Greece’s change of tack came as EU and IMF officials visiting Athens this week echoed a statement by Christine Lagarde, the IMF managing director, in a television interview that she was “not in negotiations or re-negotiations mood” on the Greek bailout.

The three coalition partners – the conservatives and two left-of-centre parties – all pledged during recent election campaigns that Greece would seek a one- or two-year extension of the programme to ease the impact of almost five years of recession, with unemployment now above 21 per cent.

Yet Antonis Samaras, the centre-right prime minister, avoided any mention of a timetable change during his first meeting yesterday [Thur] since taking office with officials from the so-called troika – the EU, IMF and European Central Bank – according to people with knowledge of the discussions.

“The prime minister stressed his commitment to accelerating structural reforms, especially privatisation, in order to turn the economy around and start creating jobs,” one such person said.

“It went well, there was a good atmosphere,” another aide said. An IMF official said: “We don’t have any comment on the talks at this point.”

Greek officials had been apprehensive about the meeting given previous stormy sessions between MrSamaras and the troika over the conservative leader’s opposition to the first Greek bailout in 2010 and his initial reluctance earlier this year to provide a letter backing the second programme.

The troika made clear that even though economic arguments could perhaps be made for extending the programme, Greece would then need extra bailout funding, which eurozone member states could refuse to provide given the country’s lack of progress to date.

Greece has missed deadlines for key structural reforms – including an overhaul of the tax administration aimed at reducing high annual levels of tax evasion, estimated at about 5 per cent of national output – because of two general elections in the past two months. This year’s budget is already off-track despite improvements in controlling spending, as revenues shrank amid a collection slowdown during the election campaign and a deeper-than-forecast recession.

“The improvements are welcome but the overall picture is misleading,” said a finance ministry official, pointing out high levels of arrears owed to suppliers and a 25 per cent cut in the public investment budget in the first quarter.

Following this week’s fact-finding mission by the EU and IMF, Greece will hold detailed negotiations at the end of this month to update the bailout programme. Athens will come under pressure to reach a deal by early August or risk further delays in disbursement of a €4.2bn loan tranche due last month, which was held back until a viable government was formed.

Greece presses case to change bailout terms

Πηγή: Reuters
July 5 2012

* Lenders reviewing Greece's compliance with bailout
* New govt wants more time to meet targets, less austerity
* Lenders resistant to any re-write of bailout package

ATHENS, July 5 - Greece's new government took up the task on Thursday of persuading sceptical lenders visiting Athens to ease the punishing terms of the bailout saving the debt-laden country from bankruptcy.

Just hours after being sworn in, Finance Minister Yannis Stournaras was due to meet senior officials from Greece's trio of international lenders - the European Union, European Central Bank and International Monetary Fund.

The so-called 'troika' is in Athens to review Greece's faltering progress on fiscal adjustment and reforms under a 130 billion euro ($162.63 billion) bailout package.

Trying to take advantage of a shift in Europe towards more growth-oriented economic policy measures, Greece's coalition government wants to soften the conditions attached to the bailout - withering tax hikes, job losses and wage cuts that have deepened a recession now into its fifth year.

It faces huge public pressure following a re-run election on June 17 that saw the radical leftist Syriza bloc surge into second place on a promise to tear up the bailout terms, raising the prospect of a catastrophic Greek exit from Europe's single currency.

But the three-party coalition government led by Conservative Antonis Samaras faces stiff resistance from European partners, notably paymaster Germany, who say that while they are open to adjusting the programme, they will not change the targets.

In Stockholm, Swedish Finance Minister Anders Borg said on Swedish Radio on Thursday there was a major risk Greece would fail to fulfil its obligations to its lenders and end up in "some sort of default".

Greece will run out of cash within weeks if it fails to secure the next 31.5 billion-euro instalment of bailout funds.

Troika mission chiefs were to hold an initial round of meetings with the government.

They are expected to leave at the end of the week but technical staff, who have already started work, will remain to review Greece's compliance with the terms of the bailout.

The mission chiefs are expected to return later in July. Only then will lenders decide how to adjust the programme to take account of weeks of political paralysis during two elections in May and June and a deeper than expected recession.

The government says it wants tax cuts, a freeze on public sector layoffs, extra help for the poor and unemployed and an additional two years to cut its deficit.

If implemented in full, that programme would undo many austerity measures the country agreed to earlier this year to clinch its second bailout since 2010.

It is offering in exchange to expand and speed up the privatisation process.

Stournaras, a liberal economist who helped negotiate Greece's entry into the euro in 2001, took on the job after Samaras's first choice, banker Vassilis Rapanos, withdrew citing ill health.

Stournaras was sworn in by robed priests on Thursday morning,

Prime Minister Samaras will present his government's policy at the start of a three-day parliamentary debate on Friday. A vote of confidence on the coalition is scheduled to take place late on Sunday.