In an earlier post, we modeled the negotiations between Greece and its creditors as a game of chicken: failure to reach agreement would be catastrophic for both, but agreement would require at least one of the two sides giving up on their stated positions.
Greece saw that its creditors were committed to going straight, and conceded on all of the important negotiating points:
As OpenEurope explains,What points has Greece capitulated on?
1. Completion of the current review – Greece has basically agreed to conclude the current bailout. This is a clear capitulation for Greek Prime Minister Alexis Tsipras, who said the previous bailout was “dead” and the EU/IMF/ECB Troika is “over”.
2. Remaining bank recapitalisation funds – Greece wanted this money to be held by the Hellenic Financial Stabilisation Fund (HFSF) ... However, this has been denied and the bonds will return to the EFSF.
3. Role of the IMF – The Eurogroup statement says, “We also agreed that the IMF would continue to play its role”. Again, Greece has given in on this point and the Troika continues to exist and be strongly involved in all but name.
4. No unilateral action – According to the statement,
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, ...
5. Four months rather than six months – Greece requested a six-month extension, but the Eurogroup only agreed to four months. This is a crucial point: ... It is very likely we will be back in a similar situation at the end of June.
Yesterday The Wall Street Journal published an interesting article about how it's not about whether Greece can pay back their debt, it's about whether they want to. According to a Wall Street Journal writer "“It’s really a matter of the extent to which it wants to tax its people, to charge its people, to sell assets to pay off the debt,”. (Vigna, 2015) Greece appears to have enough assets on the books to clear away any debt they have but the new regime appears to be more interested in renegotiating previous agreements and establishing an image of power.
ReplyDeleteToday the Greek Prime Minister, Alexis Tsipras, met with 10 other cabinet members to discuss budget cuts and financial overhauls. A primary motivation for said meetings is not just because of the extensions granted Friday, they are also detrimental to Greece being able to collect another portion of the pre-establighed bailout agreement that will allow the government to stay afloat. (Stamouli, 2015) Only time will tell how Greece decides to move forward and pay off the massive amount of debt they assumed.
References:
Stamouli, N. (2015). Greece Races to Agree on Reforms. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/greeces-negotiations-enter-more-important-stage-says-tsipras-1424522628?KEYWORDS=greece
Vigna, P. (2015). For Greece, A Matter of ‘Can’ and ‘Want’. The Wall Street Journal. Retrieved from http://blogs.wsj.com/moneybeat/2015/02/20/for-greece-a-matter-of-can-and-want/?KEYWORDS=greece
When Europeans, economists or journalists, talk about Greece economy, they knowingly obscure for non-Europeans the obvious and uncontested paradigm of Greece’s world dominance of merchant navy. “According to Greek financial newspaper Naftemporiki and data from the biggest global ship-broker company” (Menzel, K. , 2014), the fleet owned by Greece counted, at the beginning of 2014, 4,894 vessels with 291,735,318 deadweight tonnage (dwt) and 168,922,455 gross tonnage (gt). Japan came in second, with 8,357 ships, 242,640,509 dwt and 159,401,728 gt, and China was third, with 6,427 ships, 190,601,765 dwt and 116,675,336 gt. What other countries topped the world list? Germany came in fourth, with 4,197 ships, 126,355,373 dwt and 95,052,148 gt, and lastly, South Korea with 2,651 ships, 83,534,652 dwt and 52,870,979 gt. This speaks volumes about the financial resources of Greece, and about Germany’s interests into the Greece European deal. It brings to mind the historical Greek dominance of Mediterranean Sea and surrounding water paths, and may infer the significant economic resources of the merchant Greek businesses that are potentially not regulated, and should never be, by European Bank, like small single-owner ships or small tonnage fleets under non-Greek flags.
ReplyDeleteConsequently, the simplest way for a socialist Government, which is in the right place at the right time, to honor its debt is to “attack corruption and tax evasion, from the smallest taverna owner to the nation’s most powerful oligarchs” (Alderman, L., 2015). Attempts to curb corruption were made for years now, in Greece. When “Prime Minister Alexis Tsipras is vowing to take far more action than previous administrations in cracking down” on corruption, Europe political and economist observers, and certainly neighboring countries give their nod to this promise as it may have more chances to succeed than under prior conservative governments . Tsipras says that his government, “led by his leftist party, Syriza, will succeed because having never held power, it is not beholden to the entrenched interests that have long fought to maintain the status quo” (Alderman, L., 2015). During this last week, Athens submitted a simple plan to fight corruption, while keeping Greece’s €240 billion “financial lifeline in place for at least four more months” (Alderman, L., 2015). The plan is pursue the wealthy tax evaders and make them pay.
References:
Menzel, K. 2014. “Greek merchant fleet tops world tonnage ranking. Retrieved from http://greece.greekreporter.com
Alderman, L. 2015. “In Greece, bailout may hinge on pursuing tycoons”. Retrieved from http://www.nytimes.com/
This past February Greece’s new Prime Minister, Tsipras, asked for a four-month extension for the country’s bailout and has a ‘loan arrangement’ under the supervision of the troika.
ReplyDeleteThis created a sense of panic and crisis in Athens streets, as well as anxiety created by the possible ‘Grexit’ from the euro and the forced conversion of bank accounts to drachmas which caused pulling more than $19 billion out of the banks by households and businesses.
The new government, according to an editorial comment from the Economist magazine early March 2015, mentions that Greece will have to step back from breaking the relationship with its creditors, which has hurt more the economy by bringing it to a state of bankruptcy.
In a recent briefing report from the IMF, Director, Communications Department, and Deputy Director, European Department, International Monetary Fund, commented that the IMF has a program with Greece until 2016. Five of the program reviews’ have been completed, and in order to complete the 6th program, which is a set of policies that could help achieve the program goals of stability and growth.
Greece’s Finance minister made a comment early March 2015 at CNN lobbying from Dallas TX and answering to young entrepreneurs on Greece’s financial problems, that Greeks need to change their mentality and re-learn how to create new products that will attract foreign investors and partnership with Greek companies in order to keep business abreast rather than leaving the country and taking their ideas and money overseas.
Moneys made available from the creditors will not be put in place by the government until they complete the reforms that the creditors insist will bring stability to the economy and the public finances, including the creation of a budget surplus.
Regarding the speculation of Greece leaving the euro, the European Parliament’s president just made an announcement on March 17th, that there will be an agreement with the Eurogroup not later than this week, but that Greece has to submit its reform proposals along with the country’s economic investment and the plan for revitalization.
The new version of reform is to see banks, ports, railways, and waterways in public hands, taxation to higher sums of wealth, laws and treaties at fair wages, fair trade and environmental health. The article's author suggests these are alternatives to hyper capitalism (DW's Jasper Sky).
As of March 19, 2015 the Greek debt agency is hoping to lend money from the water and power utilities through short term repurchase agreements, in which the state is agreeing to make up for any capital loses. In Brussels discussions are taken place for 'the way forward for Greece' which is willing to implement agreed reforms that could pull them back from the euro exit.
Greek has also asked to receive 1.9 billion euros in ECB profits from Greek bond holdings, and wants ECB's permission to issue treasury bills that only Greece banks would be willing to purchase.
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References
Maltezon, R. a. (2015, 03, 20). Merkel sets strict terms for Greek aid. Retrieved from Reuter website: Http://www.reuter/articale/2015/03/20/us-eurozone-greece-id
Sky, J. (2015, 02,11).in greece two rival reform agendas battle for euroups future. Retrieved from http://www.dw.de
(2015,03,19). EU Leaders meet in new Greek crisis talks. Retrieved from http://www.dw.de
This past February Greece’s new Prime Minister, Tsipras, asked for a four-month extension for the country’s bailout and has a ‘loan arrangement’ under the supervision of the troika.
ReplyDeleteThis created a sense of panic and crisis in Athens streets, as well as anxiety created by the possible ‘Grexit’ from the euro and the forced conversion of bank accounts to drachmas which caused pulling more than $19 billion out of the banks by households and businesses.
The new government, according to an editorial comment from the Economist magazine early March 2015, mentions that Greece will have to step back from breaking the relationship with its creditors, which has hurt more the economy by bringing it to a state of bankruptcy.
In a recent briefing report from the IMF, Director, Communications Department, and Deputy Director, European Department, International Monetary Fund, commented that the IMF has a program with Greece until 2016. Five of the program reviews’ have been completed, and in order to complete the 6th program, which is a set of policies that could help achieve the program goals of stability and growth.
Greece’s Finance minister made a comment early March 2015 at CNN lobbying from Dallas TX and answering to young entrepreneurs on Greece’s financial problems, that Greeks need to change their mentality and re-learn how to create new products that will attract foreign investors and partnership with Greek companies in order to keep business abreast rather than leaving the country and taking their ideas and money overseas.
Moneys made available from the creditors will not be put in place by the government until they complete the reforms that the creditors insist will bring stability to the economy and the public finances, including the creation of a budget surplus.
Regarding the speculation of Greece leaving the euro, the European Parliament’s president just made an announcement on March 17th, that there will be an agreement with the Eurogroup not later than this week, but that Greece has to submit its reform proposals along with the country’s economic investment and the plan for revitalization.
The new version of reform is to see banks, ports, railways, and waterways in public hands, taxation to higher sums of wealth, laws and treaties at fair wages, fair trade and environmental health. The article's author suggests these are alternatives to hyper capitalism (DW's Jasper Sky).
As of March 19, 2015 the Greek debt agency is hoping to lend money from the water and power utilities through short term repurchase agreements, in which the state is agreeing to make up for any capital loses. In Brussels discussions are taken place for 'the way forward for Greece' which is willing to implement agreed reforms that could pull them back from the euro exit.
Greek has also asked to receive 1.9 billion euros in ECB profits from Greek bond holdings, and wants ECB's permission to issue treasury bills that only Greece banks would be willing to purchase.
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References
Maltezon, R. a. (2015, 03, 20). Merkel sets strict terms for Greek aid. Retrieved from Reuter website: Http://www.reuter/articale/2015/03/20/us-eurozone-greece-id
Sky, J. (2015, 02,11).in greece two rival reform agendas battle for euroups future. Retrieved from http://www.dw.de
(2015,03,19). EU Leaders meet in new Greek crisis talks. Retrieved from http://www.dw.de
Who is negotiating for the people of Greece?
ReplyDeleteJoanna Kakissis from NPR ran a story named: Greece Cracks Down On Longtime Tax Evasion Problem, on March 31, 2015. In the story it was mentioned that “between 2008 and 2012, the tax burden on the poor actually increased by 337 percent” (NPR.org 2015, 3/31). The International Monetary Fund is in favor of the new government going after the wealthy tax evaders, and increasing the tax rate on the wealthy. However logical this sounds, Haris Theoharis the former tax collector, thinks that it may take years to pass a fair tax plan and possibly decades to change the mind set of rich tax evaders.
Today, April 5, 2015, a story titled: In Greece, Getting By On The Brink Of A Financial Meltdown by Rachel Martin pointed out that “once again averted the latest threat of bankruptcy: Somehow, Greece has found the money to pay back hundreds of millions of dollars to the IMF” (NPR.org 2015 4/5). According to a first grade teacher, Stathis Kirillidis, students are not able to bring a lunch to school, or the supplies they need to do school work. With a 20% cut in pay, Kiirilldis states the he is thinking about moving out of the country because of the humiliation that Greece is not able to deliver the minimum social needs such as educating its young people.
The two stories finish with similar thoughts – people are making choices between paying taxes, paying utility bills, or providing for their families.
http://www.npr.org/2015/03/31/396636955/greece-cracks-down-on-longtime-tax-evasion-problem
http://www.npr.org/2015/04/05/397560140/in-greece-getting-by-on-the-brink-of-a-financial-meltdown
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ReplyDelete