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Thread: Greece's Tsipras calls referendum to break bailout deadlock

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    Re: Greece's Tsipras calls referendum to break bailout deadlock

    To highlight the current Greek government's role in worsening that country's fiscal situation, one can turn to the IMF's just-released debt sustainability analysis. The analysis notes:

    1. Had Greece implemented the fiscal aid-restructuring program as assumed, no additional fiscal aid beyond the November 2012 package would have been needed. (p.1/p.2 of the .pdf)

    2. Significant policy changes and Greece's outlook since early this year have substantially increased Greece's financing needs. (p.3/p.4 of the .pdf)

    3. The current Greek government has given "vague commitments" about some of the measures required to recapitalize banks and "stated their opposition to further privatization of key assets." (p.4/p.5 of the .pdf)

    4. There has been a "substantial weakening in the delivery of structural reforms and in the reform commitments." (p.5/p.6 of the .pdf)

    http://www.imf.org/external/pubs/ft/...15/cr15165.pdf

    The big policy changes referenced to early this year are the result of the Syriza government headed by Prime Minister Tsipiras. The current government has not been delivering on prior commitments, has not shown much appetite for reform, and has made only vague commitments on some of the issues required to keep the country's banks both liquid and solvent. At the same time, it expects--actually demands--that others accommodate it for its departure from the tasks necessary to help Greece begin to improve its finances.

    Debt relief is necessary. But the benefits of debt relief would be eroded, possibly substantially, were debt relief offered to the current government. Given its conduct since taking office--the current government has abandoned Greece's difficult but necessary reform efforts--it is difficult to view it as a reliable partner to any high-stakes deal. Ironically, that path has increased, not decreased, the amount of austerity expected. In short, the current government could merely use the debt relief as an excuse to avoid further reforms.

    Now that the IMF has published its report, which highlights significant departures from the reform path undertaken by the Syriza government, I can fully understand why the EU/ECB/IMF have taken a tougher line with the current Greek government. Its credibility was lost well before Prime Minister Tsipiras decided to blow up the negotiations expecting (irrationally) swift European capitulation to his maximum terms.

    Can the current government be expected to honor any obligations it makes in the future? Its past performance with the commitments it has abandoned suggests it can't. Therefore, not only would an optimal outcome result in a new Greek government's taking office sometime after the referendum, such an outcome might be necessary for the kind of debt relief Greece urgently needs.
    Last edited by donsutherland1; 07-03-15 at 01:16 PM.

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    Re: Greece's Tsipras calls referendum to break bailout deadlock

    Quote Originally Posted by donsutherland1 View Post
    The Troika only rejected immediate debt relief, not debt relief in principle. From The Guardian:

    Some form of debt restructuring would be promised to Athens in the future, but it would come with strings attached and not as part of the current bailout package, they said.
    Speculation from unnamed 'officials' to a journalist aren't really anything to take to the bank, if you'll excuse the pun.

    The former Prime Minister may not have been an outstanding leader, but compared to the current Prime Minister he would be a vastly superior choice. It is highly unlikely that he would have blown up the negotiations as Tsipiras did.
    No, he wouldn't have, but then again, he wouldn't (and we know this because he didn't when last in power) do anything to alleviate the suffering of the Greek people. He was merely a place-man for the Troika, someone to implement their failed strategy.

    I disagree. They worked to conclude a deal. They did not walk out. They didn't punt on their responsibilities.
    They have negotiated in bad faith throughout. They have led the Grrek government to believe that they would negotiate and haven't offered anything, not debt relief, not restructuring of the debt. What concessions do you believe they have made towards the Greek government's position since February?

    That's always possible. I was alluding to what I thought would be the best-case outcome. The opposition should make the referendum and any election a mandate on remaining within the Euro Zone and tie the Tsipiras government and Syriza to seeking a backdoor exit.
    I just hope that the Greeks take their courage in their own hands and call the Troika's bluff on Sunday.
    "The crisis will end when fear changes sides" - Pablo Iglesias Turrión

    "Austerity is used as a cover to reconfigure society and increase inequality and injustice." - Jeremy Corbyn

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    Re: Greece's Tsipras calls referendum to break bailout deadlock

    Quote Originally Posted by Andalublue View Post
    Speculation from unnamed 'officials' to a journalist aren't really anything to take to the bank, if you'll excuse the pun.

    No, he wouldn't have, but then again, he wouldn't (and we know this because he didn't when last in power) do anything to alleviate the suffering of the Greek people. He was merely a place-man for the Troika, someone to implement their failed strategy.

    They have negotiated in bad faith throughout. They have led the Grrek government to believe that they would negotiate and haven't offered anything, not debt relief, not restructuring of the debt. What concessions do you believe they have made towards the Greek government's position since February?

    I just hope that the Greeks take their courage in their own hands and call the Troika's bluff on Sunday.
    Concessions included a lower primary surplus. From the IMF's Chief Economist Olivier Blanchard:

    The offer made to the Greek government last week reflected these considerations and these tradeoffs. It proposed to lower the medium term primary budget surplus target from 4.5% of GDP to 3.5%, and give Greece two more years to achieve that target—so the target for this year was reduced to 1%—and it asked for a more limited set of reforms.

    Greece: A Credible Deal Will Require Difficult Decisions By All Sides | iMFdirect - The IMF Blog

    The last proposal also contained a somewhat reduced consumption tax rate and a large reduction in the VAT for the hotel industry. As for the former Prime Minister, he didn't inflict a completely avoidable banking holiday, capital controls, and pension rationing on Greece's people. For all his failings, he never sought to move Greece out of the Euro Zone and he took tough decisions.

    In stark contrast, the current government punted rather than making a tough decision. It asked the Greek people to vote on a complex package with only a few days to examine the information that was given to them--not the full information that was available to the negotiators. At the same time, its choice brought about the current capital controls and pension rationing. Moreover, the current government is trying desperately to deprive Greek voters of the reality that a "no" vote could well mean Greece's exit from the Euro Zone and it is expressing anger at European leaders who are bringing such information to the Greek people.

    Finally, the latest polls show that the outcome is too close to call. With a still sizable undecided group (12% in the IPSOS poll), the vote could break either way. Hopefully, the Greek people will vote "yes" and shortly afterward, Greeks will choose a new government. Following the vote, I hope the ECB will raise its emergency assistance so that capital controls will be unnecessary. Following the election of a new government, I hope that the troika will be generous in debt relief in exchange for credible reform commitments.

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    Re: Greece's Tsipras calls referendum to break bailout deadlock

    Excerpts from a letter signed by 246 economics professors in Greece:

    We believe that the recessionary consequences of debt default and exit from the Eurozone, especially in such a chaotic and superficial way, will be much worse than the effects of a painful compromise with our EU partners and the IMF. A disorderly break of our country from the core of Europe will have disastrous economic, social, political and geopolitical consequences.

    Short-run consequences: Bank closures, cut in the value of deposits, sharp decline in tourism, shortages of basic consumer goods and raw materials, black market, hyperinflation, firm bankruptcies and a big rise in unemployment, rapid fall in real wages and the real value of pensions, deep recession and serious problems in the functioning of public health care and defense, social unrest.

    Medium-term consequences: international isolation of the country, no access to international capital markets for several years, low growth and anemic investment, high unemployment combined with high inflation rates, suspension of the flow of EU structural funds, significant decline in the standard of living, poor provision of basic public goods and services.


    Declaration of Professors of Economics at Greek Universities on the Referendum | News | ekathimerini.com

    Excerpts from a column by Kathimerini managing editor, Nikos Konstandaras:

    Whatever the government predicted turned out wrong, and now, at the last moment, instead of trying to deal with the consequences of his mistakes, Alexis Tsipras is attempting to distort our reality. The prime minister and his government are like fabulists who, when they are caught out, resort to ever greater tales to cover their previous ones. After the failure of his plan to throw off the yoke of creditors while continuing to take their money, Tsipras now tells us that the result of the referendum that he called – in which the country’s future depends on how the dice will fall – will have no consequences.

    In the world according to Tsipras, a “no” vote will strengthen his hand in negotiations with creditors. If Greece finds itself out of the eurozone, perhaps even the European Union, and if the Greek economy collapses, it will not be the fault of the prime minister and his government but rather of evil foreigners and their local lackeys who campaign for a “yes” to further negotiations. In this world, “no” does not mean a rift with our partners but rather a return to a Europe of principles. It is as if we are called to believe that by setting ourselves on fire we will make our partners better people and everyone will be a winner.


    http://www.ekathimerini.com/198861/o...ing-to-tsipras

    The two pieces highlight the realities from on-the-ground in Greece. Many abroad don't fully realize or understand the self-destructive course being pursued by the Tsipiras government or the consequences of a "No" vote. Leading Greek economists and at least one influential news editor do.
    Last edited by donsutherland1; 07-03-15 at 08:37 PM.

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    Re: Greece's Tsipras calls referendum to break bailout deadlock

    Quote Originally Posted by donsutherland1 View Post
    Concessions included a lower primary surplus. From the IMF's Chief Economist Olivier Blanchard:

    The offer made to the Greek government last week reflected these considerations and these tradeoffs. It proposed to lower the medium term primary budget surplus target from 4.5% of GDP to 3.5%, and give Greece two more years to achieve that target—so the target for this year was reduced to 1%—and it asked for a more limited set of reforms.
    Reducing a limit that Greece has no chance of achieving any more than it had of achieving the (marginally) higher one is no concession at all.

    As for the former Prime Minister, he didn't inflict a completely avoidable banking holiday, capital controls, and pension rationing on Greece's people. For all his failings, he never sought to move Greece out of the Euro Zone and he took tough decisions.
    As Fenton pointed out, he also undertook yet another fraud on reporting to the Troika, presided over the worst depression in Greek history, saw hundreds of thousands of lost jobs, completely botched privatisations and refused to challenge the Troika on the failure of its strategy and, most damning of all, utterly failed to reduce the overall level of debt or increase GDP growth.

    It is no virtue to make 'tough decisions' that immeasurably damage the welfare of your people. As Stiglitz points out:

    Of course, the economics behind the programme that the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country’s GDP. I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60%.

    It is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe’s leaders have not even learned. The troika is still demanding that Greece achieve a primary budget surplus (excluding interest payments) of 3.5% of GDP by 2018.
    Joseph Stiglitz: how I would vote in the Greek referendum | Business | The Guardian

    I hope the ECB will raise its emergency assistance so that capital controls will be unnecessary. Following the election of a new government, I hope that the troika will be generous in debt relief in exchange for credible reform commitments.
    Isn't it a sign of madness to repeat the same mistakes in the hope that the outcome will be different?
    "The crisis will end when fear changes sides" - Pablo Iglesias Turrión

    "Austerity is used as a cover to reconfigure society and increase inequality and injustice." - Jeremy Corbyn

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    Re: Greece's Tsipras calls referendum to break bailout deadlock

    Quote Originally Posted by Andalublue View Post
    Reducing a limit that Greece has no chance of achieving any more than it had of achieving the (marginally) higher one is no concession at all.
    Had the Greek government been willing to undertake offsetting reforms and had it not abandoned earlier commitments, perhaps an even lower figure could have been agreed.

    It is no virtue to make 'tough decisions' that immeasurably damage the welfare of your people. As Stiglitz points out...
    While Stiglitz makes some fair points, it should also be noted that the Greek economy had actually resumed growth during 2014.

    Greek Economy Returns to Growth - WSJ

    Following its election, the Tsipiras government abandoned reforms, acted chaotically, and undermined the nascent recovery, finally suffocating it with its choice to expose Greece to capital controls and pension rationing, not to mention imperil its weak financial system.

    Not too surprisingly, all of Greece's newspapers are also urging a "Yes" vote tomorrow.

    Leading Greek Newspapers Urge

    They understand the radical nature of the current government, the destructive path it has deliberately adopted with little concern for Greece's people, and the potentially catastrophic consequences of exiting the Euro Zone. The newspapers are also pushing back against a government that refuses to inform the people that a "No" vote could lead to Greece's exit from the Euro, something a majority of Greeks oppose. Tsipiras, of course, is complaining (Greece news media taking sides in coverage of upcoming vote - LA Times), but when a government isn't honest with its people about the implications of its policy choices, good journalists need to provide the facts.

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    Re: Greece's Tsipras calls referendum to break bailout deadlock

    Killing one person is murder, killing 100,000 is foreign policy

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    Re: Greece's Tsipras calls referendum to break bailout deadlock

    Quote Originally Posted by donsutherland1 View Post
    Had the Greek government been willing to undertake offsetting reforms and had it not abandoned earlier commitments, perhaps an even lower figure could have been agreed.



    While Stiglitz makes some fair points, it should also be noted that the Greek economy had actually resumed growth during 2014.

    Greek Economy Returns to Growth - WSJ

    Following its election, the Tsipiras government abandoned reforms, acted chaotically, and undermined the nascent recovery, finally suffocating it with its choice to expose Greece to capital controls and pension rationing, not to mention imperil its weak financial system.

    Not too surprisingly, all of Greece's newspapers are also urging a "Yes" vote tomorrow.

    Leading Greek Newspapers Urge

    They understand the radical nature of the current government, the destructive path it has deliberately adopted with little concern for Greece's people, and the potentially catastrophic consequences of exiting the Euro Zone. The newspapers are also pushing back against a government that refuses to inform the people that a "No" vote could lead to Greece's exit from the Euro, something a majority of Greeks oppose. Tsipiras, of course, is complaining (Greece news media taking sides in coverage of upcoming vote - LA Times), but when a government isn't honest with its people about the implications of its policy choices, good journalists need to provide the facts.
    I see. "Newspeak," a bought and sold commodity, is allied with the IMF, the Corporatists, and the Big Money clique. Gosh, what a surprise, eh?

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    Re: Greece's Tsipras calls referendum to break bailout deadlock

    Quote Originally Posted by Montecresto View Post
    One point in the article is especially virulent and aggressive in the Euroland handling of the Greek mess. It is demonstrating a degree of moral bankruptcy to its population that is dangerous in legitimacy based systems.

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    Re: Greece's Tsipras calls referendum to break bailout deadlock

    Quote Originally Posted by donsutherland1 View Post
    Had the Greek government been willing to undertake offsetting reforms and had it not abandoned earlier commitments, perhaps an even lower figure could have been agreed.



    While Stiglitz makes some fair points, it should also be noted that the Greek economy had actually resumed growth during 2014.

    Greek Economy Returns to Growth - WSJ

    Following its election, the Tsipiras government abandoned reforms, acted chaotically, and undermined the nascent recovery, finally suffocating it with its choice to expose Greece to capital controls and pension rationing, not to mention imperil its weak financial system.

    Not too surprisingly, all of Greece's newspapers are also urging a "Yes" vote tomorrow.

    Leading Greek Newspapers Urge

    They understand the radical nature of the current government, the destructive path it has deliberately adopted with little concern for Greece's people, and the potentially catastrophic consequences of exiting the Euro Zone. The newspapers are also pushing back against a government that refuses to inform the people that a "No" vote could lead to Greece's exit from the Euro, something a majority of Greeks oppose. Tsipiras, of course, is complaining (Greece news media taking sides in coverage of upcoming vote - LA Times), but when a government isn't honest with its people about the implications of its policy choices, good journalists need to provide the facts.
    There is no doubt that economies recuperate after cutting slack. It is also true that the owners of the Greek news papers have a strong conflict of interest.

    Euroland is constructed in a manner that will mean recurrent crisis. Now that would be okay, if it were transparent and the mode of alleviating the problems were legitimate and democratically controlled, which the ESM and EZB not.

    If this were the only policy area causing misery the scary level of unemployment might be if not acceptable then at least manageable. Sorily the whole "Continously Deeper Union" project has been set on dubious foundations and to avoid outright illegality poorly constructed to the point of escalating anti EU sentiment, which is organizing itself across Europe.

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