Thursday, November 12, 2015

The Greek-Eurozone Austerity Battle Is Far from Over

Greece's accord with its Eurozone creditors is in danger. On Tuesday, Greek Prime Minister Alexis Tsipras told his cabinet to finish talks with lenders this week so Greece can get a new disbursement of aid being held up by a dispute over foreclosures and non-performing mortgages. It's the first major Greek dispute with lenders since Tsipras and his leftist coalition were re-elected in September. Eurozone finance ministers told Greek officials on Monday Greece would not get any more aid until it implements a series of reforms, the most important being a tighter foreclosures law for problem mortgages. Tsipras's office said he told his cabinet it is a "priority" to conclude negotiations and receive €2 billion in aid and another €10 billion to recapitalize Greece's four big banks. A European Central Bank stress test last month showed Greek banks need a total of €14.4 billion additional capital to survive adverse economic conditions -- €4.4 billion will come from private investors, with the rest from the €10 billion held in earmarked accounts. One banker said : "The newsflow on foreclosures created noise and is on the mind of some investors, but overall there is interest in the offerings. If there is a fast compromise, it will help." ~~~~~ Negotiations are stuck on the issue of protecting Greek mortgage holders if they fail to make payments. Greece insists that thousands of Greeks should not be put in danger of losing their homes, as happened in Spain. Now, mortgage holders can apply for foreclosure protection if the value of their home is €300,000. The Greek government wants protection based on a home valuation of between €180,000 and €200,000, with income-related criteria. Greeks losing their homes is a very sensitive issue now, as Greece struggles to shelter and feed thousands of Middle East refugees and migrants entering the country. ~~~~~ Life has been hard for Greeks caught by government efforts to manage the Greek economic crisis and EU demands. There are renewed accusations in Greece that lender-imposed austerity has crushed the economy, while the EU argues that Tsipras's leftists wasted improvements achieved by the prior center-right Greek government. ~~~~~ "Greece is making considerable efforts. They are scrupulously respecting the July agreement," French Finance Minister Michel Sapin told reporters, "France wants an agreement today." Greek officials stress that Athens wants to honor the bailout accord, but for reforms to work, they need to have social cohesion, which means not making life more difficult for poorer Greek citizens. An unnamed Eurozone official said : "There is always room for compromise but I don't think the ministers would accept rules that are much more favorable for people not paying their mortgages than in any other country." ~~~~~ Dear readers, yesterday thousands of Greeks were on strike against austerity, marching for the first time in a year, telling the Tsipras government it has not kept its promise to end austerity. There were grounded flights, hospitals with minimal staff, ships docked and public offices shut across Greece to protest the never-ending rounds of tax hikes and pension cutbacks under the bailout. Riot police fired tear gas in central Athens as youths hurled petrol bombs and stones, smashing shop windows and hitting the Greek central bank. Five years of austerity have killed economic activity - 25% of Greeks are unemployed. "My salary is not enough to cover even my basic needs. My students are starving," a protesting teacher told Reuters. Tsipras's own Syriza party said it supports the strike, because it strengthens their position. A retired teacher whose pension has been cut by 50%, is angry at Tsipras and the lenders. "I wish Tsipras had done what he promised but they didn't let him. Now we have turned into beggars for a plate of food." Tsipras accepted the unpopular terms of the third bailout when faced with the threat of an exit from the Eurozone. But, as in Spain and Portugal, the Euro remains a burden that bailouts worsen. The Euro/austerity battle is far from over.

4 comments:

  1. When Ben Bernanke talked about the sub-prime housing market he said it would be "Contained". I guess he was a little over-confident.

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  2. Germany has a highly diversified economy that is heavily export oriented and focused on high quality/high tech goods. It is centrally located with excellent local trading partners and sufficient clout on the international markets.

    Greece relies on tourism, "olive oil" (market farming), some shipping but not much else.

    Germany's labor market is highly regulated but its bureaucracy is also highly functional and efficient. Greece is overly regulated (ranks with Italy between 55-65th on the ease of creating a business, cf 7th for the US, and 14th for Germany).

    Tax collection and revenue are a shambles in Greece and long neglected leading to corruption and lack of faith in public institutions.

    Greece also negotiated and got an overly generous exchange rate when it entered the Euro, leading to a false sense of prosperity. And successive governments have outright lied to the public to stay in power rather than address and fix the problems.

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  3. The all-inclusive debt total of Greece is around 350 Billion Euros. There is NO doubt that Greece is capable of paying off this debt. The question isn’t if it can pay it off, the question is does it want to do what is necessary to pay their debt by making all the sacrifices and sustainable demands the Greek government would have to demand of its citizens. And that answer is a resounding NO.

    A primary surplus of some 4.5% of the Greek GDP for many years into the future is what is necessary to do the right and honorable thing and pay off their self inflicted debt problems.

    For Greece to perform this gargantuan budget surplus task is ‘theoretically’ possible – but requires a much healthier economy that the Greeks have presently. Greece right now is in the after throws of something akin to the Great depression in that it’s output has dropped some 30%. Factually a 4.5% surplus of GDP is possible but has never been achievable by an economy as unhealthy as Greece. In fact nothing over 4% is on record.

    So does Greece have an economic problem or a political problem – hands down its political.

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  4. In Ireland, Greece, Portugal, Latvia, and the United States itself, there is no connection between the will of the people and the policies of the government. Only in tiny Iceland did the people prevail over the banks. Everywhere else the people are forced to pay for the gambling losses and leveraged debts of the financial sector.

    Michael Hudson author of “Killing The Host” makes many things clear, foremost of which is that as long as neoliberal economics reigns, so will the One Percent and the re-ensurfment of the Western people

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