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Friday, February 27, 2015

David Beckworth: The Eurozone Counterfactual

Macro and Other Market Musings: The Eurozone Counterfactual

Now some observers will object and say the Eurozone crisis was actually a debt crisis. It was the consequence of irresponsible government spending policies that finally came home to roost. For some countries like Greece this was true, but for others it was not the case.

Thursday, February 26, 2015

A Greek Deal and What It Means

RealTime Economic Issues Watch | A Greek Deal and What It Means

Despite the predictable spin, this outcome represents a Greek government capitulation—and a likely worse outcome for the Syriza coalition in Athens than what might have resulted from a more levelheaded and credible negotiating strategy.

Wednesday, February 25, 2015

Αλέκος Φλαμπουράρης, Υπ. Επ., στο MEGA

Σε περίπτωση που δεν υπάρχουν διαθέσιμα -για πληρωμή δόσεων δανείων ΔΝΤ- θα "ζητήσουμε παράταση"! Έτσι απλά!
The Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and timely.
Ξέρει Εγγλέζικα ο κύριος Υπουργός;

Defining ‘responsible’ fiscal policy for Europe | VOX, CEPR’s Policy Portal

Defining ‘responsible’ fiscal policy for Europe | VOX, CEPR’s Policy Portal

The Greek Deal – A game changer or a mere name changer? | Re-Define

The Greek Deal – A game changer or a mere name changer? | Re-Define

Now that a “deal” has been reached, what do we make of its terms? Is it, as many are saying, “total capitulation” by Greece? A mere “name changing, not game changing” exercise? Or, is it something more substantial? Most important, does it leave Greece and the Eurozone better off? - 

The Economic Opportunity of Greece’s Exit by Alberto Bagnai et al. - Project Syndicate

The Economic Opportunity of Greece’s Exit by Alberto Bagnai et al. - Project Syndicate

This background provides crucial context for the ongoing negotiations, for it reveals that the aim of the Greek bailout was not to restore prosperity to the country's people, but to save the eurozone. Given this, the new Greek government is entirely justified in questioning the terms that the country was given.

EUROPP – Mapping the Greek party system after the 2015 elections: how the economy and Europe have merged into a single issue

EUROPP – Mapping the Greek party system after the 2015 elections: how the economy and Europe have merged into a single issue

Tuesday, February 24, 2015

IMF & ECB Letters to J. Dijsselbloem

The Intersection of Three Crises | Stratfor

The Intersection of Three Crises | Stratfor

Germany and the Eurozone Crisis

Germany has once again become the victim of its own power. As Europe's largest creditor, it has considerable political leverage over debtor nations such as Greece, whose entire livelihood now depends on whether German Chancellor Angela Merkel is willing to sign another bailout check. Lest we forget, Germany is exporting the equivalent of about half its GDP, and most of those exports are consumed within Europe. Thus, the institutions Germany relies on to protect its export markets are the very institutions Berlin must battle to protect Germany's national wealth.
Many have characterized the recent Brussels deal as a victory for Berlin over Athens as eurozone finance ministers, including the Portuguese, Spanish and French, stood behind Germany in refusing Greece the right to circumvent its debt obligations. But Merkel is also not about to gamble an unlimited amount of German taxpayer funds on flimsy Greek pledges to cut costs and impose structural reforms on a population that, for now, still views the ruling Syriza party as its savior from austerity. Within four months,Greece and Germany will be at loggerheads again, and Greece will likely still lack the austerity credentials that Berlin needs to convince its own Euroskeptics that it has the institutional heft and credibility to impose Germanic thriftiness on the rest of Europe. The more time Germany buys, the more inflexible the German and Greek negotiating positions become, and the more seriously traders, businessmen and politicians alike will have to take the threat of a so-called Grexit, the first in a chain of events that could shatter the eurozone.

Greece: No escape from the inevitable | VOX, CEPR’s Policy Portal

via, and with thanks to Peter Dorman : "Economic Wisdom in Germany"

Greece: No escape from the inevitable | VOX, CEPR’s Policy Portal
Claims that ‘austerity has failed’ are popular, especially in the Anglo-Saxon world. This column argues that this narrative is factually wrong and ignores the reasons underlying the Greek crisis. The worst move for Greece would be to return to its old ways. Greece needs to realise that things could actually become much worse than they are now, particularly if membership in the Eurozone cannot be assured. Instead of looking back, Greece needs to continue building a functioning state and a functioning market economy.
Simon Wren-Lewis' take

Reform list doesn't undo Greek capitulaton | Open Europe

Reform list doesn't undo Greek capitulaton | Open Europe

 ECB and IMF express reservations on Greek reform list

The letters sent by ECB President Mario Draghi and IMF Director Christine Lagarde to Eurogroup Chairman Jeroen Dijsselbloem in response to the Greek government’s list of proposed reforms have just been published. While 

Saturday, February 21, 2015

Αριστείδης Χατζής : 20 πράγματα που πρέπει να γνωρίζετε για τη συμφωνία της Παρασκευής

Coppola Comment: Greece and the EU: a question of trust

Coppola Comment: Greece and the EU: a question of trust

Since then [2010], successive Greek governments have failed to deliver agreed reforms or have chosen to implement so-called "reforms" that wrecked small businesses and bankrupted households without addressing the deep structural problems in the Greek economy. Greece has made an immense reform effort, but all it has to show for it is a tiny primary surplus, some illusory exports and a growth mirage. It remains deeply depressed: the Economist observes that its depression is now nearly as deep as that of the US in the 1930s and more prolonged. And its debt/gdp is now a shocking 181% of GDP. However well-intentioned these reforms are, they are not working

Eurogroup statement on Greece - Consilium

Eurogroup statement on Greece - Consilium

Germany, EU must help Greeks recover from austerity - Editorials - The Boston Globe

Germany, EU must help Greeks recover from austerity - Editorials - The Boston Globe

Now that Europe has shown that it can’t be bossed around by Greek voters, it should commit to voluntarily restructuring Greece’s debts and easing some of the austerity demands. If they don’t, when Friday’s agreement expires in four months Europe will go through the same drama all over again.

Can Syriza Break the Greek Oligarchy? - W.R. Mead, American Interest

Recurring Failed Populist Syndrome - The American Interest

Syriza has some real idealism and youthful energy behind it, and the Greek public’s deeply felt fury at its current situation is not unjustified. To the extent that this anger can be channeled to break up the cronyism that currently plagues Greece, so much the better. But there isn’t much sign, yet, that Syriza either understands or is able to implement the kinds of changes Greece needs. We can and do hope for better things, but it would be more prudent to bet that Syriza’s rise marks Greece’s descent into the world of failed populism than that the new government will lead Greece and Europe to a brighter future.

It’s Time to Kick Germany Out of the Eurozone | Foreign Policy

It’s Time to Kick Germany Out of the Eurozone | Foreign Policy

Thursday, February 19, 2015

The problem with populism | Cas Mudde | Comment is free | The Guardian

Europe’s populists: left or right, they are united by a worrying xenophobia

The problem with populism | Cas Mudde | Comment is free | The Guardian

Laclau is the intellectual figurehead for Syriza
“Rationality belongs to the individual,” Laclau writes, characterising the anti-populist thesis, and when the individual takes part in a crowd or a mass movement they are subject to the most criminal or beastly elements of that group and undergo a “biological retrogression” to a less enlightened state of being.
Gustave Le Bon : "The Crowd: A Study of the Popular Mind. "


Game Theory and Greek Default | The Leisure of the Theory Class

Game Theory and Greek Default | The Leisure of the Theory Class

Greece's path out of the euro

Michael Ben-Gad, 

Professor of Economics at City University London

Greece requests bailout extension | Open Europe

Greece requests bailout extension | Open Europe

Europe and Greece Are at War Over Nothing - Bloomberg View : Editorial

Europe and Greece Are at War Over Nothing - Bloomberg View

Even by the demanding standards of European dysfunction, the continuing standoff between Greece and the other euro countries is impressive. On substance, the distance between the two sides has narrowed almost to nothing -- yet the stalemate and the risk of a new financial crisis drag on as if it were vast. The EU is staking the future of its monetary union not on principles but on semantics.
Clive Crook : What Germany Owes Greece 

Wednesday, February 18, 2015

Greece moving to compromise but not there yet |Open Europe

Greece moving to compromise but not there yet |Open Europe

Όλος ο φάκελος της διαπραγμάτευσης- Capital.gr

Όλος ο φάκελος της διαπραγμάτευσης- Capital.gr

Expect the Greek negotiations to fail, then succeed | Brookings Institution


Douglas J. Elliott
Expect the Greek negotiations to fail, then succeed | Brookings Institution

the Greek Prime Minister has chosen a policy of brinksmanship, on the assumption that Europe is so scared of a potential Greek exit from the Euro (“Grexit”) that it will eventually cave during the negotiations, as would almost certainly have been true a few years ago. This is a miscalculation, as key European leaders are much more confident now of their ability to withstand Grexit and are much more worried about fueling radical parties elsewhere in the periphery if they make too many concessions to Greece. They do not want a collapse of negotiations, but there is a real limit to the price they will pay for an agreement.
[SS. Collins Concise English Dictionary © HarperCollins Publishers::


brinkmanship /ˈbrɪŋkmənˌʃɪp/n
  1. the art or practice of pressing a dangerous situation, esp in international affairs, to the limit of safety and peace in order to win an advantage from a threatening or tenacious foe]
In the end, I believe that both sides will be scared back to the negotiating table and will reach a sensible agreement that will work for at least a number of months before needing renegotiation. However, there are certainly risks that Europe will walk to the edge of the cliff and accidentally fall over this time, rather than stepping back as it has successfully done a number of times during the Euro Crisis.

What Greece teaches emerging markets

What Greece teaches emerging markets

Institutional improvement is the greatest economic challenge in India and China, and from Argentina to Zambia. There is a second, related lesson. Foreign experts and example can help with advice, standards, money and opportunities for trade. The EU has done that for Greece. At the end of the day, however, countries must do the hard work on their own.

Tuesday, February 17, 2015

HEAD-ON CLASH AS GREECE REFUSES TO GET REAL Berenberg Macro Flash

www.berenberg.de/uploads/tx_news/150216_Macro-news_Eurogroup.pdf

Having promised his voters three impossible things in his election campaign, Greek prime minister Tsipras can no longer avoid the truth. Instead of “calling Europe’s bluff”, as he once claimed he could, he now has to realise that Europe is not bluffing. Tsipras either has to take back most of his unaffordable campaign promises or risk pushing his country into the abyss of financial crisis, renewed recession and potential Grexit

Mark Gilbert : "Three Reasons Merkel Is So Stubborn" - Bloomberg View

Three Reasons Merkel Is So Stubborn - Bloomberg View

1. Germany Sees Grexit as Not Just Survivable, But Actually Desirable

2. Germany Would Sacrifice Greece to Keep Everyone Else in Line

3. Germany Isn't Interested in Game Theory 

Friday, February 13, 2015

Greece and Europe: No bail-out, no deal | The Economist

Greece and Europe: No bail-out, no deal | The Economist

...nothing changes the fundamental difficulty: how Greece can be helped if it continues to reject the proposition of conditionality for money.
....

When Mr Tsipras and his band of merry men took office, some feared that they might play a risky game of chicken with the euro zone, before eventually buckling. That now looks like the best hope. 

Don't Make Us Do It: ECB Wants a Political Deal on Greece - Bloomberg Business

Don't Make Us Do It: ECB Wants a Political Deal on Greece - Bloomberg Business

The ECB is concerned that the liquidity support is in fact being used to keep the government itself in cash, through the recycling of short-term bonds, or T-Bills. That borders on direct monetary financing, banned under European Union law.
....

Without political progress and continued funding, accelerated deposit flight and capital controls loom, according to Gabriel Sterne, head of global macro research at Oxford Economics in London.
“Cyprus has written a script, Greece’s could be similar,” he said in a note to clients. “Closing a nation’s banking system is probably the most economically destructive act that could be wrought in peacetime.” 

The Greek Austerity Myth by Daniel Gros - Project Syndicate

The Greek Austerity Myth by Daniel Gros - Project Syndicate

The practical problem for Greece now is not the sustainability of a debt that matures in 20-30 years and carries very low interest rates; the real issue is the few payments to the IMF and the ECB that fall due this year – payments that the new government has promised to make.
A Greek way out?

The Cost of Servicing Greece’s Debt: A Sisyphean task?

Grexit 2015: A primer



On the other hand: R. Fernandez & J. Portes : Ärgentina's Lessons For Greece

Thursday, February 12, 2015

Why a Grexit should (and would) be vetoed | Re-Define

Why a Grexit should (and would) be vetoed | Re-Define

Greece’s fate will not turn on technicalities, but it will be the outcome of a ‘great game’ that has now begun. The European Council of leaders and the United States will provide the political anchor with the Commission, the IMF, the OECD and the ECB being the main economic actors. NATO will bring in the security angle and Russia, though absent, will undoubtedly loom large in negotiations.
The key actor, of course, will be the Greek Prime Minister Tsipras. Financial, economic, political and security considerations all give him a much stronger hand than many think. Let us look at each in turn

The Eurozone in Crisis - Council on Foreign Relations

The Eurozone in Crisis - Council on Foreign Relations

Tuesday, February 10, 2015

Zero Hedge : "The REAL Greek Negotiations: Situation Is “Berserk", "There Is No Plan", "Greeks Digging Own Graves"

The REAL Greek Negotiations: Situation Is “Berserk", "There Is No Plan", "Greeks Digging Own Graves" | Zero Hedge

also this EU-Greek Relations Soured by Leaks; Sides Further Apart

Yves Smith : "Outlook Darkens for Syriza and Greece"

Outlook Darkens for Syriza and Greece | naked capitalism

also Obama, Treasury Pushing Back Against Troika Grexit Threats


David Woodruff : Can Greece escape the ultimatum game? (And no, Dra...

Political Economy in Public: Can Greece escape the ultimatum game? (And no, Dra...: At the start of a crucial week for Syriza's effort to negotiate a revision to the disastrous current arrangements between Greece and th...

Leonid Bershidsky : The World According to Angela Merkel - Bloomberg View

The World According to Angela Merkel - Bloomberg View

Merkel will probably end up accepting some kind of compromise with Greece, too, to preserve euro area unity.
Germany's approach to crisis management isn't a mystery. It starts off by asserting and defending its conservative, perhaps somewhat outdated values until that policy hits a dead end. Then, it works hard on a compromise solution that departs from these values in small ways but allows for a consensus that discourages radical posturing. The values are important for anchoring expectations in subsequent negotiations. They are not, however, rigid ideological dogmas worth fighting for to the exclusion of common sense.

Monday, February 9, 2015

Greece is Playing to Lose by Anatole Kaletsky - Project Syndicate

Greece is Playing to Lose by Anatole Kaletsky - Project Syndicate
Greece’s idealistic new leaders seem to believe that they can overpower bureaucratic opposition without the usual compromises and obfuscations, simply by brandishing their democratic mandate. But the primacy of bureaucracy over democracy is a core principle that EU institutions will never compromise.
The upshot is that Greece is back where it started in the poker contest with Germany and Europe.
The new government has shown its best cards too early and has no credibility left if it wants to try bluffing.

BBC News - "UK prime minister chaired a meeting of officials this morning to discuss the impact on the UK of a Greek exit from the eurozone."

BBC News - Greek bank shares fall sharply as fears over exit grow

Hugo Dixon : Greek euro exit will be hard to stop

Greek euro exit will be hard to stop

Tsipras may therefore already be operating on a Plan B which envisages persuading the Greek people to take the country out of the single currency
Mike Peacock : Tsipras not for turning

Saturday, February 7, 2015

Michael Pettis explains the euro crisis (and a lot of other things, too) | FT Alphaville

Michael Pettis explains the euro crisis (and a lot of other things, too) | FT Alphaville

This is literally the best analysis of the euro area’s problems we’ve ever read. You should take the time to closely read the whole thing yourself. We’ll wait.
Michael Pettis :"Syriza and the French indemnity of 1871-73"  

Now that you’re back,
 rather than posit a conflict between Germans and Spaniards, it might be far more accurate to posit a conflict between the business and financial elite on one side (along with EU officials) and workers and middle class savers on the other 

Can Greece Make a Deal with Europe? Part 1: Why and When a Deal Must Be Struck

RealTime Economic Issues Watch | Can Greece Make a Deal with Europe? Part 1: Why and When a Deal Must Be Struck

As the economic realities tighten, Tsipras’s government may have no choice but to ask for the review extension, buying time for negotiations before the June deadline. A request should buy perhaps three months of negotiating time until the end of June. It makes no sense for the euro area to extend the review beyond the hard deadline of June/July—unless they are willing to release money to Greece to pay back the ECB without getting anything in return.
Part 2: What Kind of Deal Can Greece Hope For?
All told therefore, even if it looks like the coming months will be very volatile for Greece, a deal is not impossible. It would even hold great potential benefits for Greece, Syriza, and the euro area. The Greek economy would avoid another crisis, Syriza (with Tsipras at its helm) would replace PASOK as the mainstream center-left party in Greece, and the euro area would neutralize new radical leftwing political movements elsewhere in Europe. Forcing Syriza toward the center would be far better than laying waste to its economy to teach a lesson to leftists in other countries, including Podemos supporters in Spain.
Can Tsipras deliver? Hopefully yes. But if not, a new government that can will have to be formed in Athens. 

Stop squeezing Syriza. We can’t afford another wrong turn in Europe | Sony Kapoor | Comment is free | The Guardian

Stop squeezing Syriza. We can’t afford another wrong turn in Europe | Sony Kapoor | Comment is free | The Guardian

While the unsustainability of Greek debt was recognised by many, intensive lobbying by German and French banks which owned large amounts of Greek bonds meant that the much-needed restructuring of this debt was vetoed. An ill-designed programme was imposed as condition of financial aid to Greece. This was essentially a bailout of European banks at the expense of Greek citizens and European taxpayers.

Thursday, February 5, 2015

Frances Coppola : What on earth is the ECB up to?

Coppola Comment: What on earth is the ECB up to?

P.Krugman's short take: "A Dance With Draghi"

Does Draghi know what he’s doing? Of course not — nobody in this situation knows what he or she is doing, because it’s structurally a mess. But don’t panic — yet.
While Tomas Hirst at BI says : "Greece's endgame is finally coming into view"

Ultimately, Varoufakis doesn't really have any choices if no deal is struck: Greece must either accept the terms of the bailout or risk going bust. 
As this is a strategic game, or rather more than one, re-read Jacques Sapir 's column : "Greece’s brinkmanship"
What would a frontal collision signify in the case of Greece? If we are dealing with a refusal of Germany to admit that austerity doesn’t work, a refusal motivated as much by ideological representations as by a certain vision of Germany’s interests, combined with a refusal to give in to Greece because it is Greece (we are reminded of the wounding words about the “olive-pickers”), and if on Athens’ side they refuse to give in because they know that this will be the end of the Syriza experience, the idea of the frontal collision takes its full meaning. In this case, no solution will be found between now and July, and Greece must default on its debt. The ECB’s reaction will be to cut off the financing of Greek banks, which will entail the decision by the Greek government to mobilize the Greek Central Bank in order for banks not to be deprived of credit and, with one thing leading to another, Greece will leave the Euro.





Obama Joins the Greek Chorus by Ashoka Mody - Project Syndicate

Obama Joins the Greek Chorus by Ashoka Mody - Project Syndicate

in May 2010, the IMF endorsed the European authorities’ decision not to impose losses on Greece’s private creditors – a move that was reversed only after unprecedented fiscal belt-tightening sent the Greek economy into a tailspin.

Dan Davies : Greece in the penalty box — Bull Market — Medium

Greece in the penalty box — Bull Market — Medium

In my view, the ECB really didn’t have much option but to do what it did. Syriza’s strategy was all over the place, very chaotic and (with the proviso that there might be some kind of super clever game theory going on) really quite amateurish in the way it was communicating.
Karl Whelan : So What Did ECB Just Do To Greece? and also What’s Going On with Greece and the ECB?

I think the ECB Governing Council has today increased the financial stability threat to the Eurozone without achieving anything positive in return.
Duncan Weldon of the BBC poses some questions
...if you are the Troika, why agree to a bridging finance package?
...at what point do the concessions offered so far by Syriza  start to cause problems in the party? 

eurobank : General government borrowing requirement & sources of funding

www.eurobank.gr/Uploads/Reports/GREECE_MACRO_FOCUS_Jan7_2015.pdf

ECB: Eligibility of Greek bonds used as collateral in Eurosystem monetary policy operations

ECB: Eligibility of Greek bonds used as collateral in Eurosystem monetary policy operations

Wednesday, February 4, 2015

Mohamed El-Erian : Unraveling a Greek Drama - Bloomberg View

Unraveling a Greek Drama - Bloomberg View

Q: What are the main issues?
A: The most immediate is the new Greek government's need to mobilize enough external financing to get through the next few months.

Greece New Bail Out Plan Rejected by Germany and ECB | EconMatters

Greece New Bail Out Plan Rejected by Germany and ECB | EconMatters

Greece New Bail Out Plan Rejected by Germany and ECB | EconMatters

Greece New Bail Out Plan Rejected by Germany and ECB | EconMatters

Berenberg Macro Flash : GREECE: A FIRST STEP AWAY FROM THE BRINK?

www.berenberg.de/uploads/tx_news/150203_Macro-news_greeceuturn.pdf

Varoufakis wants to present detailed proposals for such a new deal before the end of February. Encouragingly, he
admitted that in the pursuit of a modest primary surplus, the new Greek government may have to backtrack on
some of its election promises for more public spending.
That is a start. But serious problems remain:
- The Greek problem is more about competitiveness...

Tuesday, February 3, 2015

Hugo Dixon : Give Greece’s Alexis Tsipras time

Give Greece’s Alexis Tsipras time

here are two schools of thought about how the euro zone should play its negotiations with Alexis Tsipras, the new Greek prime minister. One is that other leaders and the European Central Bank should back him into a corner. The other is that they should give the radical left Syriza leader time.
The latter is the better option, particularly since Tsipras is already moderating his hard line. 

Leonid Bershidsky : Syriza Shouldn't Underestimate Merkel - Bloomberg View

Syriza Shouldn't Underestimate Merkel - Bloomberg View

Merkel will not be alone if she decides to stonewall Syriza. Besides, she knows that Greek voters never gave Syriza a mandate to take the country out of the euro area or the EU itself. In fact, Tsipras explicitly promised during his campaign that this wouldn't happen.

Leonid Bershidsky : Syriza Shouldn't Underestimate Merkel - Bloomberg View

Syriza Shouldn't Underestimate Merkel - Bloomberg View

Karl Whelan : What’s Going On with the ECB and Greece? — Bull Market — Medium

What’s Going On with the ECB and Greece? — Bull Market — Medium

Why Greece Must Repudiate Its 'Banker Bailout' Debts And Exit The Euro - NASDAQ.com

History In The Balance: Why Greece Must Repudiate Its 'Banker Bailout' Debts And Exit The Euro - NASDAQ.com

Now and again history reaches an inflection point. Statesman and mere politicians, as the case may be, find themselves confronted with fraught circumstances and stark choices. February 2015 is one such moment.
For its part, Greece stands at a fork in the road. Syriza can move aggressively to recover Greece's democratic sovereignty or it can desperately cling to the faltering currency and financial machinery of the Euro zone. But it can't do both.


Monday, February 2, 2015

RealTime Economic| A Path Forward for Greece

RealTime Economic Issues Watch | A Path Forward for Greece

The next few weeks are going to be critical, given the fragility of the Greek banking sector. The Greek government must understand that some of its radical demands are unrealistic and, more importantly, that the reversal of past policies is not needed to improve the welfare of the Greek people. Most of the actions undertaken in recent years were needed to correct the many mistakes of the past.

Greece and the euro area need a deal within days, not months | Guntram B. Wolff at Bruegel.org

Greece and the euro area need a deal within days, not months | Guntram B. Wolff at Bruegel.org
The Greek finance minister has therefore posed a difficult challenge to the EU and the IMF. By talking about insolvency, he has raised the funding needs for Greece’s banking system and made government fund raising on capital markets impossible. 
Zsolt Darvas : Greek choices after the elections 

SYRIZA (and ANEL) Goverment as seen by Brookings Fellows

Frances Coppola : So Whose Problem Is Greek Debt, Anyway? - Forbes

So Whose Problem Is Greek Debt, Anyway? - Forbes