Tag Archives: Frankfurter Allgemeine Zeitung

Greek Debt is Out of Control, Report Says

According to the newly-formed State Budget Execution Monitoring Office in Athens – staffed by independent analysts – a significant increase of debt, a high primary deficit and the deep recession have boosted to the extreme the dynamics of  Greek debt – and it is now spinning out of control, they write in a report, quoted by the Greek news paper Kathimerini, Friday.

“What does the EU do with a country that is unwilling to undergo change and structural reform, because there is a lack of political will, of functioning administration and of support of the population?”

 Frankfurter Allgemeine Zeitung

The Greek economy is shrinking at an alarming rate, offsetting the impact of the first EUR 159 billion bailout loan, according to the reports. But Greek finance minister Evangelos Venizelos states that the report lacks validity of equivalent international reports. 

Venizelos last week admitted that Greece is likely to contract by more than 4.5% this year, worse than an earlier 3.5% forecast.

Meanwhile, Greece’s debt has ballooned to over EUR 350 billion.

The deficit has climbed to EUR 15,5 billion by July, compared to a target of EUR 16,68 billion for the entire year.

Greek deficit reached EUR 15,5 billion in July, at the same time the economy is contracting by 4.5%.

To make up for revenue shortfall, Greece raises VAT by 10 percentage points on food and restaurants.

Parts of state revenue included in this year’s calculations will not be collected until early 2012.

To make up the shortfall, the authorities on Thursday raised VAT for food at restaurants and hotels by ten points to 23%.

The restaurant sector has described the measure as ruinous and some operators have threatened to withhold the tax to avoid closing down altogether, www.eurointelligence.com reports.

Separately, the Greek Finance Ministry says it will publicize the names of taxpayers who has owed the state more than 150.000 euros for over a year, according to another article in the Greek news paper, Kathimerini.

“Greece is a Lost Cause”

After the Greek parliament’s admission that the Greek debt has spun out of control, Frankfurter Allgemeine Zeitung’s economics editor, Holger Steltzner,  urges the euro zone in a front page editorial to wake up to the fact that Greece is a lost cause.

“The public service and the private sector have ballooned as a consequence of living on debt and they are not competitive and that is why the ‘rescue billions’ will disappear”, Steltzner asserts.

“What does the EU do with a country that is unwilling to undergo change and structural reform, because there is a lack of political will, of functioning administration and of support of the population?” the German editor writes.

Related by the EconoTwist’s:

2 Comments

Filed under International Econnomic Politics, National Economic Politics

IMF Will Not Provide More Financial Aid For Greek

According to Frankfurter Allgemeine Zeitung it is almost sure that the IMF will not be able to continue to pay for Greece after June 29 and that three options are being discussed, one of which – the bankruptcy of Greece – is wanted by no one.

“It is our understanding that the EU is currently considering alternative options of a private sector involvement than a maturity transformation – which would trigger ratings downgrades and possibly a loss of access to ECB financing.”

www.eurointelligence.com

The second option is to use the Commission’s EFSM to take over the billions the IMF would have paid for otherwise. The advantage would be, from Angela Merkel‘s point of view, that it involves no votes of national parliaments.

A third option would be another adjustment program with yet more conditionality attached to it.

The article says the latter is option will be discussed at a technical level in Brussels today, but no immediate decisions are expected.

It is far from certain that Merkel will get a majority for that in Bundestag for such a package. And there remains the disagreement whether any such package should be accompanied by a private sector involvement.

The Wall Street Journal’s reports from Berlin that Germany is considering dropping its push for an early rescheduling of Greek debt.

The article quote unnamed officials in Berlin who express hope that a deal could be reached with Athens to render this step unnecessary.

Financial Times Deutschland, by contrast, reports that some central banks no longer exclude a voluntary restructuring – provided it does not trigger a negative chain reaction on the markets.

It seems like the conflicting news reports somewhat reflect the confusion that currently reigns in European capitals, as the system finds it, once again, hard to cope with actual crisis management, eurointelligence.com points out. 

“It is our understanding that the EU is currently considering alternative options of a private sector involvement than a maturity transformation – which would trigger ratings downgrades and possibly a loss of access to ECB financing.”

Meanwhile, European leaders seem to have agreed that Greece can cut its VAT rate from 23% to 20% in a move designed to win support for the new austerity package from opposition parties.

But Greece’s conservative opposition party said on Tuesday that a VAT cut was not enough to win its support, Reuters reports.

An official at the new Democracy Party says: “If correct, it is a good step but not good enough, not sufficient to restart the economy…The corporate tax and personal income tax cuts we suggested would have more impact, less cost and no immediate cash flow impact.”

The VAT deal is not confirmed yet, and the so-called “troika” is expected to complete its mission to Athens late this week and then produce its review of the government’s progress towards meeting its deficit targets.

German Handelsblatt writes that the Greek have warmed to the idea of creating an independent Treuhand charged with implementing the privatization program. While the principle of this idea seems to be agreed it is still unclear if the representatives of the EU, the ECB or the IMF will be directly involved in this.

 About 50,000 people gathered in central Athens, in a seventh consecutive day of anti-austerity protests.

Banging cooking pots, protesters held a banner in front of parliament reading: “We won’t go away until the government, the troika and the debt leave.”

Last night in Athens, a trickle of protesters stopped the traffic outside parliament building on Syntagma Square. Less than an hour later they were numbered in their thousands, chanting “thieves, thieves, thieves”.

 

Related by the Econotwist’s:

 

4 Comments

Filed under International Econnomic Politics, National Economic Politics

Greek Commissioner Lets Cat Out of the Bag

The Greek EU Commissioner of Fisheries, Maria Damanaki, becomes the first senior EU official who speak openly about the possibility of Greece leaving the euro zone. She warns that Greece must make sacrifices to overcome its debt crisis or face the risk of leaving the euro zone and returning to the Drachma.

“Either we agree with our lenders on a programme of tough sacrifices … or we return to the Drachma.”

Maria Damanaki

 
It was probably well intended, but this type of comment is actually quite dangerous, the eurointelligence.com points out in their daily briefing. I suppose it’s more dangerous for the EU than for Greece. Anyway – let’s see how the financial markets react during today’s session.

The Greek fisheries Commissioner Maria Damanaki warned Wednesday that Greece must make sacrifices to overcome its debt crisis or face the risk of leaving the euro zone and returning to the drachma.

“I am forced to speak openly. Either we agree with our lenders on a programme of tough sacrifices … or we return to the drachma,” she said, according to the semi-official Athens News Agency.

Ms. Damanaki is the first senior European official to publicly declare that the debt crisis could result in Greece leaving the euro zone and reverting to its old currency.

Olli Rehn’s spokesman immediately dismissed the idea of a return to the drachma, naturally.

(Wasn’t that the guy who publicly denied that the EU ministers was attending a meeting in Luxembourg a couple of weeks ago?)

 Well, if you want rumors, you got it!

At the moment there are rumours that Greece might consider to hold a referendum to gain a mandate for proceeding with further austerity measures, spending cuts and privatizations, Greek newspaper Kathimerini reports.

The idea was raised at a Hellenic Federation of Enterprises (SEV) conference on Tuesday by the group’s chairman, Dimitris Daskalopoulos.

Prime minister Papandreou’s aides says that the minister was not averse to the idea and had actually discussed it with ministers at Monday’s Cabinet meeting.

However, Reuters reports that the Greek government denies that a referendum is a real option.

That seems to have become like a strategy for the Greek government – deny everything.

Meanwhile back in Brussels, the politicians are running around making all kinds of proposals, inventing new words for default and then taking it all back…

Now, German finance minister, Wolfgang Schäuble, seems to have changed his mind about a so-called “soft restructuring” for Greece. (Probably something along the lines of a “reprofiling”).

Speaking with Handelslbatt, the German minister explain that a credit event might be the consequence.

(Translation; credit event = financial havoc).

On top nobody knows how to deal with such a situation in country that is part of a monetary union.

“That would be an entirely different constellation that in 1990’s in Argentina and other countries”, Schäuble adds.

But no matter how you twist it; there’s nothing soft about the austerity measures that are in store for the people of Greece. 

Talking to Frankfurter Allgemeine Zeitung, the Bundesbank president, Jens Weidmann, warns that monetary policy will not clean up the mess after a soft restructuring in Greece.

The German central bank is not opposed the restructuring in principle, he points out in his first interview since taking office this month, adding:“As a question of principle the consequences of mistakes in financial policy must not be rolled over to the central banks. That would be a monetization of state debt. There must be a clear separation of monetary and financial policy.”

Weidmann warned a soft restructuring as currently discussed for Greece – a voluntary extension of the maturities of government bonds for private investors – would inevitably have the consequence that the ECB would no longer accept these bonds as collateral.

(Not even as soft assets?)

Talking about the ECB’s securities market program (SMP) Weidman says it is currently on hold.

Explaining the rationale of the SMP he says:

“The eurosystem has acted in a phase when the fiscal policy was unable to act. By doing so it built a bridge. With the EFSF and the EFSM there are now the instruments and the end of the bridge has been reached. The ECB council agrees that the program is limited in time, the only discussion is about the right timing of the exit.”

Well, Mr. Weideman, I can assure you the EU leaders can stay irrational longer than you can stay in office!

However – as eurointelligence.com also underline – these comments are important because Weidmann chooses to bring the Bundesbank back in line with all the other central banks.

Remember that his predecessor Axel Weber marginalized himself and the Bundesbank by publicly opposing the SMP.

(…I did not mention Merkel or PMS…)

Related by the Econotwist’s:

7 Comments

Filed under International Econnomic Politics, Laws and Regulations, National Economic Politics, Philosophy