German firm takes over 14 privatized Greek airports

The Greek government gazette reveals that a German company Fraport AG has been given the rights to operate 14 regional airports. Fraport AG also runs the Frankfurt airport in Germany among others.

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This is just the first of many expected privatization moves as agreed to as part of the bailout deal. Syriza the major party in the Greek coalition government had opposed such privatizations during the election campaign but now has agreed to an extensive program that will be overseen by technical staff from the lenders. Several of the airports are on popular tourist islands.

The deal represents the first privatization decision since the signing of Greece's third bailout deal worth 86 billion euros. Far from being able to repeal the austerity conditions and privatization programs of the earlier bailout deals, the new deal contains an even more extensive and more controlled privatization program than the first two deals and imposes even harsher austerity conditions. Rather than face a bankruptcy and a possible Grexit, Greek Prime Minister Alexis Tsipras agreed to almost every bailout condition that he had earlier opposed. The airport deal will yield 1.23 billion euros or about $1.37 billion US. Several of the airports are on islands that are popular tourist destinations.

The bailout deal needs approval in a number of Europeans countries. It has already been approved in Spain and Estonia. Germany approved the deal by a vote of 454 in favour, 113 against, and 18 abstentions. The bailout agreement will release 13 billion euros just a day before Greece must pay 3.2 billion euros to the European Central Bank. Much of the bailout money will simply be recycled back to the lenders as loan payments. When the agreement was announced on August 11th the Greek stock market rallied. Last Friday, when Tsipras was able to have the agreement ratified in parliament dozens of Syriza party members voted against the deal. Tsipras may call for a vote of confidence in the government this week.

While many economists and the IMF believe that the deal is not workable unless there is further debt relief including a possible write down of some Greek debt, in the short term the provisions will provide ample opportunity for private corporations, many outside of Greece, to buy public assets at fire sale prices. Assets for sale include the national lottery, the port of Piraeus, and large land areas on islands such as Corfu. Privatizing assets such as the national lottery will generate a one time cash injection into government coffers but deprive the government of a reliable and constant revenue stream in the future. That revenue stream will enrich whatever corporation purchases the port.

German Grexit plan offer probably better than bailout plan accepted by Greece

Greek negotiators finally arrived at a deal for a further bailout from the European Stability Mechanism (ESM) and the IMF. The deal has harsher austerity conditions than the one rejected by over 60 percent of Greeks voting in a recent referendum.

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The details of the agreement with the European Stability Mechanism can be found here. Accepting this deal meant ignoring any red lines that remained for Greek negotiators. The deal imposes even harsher austerity conditions on Greeks, as well as forced privatizations of state assets. Even so, many leftists and others still support the deal as better than a Grexit. A Grexit was actually mentioned as a possibility by the German Finance Minister Schaueble and the German Foreign Ministry as an alternative to another bailout. The German newspaper Frankfurter Allgemeine Sonntagszeitung (FAS) reports the latest reform proposals from Greece did not go far enough and suggested two alternatives in a position paper:"... the ministry set out two alternative courses for Greece. Under the first, Athens would improve its proposals quickly and transfer assets worth 50 billion euros ($56 billion) to a fund in order to pay down its debt.

Under the second scenario, Greece would take a "timeout" from the euro zone of at least five years and restructure its debt, while remaining a member of the European Union."During the timeout period of the second scenario Greece, as a member of the EU, would still qualify for "growth enhancing, humanitarian, and technical assistance." The majority of creditors apparently regarded this second scenario as not worth discussing and a Greek official claimed that indeed the Grexit plan was not even discussed in the Eurogroup. Instead we find in theactual agreement the first scenario with precisely the same amount in the fund as suggested in the German Foreign Ministry position paper:".. to develop a significantly scaled up privatisation programme with improved governance; valuable Greek assets will be transferred to an independent fund that will monetize the assets through privatisations and other means. The monetization of the assets will be one source to make the scheduled repayment of the new loan of ESM and generate over the life of the new loan a targeted total of EUR 50bn of which EUR 25bn will be used for the repayment of recapitalization of banks and other assets and 50 % of every remaining euro (i.e. 50% of EUR 25bn) will be used for decreasing the debt to GDP ratio and the remaining 50 % will be used for investments.This fund would be established in Greece and be managed by the Greek authorities under the supervision of the relevant European Institutions. "

Note that the process while carried out by Greek authorities is under the "supervision of the relevant European Institutions." The Greeks no longer control their own privatization process, nor do they control what happens to the proceeds, half of which go to pay back the bailout loans! So foreign investors can buy Greek assets and half the funds just go back to the "institutions." Only one quarter can be used for investment and no doubt that investment must be approved by the institutions.

The new agreement ensures not only that all Syriza's red lines have been breached but that with one exception, anti-austerity legislation passed earlier that might have breached the conditions of the previous bailout must be rescinded and any new legislation must be approved by the institutions:".. to fully normalize working methods with the Institutions, including the necessary work on the ground in Athens, to improve programme implementation and monitoring. The government needs to consult and agree with the Institutions on all draft legislation in relevant areas with adequate time before submitting it for public consultation or to Parliament. With the exception of the humanitarian crisis bill, the Greek government will reexamine with a view to amending legislations that were introduced counter to the February 20 agreement by backtracking on previous programme commitments or identify clear compensatory equivalents for the vested rights that were subsequently created."

No wonder in social media the new agreement is called a coup. John Pilger notes just a few of the ways in which Tsipras not only jettisoned almost completely the Syriza program but also went quite counter to his promise to negotiate a better deal:Prime Minister Alexis Tsipras has pushed through parliament a proposal to cut at least 13 billion euros from the public purse – 4 billion euros more than the “austerity” figure rejected overwhelmingly by the majority of the Greek population in a referendum on 5 July. These reportedly include a 50 per cent increase in the cost of healthcare for pensioners, almost 40 per cent of whom live in poverty; deep cuts in public sector wages; the complete privatization of public facilities such as airports and ports; a rise in value added tax to 23 per cent, now applied to the Greek islands where people struggle to eke out a living.

Had Syriza planned for Grexit in the early stages of negotiations, it would have been able to press for Germany's alternative scenario as a far better alternative to a fire sale of its assets with the money used mostly to pay debt. It really does not matter that Germany and other countries want a Grexit because they consider Greece a burden to the eurozone and its taxpayers, a Grexit would still free Greece from being ruled by creditors and at least give them control of their own legislature and resources. Surely that is better than a promise of three years of debt slavery and a possible debt restructuring but no "haircut." What is required immediately by the deal is proof that Greece is serious about cutting pensions, boosting taxes even on those least able to pay and other wholly regressive policies. All of this being implemented by those the media calls "radical leftists."

Economist Paul Krugman applauds decision to hold referendum on bailout deal

Athens - Paul Krugman, the American liberal economist, has been consistently critical of the austerity program demanded by the Troika as a condition of releasing the final funds of the Greek bailout that expires on June 30.

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Krugman in his New York Times blog notes that until now every Greek government has given in to the demands of the Troika no matter what they had said during the election. Krugman refuses to use the term "institutions" to refer to the European Commission, European Central Bank(ECB) and the International Monetary Fund(IMF) or Troika. After the Greek government refused to meet with the Troika after being elected, they were rebranded as "institutions" presenting the radical Syriza government with at least a linguistic victory. Krugman's refusal to go along with this game is refreshing.

The continuous caving in to Troika demands has damaged the credibility of centre-left parties and no doubt is a factor in the success of Syriza, a more radical leftist umbrella group. Krugman suggests the Troika thought that the Syriza government would abandon most of its anti-austerity program or the government might fall. The Greek government did abandon most of its austerity program and almost all of its red lines. They have followed the usual pattern. However, the Troika has pressed for more and abandonment of any red lines. It is as if they needed to humiliate the party to show that a radical leftist party is helpless. They must be taught to respect their superiors.

The call for the referendum should have been a wakeup call for the Troika. It was not but an occasion for the usual moralistic blather about Tsipras being irresponsible. Krugman thinks that Tsipras did the right thing. Krugman has been arguing that the Troika has been doing the wrong things all along. In fact, he claimsthat if Grexit happens, it will be because the creditors, especially the IMF wanted it to happen. This may be correct but there are certainly risks for the eurozone and Troika if there is a Greek exit (Grexit) from the zone. If Greece defaults on debt payment the ECB and IMF will suffer huge loan losses. There is also the possibility of contagion. If over the longer term Greece recovers and grows, this would encourage resistance to austerity and the rule of the Troika in other countries. The Troika must hope that somehow they will persevere without yielding much if anything even at this late stage.

Krugman approves the referendum for two main reasons. First, a referendum will give the Greek government democratic legitimacy in any future negotiations. Most Greeks are still very much for staying in the zone it seems even if their anti-austerity demands are not meant. However, given the recent increased demands and the fact that Syriza, and no doubt other parties such as the Communists, will campaign for a rejection of the Troika proposals there is no guarantee it will pass. Even if it does pass and a deal is then negotiated it would not be a long term solution to the Greek problem but kicking the can down the road again until another bailout is needed. Meanwhile social discontent might rise to the boiling point. Krugman claims that democracy still matters in Europe. Of course it does not when it comes to the power of the Troika over individual countries. The referendum is the exception not the rule. Krugman's second reason for approving the referendum is that it will solve the dilemma that the governing party Syriza faces. Syriza faces citizens who voted for anti-austerity measures but are not willing to leave the euro zone. Syriza has achieved very little if anything in the way of relief from austerity policies and so it is now quite fitting that they should ask Greeks whether they want to bow to the Troika demands and accept their offer or to turn it down. This will provide Tsipras a mandate to cave as others have done or to develop a plan B for default and possible exit from the euro zone.

Many critics have argued that a plan B should have been planned long ago when it became obvious the Troika was giving little or nothing to satisfy demands for relief from austerity. The negotiations were filled with bluster, useless rhetoric, and false optimism that a deal was close. Having the referendum at this late date creates huge problems for Greeks that would not have been as severe were it held much earlier, say on the earlier proposals of the Troika. If held then there would not have been a huge payment coming due as that to the IMF the end of June, days before the referendum. The move to hold a referendum and the lack of a plan B show that Syriza is guilty of poor planning or perhaps no planning at all. Now Greeks face a bank holiday on Monday and capital controls. In the appended video from January of this year, Krugman was even then predicting a Greek default on its debt well before the election of Syriza.

Greek Prime Minister claims that deal with creditors is close

Alexis Tsipras, the Greek Prime Minister, insists he is close to a deal with the country's creditors that would result in the remainder of the bailout loan funds to be dispersed helping to ease the country's cash shortage.

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This is not the first time Greek officials have said they are close to a deal. The same claim was made back on May 8. There are still key issues that are not resolved including pension and wage reforms, that is austerity measures. Tsipras claims that there is no possibility of retreat either on the wages issue or pensions. However, Greece has already caved on the issue of privatizations and tax reform another two issues that were previously said to be red lines. If there is to be a deal Tsipras would probably be required to yield on the pensions and wage issues as well. There will be virtually nothing left of the government's anti-austerity measures. Both the IMF and other EU creditors insist that the Greek reform proposals are still too vague. An EU official said that the Greek government needed to move beyong promising openings to final agreed upon wording and commitments.

EU leaders are holding a conference in Riga, Latvia, on May 21 and 22 to discuss eastern Europe. Tsipras will raise the bailout negotiations issue on the sidelines of that conference. The negotiations are now stretching beyond 100 days with little progress made until lately when Greece caved on key issues of taxation and privatization. Stephen Gallo, European head of currency strategy at the Bank of Montreal said in a TV interview: “Even if they have a deal before the bailout extension ends at the end of June, we don’t think they’ll get access to the full remaining 7.2 billion euros ($8.2 billion) of the current bailout extension.” He said the Greek crisis will not be over for a long time.

Meanwhile the Greek financial situation is getting worse as the government scrambles to raise 500 million euros in cash to pay for wages and pensions at the middle of the month. After raiding pension funds, and local governments the government is now asking that consulates and embassies cough up any cash reserves. The credit rating of government debt has plunged further into junk status. Greek banks have seen huge withdrawals of funds as nervous depositors worry that there may be a default and a return to the drachma. Money is flowing out of Greece as well. A leaked IMF document notes:“non-performing loans are at very high levels and – going forward – the system might suffer from important stress. The staff also noted a dramatic deterioration in the payment culture in the country”. This last refers to the near gridlock of the Greek system of inter-company payments as betwen €30 and €35bn has flowed out of the banking system – into the cash economy and abroad – since Syriza came to power.

Greece threatens to miss payment deadline on IMF loan

Conflicting narratives are coming from the Greek government. There are reports that the government is drawing up plans to nationalize the banking system and introduce the drachma as a parallel currency to the euro.

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According to an article in the Telegraph, a senior Greek official said:'We are a Left-wing government. If we have to choose between a default to the IMF or a default to our own people, it is a no-brainer...We may have to go into a silent arrears process with the IMF. This will cause a furore in the markets and means that the clock will start to tick much faster,”The article claims that sources close to the Syriza party insist that when it comes to keeping public services running and paying pensions or missing a payment to the International Monetary Fund(IMF) on April 9, the government will choose to miss the payment.

The article claims that Greece does not have funds to cover payments of salaries and pensions on April 14th and also the IMF on April 9th. There are conflicting reports however. On Wednesday, Interior Minister Nikos Voutsis claimed that the country would be required to choose between paying the IMF and paying pensions and salaries, and that the government would choose the latter. This position was used in an appeal for further funds in a teleconference with euro zone deputy finance ministers, also on Wednesday. Later, a government spokesperson denied that Greece would miss the IMF payment deadline.

The threat of default and plans to return to the drachma and nationalise the banks may be a bluff designed to force creditors to release cash quickly to avoid these drastic measures. Apparently, the view in Athens is that EU creditors do not sufficiently appreciate the significance of the changed political landscape in Athens. To get a deal the EU creditors must make genuine concessions. So far most concessions are coming from Greece that has given up any debt write off, halts to privatization, and any significant easing of the austerity conditions imposed by the original bailout deal. So far the reforms presented by the Greek government have been rejected as inadequate. Even if Greece does carry through with its threat to default on the IMF loan this is unlikely to cause EU creditors to change course.

Syriza seems incapable of setting out a unified position in public. This has happened on the issue of privatization where it has promised as part of reforms to privatize the port of Piraeus while government officials at the same time claim that the government will not give up its 67 percent stake in the port project. Now it is happening with the default threat. While Voutsis announces the threat of default, government spokesperson, Gabriel Sakellandis, claimed to Reuters that this announcement did not represent the stance of the government: "There is no chance that Greece will not meet its obligations to the IMF on April 9."

Circumstances may be developing for an accidental Grexit or Greek exit from the euro zone. The National Bank of Greece is already facing difficulties with its stock hitting new lows. It has required emergency liquidity assistance. There has been an outflow of funds that add up to $30 billion since last October. One Greek source said: “We will shut down the banks and nationalise them, and then issue IOUs if we have to, and we all know what this means. What we will not do is become a protectorate of the EU." Another official complained:“They want us to impose capital controls and cause a credit crunch, until the government becomes so unpopular that it falls. They want make an example of us, and demonstrate that no government in the euro zone has a right to have mind of its own. They don’t believe that we will walk away, or that the Greek people will back us, and they are wrong on both counts.”The Greek government should have seen this coming and made plans and started to implement them long ago. Instead, it insisted that it would do anything to remain in the euro zone.

The Greek government apparently suggested that a partial payment of the bailout funds could be issued but this was rejected by the Eurogroup. While indications are that there is no agreement yet in sight, Economy Minister, George Stathakis,said on TV that an agreement will be reached next week. There are a few days between the IMF payment and the payroll payment. Perhaps Greece will make the IMF payment and then expect some move by creditors to help cover the pension and government payroll payment.

Greece receives over $2 billion from European Commission to avoid cash crunch

Head of the European Commission(EC), Jean-Claude Juncker says that 2 billion euros($2.15 billion) in unused funds will be made available to help Greece avoid a looming cash crunch.

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The offer of the funds, comes just a day after talks between Greek Prime Minister Alexis Tsipras and European leaders in Brussels dealing with Greece's compliance with the terms of the extended bailout loan. The leaders, including German Chancellor Angela Merkel said that Greece has agreed to draft a new reform plan that would allow it to receive further funds as part of the loan. Tsipras said that he was now "more optimistic" subsequent to the talks. Greek authorities also claimed that they were gradually coming closer to meeting the requirements of the loan extension.

The Troika of creditors, the European Commission, European Central Bank, and International Monetary Fund now rebranded at the insistence of Greece as "the institutions", agreed they would extend the current bailout program until June of this year. However, there have been constant conflicts between Greek's creditors and the Greek government.The Syriza government has been passing humanitarian legislation that will help the poorest Greek households with free food and electricity and will also allow taxes that are in arrears to be paid by instalments. The European Commission has in effect vetoed such legislation on the grounds that it was introduced without consultation and violated the terms of the loan extension. The creditors demand reforms in the economy including cutting government expenditures and continuing with privatizations

Since the two bailouts in 2010 and 2014, and the implementation of austerity conditions, the Greek GDP has shrunk by 25 per cent. One third of Greeks now live below the poverty line. Unemployment is around 30 percent but half the young people are unemployed. Gaining access to this new money is a victory of sorts for the Greek government.

Juncker, the EC president, said that the new funds will not be tied to the existing bailout loan. but can be used as aid for people and companies hardest hit by the debt crisis. This sounds very much as if even the EC recognizes the need behind the very legislation it had just vetoed. No doubt, Juncker hopes that this move will.make it easier for the Greek government to propose reforms that will meet the approval of creditors as Greece has pledged to do. Since these funds are not tied to the bailout, they can be used for purposes that might run counter to the conditions for the bailout funds. Greek Prime Minister Tsipras praised the decisionsaying:"It is a good sign. It was recognized that there is a humanitarian crisis in our country and that there must be a common effort against it — because it was the not the result of some natural catastrophe."

The EU creditors have been complaining that Greece is not cooperating with technical staff who are trying to monitor Greece's compliance with the bailout terms. The IMF calls Greece the least cooperative client they have ever had. EU leaders have told Tsipras that within the next few days he must come up with detailed budget cuts, and also tax increases, and other reforms before any more bailout money will be released. Tsipras refused to specify a date for delivery of the reforms. What is happening may be another case of kicking the can down the road only to face the same issues within a short time. For now, however, Tsipras seems finally to have gained more breathing space and some recognition of the political problems he faces in Greece.

Syriza not even able to win symbolic victory but tops in rhetorical flourishes

Mario Draghim, president of the European Central Bank(ECB), told Greek officials in Brussels that the Greek government must allow technical representatives representing the European Commission, the ECB and the IMF to start work in Athens on Wednesday.

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These three institutions are the Troika charged with overseeing Greece's compliance with the terms of the bailout agreement. The European Commission and the International Monetary Fund(IMF) had the same message. Originally the Greek government claimed it would not negotiate with the Troika and the group did not go to Athens as is usually the case. Instead of being referred to in most documents as the "Troika," the new term is the "institutions" even though the reality is exactly the same. The Greek government was able to move the meetings discussing the proposed reforms to Brussels rather than Athens. However technical personnel from the Troika insist they need to go to Athens to examine the government books. Greece has given in and agreed to that.

Jeroen Dijsselbloem, chair of the Eurogroup of finance ministers said:“The important thing is that we’re starting the technical work between the troika institutions and the Greek government. It needs to start to bear fruit.”

Note that Dijsselbloem sneaks the term "troika" back into his description as if to remind the Greek government of the reality that they are still dependent on the Troika whatever the rhetoric from the ruling party Syriza. Dijsselbloem said the list of reforms presented by Greece last week was far from complete and not enough. He also complained that Greece was not moving quickly enough to implement what had been already agreed and wasted time arguing about where meetings should be held: "We seem to be losing time now - since the last eurogroup little has been done in terms of future talks, in terms of implementation. We have spent the last two weeks discussing who will meet who, where, and in what configuration. It’s been a complete waste of time."

The problem for Prime Minister Alexis Tsipras is that he is trying to salvage at least some of his campaign promises and get relief from some of the austerity policies imposed upon him by conditions of the Greek bailout. While there are some reforms that are at least agreed upon in principle by the two sides, such as tackling corruption, and tax evasion, even on these issues there are disagreements about some policies. However, with respect to some other issues such as privatization and humanitarian issues such as raising minimum wages, and rehiring government workers, the two sides disagree entirely.

Greece could face a cash crunch in a matter of weeks. Even to make a recent payment the government had to "borrow" from social security funds and issue more treasury bills. Greek sovereign debt is no longer eligible to be used as collateral in liquidity operations. The interest rate on treasury bills is higher than it would be if they could participate in the sovereign debt purchase operations to obtain funds.

While Greece has not even achieved a symbolic victory, since the Troika are going to Athens to examine the books, the Greek Finance Minister spins the situation to suit the demands of his constituency back home: “The troika is a cabal of technocrats that used to arrive in Athens and enter the ministries with a kind of power play that smacked of a colonial attitude. That practice is finished. We shall endeavor to do whatever it takes to provide the institutions with whatever information they need.”Who does he think the people are that he just agreed could go to Athens to look at the books?

To give Varoufakis even a symbolic victory is just too costly as far as the Dijsselbloem is concerned. Hundreds of Greek officials would need to be flown to Brussels to do the work there. The troika cabal of technocrats will return to Athens even if Varoufakis will not call them that. He agreed that the technical people could start Wednesday. German Finance Minister Wolfgang Schaeuble agreed that if the Greeks want it the troika could be renamed "the institutions":If Greece wants that, one can of course negotiate with the three institutions which we should no longer call the troika, but which is the troika,”The Troika smells just as sour by any other name. Notice that in the video appended only the term "institutions" is used not the Troika. This is a great semantic leap forward for Syriza.

The stock markets are declining in Europe and also North America. Gold has come off its lows in reaction to increased concern that Greece may default on its loans soon.

Greek Prime Minister insists that Greece will not seek a third bailout

Alexis Tsipras, the Greek Prime Minister, announced that Greece will not seek a third bailout when the extension of the present bailout runs out in four months time.

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Tsipras, the leader of the major government party Syriza, made the announcement in an address to parliament that was on Greek TV. Tsipras has just four months to negotiate something to deal with the large payments coming due shortly after the four month period is ended. Tsipras, may simply have announced another name change as happened with the Troika. Tsipras and his finance minister, Yanis Varoufakis, refused to extend the bailout originally and would not meet with the Troika of the European Commission, European Central Bank, and International Monetary Fund to renegotiate an extension of the bailout. Varoufakis did meet with the Eurogroup of finance ministers and the "institutions" that included the Troika were also involved and eventually reached a deal under the original terms so that in the end there was a four month extension of the original bailout agreement. The plan may be to remove the term "bailout" in any new agreement. The old wine will be put in new bottles but with new labels as well. Tsipras' remarks came just a few hours after German legislators had approved the four month extension of the present bailout but with some votes against the extension.

Tsipras said: “The bailout agreements are over, both in form and in essence. Some people are betting on a third bailout in July … but we will disappoint them.”

Some leftist groups in Greece such as the Greek Communist Party oppose the Brussels agreement, so Syriza must describe their policy in a positive fashion and as being a replacement for the hated austerity conditions of the original bailout deal. Any new deal in July must also have a positive new description even though it will be very much like other bailouts and will be described as such by the Eurogroup.

Tsipras claims that Greece has been successful in separating the loan agreement from the "disastrous" austerity conditions imposed by previous governments. That is far from the truth. Indeed the terms of the extension were based upon the existing agreements. As a Eurogroup statement put it:

The Eurogroup notes, in the framework of the existing arrangement, the request from the Greek authorities for an extension of the Master Financial Assistance Facility Agreement (MFFA), which is underpinned by a set of commitments. The purpose of the extension is the successful completion of the review on the basis of the conditions in the current arrangement, making best use of the given flexibility which will be considered jointly with the Greek authorities and the institutions. This extension would also bridge the time for discussions on a possible follow-up arrangement between the Eurogroup, the institutions and Greece.The MFFA is the original bail out plan "underpinned by a set of commitments" which would include the austerity reforms. Interestingly, the Eurogroup statement already refers to a "possible follow-up arrangement" rather than a bailout. The best that Tsipras can take from this is that the "given flexibility" might be employed to change some conditions but only with the agreement of the EU group.

At a two-day meeting of the Syriza central committee, Tsipras said that Syriza had won the battle for an extension of the loan agreement even though the party sold out on most of its key commitments during the election campaign and did not actually manage to forge a new agreement outside the original agreement.Tsipras noted that many forces were against the new government: "We joined the battle in Europe with every step undermined. The most aggressive European conservative forces, in cooperation with the (ex-Premier Antonis) Samaras government, had sprung up a trap to derail us before we had even governed.They had everything set up to shipwreck us ... and the country."

Tsipras singled out Spain and Portugal as countries opposing Greece, since both countries worry that any gains by Greece could encourage anti-austerity forces in their own countries. Spain in particular faces upcoming elections with the anti-austerity party Podemos growing in strength. Tsipras claims: "We found opposing us an axis of powers ... led by the governments of Spain and Portugal which for obvious political reasons attempted to lead the entire negotiations to the brink,Their plan was and is to wear down, topple or bring our government to unconditional surrender before our work begins to bear fruit and before the Greek example affects other countries. And mainly before the elections in Spain."

Greece did come close to what was an unconditional surrender. However, when it comes to politics, rhetoric often trumps reality.

Greece may not receive further bailout funds

The Troika, that is the European Commission, The European Central Bank, and the International Monetary Fund are set to meet with Greek officials on July 24. In preparation for the meeting the Greek government approved a further 11.5 billion euros in cuts to placate its creditors. However this may be too little too late. There is already a report in the German newspaper Der Spiegel indicating a decision has been made not to extend further credit.
   If true, this is somewhat surprising in that the newly former coalition was intent on solving the crisis and making sure it received the next tranche of  funds under the bailout plan. Bloomberg reports that Der Spiegel article claims that IMF officials are becoming impatient with Greece. According to a translation of  the report
. “High ranking officials at the Fund have informed the European Union that the IMF is no longer willing to provide Greece with more aid,”  
  The IMF wants Greece to reduce its GDP debt ratio to 120 per cent of GDP in order for it to be sustainable in the longer term. However the officials are pessimistic about the ability of Greece to do so. This pessimism is warranted. Given the austerity policies involving severe cutbacks to spending, demand will fall. Already unemployment is soaring over twenty per cent and production is dropping not growing. The report noted “Giving the country more time to meet its targets would, according to troika estimates, mean an extra 10 to 50 billion euros in relief aid,”  The political situation in Europe is such that many governments are simply not willing to extend that much more aid.
  Greece already has a  3.2 billion euro bond due on August 20 but no more money is due to Greece until after the report of the Troika is analyzed in September! It is not clear how Greece will pay for the bond. Perhaps the European Central bank will provide aid or the Greek government will issue short term T Bills.
   The Greek crisis is obviously far from over. As many analysts have predicted Greece may yet leave the euro zone. Stock markets next week may reflect this new uncertainty. For more see this article.

Second attempt to form a Greek coalition government fails

The leader of the second place finisher in Greek elections the Syriza party has admitted failure today in his attempts to form a coalition government. Alexis Tsipras said he failed because he insisted on rejecting the austerity measures required by the Troika in return for new bailout money.

Tsipras talked only with New Democracy and PASOK the first and third parties in election results. He might have tried a left coalition but the Communist Party has indicated it would not join in a coalition.

The leader of the third running party Evangelos Venizelos now has his turn although it seems unlikely he can be successful. If he fails then there will be elections in June and a long period of crisis. There may be a great deal of pressure on PASOK and New Democracy to form another coalition to avoid elections and carry on with reforms.

If Athens rejects the austerity deal the money that was promised in June will probably not be given. Both the EU and Germany have made it clear they expect Greece to keep its commitments if it expects to have new money.

In the short term the EU will provide an installment of 6.7 billion to meet immediate debt obligations. Representatives of the Troika (European Commission, European Central Bank and International Monetary Fund) have aborted a trip to Athens that was to happen in mid May. No date has been set for another meeting. The Troika are obviously standing by until the situation in Greece becomes more stable or at least clearer! For more see this article..

Greece: Anti-bailout deal parties surge in exit polls

Results from exit polls are listed by Bloomberg here. The results so far suggest that even together the two biggest parties New Democracy (center-right) and PASOK(socialist) will not have enough seats to form a coalition government.

Although New Democracy had a slight lead according to one poll it was only between 17 and 20 per cent of the vote. Behind them was the other main party PASOK with between 14 and 17 per cent. However the anti-bailout party Syriza came from nowhere to get 15.5 to 18.5 per cent of the vote. Independent Greeks another anti-bailout party got as much as 12 per cent of the vote as well.

Martin Blum an asset management official at Ituba Capital said:“It’s a meaningful bearish shock to the lazy market consensus that New Democracy and Pasok could form a majority coalition,” The two old line parties need 151 seats to form a majority in the new parliament. It looks as if they may not reach that level.

Greece has received two bailouts amounting to 314 billion dollars altogether. In return the government has imposed pension and wage cuts as well as higher taxes. It is also privatizing state assets. If the new government cannot continue and even increase austerity measures the funds may stop flowing. International lenders want to know by June how Greece is going to achieve 11.6 billion euros in savings in the next two years.

The Greek economy is in a shambles with unemployment at almost 22 per cent. Among youth,, the figure is about 51 per cent. For more see this article. 
   Results are shown as they come in at this site including vote percentage for each party.

Upcoming Greek election may produce new crisis

The leftist PASOK party and the center-right New Democracy party have been the two most popular parties for decades in Greece and between them have usually formed governments. However both parties support the new austerity measures imposed by the EU and creditors. The result has been a plunge in their popularity.

Although polls up to April 20th at least (see this site) indicate a probable slim majority for the two combined perhaps this may not happen as more and more voters swing to other parties who do not support the austerity measures.

The result is that 8 to 10 different parties are expected to gain seats in the 300 member Parliament. Even if the two main parties are able to form a government it will probably be quite weak. It may be difficult to carry out all the tough demands required to get the 170 billion dollar loan just recently approved.

Desmond Lachman who previously worked as an economist for the IMF says that we are witnessing the calm before the storm as Greece has faded from the headlines. Its debt has even been upgraded!

Lachman notes that over four years Greek GDP has dropped by 14 per cent. In spite of the fact the IMF has already loaned Greece 37 billion dollars it predicts that GDP will drop another 5 per cent this year.

Unemployment in Greece is already 18 per cent but among youth it is a horrendous 40 per cent. This is a sure recipe for more social unrest.

Lachman calls the austerity policies pushed by both the IMF and EU insane. They produce precisely the worst results since the slower economic growth causes the deficit to grow as revenues decrease.

After the election the government has a June deadline to approve another 14 billion dollars in cuts. The spending cuts are equal to 5.5 per cent of GDP.. Even before these new cuts wages and pensions were slashed by up to one quarter. For more see this article.

The last quarter of 2011 saw the Greek jobless rate hit a record high at 20.7 per cent. Greece received a 130 billion euro bailout. However to receive the bailout Greece had to make severe budget cuts including reducing the number of government jobs.

The public and especially unions are angry. Consumer confidence is declining as well. The statistics agency ELSTAT indicated that jobs were being lost at an increasing rate. The unemployment rate of 20.7 in the last quarter of 2011 compares to 17.7 in the third quarter and 14.2 per cent in the final quarter of 2010.

Worst hit are Greek young people. In the 15 to 29 age range almost 40 per cent are unemployed. A year earlier the rate was 28 per cent itself a very high rate.

The Greek economy shrank 7 per cent in 2011 and is expected to remain in recession in 2012 for the fifth year in a row. Under these conditions it is difficult if not impossible for Greece to increase revenue and pay off its debts. No doubt the solution according to the Troika overseeing the bailout will be to demand further belt tightening.

Greece's December jobless rate was about double the euro zone average of 10.6 per cent. However, Spain's rate was even worse in the last quarter of 2011 at 22.9. For more see this BNN article.

Greece: Over 50 per cent of youth unemployed

The overall jobless rate in Greece has risen slightly in December to a record high 21 per cent. In November the rate was 20.9. New austerity measures when introduced will no doubt drive these figures even higher.

Even as stock markets react positively to news of a Greek debt deal the reserve army of the unemployed in Greece is growing by leaps and bounds. No doubt investors see this as positive since labor costs will fall. As the positive spinners will have it, Greece is becoming more competitive.

Youth between 15 and 24 suffered the worst with their unemployment now at 51.1 per cent. Budget cuts required for Greece to get a bail-out loan from the EU and IMF have resulted in many corporate closures and bankruptcies adding to the rolls of the unemployed.

Since 2008 the Greek economy has shrunk by about twenty per cent. About 600,000 jobs have been lost almost one in ten that existed before the recession.

Nicos Magginas from the National Bank of Greece said: "Despite some emergency government measures to boost employment in early 2012, it is hard to see how the upward unemployment trend can be stabilized in the first half of the year," For more see this Reuters article.

Greek unions protest austerity measures

The largest Greek unions are having protests and work stoppages today (Feb. 29) to protest the coalition government's plan to press ahead with more austerity measures and wage cuts.

A three-hour work stoppage will close tax offices and public agencies from noon to 3. At 6 PM protests are planned for central Athens. Groups in other parts of Europe are to join in solidarity.

The government already passed cuts to public pensions and government spending and cuts to the minimum wage yesterday. The measures are demanded by creditors to receive rescue loans.

Doctors in many hospitals are also on strike for a day to protest cuts in health care funding. Greece's largest union the GSEE said:"The workers in our country will continue step up their (protest) action and in Greece and in Europe so we can finally put a stop to this steamrolling of society," The protests have not stopped the government from forging ahead with austerity measures.

Since the start of the financial problems Greece's unemployment rate has almost doubled to a whopping 21 per cent. Yet the country is forced to make more cuts that will create further unemployment to receive a 174 billion rescue package to avoid default. Many analysts doubt the package will save Greece and that it will eventually default in any event. For more see this article.

Clive Crook: Greek deal leads Europe down road to disaster

Clive Crook is an editor of the Atlantic Monthly, and writes for the Financial Times as well as Bloomberg among other publications. This material is summarised from a Bloomberg article.

Crook thinks that the Greek bailout deal is simply a holding action one that does not deal with the larger confidence issues facing Europe. The losses to private lenders will be about 75 per cent of the value of their holdings as the face value of Greek bonds is cut by about half and a low interest rate will be paid.

Providing enough private lenders go along with the deal new official loans will be provided that will service the Greek deficit and upcoming payments due. The loans involve various subsidies and a low interest rate. The IMF is supposed to take part as well but it is not clear how.

Clive notes that if too many private lenders reject the plan the deal must be changed. He notes too that the Greek government may have problems passing the required legislation. This includes drastic cuts to the minimum wage, make debt-service payments into an account that will be monitored externally. Also the Constitution has to be amended to make debt repayment the first priority. Finally the government must accept that a team of EU officials monitor public accounts. The end of democracy in Greece and rule by financial capital--my words not Crook''s!

Clive suggests that if Greece postpones changes such as lowering wages and delays privatisation then dependence on official loans will grow. I thought that if Greece were to do this it would not even get the loans in the first place.

The EU has chosen to keep muddling through without ever doing enough to resolve the problem. Clive admits that so far unilateral default has been avoided. Clive thinks that perhaps the rational principle behind the EU approach is this: "Let's build this manageable problem up into a crisis capable of vast destruction that we might be unable to control. That will create the fear needed to force some real improvements in economic policy."

According to Crook creating this panic turns a liquidity problem (difficulty in borrowing) into a solvency crisis, as government debt balloons. The EU policy seems to be to maximize panic. Even many EU officials believe the bailout plan will not work and that Greece may default maximizing panic.

However Crook thinks that the EU has no plans to deal with this contingency of the deal not working even though it could bring disaster. Clive thinks that the Greek economy is small enough that the rot could be stopped. Greek debt should simply be written off. Until Greece can start growing again and get a surplus that would allow it to borrow on the private market Europe should provide financing. Greece should continue using the Euro rather than reverting to the drachma.

European banks need to be recapitalised and the EFSF increased. It may even be necessary to do in Ireland and Portugal something similar to what he recommends in Greece. I find it doubtful that European Finance capital is willing to take a haircut of the proportions Crook suggests. No doubt there will be arguments that the Crook policies involve a moral hazard by encouraging reckless debt with no appropriate punishment. To avoid such a moral hazard one should cut wages, pensions ,, health care, education and sell off state assets at fire sale prices. For more see the full article.

Eventually the working class will be suitably weakened so that Greece will be competitive in providing telemarketers with Greek accents to service global corporations.

More protests against Greek austerity measures

Austerity measures in Greece include a 22 per cent cut to the minimum wage. This is just one of many cuts demanded by Greek creditors and the Troika imposing austerity upon Greece.

Deep budget cuts are a pre-condition of a scheduled 171 billion bailout payment to keep the country from going bankrupt as early as March. Protests turned violent the other day as a number of buildings were torched. An article in the Guardian by John Holloway praises the citizen's resistance to the measures although deploring the senseless destruction.

European finance ministers are scheduled to approve the bailout package on Monday. According to Austrian Finance Minister Maria Fekter final details were still being worked out. Fekter said:"I don't think there is a majority to go a different way because a different way is enormously arduous and costs lots and lots of money,"

Greek unions both in the private and public sector reject the deal calling the Troika's austerity demands unacceptable. The measures set by the EU and IMF violate workes'rights and collective agreement they complain.

Few commentators note the undemocratic nature of the imposition of the austerity measures. The elected prime minister was replaced by an unelected technocrat but even his government is at the mercy of the Troika representing creditor interests. The power of finance capital over people has never been more stark but there rarely is much commentary on the issue. It is as if this were just part of nature that workers must adjust to.

Supposedly the latest austerity measures are meant to revive the Greek economy and make it more competitive. But the result has been prolonged depression and lack of growth which makes the debt more burdensome than ever.

Apparently the key issue still to be worked out is as to who exactly will hold the whip over the Greek government to make sure it complies with the new austerity measures. At present the Troika has that task: the European Commission, European Central Bank, and IMF. Perhaps the group wants to simplify the oversight. Some analysts believe the rescue passage will just stave off Greek bankruptcy for a period of time but that eventually banrkuptcy is most likely. For more see this article.

Greeks take to the streets and Troika agreement in Limbo

   Thousands of disgruntled Greeks are taking to the streets in a two day protest against new austerity measures demanded by Greek creditors as a condition for receiving bailout money. If the money does not come through Greek could be bankrupt by March.
   Yesterday reports were that party leaders had agreed to austerity measures demanded by the Troika. Today the deal is in limbo. Led by unions Greek workers are demanding that the deal not go through. The measures have reduced the minimum wage by 22 per cent and cut 20 per cent of government jobs. This is all to make Greece more competitive i.e. more attractive to investors.
    Creditors complain that Greece has not yet met all demands made. The government has been given until the middle of next week to meet all the demands. This assumes that the government can even survive until the middle of next week. Workers are trying to make sure that the country cannot function.
     Most public services are disrupted. There are no railway or other public transport services operating. Hospitals are on a skeleton staff.  As well as cuts to government jobs and the minimum wage pensions are also cut and there are reductions in spending on health and social security. Even military spending has been cut!
   Unemployment is a 21 per cent and the Greek economy is in its fifth year of recession. The cure, more cuts. For more see this article.