Sunday, January 11, 2015

Greece's Race Against Time

This article by Hugo Dixon of Reuters, published in the NYT, is the most realistic assessment of the stuation I have read so far. Just a short excerpt: 

"All this means is that if SYRIZA wins the upcoming election, it will immediately be under extreme time pressure. Its first priority, to form a government, will not be easy because it is unlikely to have an overall majority. Syriza would have to secure a coalition, and its most obvious partner, the centrist To Potami movement, is adamant that it won’t agree to a deal that could put Greece’s membership of the euro at risk. (…) The top priority now is for the eurozone creditors and the moderate elements in SYRIZA to put out feelers to one another to work out how the party could perform a kolotoumba without too much of a loss of face. The creditors should indicate that they would extend the bailout deal so long as Syriza asked for one nicely. After all, it is in nobody’s interest for Greece to be driven out of the euro".

To translate this into soccer language: neither the home team nor the visiting team should expect a win. Instead, they should both learn to be happy with a draw.


  1. And this is exactly why i have been saying that no matter which way SYRIZA goes, it will have to greatly disappoint a big chunk of its voters.

    Already, Tsipras, who up until last week, was saying that he wouldn't pay the bonds that are due in March, in today's newspaper, says that he will pay them (and now the default threat, according to other SYRIZA members, is postponed for July, in case the negotiations fail).

    The interview has spurred new clash, because from one side, Tsipras will suspend all memorandum agreements until the end of negotiations, won't sign for new one etc and on the other hand, he will pay bonds in March. So a natural question is "with what money". A possible answer, is by using a forced loan on bank deposits.

    SYRIZA replied that it guarantees bank deposits.

    Soon, the magical solution to the problem, by Alexis Tsipras.

    1. I don't know whether the March bonds are due to the hold-out's or due to someone else. I do know, however, that 500 MEUR of payments must be made during 2015 to the hold-out's. That will be a key test: how can Tsipras explain to his followers that he pays foreign hedge funds while his compatriots are suffering?

      On the other hand, if he promised until last week not to pay the March bonds and now changes his mind and gets away with it, one could conclude that he is a man who will get away with a lot of things.

    2. 0,5 beur will be digestible for his followers, if in the meantime he has a victory to present (like a debt reduction). About promices and getting away... Mr. Kastner, the entire Tsipras campaign, is based on contraddictions and lack of a clear, credible program. Otherwise, he would be at 40% at polls already and extrapolated in the ballots, he would end up with 50%. His followers follow him, because more or less are prepared for anything, but think that nothing bad will happen.

      Today: Stournaras (Bank of Greece) to Tsipras: You can't pay the March bonds, because:
      1) You can't use T-bills, since the troika sets a limit on their use and we 've already used it up.
      2) The only buyers of such T-bills would be the greek banks, that though, without ECB liquidity, will probably not be able to buy them.

      As long as you are opposition, you say all nice things. When you become goverment, you start suffering the attrition...

  2. At least now i know that the Potami is centrist. If one had watched since the beginning, it was saying it was between PASOK and SYRIZA. Later it became the probable ally of SYRIZA and ND. Most recently it took MPs from DIMAR aboard on one side and candidates from Drasi on the other side. More than centrist, it is evolving in a SYRIZA of the center, with internal parties inside the party. But as long as it has strong media support, it is bound to do well... and act as SYRIZA's watchdog.

  3. Oh, by the way, the flow of money to the state coffers, mainly from taxes, plumetted in December, because everyone is waiting for "magic" Alexis to take power and cut taxes! (why pay ENFIA now, if Alexis said that he will abolish it in 1 month from now!).

    - 1.2 beur.

  4. Agreed. Tsipras will find himself with his back against the wall very soon.

    There are two outcomes, either he will backtrack on his promises ("no more austerity") and stay in the euro, or he will revert to a national currency. In both outcomes, his government will likely fall.

    Put simply, as long as the currency union remains incomplete (lack of fiscal transfers), and as long as Greece fails to reshape it's economy (failure of internal devaluation), the pressure will increase for Greece to reshape it's economy by using the tried and tested method: currency depreciation (imports will increase in price, exports will decrease in price).

  5. @ Mr. Kastner.

    This is a very interesting short video with Mr. Roumeliotis. He was the greek representative to the IMF when George Papandreou was PM in 2010. He was the first to come out and expose Papandreou's incompetency, as well as the german wall to an early debt restructuring and Strauss Kahn's plan to press on it, before getting arrested for the known hotel affair.

    This is how Tsipras gets away with much. Because he has made the debt his flag. Roumeliotis says:

    "Up to 2020, Greece must pay 90 BEUR in interests. From 2020 to 2030, it must pay another 201 BEUR. Summing it all up, in 15 years, Greece must pay 291 BEUR or 160% of GDP. In interests. No country in such short time has ever paid such amounts of debt. So, pretending that the debt is sustainable, doesn't lead anywhere.
    Let me say some characteristic points: This year we have to pay about 22 BEUR. In interests. This is 27% of the state budget. This is not sustainable according to the international standards. After that, we have to pay for about 16-17% of the state budget up to 2020. If we go to 2021 and beyond, then things become i would say, insane. Because for instance, in 2022, we must pay 33 BEUR in interests. So, we must start from this discussion. The EU partners must understand that the main problem of Greece is debt."

    1. I beg your pardon. A former Greek representative to the IMF says such nonsense??? C'on!

      Greece pays VERY LITTLE interest! 5,7 BEUR for 2014 according to the state budget. Perhaps a little more when other entities are included. At the same time, Greece receives large amounts of interest rebates from the ECB. Depending on how you do the math, you could even argue that Greece pays no interest at all. The point is: paying less than 5% of GDP in interest is almost a give-away these days for a normal country.

      Perhaps you want to take the time to translate the link below into Greek and distribute it to about 11 million of your compatriots. This story about Greece's suffering from debt is turning into a soap opera. Creditors have forgiven debt, have lowered interest rates to below 2%, have deferred interest payments for 10 years, etc. How much more can one expect??? Well, creditors will undoubtedly be willing to lower the interest rates even more. Perhpas close to zero. What else is Greece going to complain about afterwards?

      SYRIZA wants debt to be forgiven without understanding that debt at zero interest (or close to it) is no longer debt but equity. Someone ought to explain to them that 100% of debt at zero interest rate is better than 50% of that debt at market rates because that would cost a lot more.

      Greece's debt problem is a domestic one (70 BEUR in non-performers, arrears of the government, 70 BEUR in unpaid taxes, etc.). Here I would like to see proposed solutions which do not involve the need for more foreign capital.

      I hope that sooner or later the eyes of commentators are opened so that they see that the Greek sovereign debt problem is a soap opera. The proof would come if the Troika forgave 50% of the debt and put the other 50% on market rates. Then SYRIZA will learn what it means to be indebted.