Tag Archives: tsipras

Greece

Greek referendum — the right step at a dangerously wrong time

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For the past 48 hours, the rest of Europe and, indeed, the rest of the world have watched Greece come unhinged. Greece Flag Icon

In a speech shortly after midnight Friday night, prime minister Alexis Tspiras announced that instead of continuing negotiations between the Greek government and the Eurogroup of eurozone finance ministers, he would call off talks to hold a referendum next Sunday, July 5, thereby putting the question to the Greek people — will they accept the terms of the latest deal with Greece’s creditor institutions or will they reject it?

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RELATED: Seven lessons from the Greek election results
RELATED: Meet Greece’s new economic policymakers
RELATED: As Schäuble sneers, Greeks agree four-month debt deal
RELATED:  What are the chances of snap elections (again) in Greece?

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Never mind that the creditors’ offer could be moot by next Sunday.

Never mind that Greece faces, at best, a technical default on Tuesday.

Never mind that the referendum caught everyone else in Europe off guard, eliminating what little goodwill Greece had left.

Never mind that Greece’s constitution seems to forbid direct referenda on fiscal matters.

Never mind that it seems to be accelerating a financial crisis now mandating extraordinary measures in Athens.
Continue reading Greek referendum — the right step at a dangerously wrong time →

Greece

Four sentences that frame the Greek-EU brinksmanship conundrum

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If you don’t have time to read Suffragio‘s latest update on the chances of Greek elections, here’s an easy framework to think about the endgame for Greece and EU leaders:Greece Flag Icon

1. The central dilemma for Greek prime minister Alexis Tsipras and his SYRIZA-led government is that the Greek electorate wants both (a) Tsipras to continue to engage in high-stakes brinkmanship with the European Union and Greece’s lenders to get a better deal on Greek debt and (b) to remain in the eurozone, and this is an untenable position for Greek voters to take, given the facts — even if you believe that the austerity measures taken pursuant to Greece’s two bailouts were unjust and injurious to the Greek economy.

2. The trickiest question now is when Greece and the Eurogroup will reach a ‘brink’ moment where there’s no going back, which could be triggered by any sort of financial, political or other factors.

3. If Tsipras calls fresh snap elections before the ‘brink’ moment, it could make a final deal on Greek debt even harder because Tsipras might easily win a stronger mandate from the Greek electorate, especially if Greek voters don’t fully realize the inconsistencies of point (1) above (and, by the way, Tspiras will have no political incentive to clarify them).

4. If the ‘brink’ moment comes before any fresh elections, Tsipras will have to choose between (a) making a deal with the Eurogroup, which will cause SYRIZA to crumble one way or another (though not necessarily Tsipras if he’s politically talented enough to emerge as the leader of whatever center-left entity emerges from the collateral damage) or (b) returning to the drachma, probably on an involuntary basis when Greece can’t meet its obligations.

Call option 4a the ‘Cyprus 2013’ option.

Call option 4b the ‘British Black Wednesday 1992’ option on steroids.

Both will be painful.

Economist Tyler Cowen, over at Marginal Revolution,  has taken to calling Greece’s new government the ‘Not Very Serious People,’ riffing off a term familiar to Paul Krugman’s readers. But put aside all the smoke over the personalities (of course Wolfgang Schäuble and Yanis Varoufakis hate one another) and the smokescreen over reparations and the possibility of a last-minute loan from Moscow (or Beijing), and what you’re left with is the conclusion that Tsipras and his government have some Very Serious decisions to make soon.

Greece

What are the chances of snap elections (again) in Greece?

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It’s a sign that fiscal affairs in Greece are bad when the sensible Plan B to cover the Greek government’s looming shortfall involves loans from Moscow (despite protests to the contrary).Greece Flag Icon

Greek prime minister Alexis Tsipras has dismissed European sanctions against Russia, and he met Russian president Vladimir Putin in Moscow earlier this week, signaling to the European Union that Greece is keeping its options open if ongoing debt talks fail. Though Tsipras didn’t seek any financial assistance from Putin, he failed to convince Putin to lift a ban on Greek agricultural exports.

The even more outlandish Plan B involves demanding reparations from Germany for World War II damages, amounting to €278.7 billion. Perhaps not coincidentally, that’s just a little more than the €240 billion in financing that Greece has received in the last half-decade under two bailout programs from the European Commission, the European Central Bank and the International Monetary Fund.

Today, Greece’s government, not even three months old, will repay a €460 million portion of its debt to the International Monetary Fund. But that doesn’t mean that all is well in Athens, where last year’s green shoots of economic recovery are now obscured by the uncertainty of a leftist administration that’s engaged in brinksmanship over Greece’s financing and, ultimately, over the wider question of national fiscal sovereignty in today’s eurozone.

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RELATED: EU should give Tsipras a chance to govern

RELATED: What a Eurogroup-brokered deal with Greece might look like

RELATED: Seven lessons from the Greek election results

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 Why Tsipras can’t (and won’t) make a deal on Berlin’s terms

Without a deal, Tsipras will go down in history as the prime minister who led Greece out of the eurozone, willingly or not. Politically, however, Tspiras can’t agree to any deal that the Eurogroup seems to be offering. That’s increasingly a recipe for Tsipras to call fresh elections early this summer, but there’s no guarantee the results will solve the Greek-EU political quagmire.

Tsipras and his anti-austerity SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς) were elected three months ago on a pledge to renegotiate the terms of Greece’s debt with its European lenders and end the harsh austerity measures that have exacerbated Greece’s contracting economy and growing unemployment. But the EU’s leaders, including Commission president Jean-Claude Juncker, German chancellor Angela Merkel and, presumably, ECB president Mario Draghi, no longer fear the ‘contagion’ effect of a Greek eurozone exit.  Continue reading What are the chances of snap elections (again) in Greece? →

Andalusia, Spain

Socialists thrive in Andalusian regional elections

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After last Saturday’s election, it’s no exaggeration to say that Andalusia’s regional president Susana Díaz might be the most popular politician in Spain.Spain_Flag_Iconandalucia flag

Díaz, who heads the Partido Socialista Obrero Español (PSOE, Spanish Socialist Worker’s Party) in Andalusia, the largest region — or ‘autonomous community’ — in Spain, won her first term as regional president since taking power in 2013 upon the abrupt resignation of her predecessor, José Antonio Griñán. Both Griñán and Manuel Chaves, who governed the region between 1990 and 2009, are under investigation for their connection to a wide-ranging ‘ERE’ corruption scandal involving the diversion of funds designated to assist laid-off workers in Andalusia, where the unemployment rate remains stubbornly high at 34%, the worst in Spain, where joblessness also remains stubbornly high, despite its economy’s tepid 1.4% growth last year — the first year of GDP expansion since 2008.

Those two concerns, jobs and corruption, dominated the campaign in Andalusia, the sprawling southern region of Spain.

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RELATED: In Andalusia, Díaz takes office with staggeringly high unemployment, economic woes (September 2013)

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Though Andalusia has been a Socialist stronghold since the return of democracy in the late 1970s, disillusionment with widespread corruption and with Spain’s deteriorating economy gave the center-right Partido Popular (PP, People’s Party) of prime minister Mariano Rajoy its first Andalusian electoral victory in March 2012. Despite the Socialists’ losses, the party remained in power by forming a coalition with a smaller left-wing coalition of parties, Izquierda Unida (IU, United Left).

The Socialist-IU coalition continued under Díaz, who at age 40 is pregnant with her first child and who still marks a sharp contrast, generational and otherwise, with the region’s previous Socialist leaders. Díaz, a sharp-tongued populist who declined to contest the party’s national leadership, has also declined (so far) to challenge the PSOE’s leader Pedro Sánchez to become the prime ministerial nominee in November’s general elections.

andalusia2015 andalusia parliament

Her victory in Andalusia’s March 22 snap election, called in January after Díaz wearied of the IU’s demands as junior coalition partner, will give hope to Sánchez and the national PSOE leadership that it can thrive throughout the 2015 electoral gauntlet.

An additional 13 regions will hold elections on May 31, including Madrid, the Valencian Community and Castile and León, the third, fourth and sixth most populous regions in Spain, respectively. Rajoy’s PP and its allies are defending governments in 11 of the 13 regions, including each of Madrid, Valencia and Castile and León. The party’s 17-seat loss in Andalucia, therefore, is an alarming sign for the ruling party.  Continue reading Socialists thrive in Andalusian regional elections →

European Union, Germany, Greece

As Schäuble sneers, Greeks agree four-month debt deal

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schaublePhoto credit to Bloomberg News.

If you want to know which side ‘thinks it won’ in today’s temporary deal between Greece and the Eurogroup, you need look no further than the extraordinary statement from German finance minister Wolfgang Schäuble, who essentially spiked the ball in Greece’s face after winning a key concession from its new anti-austerity government that it would honor existing Greek commitments to its creditors in exchange for a four-month extension of its bailout program:Greece Flag Icon

“Being in government is a date with reality, and reality is often not as nice as a dream,” the conservative veteran said, stressing Athens would get no aid payments until its bailout program was properly completed. “The Greeks certainly will have a difficult time to explain the deal to their voters.”

Even if you think the Greek government had little leverage to force the Eurogroup to accept its demands and even if you think today’s temporary deal is at least a step on the path to a stronger Greece within the eurozone, I can’t think of a statement from any European leader more at odds with reality and basic political acumen since the out-of-touch musings of former French president Valéry Giscard d’Estaing in 2004 and 2005, when he was in charge of the process to enact a constitution for the European Union, a process that died when France itself rejected the constitution in a referendum.

It’s as if Schäuble (pictured above with Greek finance minister Yanis Varoufakis) actively wants to feed the notion that Germany dominates European policymaking. His comments might play well in Munich or Stuttgart, but they’ll be poisonous in Madrid and Athens, and cause some amount of indignation in capitals like Paris and Dublin. 

Imagine a different response, whereby German chancellor Angela Merkel delivered a statement that, even while holding steady against concessions to the Greek government, acknowledged Greece’s economic suffering and acknowledged that the Berlin-led bailouts have caused more harm than anticipated — an admission, by the way, that the International Monetary Fund was already making years ago.

A German Europe, and a divided Europe

Greece is in a depression that’s now lasted six years and runs deeper than the Great Depression of the 1930s in either Europe or the United States. Unemployment is rife in Spain, so much so that an untested anti-austerity group, Podemos, now leads polls for the general election later this year. Italy, for now, has placed its trust in its young Tuscan prime minister Matteo Renzi, who seems to have far more commitment to reform than ability to carry it out. Romania and Bulgaria, despite responsible budget policies, are being hollowed out by depopulation and migration to wealthier EU countries.

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RELATED: What a Eurogroup-brokered deal with Greece might look like

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Europe’s best and brightest are leaving economically depressed regions and countries, and they’re heading to London. To Amsterdam. To Frankfurt. That’s left national governments responsible for fiscal commitments to social welfare, education and health care. While its most ambitious citizens look abroad for careers, these national governments find their revenues shrinking and their obligations increasing. Continue reading As Schäuble sneers, Greeks agree four-month debt deal →

European Union, Greece

What a Eurogroup-brokered deal with Greece might look like

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At times this week, it has felt nearly like the European Union was brokering a bailout of Ukrainian debt, while working to negotiate a ceasefire with Greece.European_UnionGreece Flag Icon

But as Greece’s new left-wing government and the Eurogroup, the collection of eurozone finance ministers, work over the weekend for a new Greek debt deal to float Greece’s treasury for the next two years (or thereabouts), there are glimmers of hope on both sides that a deal might possibly emerge. Negotiations continue as the February 28 deadline approaches, when Greece’s current bailout program is scheduled to end.

So what might that deal ultimately be? Above all, any deal that attempts to put Greece on a long-term path to prosperity needs to start from the notion that its debt burden of nearly 175% of GDP growth is simply unsustainable. You might not hear that in public from figures like German chancellor Angela Merkel, German finance minister Wolfgang Schäuble, European Commission president Jean-Claude Juncker or Eurogroup president and Dutch finance minister Jeroen Dijsselbloem, but it’s likely another story in private.

No matter how many cuts successive governments make to future budgets, the cost of servicing that debt will cripple its ability to provide the same level of public services to Greek citizens — especially at a time when unemployment remains so high. (Not everyone has the view, however, that the Greek debt burden is so incredibly unsustainable).

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RELATED: A Russian bailout may have always been Plan B for Tsipras

RELATED: Seven lessons from the Greek election results

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Here’s an outline of what to expect — perhaps as soon as early Monday morning: Continue reading What a Eurogroup-brokered deal with Greece might look like →

Greece, Russia

A Russian bailout may have always been ‘Plan B’ for Tsipras

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junckertsiprasPhoto credit to ELTOS/ELTA.

It may have seemed odd that, within hours of taking office, Greece’s new prime minister Alexis Tsipras struck out at the European Union to delay and ultimately weaken the bloc’s resolution to extend sanctions against Russia and certain actors within the Russian government.Greece Flag IconRussia Flag Icon

The incident shed light on an under-explored element of policy preferences of Greece’s new governing party, the leftist SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς), including its reluctance to embrace NATO and the traditional military and security alliance that links the United States and the European Union. Tspiras, who has visited the Kremlin several times, has forcefully opposed the EU sanctions against Russia stemming from its involvement in the unrest in eastern Ukraine.

Furthermore, Tsipras’s choice to form a coalition with the right-wing, anti-austerity Independent Greeks (ANEL, Ανεξάρτητοι Έλληνες), and to appoint ANEL’s leader, Panos Kammenos, as defense minister, brought into government a brand of right-wing nationalism with roots in traditional Greek Orthodoxy and plenty of euroscepticism.

Throughout the campaign and, indeed, for years, Tspiras has publicly evoked confidence, if not outright cockiness, that he would be able to negotiate a deal to lighten Greece’s debt load if elected to power. Presumably, many commentators believed that meant Tsipras was willing to engage EU elites, including German chancellor Angela Merkel, in a game of ‘chicken’ over Greece’s potential exit from the eurozone. That’s probably still true.

But the common view among most economists is that Greece’s leverage on this point is growing weaker. Merkel and others have privately briefed that the eurozone is much stronger now than in 2012 when the ‘Grexit’ issue first became a real concern, and they don’t believe that the contagion from a Grexit today would be considerable. Greece’s turmoil can be isolated, but caving to the demands of the Tsipras government could embolden radical leftists elsewhere in Europe, especially in Spain, where the leftist Podemos movement now leads polls in advance of elections later this =year. The European Central Bank last week essentially backed Merkel’s view by announcing that it would refuse to accept Greek bonds as collateral, pushing the burden of risk on Greek debt exclusively upon the Greek central bank. Greek finance minister Yanis Varoufakis clashed publicly with German finance minister Wolfgang Schäuble last week as well, noting that he didn’t even ‘agree to disagree’ with Schäuble over the Greek debt standoff.

But Kammenos’s comments yesterday about Greece’s ‘Plan B’ make it clear that the Tsipras government believes it has another, potentially more explosive card it can play:

“What we want is a deal. But if there is no deal – hopefully (there will be) – and if we see thatGermany remains rigid and wants to blow apart Europe, then we have the obligation to go to Plan B. Plan B is to get funding from another source,” he told a Greek television show that ran into early Tuesday. “It could the United States at best, it could be Russia, it could beChina or other countries,” he said.

The United States is certainly not going to undermine Merkel and the EU leadership, especially to bail out a far-left government in Greece. Furthermore, China’s recent history demonstrates that it very rarely makes splashy political moves in foreign policy outside regional Asian politics (such as in Bhutan or Sri Lanka).

That, of course, leaves Russia, which shares a common form of Christianity with Greece in Orthodoxy, and which also happens to be in the middle of the most high-stakes geopolitical struggle with NATO since the end of the Cold War. Continue reading A Russian bailout may have always been ‘Plan B’ for Tsipras →

Greece

Meet Greece’s new economic policymakers

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Varoufakis

With the Greek far left set to take power after Sunday’s staggering parliamentary elections, its next prime minister Alexis Tspiras will be just one of many key figures who will now become the central players in the latest chapter of the European Union’s economic policy debate.Greece Flag Icon

After Tspiras, no one will be more important than the economic advisers to whom the new government will entrust its attempt to reverse Greek economic policy and to negotiate debt relief from skeptical European Union leaders and international bondholders.

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RELATED: EU should give Tsipras a chance to govern

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Among the chief economic advisers to Tsipras and the soon-to-be-governing SYRIZA (the Coalition of the Radical Left, Συνασπισμός Ριζοσπαστικής Αριστεράς) are a handful of colorful personalities, from moderates to Marxists, all of whom will shape Greek economic policy in the years ahead.

Varoufakis: the political neophyte and telegenic economics professor

Yanis Varoufakis, an economics professor at the University of Athens, is widely tipped to become Greece’s next finance minister or, at the very least, lead the new government in negotiations with the troika — the European Central Bank, European Commission and the International Monetary Fund — and other EU leaders. Until very recently, Varoufakis was an outsider to Greek politics. He’s not a politician and, until recently, was a visiting professor at the University of Texas in Austin.

Varoufakis, however, was invited to run for a parliamentary seat by SYRIZA’s leaders. His international profile (Varoufakisis half Australian) and fluent English skills mean that he could soothe international markets as the chief economic spokesperson for Greece’s new government. A former adviser to George Papandreou in the early 2000s, Varoukakis has been a strident critic of the austerity measures that, first Papandreou and, since 2012, outgoing prime minister Antonis Samaras have accepted as conditions for Greece’s two bailouts, totaling €240 billion. In his announcement that he would stand as a candidate for the Hellenic Parliament, he compared that austerity to ‘fiscal waterboarding’:

Instead of discussing, in the European Union’s fora, the nature of our systemic crisis, the powers-that-be were busy fiscally waterboarding proud nations, letting them take a few short breaths before submerging them again into the waters of illiquidity.

Somewhat unusually for a European finance minister, Varoufakis has not shied away from criticizing the United States. Three years ago, Varoufakis wrote a book, The Global Minotaur, that paints a menacing portrait of the role of US economic policy vis-à-vis the rest of the world and American workers. Continue reading Meet Greece’s new economic policymakers →

Greece

EU should give Tsipras a chance to govern

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With his sweeping victory today in Greece, Alexis Tspiras has led the far left to its only victory since his country’s return to democratic rule in 1974.Greece Flag Icon

In so doing, Tsipras (pictured above) and the socialist SYRIZA (the Coalition of the Radical Left, Συνασπισμός Ριζοσπαστικής Αριστεράς) have upended the political order in a country that, for more than four decades, shifted between the rule of political elites on both the center-right and the center-left, often hailing from two or three dozen well-connected families. Tsipras’s victory today is as much the defeat of that Greek political elite on both the left and right, which cumulatively share responsibility for irresponsible budget policies and widespread corruption in government.

More recently, they have also shared responsibility for the Greek bailout that ceded significant control over Greek fiscal policy to the ‘troika’ of the International Monetary Fund, the European Central Bank and the European Commission. Center-left prime minister George Papandreou (himself the son of a prime minister) accepted the first bailout in his term, between 2009 and 2011. Since 2012, a grand coalition headed by center-right prime minister Antonis Samaras and center-left deputy prime minister Evangelos Venizelos, have also accepted the increasingly onerous demands of the troika in exchange for the funding that has floated Greece’s treasury since the eurozone crisis of 2010.

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RELATED: What to expect from Greece’s January 25 snap elections

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Tsipras, at age 40, emerged in the lead-up to the 2012 parliamentary elections, by consolidating support on the Greek left in his denunciations of the grinding course of austerity that accompanied Greece’s humiliating bailout. Then, Greece was only in its third consecutive year of recession and, remarkably, the unemployment rate was actually lower then (24.8%) than it is today (25.8%), with the country nominally back on the path to GDP growth.

But for all the smoke of the election campaign, and for all Tsipras’s fiery rhetoric, the reality is that Tsipras and SYRIZA have spent the past three years moderating their positions and preparing for the day when Tspiras would lead the next Greek government, which may prove more ‘pragmatic left’ than ‘radical left.’

In 2012, Tspiras was ambivalent (at best) about Greece’s eurozone membership. Today, however, Tspiras is adamant, along with a wide majority of the Greek electorate, that Greece must retain the single currency. Whereas SYRIZA once mused about defaulting on greek debt and ripping up the ‘memorandum’ of stipulations that governs the country’s two bailouts, which totals €240 billion, the party now pledges to renegotiate Greece’s debt burden with EU leaders in an orderly manner. Though Tspiras and other SYRIZA leaders are committed to reversing the grinding austerity of the past six years, they will seek to do so in the context of a balanced budget (as opposed to the 4% to 5% surplus that outgoing prime minister Antonis Samaras hoped to achieve).

Tsipras, in short, will govern more like a social democrat than a democratic socialist. As prime minister, with the full weight on government on his shoulders, Tspiras will be hard-pressed to deliver appreciable relief from six years of austerity, recession and unemployment. To devote more funding for public services and boost growth will require a very different skill set than the campaign oratory of the past three years.  Continue reading EU should give Tsipras a chance to govern →

Germany, Greece

Merkel’s incredibly stupid New Year Grexit bluff

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It’s understandable why German chancellor Angela Merkel doesn’t want to cut any deals with Greece — no matter who wins the snap elections later this month.Greece Flag IconGermany Flag Icon

Making concessions, especially to a far-left, anti-austerity figure like potential prime minister Alexis Tspiras, could embolden every recession-weary country from Portugal to Romania to demand relief from Brussels and Berlin, and it could give substantive figures on the European left, including Italian prime minister Matteo Renzi, French president François Hollande and even German social democrats in Merkel’s own grand coalition, a platform to doubt the Berlin-dominated approach to fiscal policy throughout the eurozone.

According to Merkel (pictured above, right, with incumbent Greek prime minister Antonis Samaras) and much of the German electorate, the troika of the European Commission, the European Central Bank and the International Monetary Fund has already been too soft on Greece, lowering the interest on over €240 million in bailout funds and extending the repayment schedule.

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RELATED: What to expect from Greece’s January 25 snap elections

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Nevertheless, it’s incredible that Merkel and her aides take such a cavalier attitude to a potential Greek eurozone exit, which they apparently haven’t ruled out in the event that Tsipras’s leftist SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς) wins national elections in 18 days. Three years after ECB president Mario Draghi promised to do ‘whatever it takes’ to save the eurozone, Merkel now believes that Greece is expendable, that the eurozone is no longer subject to the domino theory that would make a ‘Grexit’ calamitous and that the eurozone is now governed by a chain theory that suggests a Greece-less eurozone will be rid of its weakest link.

tspiras

It may be smart domestic politics in Germany, where the anti-euro Alternative für Deutschland (Alternative for Germany) is gaining support on Merkel’s right flank in both state and federal politics, but it’s an incredibly tin-eared intrusion three weeks before Greeks vote. It certainly won’t help the beleaguered coalition government of center-right, pro-bailout prime minister Antonis Samaras, whose New Democracy (Νέα Δημοκρατία) narrowly trails SYRIZA in most polls. Greeks already realize that a vote for Tsipras (pictured above) brings with it greater uncertainty, so Samaras has some hope that the electorate will have doubts about handing power to SYRIZA. He certainly doesn’t need Merkel to make that point for him.  Continue reading Merkel’s incredibly stupid New Year Grexit bluff →

Greece

What to expect from Greece’s January 25 snap elections

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With the failure of Greece’s parliament to elect a president after a third and final vote this morning, prime minister Antonis Samaras will dissolve the parliament and schedule early elections — most likely on January 25.Greece Flag Icon

It will be the first election since June 2012, when Samaras’s center-right New Democracy (Νέα Δημοκρατία) narrowly defeated the hard-left SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς). According to just about every poll, SYRIZA holds a lead of between 3% and 7% against New Democracy.

Expect a tough Samaras-Tsipras fight for first place

Samaras is a wily and seasoned campaigner, and he will undoubtedly cast himself as the guardian of Greece’s long-term stability. On Monday morning, he was lashing out at ‘political terrorism,’ and warning that a SYRIZA victory would allow Greece’s sacrifices to go to waste. SYRIZA will face sustained criticism — some justified, some overblown — from just about every quarter in Europe that it and its leader, Alexis Tspiras, are dangerous ideologues whose policies could force Greece out of the eurozone in 2015. Already, publications like The Guardian are referring to Greece being ‘plunged into crisis.’ Expect the fear-mongering about the consequences of a SYRIZA victory to be on par with efforts by the British political establishment and business community in the fraught week leading up to the Scottish independence referendum. It’s by no means certain that SYRIZA’s narrow single-digit lead will survive that kind of onslaught.

The fight between SYRIZA and New Democracy is so important because the first-place finisher in the election will not only win the largest share of seats in the 300-member Hellenic Parliament (Βουλή των Ελλήνων), but also a 50-seat ‘bonus’ meant to provide the winning party with enough seats to form a working majority government. Over the next few days, it will be worth watching to see whether SYRIZA or New Democracy convince any other smaller parties to merge, because the marginal value of even a one-vote victory in Greek elections is so consequential.

Since 2012, Greek economic conditions are slightly improved. Greece’s GDP is set to grow by between 1.0% and 1.4% in 2014, following six consecutive years of contraction, and there’s every reason to believe it will continue to expand in 2015. The government even attempted a reasonably successful bond sale in April, and Greece’s staggering unemployment rate is now just 25.7%, down from its high of 28%.

Nevertheless, the dual cuts of budget austerity and economic depression have, understandably perhaps, left the Greek electorate weary of renewing a mandate for austerity, and the uncertainty over the country’s political future has pushed 10-year bond yields to an unsustainable 8.5%.

greece gdp

Greece’s ‘bailout’ questions remain unsolved

Fueling that uncertainty is Greece’s planned exit from its bailout program in February 2015, just days after the election.

Continue reading What to expect from Greece’s January 25 snap elections →

Greece

Greek parliament prepares for 3rd and final presidential vote

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dimas

In the second of three presidential votes, the Greek parliament failed to elect the government’s center-right choice for president, Stavros Dimas (pictured above), a former foreign minister and European Commission member, in voting on Tuesday.Greece Flag Icon

Though it was the second time that Greek prime minister Antonis Samaras, both failures were expected, given that Dimas needed 200 votes in the 300-member Hellenic Parliament (Βουλή των Ελλήνων) in order to win the presidency outright in either of the first two rounds. That threshold drops to just 180 votes in the third and final round that will take place next Monday, December 29. Samaras is waging an all-out campaign over the weekend to convince enough legislators to support Dimas and, by extension, his government.

Dimas won just 160 votes in the first round, but Samaras, who governs a coalition that includes his own center-right New Democracy (Νέα Δημοκρατία) and its traditional center-left rival, PASOK (Panhellenic Socialist Movement – Πανελλήνιο Σοσιαλιστικό Κίνημα), increased that total to 168 in the second vote after winning over a handful of independents.

If the Hellenic Parliament fails to elect a new president, Greece will hold snap elections next spring and New Democracy might lose, as polls currently suggest, to the hard-left SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς). That could put Greece’s financial future in doubt as SYRIZA’s leader, Alexis Tsipras, pledges to reverse the austerity measures of the past six years and negotiate a bond haircut to lower the country’s debt burden, from the ‘troika’ of the European Commission, the European Central Bank and the International Monetary Fund that provided Greece two bailouts worth €110 billion and €130 billion, starting in June 2010. 

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RELATED: Markets shouldn’t be freaking out about Greek elections

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Samaras starts with the existing ND-PASOK governing coalition, which controls 155 votes, there’s a theoretical bank of 46 additional votes, including 24 independents, 12 legislators from  Panos Kammenos’s Independent Greeks (ANEL, Ανεξάρτητοι Έλληνες), an anti-austerity spinoff from New Democracy and 10 additional legislators from the Democratic Left (DIMAR, Δημοκρατική Αριστερά), a new social democratic party and SYRIZA spinoff that joined Samaras’s coalition between the June 2012 elections and June 2013 (when it eventually withdrew to the opposition in the face of further austerity measures). Though DIMAR leader Fotis Kouvelis has indicated he will support SYRIZA’s call for early elections and will support a SYRIZA-led government, not all of the party’s members agree. Negotiations with the Independent Greeks have been equally tenuous, and one of its members accused the government of attempting to bribe him in exchange for his support in the presidential vote.

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Snap elections would coincide with the end of Greece’s bailout program in February 2015. The the next Greek government already faces a €22 billion budget shortfall between 2015 and 2016. Among the solutions currently under discussion is a short-term credit line from the troika or the IMF, though the troika is already demanding additional wage cuts and other fiscal contraction as part of the deal. Another potential solution might be to extend the repayment period by 20 years, equivalent to writing off around €50 billion in debt. Continue reading Greek parliament prepares for 3rd and final presidential vote →

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Markets shouldn’t be freaking out about Greek elections

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It’s not surprising that Greek investors would be spooked by the idea of political turmoil that could replace Greece’s center-right coalition government with a radical leftist one as soon as February.Greece Flag Icon

That possibility became much more likely yesterday, when Greek prime minister Antonis Samaras brought forward a presidential election to replace Karolos Papoulias, the 85-year-old incumbent and a founder of PASOK (Panhellenic Socialist Movement – Πανελλήνιο Σοσιαλιστικό Κίνημα), Greece’s traditional center-left party, whose second five-year term was due to expire in March 2015. Greece’s presidency, a chiefly ceremonial office like in many European parliamentary systems, is determined indirectly by the Hellenic Parliament (Βουλή των Ελλήνων), not directly through national elections.

Samaras’s decision only moves up the presidential vote by two months. Samaras leads a coalition government of his own center-right New Democracy (Νέα Δημοκρατία) and its former rival PASOK. If the coalition fails to elect a president, it will trigger the government’s collapse, bringing forward parliamentary elections that would otherwise take place in June 2016.

The prospect of early elections and the possibility that SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς) and its charismatic leader, Alexis Tsipras (pictured above), could be running Greece’s economic policy within weeks was enough to send the Athens stock exchange tumbling by 12.78% on Tuesday, the largest single-day drop since 1987, as analysts went berserk explaining that a potential SYRIZA victory could spell doom not just to the European but to the global economy:

“Greece in the next 6 weeks may prove to be more important for global markets than Russia/Ukraine was in 2014,” said Charles Robertson, chief economist at Renaissance Capital. “A possible [SYRIZA] election victory may force the eurozone to choose between a fiscal union (debt write off for Greece) or the first Euro exit.”

Though voters might be weary of seven years of economic pain, Greece’s economy is actually growing at one of the highest rates in the eurozone, which is struggling with low growth and deflationary pressure. At a time when most Europeans have reason to be wary of 2015, Greeks should be confident that their economy has bottomed out, and employment and GDP growth should continue to improve in 2015 and beyond. In the long-term perspective, it’s a great time for stronger investment in Greece, not panic and divestment.

There’s reason to believe that Tsipras, once in power, would act responsibly. SYRIZA, and not PASOK, is now the standard bearer of the opposition left in Greece, but Tsipras has moderated some of his more firebrand positions. Though he is arguably the loudest critics of eurozone austerity, he is more solicitous of the investor class today than he’s ever been. Tsipras still wants to restructure Greece’s public debt (still a staggering 174% of GDP) by forcing a renegotiation that could lead to a haircut or other modification. Tsipras and his economic advisers have nevertheless committed a potential SYRIZA government to budget discipline, even while promising to ameliorate the worst of the drastic cuts to social welfare spending required under the terms of Greece’s two bailouts worth €110 billion and €130 billion, respectively, from the ‘troika’ of the European Central Bank, the European Commission and the International Monetary Fund. Reassuringly, however, Tsipras has essentially promised he will not default on Greek debt and he will not attempt to leave the eurozone. 

Tsipiras is probably correct that Greece’s debt burden is not sustainable. He’s also probably right that Brussels and Berlin would cave to renegotiating that debt if the alternative is a return to the ‘Grexit’ speculation and the financial market turmoil of 2012 when the ECB is trying to wage its own fight to expand the central bank’s reflationary ‘quantitative easing’ efforts. The upside for Tsipras, if he wins a new election, is that SYRIZA would likely take credit for Greece’s economic progress just as it’s beginning to emerge from the nadir of its recessionary cycle.

Continue reading Markets shouldn’t be freaking out about Greek elections →

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A detailed look at the European parliamentary election results (part 2)

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 Across Europe on Monday, officials, voters and everyone else were trying to sort through the consequences of yesterday’s voting, across all 28 member-states, to elect the 751 members of the European Parliament.European_Union

Late Sunday, I began analyzing the results on a state-by-state basis — you can read my take here on what the European election results mean in Germany, France, the United Kingdom, Italy and Spain.

This post picks up where that left off, however, with a look at some of the results in Europe’s mid-sized member-states.

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RELATED: A detailed look at the European parliamentary election results (part 1)

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With the count now almost complete, here’s where the Europe-wide parties stand:

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The European People’s Party (EPP), which has been the largest group in the European Parliament since 1999, will continue to be the largest group, but with fewer seats (215) than after any election since 1994.

The second-largest group, the Party of European Socialists (PES) has 188 seats, a slight gain, but not the breakout performance for which it was hoping.

The Alliance of Liberals and Democrats of Europe (ALDE) will remain the third-largest group, notwithstanding the collapse of two of its constituent parties, the Liberal Democrats in the United Kingdom and the Freie Demokratische Partei (FDP, Free Democratic Party) in Germany.

The European Greens have won 53 seats, just two less than before the elections. The Party of the European Left, which had hoped to make strong gains on the strength of its anti-austerity message, gained nine seats to 44.

The Alliance of European Conservatives and Reformists (ECR), a slightly eurosceptic group of conservative parties, including the Conservative Party of the United Kingdom, holds steady at 46 seats — that’s a slight loss of around eight seats. The Movement for a Europe of Liberties and Democracy (MELD) gained six.

The real increase was among the ‘non-inscrits,’ the unaffiliated MEPs, which will rise from around 30 to 104. The bulk of those MEPs include the newly elected eurosceptics that have made such a big splash in the past 24 hours, including Marine Le Pen’s Front national (FN, National Front) in France.

But, in addition to being a pan-European contest with wide-ranging themes that resonate throughout the European Union, the elections are also 28 national contests, and they’ve already claimed resignations of two center-left leaders — Eamon Gilmore, of Ireland’s Labour Party, and Alfredo Pérez Rubalcaba, of the Partido Socialista Obrero Español (PSOE, Spanish Socialist Workers’ Party).

Here’s a look at how the European elections are affecting nine more mid-sized counties across the European Union: Poland, Romania, The Netherlands, Belgium, Greece, the Czech Republic, Portugal, Hungary and Sweden.

Continue reading A detailed look at the European parliamentary election results (part 2) →

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An interview with Greek-German MEP Jorgo Chatzimarkakis

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If there’s anyone in European politics who straddles the line between the two cultural realities of Europe today, it’s Jorgo Chatzimarkakis.European_UnionGermany Flag IconGreece Flag Icon

Born in 1966 to Greek migrants in the Ruhr Valley, in what was then West Germany, Chatzimarkakis has served for the past 10 years as a member of the European Parliament from Germany’s liberal Freie Demokratische Partei (FDP, Free Democratic Party). 

Over the course of the past five years, that’s put Chatzimarkakis in one of the most unique roles of any European policymaker. As a German MEP, he belonged to a party that was one of the most outspoken critics of using German funds for what seemed, at the heart of the eurozone’s sovereign debt crisis, like an endless number of bailouts for troubled European economies, including Greece’s.

But as an MEP of Greek descent,  Chatzimarkakis also understood the emotional and social toll of the economic crisis from the other perspective, in light of the pain Greece continues to suffer due to the bailout — often referred to in Greece simply as the ‘memorandum,’ in reference to the Memorandum of Understanding that sets out the terms of the Greek bailout with the ‘troika’ of the European Central Bank, the European Commission and the International Monetary Fund.

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RELATED: In-Depth: European parliamentary elections

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Though the bailout program has kept Greece inside the eurozone, it’s come at a huge cost. The conditions Greece accepted in exchange for the loan program required tough budget cuts, tax increases, and reduced state salaries and pensions, exacerbating an economic downturn that, for Greece, has now developed into a full-blown depression. Unemployment is still nearly 27%, youth unemployment is even higher, and the Greek economy has contracted for six consecutive years:

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Cuts to education, health care and other programs have strained the Greek social fabric, civil strife and strikes are seemingly endless, and politician violence has increased. The neo-fascist Golden Dawn (Χρυσή Αυγή) is now the third-largest party in the Hellenic Parliament, despite the efforts of the current national government to prosecute many of its leaders. Though Greece’s economy may expand this year, for the first time since 2007, it’s clear that the effects of the downturn will reverberate for years to come.

In the 2014 European elections, Chatzimarkakis is running for the European Parliament in Greece, having formed a new political party, the Hellenic European Citizens (Έλληνες Ευρωπαίοι Πολίτες).  Continue reading An interview with Greek-German MEP Jorgo Chatzimarkakis →