Greek depression

Greece now in "Great Depression", PM says

Greece is in a "Great Depression" similar to the American one in the 1930s, the country's Prime Minister Antonis Samaras told former U.S. President Bill Clinton on Sunday.

Reuters,

22 July, 2012

Samaras was speaking two days before a team of Greece's international lenders arrive in Athens to push for further cuts needed for the debt-laden country to qualify for further rescue payments and avoid a chaotic default.

Athens wants to soften the terms of a 130-billion euro bailout agreed last March with the European Union and the International Monetary Fund, to soften their impact on an economy going through its worst post-war recession.

By the end of this year Greek GDP is expected to have shrunk by about a fifth in five consecutive years of recession since 2008, hammered by tax hikes, spending cuts and wage reductions required by two EU/IMF bailouts. Unemployment climbed to a record 22.6 percent in the first quarter.

"You had the Great Depression in the United States," Samaras told Clinton, who was visiting Greece as part of a delegation of Greek-American businessmen. "This is exactly what we're going through in Greece - it's our version of the Great Depression."

Athens must reduce its budget deficit below 3 percent of GDP by the end of 2014, from 9.3 percent of GDP in 2011 - requiring almost another 12 billion euros in cuts and higher taxes on top of the 17 billion successive governments have cut from the budget shortfall.

Greece wants its lenders to give it two more years to achieve the budget goal to avoid an even deeper economic slump but its lenders have opposed the idea because it would imply even more financial aid.

Highlighting growing frustration with Athens, German magazine "Der Spiegel" reported on Sunday, citing high-ranking representatives in Brussels, that the IMF may not take part in any additional financing for Greece.

The German and Greek finance ministries declined to comment on the report, which suggested additional support required for Athens could range from 10-50 billion euros.

NO MORE

Officials have already indicated there would be a shortfall on the current bailout. How much is likely to depend on the extent by much Greece continues to miss its fiscal targets and the extent of support needed to keep its major banks afloat.

German economy minister Philipp Roesler told ARD public television he did not expect Greece could fulfill its requirements and that that would mean no more money to Athens.

"I am more than skeptical," Roesler, who is the head of the junior party in Germany's ruling coalition and often outspoken on euro zone issues, said in an interview.

"If Greece does not fulfill its requirements, there cannot be any more payments to Greece," added Roesler, whose views often do not reflect those of Chancellor Angela Merkel or Finance Minister Wolfgang Schaeuble.

The inspection team of the international "troika" of the EU Commission, the IMF and the ECB will focus on the 11.7 billion euros of spending cuts Athens needs to take in 2013 and 2014.

Clinton criticized Greece's lenders for focusing excessively on austerity, saying Athens will be more likely to repay its debt if its manages economic recovery first.

"(It) is self-defeating... if every day people are saying this may or may not work to give us back 100 cents on the dollar, so give us more austerity today," he told Samaras.

"People need something to look forward to when they get up in the morning - young Greeks need something to believe in so they can stake their future out here," Clinton said.

IMF To Stop Further Aid Tranches To Greece, Spiegel Says

The International Monetary Fund will stop paying further rescue aid to Greece, making the country’s insolvency in September more likely, the Der Spiegel magazine said. citing unidentified European Union officials..

Bloomberg,

22 July, 2012

While a review of Greece’s progress in meeting terms of its rescue is unfinished, it is “already clear” to the reviewing body of the IMF, the EU Commission and the European Central Bank that Greece will not be able to fulfill its promise to cut debt to 120 percent of annual economic growth in euro terms by 2020, Der Spiegel said.

Missing the target means Greece needs between 10 billion euros and 50 billion euros ($60.8 billion) in additional aid, a potential outcome that the IMF and several unidentified euro- area states are not prepared to accept, the magazine said, citing the review.

Euro-area leaders regard Greece’s exit from the euro as manageable even though they want to prop up the country’s finances until the new and permanent rescue fund called the European Stability Mechanism is in operation, the magazine said, citing from the same sources. Germany is holding up the inception of the ESM as it awaits a court ruling on the fund’s constitutionality on Sept. 12, Spiegel said.

The ECB may step in to help Greece in the meantime, said the magazine, citing some 3.8 billion euros the government needs to pay back to the central bank on August 20. The government may sell debt of that amount as short-term “T-Bills” to Greek banks, which in turn would deposit the bonds as security at the ECB, securing further aid, Spiegel said.

IMF Seeks to Halt Aid to Greece; September Bankruptcy Awaits; Dominoes Will Fall

Mish's Global Economic Analysis,

22 July, 2012

According to Der Spiegel, the IMF Wants to Stop Aid to Greece as soon as the ESM is up and running in September. At that time Greece would become bankrupt.

This is a Mish-modified translation from German: 

 The patience of the International Monetary Fund (IMF) with Greece comes to an end: According to to information obtained by SPIEGEL, senior IMF officials told EU leaders in Brussels that the IMF was no longer willing to provide additional funds for Greece.

The Troika estimates that Greece needs between ten and 50 billion € to meet targets, but many governments in the euro zone are no longer willing to shoulder new burdens. In addition, countries like the Netherlands and Finland, have linked their support because the IMF was involved.

The risk of withdrawal of Greece from the monetary union is now held in the countries of the Euro-zone control. To limit the risk of contagion to other countries, governments want to wait for the start of the new bailout ESM.

The judgment of the German Constitutional Court regarding the ESM on September 12th will come into play.

Dominoes Will Fall

I picked this story up from Raul at Automatic Earth. Here are some interesting point of view from Automatic Earth that I generally agree with. 

 It’ll be a lot of fun seeing the IMF, and European leaders, try to deny the article and its implications. From what I understand, they want to wait until the ESM is effective, and then dump Greece. The article may trump any such intentions. Some things only work in secret, and once Pandora's box is open, they no longer do.

I still think it would be curious that the ESM, supposedly good for €700 billion or so (if not more), would be used to "save" Spain and perhaps Italy, but not Greece. For countries like Portugal and Ireland, dumping Greece would mean they need to get very nervous about being the next one thrown under the wheels and off the back end of the wagon.

The message might become that any and all reform and austerity measures demanded must be adhered to very strictly or else. Politicians in these other "borderline" countries might go along with it all, but will the people? Do the Irish really enjoy the idea of being strangled into submission? And will Spain really be "saved" once real debt numbers are known?

It seems far more likely that getting rid of Greece will be merely the first step in dissolving the entire eurozone. The rest of the dominoes can then fall in rapid succession.

There's more in the AE article including a discussion of the resignation of Peter Doyle, former division chief in the IMF's European Department, who, upon resigning, shared a few of his thoughts on the fund: "After twenty years of service, I am ashamed to have had any association with the Fund at all..."

Everyone Prepared to Pull the Plug

DW has a bit more information in IMF to provide no new funds to Greece  

 In an article published on its website, Spiegel cites unnamed senior European Union sources in Brussels who told the news magazine that the International Monetary Fund (IMF) had signaled it would not contribute to any further aid for Greece.

The  report comes ahead of a planned visit to Athens by a team of auditors from the troika of the European Commission, the European Central Bank (ECB) and the IMF. They are to conduct another inspection of the new government's economic program to determine whether Greece is doing enough to comply with the terms of its second international bailout to merit receiving the next tranche of funds.

Just this past week, leading Greek politicians pushed back talks on how to cut almost 12 billion euros ($14.6 billion) from the budget after it became clear that they were far from reaching a comprehensive agreement.

On Friday, the ECB increased the pressure on Greece to comply with the terms of the bailout when it announced that it would stop accepting the country's bonds as collateral in return for ECB funding, at least until after a positive verdict from the troika.

In a further indication that patience may wearing thin among Greece's paymasters, German Foreign Minister Guido Westerwelle on Saturday ruled out the possibility of relaxing the conditions of Athens' second bailout.

Many signs suggest that everyone is finally ready to pull the plug on Greece. Hundreds of billions of euros have been wasted in the last three years attempting to stop the unstoppable.

Tsipras predicts Greek

default

Athens News,

21 July, 2012

The leader of the main opposition Radical Left Coalition (Syriza) party, Alexis 

 Tsipras, was quoted as predicting the country's default, while also forecasting that the government will "soon present" a return to a national currency (drachma) as a national success.

In an interview published with Real News newspaper on Saturday, Tsipras said any re-negotiation of a memorandum signed by Greece with its EC-ECB-IMF creditors ended on the night of the June 17 election, while charging that any payment extension is "essentially a longer rope with which to hang ourselves."

He also criticised the government for abandoning, as he said, any discussion over restoring cuts made to pensioners receiving low pensions, re-instituting collective bargaining talks and increasing the tax-free ceiling for individual taxpayers.

He even attacked Finance Minister Yannis Stournaras, for whom he had spoken positively of during the vote of confidence discussion in parliament, saying he is the definition of a finance minister that the EC-ECB-IMF 'troika' would have chosen. (AMNA)