Thursday, June 27, 2013

Greece: the sequel (this time with even more tourists)

Helena Smith, Wednesday 26 June 2013 04.40 AEST

Holiday sector hits all-time high as nation savaged by austerity reinvents itself


The Greek island of Mykonos is expecting 1 million tourists during the summer as yacht owners and cruise ship passengers make up a much bigger proportion of visitors to Greece. Photograph: Getty Images

Long before the setting sun turns the sky above Mykonos into a blaze of crimson, they begin to arrive: super-yachts and pleasure boats and high-speed craft all vying for a spot in the Aegean isle's picturesque old port.

In his aviator sunglasses, Mykonos's harbourmaster, Lieutenant Jr Nicholaos Zigouris, supervises this elegant race for  space.

"It wasn't like this last year or the year before," he says. "There's been a huge leap in the number of private and professional boats sailing in, and the tourist season has barely begun."

Mykonos, the island made famous by Jackie Onassis, is braced to accept 1 million tourists this summer but it is not only the international jet-set descending on its shores.

The island's economy may be in freefall, its people hit by the harshest peacetime austerity programme ever imposed on an advanced western state, but Greece is back in business.

After three lean years marked by riots, strikes, social upheaval and political unrest, 17 million or so holidaymakers – 1.5 times the country's population and an all-time record — are about to visit, according to officials.

The arrivals have never mattered more. Tourism accounts for almost 20% of GDP – and jobs. With recession-hit Greeks also struggling with a record level of unemployment, which has reached nearly 28%, the highest in the eurozone, industry earnings this year may well be the only income for many.

Up in the mini-resort that his father, Mykonos's first hotelier, built back in the 1960s, Andreas Fiorentinos says Greeks have learned the hard way to appreciate the benefits of tourism.

"The crisis has taught us that we cannot fool our clients," says Fiorentinos, taking in a spectacular view framed by bobbing yachts below. "And it has made us more aware. People understand how important it is for our economy."

Like many, the third-generation hotelier believes the time has come for Greece to reinvent itself. For too long, he says, the industry has been overly dependent on its image as a destination of sun, sand and sea. "As a result of catering to price-sensitive tourists interested only in drinking and going to the beach, we have failed to tap into a whole market," he sighs. "It's an outdated model that has to change."

Fiorentinos is also deputy secretary general of EOT, the country's tourism board. "For the past year we've been visiting tourist expos around the world to convey the message that Greece is not only about souvlaki and Zorba the Greek. If it weren't for our lumbering state we would have moved away from those stereotypes long ago."

The efforts to appeal to a broader and more affluent audience – evident in the blossoming of five-star resorts, boutique hotels and gastronomic and cultural tourism – have not been easy.

Breaking old moulds has frequently been thwarted by corruption and vested interests, the twin ills blamed for bringing the country to its knees.

"Take Delos," says Fiorentinos referring to Mykonos's adjacent isle, an archaeological treasure trove and the country's most sacred site. "It was considered the most important place in the ancient world. But do we show it off? No. Every day it closes at 3pm because the [state-run] archaeological service refuses to do otherwise."

In the same vein it has taken nearly 20 years for Mykonos to get a new marina, seen as vital for attracting the fast-growing cruise tourism sector and niche commerce.

This year's sharp rise in numbers has been partly attributed to a 40% increase in travellers on cruise ships, mostly from the US.

But it is not just westerners who are fuelling this tourism boom. Seated in his air-conditioned Athens office, Andreas Andreadis, who heads the association of Greek tourism enterprises, SETE, says much of Greece's new traffic arises from the lifting of visa restrictions in long-haul emerging markets such as China, Turkey and Russia.

Russian arrivals at regional airports alone have shot up by 230% this year.

Andreadis says about 1.2 million Russians are expected to visit the country this year. "The volume is so high that SETE has employed 20 of its own people just to help stamp visas."

Airlines have got more than 1m extra seats and scores of new routes to the country, including to places such as Mykonos island.

"We are linked to 14 countries and 28 destinations. There are daily flights to London, Milan and Istanbul," says Athanasios Kollias, the air traffic controller at the island's newly expanded airport. "From now on, 120 charters are expected every week. In May the number of passengers flying in from abroad more than doubled."

Summer bookings to Greece from Germany and the UK have also soared. Some of the 15% increase from Germany was attributed to the chancellor, Angela Merkel – because of her insistence on austerity, exhorting her compatriots to visit the country. This month, Lufthansa chose Athens for the inaugural flight of its new flagship plane, the B747-8, the largest aircraft in the world.

For Andreadis the key to sustaining this boom is quality. And on Super Paradise beach, Mykonos's favoured spot for the cool and trendy, the emphasis on improved service is everywhere to be seen. There's a champagne bar at one end and a massage tent at the other as holidaymakers lounge on new sunbeds, under new, thatched, umbrellas, and take in the turquoise waters below.

For people like Nikos Xydakis, who has run a beach taverna for the past 40 years, the new look is not just about survival. "This year we had to do everything, even clean the beach because the state is in no position to help. But in life everything changes. The crisis has played a big role. Our tourists have changed and we have changed too."

Greece: the sequel (this time with even more tourists) | World news |

Greece tries to fix economy with cabinet reshuffle amid strikes and protests

Helena Smith, Thursday 27 June 2013 04.02 AEST

Antonis Samaras has rearranged his cards – but vast Greek debt keeps him playing the same hand


Greek prime minister Antonis Samaras. Photograph: Louisa Gouliamaki/AFP/Getty Images

On his first day in office with his newly reshuffled cabinet, the Greek prime minister Antonis Samaras had a to-do list that included dealing with striking seamen and trolley-bus drivers, discussing the privatisation of Pireaus port and preparing for talks with the creditors keeping Greece's defunct economy afloat.

At the same time, tax employees prepared for battle with a 48-hour strike; protesting staff continued to occupy the main offices of the public broadcaster, ERT, while thousands of entrepreneurs representing small-and medium-sized businesses took to the streets. The focus of their fury: "hunger pensions" and cuts to a health system on the point of collapse.

For any other government, fighting fires on so many fronts would prompt a response that would be, at best, crisis management. In Greece, however, it's business as usual.

With his newly installed team, Samaras hopes to handle the myriad problems confronting the country with a new zest and tact. The reshuffle, a year and a week after he assumed power, had been long overdue. The sudden departure from the coalition government of the small Democratic Left party, Dimar, provided the perfect alibi for a radical restructuring of a tripartite alliance that had begun to look lacklustre and lazy. There was, said Samaras, "not a moment to waste" in the battle to save the debt-stricken nation.

But far from boding well, there is also a sense of déja vû about the new administration. With Dimar's exit, the coalition is now comprised solely of figures from the two mainstream political forces most blamed for the country's woes. The recycling of politicians from both the conservative New Democracy and socialist Pasok parties has been met with incredulity and derision.

Many are wondering how politicians who have already been tried and tested – frequently displaying a marked reluctance for reforms – can possibly put Greece back on its feet.

Michalis Chrysohoidis, the Pasok cadre elevated to run the transport ministry, caused uproar last year when he admitted he hadn't even read the first bailout accord outlining the onerous terms Athens had agreed to in return for funds from the EU and IMF. He was public order minister at the time.

The appointment of Adonis Georgiades as minister of health – one of the most sensitive portfolios – has caused similar dismay. A conservative extremist, Georgiades is more usually associated with the talk show he hosts exhorting the glories that were ancient Greece.

Both are indicative of a power-sharing arrangement that more resembles a balancing act. For the first time since being plunged into its worst crisis in living memory, there is an overwhelming sense that the country is in the hands of a government that is buying time.

Geopolitics have forced a semblance of stability on Greece. The German elections in September have increased expectations that what lies ahead is a slow-motion summer of little or no policymaking that could rock the boat.

But few have bought the government's argument that Greece is on the road to recovery. Even fewer believe Samaras' prognostications that with the benefit of hard work, yet more austerity will be kept at bay.

Indeed, many are certain it is only a matter of time before the crisis intensifies when the coalition is forced in the autumn to take fresh measures to avoid the collapse of the pension system.

With unemployment now at a record 27% and poverty soaring, Greeks may be forgiven for believing that the real truth lies not so much in the notion of hard labour, but in the rules of the game being changed.

Short of a deus ex machina, the crisis engulfing Greece will only be resolved when its debt load is somehow forgiven.

Greece tries to fix economy with cabinet reshuffle amid strikes and protests | World news |

Tuesday, June 25, 2013

Olli Rehn should resign for crimes against Greece and against economics

By Ambrose Evans-Pritchard Economics Last updated: June 6th, 2013

The consequences of Greek austerity (Photo: Getty)

Nobody has taken responsibility for the disastrous errors made by the EU-IMF Troika in Greece, where youth unemployment has just reached 58.3pc.

Nobody has resigned, or missed a day’s pay, or faced any kind of censure from an elected body, despite the withering indictment just issued by the IMF.

Worse yet, the basic conceptual policy errors that led to this tragic episode have not been fully corrected.

With a little trimming here and there, the eurozone is sticking to the same mix of self-defeating contractionary policies that have tipped the region back into a double-dip recession, with seven quarters in a row of falling GDP, soaring unemployment, and an ever starker divergence with the United States.

Just to recap what our man Bruno Waterfield reported from Brussels, the IMF’s mea culpa admits that the Troika sacrificed Greece to save the euro.

It completely misjudged the ferocity of the downward spiral caused by austerity a l’outrance, and then blamed the victim by pretending that Greece was failing to comply with the terms.

The Troika recoiled from the standard IMF policy of debt restructuring for Greece in 2010 because it was “politically difficult” for countries (France? Germany?) whose banks held Greek bonds.

The report said the terms of the rescue violated three of the IMF’s four key rules for lending to insolvent countries, no small matter given that it was the biggest loan the Fund has ever made in proportion to a member’s quota, and given that staff were “unable to vouch that public debt was sustainable”.

It admitted that the 2010 package was a “holding operation” that “gave the euro area time to build a firewall to protect other vulnerable members and averted potentially severe effects on the global economy”.

The European Commission defended itself yesterday, saying a debt restructuring in 2010 would have caused havoc in the bond markets and virulent contagion. This is true, but what kind of a defence is that?

Yes, everybody feared a chain-reaction of sovereign defaults reaching Italy and Spain, but this was entirely because the ECB was recklessly refusing to carry out its responsibility as a lender of last resort, the ultimate purpose of any central bank. In doing so, it was endangering the entire global financial system.

You can trace this paralysis to Maastricht and the nature of the ECB mandate, but as the Draghi (OMT) backstop for Italy and Spain has since demonstrated, what it really showed was that a lot of ECB governors were out of their depth, or pursuing naked national agendas, or both, and hiding behind what are in reality very elastic treaty clauses)

The IMF makes it crystal clear that the EU institutions and the leaders of EMU countries (still refusing to face up to the implications of EMU, or admit to their own voters that monetary union costs real money) were the chief villains in this saga.

What we see is a near perfect exhibit of what is wrong with the European Project. There is no mechanism of accountability. The buck stops nowhere.

I don’t wish to pick on Economics Commissioner Olli Rehn, although one’s patience runs out after listening to the Commission’s retort that the IMF is “plainly wrong”.

Mr Rehn is a decent man, with an impossible task, carrying responsibility without power. The politicians of the northern EMU states and the ECB are chiefly to blame.

I wrote at the time that Germany’s Wolfgang Schauble crossed a line by threatening to eject Greece from the euro and persistently vilifying the Greeks for failure to comply, when the essential failure was the policy itself. Greece kept missing deficit targets because the economy was collapsing, causing tax revenues to shrink.

Yet Mr Rehn is the titular official in charge. The Troika is “his” baby. If he were the finance minister of a democratic state he would surely have to resign after such blistering demolition of his tenure.

The fact that nobody ever resigns for botched policies in the EU system (Pace, the Santer Commission: the exception that proves the rule) should not deter Mr Rehn from falling on his sword from a high sense of honour. Such a gesture would clear the air, and mark a recognition that the policy formulae of EMU must be swept away to allow for recovery.

His director-general of economic and monetary affairs, Marco Butti, has admitted that the fiscal multiplier is higher than normal in a countries during a region-wide slump where the financial system has partially broken down and interest rates are near zero, and therefore that fiscal tightening does more economic damage.

But he admits it only in hindsight. The Commission now argues that the return to calm after the Draghi `Put’ has lowered the multiplier again, so there is no real need to change policy (other than letting the fiscal stabilizers do their work, avoiding the mistake of yet further tightening to chase missed deficit targets)

If no such resignation comes from Commissioner Rehn, we know the Rehn of Terror will go on. The regime will persist in destructive folly, adding 100,000 people to the jobless rolls each month.

Just a reminder of the scale of error, which I wrote about in this blog last year.

The Troika originally said that Greece’ economy would contract by 2.6pc in 2010 under the austerity regime, before recovering with growth of 1.1pc in 2011, and 2.1pc in 2012.

In fact, Greek GDP remained in an unbroken free-fall. It did not grow in either year. It contracted a further 7.1pc in 2011, 6.4pc in 2012.

Roughly speaking, the Troika misjudged the scale of economic decline over three years by 12pc of GDP. The total decline will be around 25pc, surely a Great Depression.

Don’t tell it was hard to foresee. The Greek Labour Institute and the think tank IOVE produced very accurate forecasts. The truth is that the Troika’s ideology of “expansionary fiscal contraction” is bunk, and doubly dangerous when compounded by tight money.

Like the Spartans, Thebans, and Thespians at the Pass of Thermopylae, the Greeks were sacrificed to buy time for the alliance.

Instead of applause, they were then vilified for their heroic efforts by ill-informed and self-interested Dutch, Finnish, Austrian, and German politicians. A squalid episode.

Olli Rehn should resign for crimes against Greece and against economics – Telegraph Blogs

How eurozone taxpayers came to own Greece

By Mats Persson Economics Last updated: November 29th, 2012

The other day a deal was finally struck on how to fund Greece for the next few years after many late night meetings and circular discussions. Although the deal may allow Greece to carry on for now, it seems likely that it will continue missing the targets set by the EU/ECB/IMF Troika, meaning a new funding gap will open and fear of ‘Grexit’ will resurface before too long. But the one thing that this deal did drive home is, when it comes to Greece, just how far down the wrong path EU leaders have gone.

As a recent Open Europe analysis shows, 70.5 per cent of Greece’s €301bn debt mountain is now held by taxpayer-backed institutions (eurozone governments, bail-out funds and central banks as well as the IMF) – that is around €212bn, well over 100 per cent of Greek GDP, and by the end of January next year this is set to increase to close to €250bn. A further €14bn could be needed to execute a buy-back of Greek bonds – one of the measures included in this week’s deal, which involves using new funding to purchase Greek debt at a low price and then retire it, providing a reduction in debt equal to the difference in the purchase price and the original price of debt. In addition, we’re now looking at numerous billions which the eurozone governments and central banks will forego in profits on their holdings of Greek debt and reduced interest rates on loans. (Although how this isn’t seen as a loss for the countries or at least an increase in the loans remains an enigma).

To put this in context, Greek debt at the time of the first bailout was just over €300bn, all held by private creditors – by the end of this year it is set to be €344bn. In other words, not only has Greece’s debt continued to increase while Greek GDP has plummeted, but it has been overwhelmingly handed over to innocent eurozone taxpayers. This also means there’s very little private debt left to write down, setting taxpayers up for major losses should Greece sink in, say, 2015.

It’s hard not to conclude that simply writing down the debt in the first place would have been a far superior course of action – much cheaper and more effective for everyone involved (apart from some banks and investors, but they could have been aided with far less money than the amount that has been poured into Greece so far). Now, to be a Monday morning quarterback, as the Americans say, is always easy, but many pointed this out at the time – including Open Europe which gave that recommendation as early as February 2010.

But it is even more important that lessons are learnt. Eurozone leaders should keep Greece in mind when dealing with Spain and its banking sector. A continued reluctance to fully accept the depth of the problems and resolve them now could come back to haunt them in the future (see here and here for our full recommendations for how to deal with the Spanish crisis). As has been noted in many a crisis, policymakers biggest failing could be failing to learn from previous mistakes.

If this continues, there will be no end to the costs of the eurozone crisis.

How eurozone taxpayers came to own Greece – Telegraph Blogs

Greek cabinet reshuffle bolsters Pasok's role


New Democracy leader Antonis Samaras (L) and Greek Socialist party (PASOK) leader Evangelos Venizelos (R) speak during a meeting in the Greek Parliament, in Athens (Photo: EPA/ALKIS KONSTANTINIDIS)

Greek cabinet reshuffle bolsters Pasok's role

Greek Prime Minister Antonis Samaras has reshuffled his cabinet after a minor party withdrew from the coalition. The personnel change hands a little more power to the socialist Pasok party.

The Greek premier made some changes to shore up his coalition after the smallest party within the government, the Democratic Left, withdrew its support.

Samaras (pictured left) named former Finance Minister Evangelos Venizelos (right), who is leader of junior coalition partner Pasok, as both foreign minister and deputy prime minister.

The departure of the Democratic Left from government means that the socialist Pasok party increases its number of ministers from two to four. However, the coalition now has a slender majority of just three deputies in the 300-seat assembly.

For Venizelos, who brokered a write-off of Greek debt in the previous government, the appointment is a return to government after elections last year that saw Samaras' New Democracy party emerge as the largest political force - albeit in a splintered parliament.

Samaras has been accused of ignoring his coalition partners, Pasok and the Democratic Left. The Democratic Left abandoned the coalition after a ministerial decree by the government announced the closure of state television broadcaster ERT.

The increased weighting of cabinet appointments to Pasok reflects the party's increased importance in the coalition since the departure of the Democratic Left.

Two other socialist ministers return to the government lineup, Michalis Chryssohoides taking the infrastructure and transport portfolio and Yannis Maniatis moving to an environment and energy post. Pasok also retained the agricultural ministry.

Meanwhile, outgoing Foreign Minister Dimitris Avramopoulos - from New Democracy - moves to the Defense Ministry to make way for Venizelos. Finance Minister Yannis Stournaras - an independent - retains his position.

rc/jm (AP, AFP, Reuters)

Greek cabinet reshuffle bolsters Pasok's role | News | DW.DE | 25.06.2013

Sunday, June 23, 2013

Greek government on knife edge as coalition party pulls out

By Anthee Carassava, Athens 5:57PM BST 21 Jun 2013

Greece’s troubled coalition government lay in tatters on Friday after a leftist partner withdrew from the alliance amid a crisis over the sudden shutdown of the country’s state broadcaster.

A protester holds a Greek flag in front of the ERT headquarters in northern Athens

A protester holds a Greek flag in front of the ERT headquarters in northern Athens Photo: AFP/Getty Images

The Democratic Left party, a junior partner in the country’s tense right-left coalition, pulled out of the government after Prime Minister Antonis Samaras refused to back down on his closure of the Hellenic Broadcasting Corporation (ERT), a move which has led to countrywide protests.

The departure of the Democratic Left stoked fears of fresh turmoil in the bailed-out country. Leaving the coalition on a knife edge, it marks the gravest crisis to engulf the government since the three parties joined forces year ago to steer Greece - the first domino to fall in Europe’s lingering debt crisis - to economic recovery.


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Officials ruled out snap elections and Mr Samaras was set to swiftly overhaul his cabinet council to reassure Greece’s European peers and the International Monetary Fund that his reform-minded government was up and running.

At least two ministers from the Democratic Left were due to be replaced, including Antonis Manitakis, the minister of public administration, who infuriated creditors with his resistance to mass public sector layoffs and the closure of state organizations. An additional two deputy ministers were clearing out their government offices, preparing to resign, party officials told the Telegraph.

A flurry of emergency meetings and votes at the Democratic Left headquarters on Friday pooled resounding support for the pullout, a move proposed by the party’s leader, Fotis Kouvelis. A soft-speaking grandfatherly-like figure of the leftist party, Mr Kouvelis had stormed out of crisis talks with the prime minister and his socialist counterpart, Evangelos Venizelos of PASOK, late on Wednesday, refusing to sign up to a compromise solution over the sudden switch-off on June 11.

“It was very difficult to continue,” he said. “There was serious disagreement [with the Prime Minister].”

The departure of Democratic Left and the support of its 14 lawmakers from the government leaves Mr Samaras relying on the socialist PASOK party, alone, to press ahead with the vital reforms — including 15,000 public sector layoffs by 2014 - that international lenders want in exchange for continued bailout funds.

The two remaining parties commands a slim three-seat majority in Greece’s 300-member parliament. Still, a duo of independent lawmakers have pledged to back the government’s fiscal policies, while Mr. Kouvelis conceded that he would passively support the government from the backbenches of parliament.

“Reforms should continue,” he said. “We stand by our core belief that that the country should stay within the euro.”

While the coalition may be able to corral enough support to survive in the near term, the Democratic Left pull-out casts a pall over its fate and that of the country’s troubled bailout programme.

“Even if it survives for now, a limping government can not last for long,” said John Loulis, a leading political strategist. “There will be more crises. They won’t be able to push reforms.”

“At some point — sooner rather than later we’ll have early elections,” he added.

Greece plunged into political crisis when the Prime Minister shut down ERT, sacking all its 2656 employees because of what he called a “sinister operation of waste and corruption.” The heavy-handed, abrupt move - with millions of television screens left black and scores of radio signals dead - touched off fiery protests, provoking a powerful political backlash.

For days, both of the premier’s governing partners insisted the 75-year-old network resume broadcasting, allowing restructuring to take place while it was in operation.

To defuse tensions, Mr Samaras offered earlier this week to hire back some 2000 employees for three months, until a new entity with a leaner and more efficient workforce was set up. But it was not enough to keep the Democratic Left in the coalition fold.

Greece’s fresh political turmoil coincides with a new hitch in the country’s multi-billion dollar bailout, following a potential funding shortfall due to the reluctance of some eurozone central banks to roll over their holdings of Greek government bonds, Reuters reported.

As a result Greece saw its borrowing costs spike on Friday with 10-year government bond rising to their highest level - 11.35 - percent since late April. Greek stocks sank by nearly 3 per cent.

Greek government on knife edge as coalition party pulls out - Telegraph

Sunday, June 16, 2013

Greek debt crisis: lessons in hindsight

 Barry Eichengreen

Barry Eichengreen, Saturday 15 June 2013 00.41 AEST

What should policymakers have done differently in confronting the country's financial crisis?

People protest against the government's decision to shut down the Greek state broadcaster, ERT

Thousands of people protest against the government's decision to shut down the Greek state broadcaster, ERT. Photograph: Aris (Kyriakos) Chatzistefanou/ Aris (Kyriakos) Chatzistefanou /Demotix/Corbis

A visit to Greece leaves many vivid impressions. There are, of course, the country's rich history, abundance of archeological sites, azure skies, and crystalline seas. But there is also the intense pressure under which Greek society is now functioning – and the extraordinary courage with which ordinary citizens are coping with economic disaster.

Inevitably, a visit also leaves questions. In particular, what should policymakers have done differently in confronting the country's financial crisis?

The critical policy mistakes were those committed at the outset of the crisis. It was already clear in the first half of 2010, when Greece lost access to financial markets, that the public debt was unsustainable. The country's sovereign debt should have been restructured without delay.

Had Greece quickly written down its debt burden by two-thirds, it would have been able to shed its crushing debt overhang. It could have used a portion of the interest savings to recapitalise the banks. It could have cut taxes, rather than raising them. It could have jump-started investment and got its economy moving again, if not in a matter of months, then, with luck, in no more than a year.

In its official post-mortem on the crisis, the International Monetary Fund now agrees that debt restructuring should have been undertaken earlier. But this was not its view at the time. Under the leadership of Dominique Strauss-Kahn, the Fund was in thrall to the French and German governments, which adamantly opposed debt relief.

The European Commission, for its part, has rejected the IMF's mea culpa. Preoccupied by the state of the French and German banks, it continues to argue that delaying debt restructuring was the right thing to do. It has no regrets about throwing Greece to the wolves.

Given this opposition, the Greek government would have had to move unilaterally. Hindsight suggests that the authorities should have done just that. Faced with foreign opposition, the government should have announced its decision to restructure as a fait accompli.

Clearly, there would have been risks. The "troika" – the IMF, the European Commission, and the European Central Bank – might have refused to provide an aid package, forcing Greece to compress imports even more sharply. The ECB might have cut off emergency liquidity assistance, forcing the government to impose capital controls and even consider abandoning the euro.

But, by acting preemptively, Greek leaders could have shaped the dialogue. They could have said to their EU colleagues, "Look, we have no choice but to restructure what is clearly an unsustainable debt. But make no mistake: our preference is to remain in the eurozone. We are committed to reforms. Given this, don't you agree that we are deserving of your support?"

Making a compelling case would have required Greece to get serious about those reforms. The government could have started by bringing together employers and unions to negotiate an equitable burden-sharing agreement, including an across-the-board reduction in wages and pensions, thereby getting a jump on internal devaluation. This could then have been complemented by a simultaneous agreement to restructure private debts. With everyone accepting sacrifices, it might have been possible to reach an accord on liberalising closed professions and on comprehensive tax reform.

But, instead of working together with its social partners, the government, heeding the troika's advice, dismantled the country's collective-bargaining system, leaving workers unrepresented. Greece thus lacked a mechanism to negotiate a social compact to cut wages, pensions, and other obligations in an equitable way. With every vested interest fighting for itself, closed professions proved impossible to pry open. Doubting that there would be shared sacrifice, those same interest groups were unable to negotiate meaningful tax reform.

With the Greek government thus failing to push through structural reforms, it was unable to earn the trust of its creditors; and, skeptical that the government was committed to reform, the troika demanded a pound of flesh, in the form of front-loaded austerity, as the price of assistance. Those front-loaded tax increases and government-spending cuts plunged the economy deeper into recession, making a farce of claims that the public debt was sustainable – and forcing the inevitable debt restructuring after two more agonizing years.

Greece is now seeking to make the best of a difficult situation. It is attempting to breathe life into the campaign for structural reform. It is lobbying the troika for further debt relief. But the damage will not be easily undone. Past mistakes, committed not just by Greece, but also by its international partners, make a difficult short-term future unavoidable.

It is important that other countries draw the right lessons. If they do, Greece's brave, beleaguered citizens can at least take comfort in knowing that many people elsewhere will be spared the same unnecessary sacrifices.

Copyright: Project Syndicate 2013

Greek debt crisis: lessons in hindsight | Business |

Greek PM seeks to avert crisis over broadcaster shutdown

By Anthee Carassava, Athens 3:45PM BST 13 Jun 2013

Greek Prime Minister Antonis Samaras has called talks with coalition partners in a bid to defuse a crisis over his government’s closure of the state broadcaster, a move that has prompted nationwide strikes and could trigger new elections.

Greek PM seeks to avert crisis over broadcaster shutdown

Thousands rally outside the Greek State broadcaster ERT headquarters in Athens Photo: AFP

The bailed-out Eurozone country was today facing fresh political turmoil as both junior coalition parties warned that Tuesday's abrupt closure of ERT could lead to the collapse of the fragile year-old alliance.

Buses and trains came to a halt, state offices were shut, hospitals operated on skeleton staff, and flights were grounded after Greece’s two biggest labour unions called 24-hour strikes in response to what they called a “coup-like move... to gag unbiased information”. Greek media maintained an indefinite news blackout while thousands of protesters rallied at ERT’s headquarters holding banners reading "Fire Samaras, not ERT workers!"

Workers formed a human chain at the building's entrance, while inside defiant staff camped out, attempting to continue a makeshift news service via private satellite links and internet streaming. In a statement, staff called for an end to the violation of "fundamental democratic rights" and for a guarantee that police would not be ordered into the offices.

The government said it pulled the plug on ERT and fired its 2,600 employees to stem the flow of taxpayers’ money into a network plagued by “waste, corruption and a scandalous operation.”

The conflict with the Socialist PASOK and the Democratic Left parties has rapidly turned into the most serious political crisis since Mr Samaras stitched the uneasy right-left coalition following last June’s election. “Either there’s a solution in a week or it’s elections,” conservative newspaper Kathimerini said on its front page.

The Prime Minister’s office said crisis talks had been tabled for Monday and a senior government official told Reuters that there was “scope for compromise”. However the official said Mr Samaras did not intend to reverse his decision to shutter ERT and relaunch a smaller more efficient entity.

Amid uncertainty whether agreement could be reached, one coalition source said the country was “on a knife edge”.

“The country doesn’t need elections, they would be a colossal mistake, but PASOK is not afraid of them,” said Socialist PASOK chief Evangelos Venizelos. “We support a radical restructuring of ERT, but not with blacked-out screens.”

Regarded by many as a den of patronage jobs which successive governments used over the decades to woo voters, ERT has shed much of its audience with the rise of commercial television. And while the network’s three channels pooled an audience share of 13 percent and its expenses ranged between three and seven times other commercial networks, pundits, politicians and the public were left aghast by its sudden switch-off. News presenters were cut off mid sentence, journalists dragged off air and a 75 year-old tradition of public broadcasting indelibly linked to Greece’s cultural identity scrapped within minutes.

“The prime minister may have wanted to show resolve and determination in his stated bid to reinvent the Greek state,” said John Loulis, a leading political strategist and analyst. “But in doing so, he came across as cocky and arrogant.” “He overplayed his hand,” he told The Telegraph, “and that may cost him dearly. This is the most defining moment for the coalition government.”

Although a coalion fraught with friction, the three parties have overcome frequent policy hitches in the year since they joined forces to steer the country to financial recovery.

Last month, however, disagreement over anti-racism reforms revealed serious rifts, with the the two minority partners breaking ranks from the prime minister for the first time.

“If a compromise isn’t reached now,” Mr Loulis said, “then the political crisis may spark early elections, and that would prove a monstrous failure and catastrophe for Greece.” Locked out of international markets and well into the throes of its worst financial crisis since World War II, the Greek economy has been shrinking for six consecutive years, with no end in sight, wiping out a decade of growth.

Greek PM seeks to avert crisis over broadcaster shutdown - Telegraph

Thursday, June 13, 2013

The loss of ERT, the 'Greek BBC', is a cultural calamity

 Jeanette Kwakye

Costas Douzinas, Wednesday 12 June 2013 22.47 AEST

Pulling the plug on our flawed but vital state broadcaster is political vandalism, with chilling echoes of the bad old days

People gather outside the Greece's publi

People gather to protest outside Greece's state broadcaster ERT after the government's shock decision to close it. Photograph: Louisa Gouliamaki/AFP/Getty Images

The Greek government recently announced that the dreaded "grexit" (Greece leaving the euro) no longer threatened the nation and had been replaced by the Greek "success story". If it was a success it didn't last long. On Tuesday, Greece became the first developed nation since 2007 to be downgraded to emerging-market status by index provider MSCI.

On the same day, the privatisation of the Greece's Public Gas Corporation (Depa), was abandoned when Russia's Gazprom withdrew the only bid on the table. Greek prime minister Antonis Samaras, who had personally negotiated the deal, announced that the government would re-advertise the sale and not take further austerity measures to fill the financial gap created. Under the terms imposed by the troika, Athens must raise at least €1.8 bn from privatisation by the end of September and sack 4,000 civil servants by the end of the year.

Then, , without warning, the government pulled the plug on the Hellenic Broadcasting Corporation (ERT) with its three TV channels and numerous local radio stations. The ERT online operation is a lifeline for the Greek diaspora. ERT World might not have had the prestige of the BBC's World Service but it was the main link to the homeland for Greeks in Melbourne, London and Chicago. Greeks everywhere have been outraged and demonstrations have been organised in many European cities. The archbishop of Athens and major Greek diaspora organisations have joined the chorus of condemnation.

The government claimed that the closure was not linked to the fiscal gap but was part of the wider streamlining of the public sector. The 2,700 journalists and technicians summarily sacked assist on both counts. The government announcement said that the broadcaster suffers from a "unique lack of transparency and incredible waste". It is true that every time the government changed, managers and top journalists were appointed to pursue the new political agenda. But the blame lies squarely with the ruling New Democracy and Pasok parties, which ran the country like a private fiefdom for 40 years. It was their cronies and clients who inflated ERT's workforce.

When I heard of the sudden disappearance of the ERT signal from the screens while on air I was reminded of the military dictatorship. The TV station of the armed forces, the formal mouthpiece of the colonels, would regularly post a bland card on screen accompanied by stirring martial music. It caused fear and trepidation. It was invariably the sign of a bad turn: an aborted coup, the invasion of Cyprus, the overthrow of the dictators by even worse thugs. I don't know of any democratic government who could pull the plug on the national broadcaster without any discussion, or the agreement of its coalition parties.

I had the same sense of foreboding yesterday. The economic and humanitarian crisis that has befallen Greece has been well documented. Equally dramatic is the destruction of democracy that has been gathering pace. The country is ruled through government decrees without parliamentary approval. A presidential decree, a legal tool that deeply offends the rule of law, was used to silence ERT. Freedom of speech exists only for those who back the government. When the Guardian revealed extensive police torture, which had remained largely unreported in Greece, the government threatened to sue the newspaper and sacked two senior TV journalists who reminded their audience that this was an idle threat. Kostas Vaxevanis, the journalist who published the so-called Lagarde list of potential major tax evaders, has been prosecuted twice. Private TV channels act as the propaganda arm of the government silencing or attacking the left.

The attack on the public broadcaster is part of the wider conflict between private media moguls and the fast shrinking public media. The closure of ERT is a victory in the developing war between the Murdochs and the BBCs of this world. ERT aspired to BBC status and neutrality but successive governments did not allow it. Its news and current affairs promoted the government line but, unlike many private broadcasters, it aired opposition views. Its cultural and entertainment programmes, many from British sources, were a breath of fresh air in a landscape dominated by Turkish soaps and soft porn.

Whatever the government's motives, it clearly underestimated the Greeks love for their poor man's "auntie". ERT represents the dignity that remains in the public sector after four years of continuous attacks by the government on its probity, honesty and efficiency. Thousands of protesters demonstrated outside the ERT headquarters in Athens and cities all over Greece. ERT journalists are broadcasting their programmes, streamed via private websites and radio stations, as ERT transmitters are now guarded by riot police. It looks as if the Greeks, after a period of relative lull during which the baton was passed from Athens to Istanbul, have woken again. The Greeks have a word for Samaras's action: hubris. Perhaps the "Greek success" may happen after all – but in the form of nemesis for a government and policies that have laid waste to a proud people.

The loss of ERT, the 'Greek BBC', is a cultural calamity | Costas Douzinas | Comment is free |

ERT shutdown: European Broadcasting Union sets up makeshift studio

Lisa O'Carroll, Wednesday 12 June 2013 22.03 AEST

EBU provides satellite news gathering operation in car park outside Greek state broadcaster's Athens headquarters


Protesters gather outside the Greek state broadcaster’s HQ in Athens, where the EBU has set up a makeshift studio. Photograph: Louisa Gouliamaki/AFP/Getty Images

The European Broadcasting Union has stepped in to help Greek TV journalists keep the country's state broadcaster on air after the government announced on Tuesday night it was closing it down as an austerity measure with immediate effect.

A number of ERT staff have defied the government order, staying overnight in the broadcaster's headquarters and managing to continue broadcasting a makeshift schedule of news and talk shows.

However, there are fears that police will move to empty the building, cut off power and seize all ERT equipment later on Wednesday.

ERT's TV and radio services went off air overnight, but had been broadcasting over the internet. "This is a blow to democracy," said ERT newsreader Antonis Alafogiorgos at the end of the main TV station's final broadcast.

The EBU, the body representing all of Europe's public service broadcasters, has set up a satellite news gathering operation in the carpark outside ERT's offices, enabling journalists to set up a makeshift TV service using equipment that has yet to be confiscated.

This is being fed around Europe on an EBU satellite as part of its European news exchange operation and can be picked up by commercial stations in Greece but not the general public.

A spokesman for the EBU, which is headquartered in Geneva, said a "high-level meeting with a conference call" with the director general of ERT would take place later on Wednesday to decide on next steps.

Roger Mosey, the BBC's editorial director, who is on the EBU board told the Guardian: "We're watching events in Greece with great concern. When countries are in difficulty, there's an even bigger need for public service broadcasting and for independent, impartial news coverage. I hope that's restored in Greece as soon as possible."

The EBU spokesman said ERT staff in contact with the organisation have told them the power has not yet been cut by the government, but email servers have been taken down. They are now contacting the EBU through smartphones, using Facebook and personal email accounts.

"This is unprecedented, stations have closed and re-opened for a number of reasons, but never with such abruptness," said a spokesman for the EBU.

There are also fears that the police will move in on ERT's Athens headquarters later on Wednesday to forcibly remove the journalists who have refused to leave the building and to confiscate cameras and other broadcasting equipment in the makeshift studio outside where thousands have gathered in protest.

The EBU has expressed its "profound dismay" in a letter to the Greek prime minister Antonis Samaras, urging him to reverse the ERT closure, which included firing about 2,500 workers.

The EBU's assistance comes as the EU commissioner for monetary affairs, Ollie Rehn, says it did not request the state broadcaster was closed down as part of the bailout programme.

ERT has overall funding of €328m (£278m), which comes from a €51 per household levy on energy bills.

The budget dwarves that of smaller countries like Ireland, which is also in an IMF/EU bailout programme and where public service broadcaster RTE has an annual income of €185m from licence fees and advertising.

However, it is similar to that of the less populous Denmark whose state broadcaster has annual revenues of €518m.

Greece's Conservative-led coalition government announced the unprecedented move to shut down the broadcaster, claiming it was required to cut "incredible waste" and that it planned to reopen a smaller state broadcasting operation at a later date.

"ERT is a case of an exceptional lack of transparency and incredible extravagance. This ends now," government spokesman Simos Kedikoglou said on Tuesday.

The controversial move comes five days after the International Monetary Fund chastised Greece for not moving more quickly to cut public spending.

Greece's largest unions, the GSEE general workers' union and the civil servants' ADEDY, began emergency meetings to decide on likely strikes in response to the ERT shutdown on Wednesday.

The founder of Shedia, a Greek news magazine, Chris Alefantis said: "The overnight closure of the state broadcaster is a sad day for Greek democracy, and not only for the Greek media landscape. The Greek people are just about to lose their voice."

ERT shutdown: European Broadcasting Union sets up makeshift studio | Media |

Greek journalists defy government order to close state broadcaster

Lisa O'Carroll, Wednesday 12 June 2013 19.54 AEST

ERT, Hellenic Broadcasting Corp, was ordered to shut down as part of public spending cuts, but remained on air via the internet

• Click here to see ERT's Ustream broadcast


ERT journalists at the state broadcaster’s headquarters continue to work, despite a government order to close down. Photograph: Louisa Gouliamaki/AFP/Getty Images

Journalists from Greece's state broadcaster ERT have defied a government order to close it down as part of the latest public spending cuts imposed to meet the terms of the country's bailout deal.

ERT, or Hellenic Broadcasting Corp, ceased broadcasting in some locations overnight on Tuesday as the government imposed shutdown took effect, with screens going blank and 2,500 staff fired with immediate effect. It is believed to be the first time a state broadcaster in Europe has been closed down by its government in the post-war era, with the move attracting widespread condemnation from inside Greece and also overseas.

ERT employees managed to keep the service going through the night and have continued broadcasting on the internet via Ustream, while thousands of protesters remained outside its headquarters north of Athens.

Greece's Conservative-led coalition government said the move was required to cut "incredible waste" and that it planned to reopen a smaller state broadcasting operation at a later date.

However, opposition to the ERT shutdown snowballed overnight, threatening to blow up into a major political crisis for the Greek government nearly a year after it took office.

The European Broadcasting Union, the body which represents all public service broadcasters in Europe, expressed dismay at the decision to close ERT, which became a founding member of the EBU in 1950. The EBU is on standby to step in and try and help ERT fully reopen.

Jean Paul Philippot, EBU president, and its director general Ingrid Deltenre wrote to the Greek prime minister urging him to "use all his powers to immediately reverse this decision".

In the letter, they said: "While we recognise the need to make budgetary savings, national broadcasters are more important than ever at times of national difficulty."

The European Federation of Journalists said the shutdown of Greece's state broadcaster was "absurd".

EFJ president Mogens Blicher-Bjerregård said: "These plans are simply absurd. It will be a major blow to democracy, to media pluralism and to journalism as a public good in Greece, thus depriving citizens from their right to honest, level-headed and unbiased information. But it will also mean the loss of many journalists' jobs across the country."

Greek journalist unions called a 24-hour strike, halting TV news on rival commercial channels, while Conservative prime minister Antonis Samaras is facing demands from his coalition partners, the socialist Pasok and Democratic Left party, to reverse the decision to close ERT.

The executive order to close ERT must be ratified by parliament within three months but cannot be approved without backing from Samaras's minority coalition partners.

Leftwing opposition leader Alexis Tsipras criticised the closure as "illegal" during an interview on ERT's online broadcast. "Many times the word 'coup' is used as an exaggeration," he said. "In this case, it is not an exaggeration."

Tsipras said he would meet the country's president, Karolos Papoulias, on Wednesday and ask him to cancel an executive order he signed allowing the government to close ERT.

The decision to close ERT was announced during an inspection in Athens by officials from Greece's bailout creditors. The so-called "troika" of the European Union, European Central Bank and International Monetary Fund has been pressing the government to start a long-delayed programme to lay off civil servants.

Government spokesman Simos Kedikoglou promised on Tuesday to reopen ERT at an unspecified later date.

Despite tensions over a number of issues, notably related to the austerity measures demanded by Greece's international creditors, the coalition government has surprised many by surviving thus far. It has also been credited with stabilising the bailed out Greek economy and easing the threat of an exit from the Euro.

Five days ago, the IMF admitted it made mistakes in handling Greece's first €110bn (£93bn) bailout in 2010 by framing the repayment programme on a model with growth assumptions that were too high. A second €130bn rescue package was approved in February 2012.

The IMF's original Greek unemployment projection was 15%, whereas it is now running at 25%. By comparison, unemployment in Ireland, which was also bailed out in 2010 but has not had the structural problems of Greece, has remained stubbornly high, hovering at just under 15% – twice that of the UK – for the past three years.

Greek journalists defy government order to close state broadcaster | Media |

Wednesday, June 12, 2013

Greece to close state broadcaster

By Alex Spillius and agencies 7:26PM BST 11 Jun 2013

The government of Greece said it will shut down the national broadcaster until further notice from Wednesday morning as part of its plan to cut costs.

Employees of the Greece state broadcaster ERT listen to the government announcing ERT's closure last night.

Employees of the Greece state broadcaster ERT listen to the government announcing ERT's closure last night. Photo: SIMELA PANTZARTZI/EPA

A government spokesman said screens would go black and 2,500 employees would be suspended until the company re-opens “as soon as possible”.

The shock move seemed intended to rouse the Hellenic Broadcasting Corporation (ERT) from what the centre-Right coalition regards as its complacent attitude to demands to provide savings in line with Greece’s commitment to its EU-IMF creditors.

"ERT is a case of an exceptional lack of transparency and incredible extravagance. This ends now," said Simos Kedikoglou, a government spokesman.

He did not say how many employees would be rehired if and when ERT’s channels start transmission again. Unions representing ERT staff members at three terrestrial TV stations, one satellite channel and its radio network said they would keep the stations on the air, without specifying how.

ERT is funded by a direct payment by of 4.3 euros added monthly to electricity bills.

In April the Greek parliament passed a bill which would see 15,000 state employees lose their jobs by the end of next year. It was a high profile part of a range of options to reduce expenditure and ensure bailout funds which the country needs to survive are delivered.

Those reform efforts were hit yesterday by the collapse of a major privatisation sale, when the Russian gas giant Gazprom pulled out of the bidding process for Greece's gas distributor DEPA.

The European Commission said that the failure of the process was a concern.

The setback could cause a shortfall of at least 700 million euros, with Greece needing to raise 2.6 billion this year under the terms of the two record fiscal bailouts.

It came as a mission from the so-called troika of creditors - the EU, IMF and the European Central Bank - began a scheduled audit of Greek reforms and fiscal performance that will determine the payment of the next instalment of rescue funding under bailout agreements.

The spokesman for EU Economic Affairs Commissioner Olli Rehn said that the failure of the sale would "clearly be discussed" during the audit.

A Greek government source earlier said it was "practically impossible" to find a buyer for DEPA this year.

Greek media had earlier raised the prospect of additional budget cuts this year to make up the expected shortfall from the sale failure.

Gazprom said it was worried by mounting unpaid bills owed to DEPA by independent electricity producers and industry.

"We did not receive adequate guarantees that DEPA's financial situation will not deteriorate until the deal is concluded," said Gazprom spokesman Sergei Kupriyanov.

"The takeover procedure could last another year after the end of the tender," he added. "The company is already burdened with unpaid customer bills."

But there are also strong signs that the European Union had reservations about the sale as Gazprom is a key gas supplier to Greece.

Greece to close state broadcaster - Telegraph

Greek state TV, radio go off the air

AP June 12, 2013, 8:49 am

The European Broadcasting Union has urged Greece to backtrack on closing the public broadcaster ERT.

AP © The European Broadcasting Union has urged Greece to backtrack on closing the public broadcaster ERT.

    Greek state TV and radio have been gradually pulled off the air, hours after the government said it would temporarily close all state-run broadcasts and lay off about 2500 workers.

    The surprise moves are part of a cost-cutting drive demanded by the bailed-out country's international creditors.

    The conservative-led government says the Hellenic Broadcasting Corp, or ERT, will reopen "as soon as possible" with a new, smaller workforce.

    It wasn't immediately clear how long that would take, and whether all stations would reopen.

    "Congratulations to the Greek government," newsreader Antonis Alafogiorgos said toward the end of ERT's main TV live broadcast.

    "This is a blow to democracy," he added, as thousands of media workers and supporters protested the closure outside the company's headquarters in Athens.

    The move heralds the first direct public-sector layoffs in more than three years of painful austerity, which have already cost nearly 1 million private sector jobs.

    The announcement widened cracks in the year-old governing coalition, with both minority partners condemning the corporation's suspension, while international journalists' associations expressed dismay.

    ERT TV and radio started to be yanked off the air in several parts of the country around 11 pm (2000 GMT) on Tuesday, about an hour before the government said all signals would go dead, although satellite broadcasts continued.

    A Finance Ministry statement said ERT has been formally disbanded, and authorities would "secure" the corporation's facilities.

    Riot police deployed outside ERT buildings in several parts of Greece, but no clashes were reported.

    Government spokesman Simos Kedikoglou - a former state TV journalist - described ERT as a "haven of waste" and says its 2,500 employees will be compensated.

    Debt-stifled Greece has depended on rescue loans from its European partners and the International Monetary Fund since May 2010.

    In exchange, it imposed deeply-resented income cuts and tax hikes, which exacerbated a crippling recession and forced tens of thousands of businesses to close, sending unemployment to a record of 27 per cent.

    As part of the bailout agreement, Greece's government pledged to cut 15,000 state jobs by 2015, out of a total of about 600,000.

    Greek state TV, radio go off the air - The West Australian

    Tuesday, June 11, 2013

    Greece has been sacrificed on the altar of the failed euro experiment


    By Nigel Farage, Ukip Leader 11:48AM BST 07 Jun 2013

    An IMF report proves that British taxpayers' money was used to back a coup against the Greek people, says Nigel Farage.

    Dreams have been destroyed, a future mortgaged Photo: Getty

    In June 2011, I stood in front of the assembled ranks of Eurocrats – Barrosso et al – with a copy of the IMF charter in my hand and read it out. The IMF expressly rejects the idea of supporting currencies; it is there instead to support countries.

    Now, exactly two years later, we find that the IMF – with the support of the political establishment of the European Union, including our own George Osborne and David Cameron – was preparing to gamble billions of pounds on a lie.

    This gamble has resulted in liabilities being run up that will take generations to pay back. It has resulted in the destruction of millions of lives and the colonial depredation of a once-proud nation.

    Greece has been sacrificed on the altar of the failed euro experiment, its business community decimated, its families driven to penury, its suicide rate through the roof (up more than 40 per cent over the period of the crisis). Unemployment in the strike country has quadrupled, and youth unemployment is now at 64%. Dreams have been destroyed, a future mortgaged – and hopes left rotting in untended olive groves.

    What has happened is nothing so much as the desperate play of an ancient regime, throwing a loaded dice at a Versailles gaming table, hoping against hope that for once the numbers will come up. They never did; they haven’t now.


    Related Articles

    According to the IMF report published this week, of the four criteria that they set themselves as to whether a bailout is acceptable, the bailout clearly failed on one of those, and they say with hindsight it should have failed on two more. In bald figures, Greece was needful of seven times the IMF-imposed quote. A staggering amount.

    And as to British money in this venal, below-the-counter deal? This is what the Chancellor said: "The IMF contributing money to the euro zone bailout fund? No. And Britain contributing money to the euro zone bailout fund? No. That is Britain’s clear position.”

    Except, of course, we now learn that the IMF was well aware at the time that the money was to be used to bail out the euro, the euro zone, and not to support the country of Greece.

    I am not sure how Mr Osborne will try to wriggle out of this; maybe he will try to use the defence of hindsight. The problem with that is that there were plenty of people at the time making it very clear that they knew that this was a breach of the IMF rules, even on his own backbenches.

    Maybe he was stuffing wax into his ears at the time, or maybe he was just being economical with the communiqué.

    The tragedy of all this dishonesty is that it has failed. It has in no way helped the Greeks, and has merely extended the pain and the trauma. It has resulted in the overthrow of good sense, and of democracy. There is a chilling passage in the IMF report that shows in simple language the effect of all this on the basic principles of democracy and good governance.

    “As 2011 progressed, a Greek euro exit became a serious possibility particularly after being discussed by euro leaders at the Cannes summit in November 2011. The government then announced a referendum to test the views of the Greek people. This was subsequently cancelled, but the government resigned later that month and was replaced by a technocratic government. “

    What we saw here was a coup, against the Greek people, a coup orchestrated with our connivance and backed by our money.

    Nigel Farage is Ukip Leader and MEP for the South East Counties

    Greece has been sacrificed on the altar of the failed euro experiment - Telegraph

    Tuesday, June 4, 2013

    Talk of recovery in Greece is premature – and all about justifying austerity


    Aditya Chakrabortty The Guardian, Tuesday 4 June 2013 04.59 AEST

    Bank bosses and politicians are trying to convince the world that Greece is on the mend – but this boosterism is all about justifying the shock therapy imposed on the euro zone


    Greek prime minister Antonis Samaras has started talking about his country's 'success story'. But how real is this recovery, asks Aditya Chakrabortty. Photograph: Georges Gobet/AFP/Getty Images

    Perhaps you remember reading about a basket case called Greece. The first domino to fall in the euro zone crisis, it was officially broke and only kept afloat by hundreds of billions in Euros from Europe and the IMF. To secure the loans, Athens had to slash spending, lay off or cut pay for thousands of public servants and flog state assets. The result was social uproar, political turmoil and economic collapse. Hundreds of thousands of Greeks took to the streets. The country faced ejection from the euro, what economists drolly dubbed a "Grexit". In short, it was in a deep hole. But if that's your image of Greece then you need to update it: that's so spring/summer 2012.

    Over the past few weeks, Athens' top brass have been trying to convince the world that happy days are here again. Prime minister Antonis Samaras now talks of the Greek "success story". The boss of the central bank and the finance minister say Greece has turned a corner. Editorialists in the national press and parts of the international financial press dutifully nod their assent. And those with Greek or European assets to sell clap along: "Forget Grexit – it could be Greecovery instead," ran one particularly bone-headed "research" note I received on Friday.

    What's at stake here is a much bigger prize than whether an economy worth 2% of Europe's annual GDP really is on the mend. It's about justifying the shock therapy imposed on distressed members of the euro zone.

    This was frankly put by Maria Paola Toschi, a market strategist at JP Morgan, in the FT last week. "If Greece can present itself as a recovering economy, having taken the medicine of fiscal austerity and supply-side reform, then the reform agenda of the European Central Bank and International Monetary Fund will be given a further boost."

    If the elites of Europe and Washington can claim to have "healed" Greece, then they can shrug off criticisms of euro zone austerity. And they can also defend an economic model that just three years ago looked as if it had crashed into a wall.

    Yet the exhibits the boosters are using do not a case make. Athens shares doubled in the past year? Cheap money from central banks and investors desperate for returns can play funny tricks. Wages have fallen? Yes, but the business investment that was meant to follow on from that hasn't materialised. The public finances are back in some kind of order? Taking an axe to the welfare state and public services will do that; still, few think Athens could go a day outside the sovereign version of debtor's jail.

    And no one is seriously disputing that the economy remains badly sick; the OECD predicts Greece will face its seventh year of recession in a row in 2014. More than one in four Greeks are out of a job; of young Greeks, nearly two in three. Around 60% of those out of work haven't been employed in more than a year. According to a recent piece by Nick Malkoutzis and Yiannis Mouzakis for Ekathimerini, there are 400,000 families in Greece without a single breadwinner.

    Although I was one of those who opposed the austerity imposed in Greece from the outset, I would far rather have been proved wrong. As someone who reported from Athens on a few occasions in 2011, and who has a number of Greek friends, I'd like to see them flourishing.

    As it is, the most that can be said for the elusive recovery is that Germany and the rest of Europe have decided to keep Athens in the single currency and to keep supplying it with Euros. From that has come a measure of financial stability which has attracted investors. The silent run on the banks, with savers pulling out their money, has stopped; but the financial institutions now function more like deposit vaults than dispensers of credit. And there have been some important cultural and institutional changes, as fund manager Jason Manolopoulos points out. Before the crisis, the government didn't know how many civil servants it employed; now it does. And, should you wish to trade in the middle of a depression, it has got easier and cheaper to set up a business.

    But pit those gains against the near-collapse of the health system, the rise of the neo-Nazi Golden Dawn and the clampdown on investigative journalists such as Kostas Vaxevanis, persecuted for publishing a list of super-rich tax dodgers.

    While the economy remains catatonic and civil society is in crisis, all such boosterism amounts to is a 21st-century version of claiming the operation was successful; it's just a shame the patient died. It's a more dramatic variant of something George Osborne and the austerity crowd are trying in the UK, too: to define down what success looks like.

    Two summers ago, I sat with economist Yanis Varoufakis on his balcony overlooking the Acropolis, and asked him to sum up the outlook for Greece. "It's in freefall." Last night, I asked him the same question. "It's still in freefall."

    Then he told me a story. Last year, his book The Global Minotaur was a bestseller in Greece, ahead even of Fifty Shades of Grey. But, he said, he had not received a cent in royalties. Why not? His publisher hadn't received any money from the bookshops, which were all bust. Rather than chase them, put booksellers out of business and finally kiss goodbye to getting any money, the publisher preferred to leave it be. So the shops, the imprint and the author all got by on nothing.

    That sweet little story of economic inertia seems to me to say a lot.

    Talk of recovery in Greece is premature – and all about justifying austerity | Comment is free | The Guardian

    Monday, June 3, 2013

    Britain and the euro: what if we'd joined?


    Ten years after Gordon Brown decided the UK should stay outside the eurozone, imagine the alternative scenario

    A one euro coin alongside a British pound ensignia

    A bigger boom, a bigger bust, no more euro ... and Nigel Farage in No. 10? Photograph: Corbis

    Ten years ago this week, it was euro crunch time for Britain. Gordon Brown had promised an assessment of whether the UK met his five tests for entry into the single currency within two years of the 2001 election. He met the deadline almost to the day.

    The conclusion was never really in doubt. Brown did not think the UK should join the single currency and the Treasury analysis provided him with strong arguments to fend off the much more enthusiastic Tony Blair.

    Four of the five tests, including the two most important ones involving sustainable convergence and economic flexibility to withstand shocks, were failed. And that was that. Pro-euro cabinet members such as Charles Clarke and Patricia Hewitt grumbled that the decision had been a Treasury stitchup, but Brown's position was unassailable. Euro membership was off the agenda for the foreseeable future.

    A jolly good thing too, of course. The euro has proved to be exactly the job-destroying, recession-creating, undemocratic monster the doubters always warned it would be. This was not the received wisdom on the left at the time, when to suggest that the euro would be supercharged monetarism, Thatcherism with knobs on, was deemed unseemly. People who liked the euro were civilised, supported the arts, went to Tuscany or the Dordogne for their holidays. People who didn't like the euro drove white vans decorated with the flag of St George.

    Today, it is hard to find even the most fervent euro enthusiasts in the Liberal Democrat party arguing for UK membership of the single currency. Disillusionment with what was once called "the Project" is almost total in the face of grinding austerity, a double-dip recession that has already lasted 18 months and a jobless rate of 12.2% and rising.

    Imagine for a moment that Nick Clegg, Ken Clarke and Tony Blair had triumphed back in 2003. Let's do one of Niall Ferguson's virtual history exercises and think through what would have happened had Brown been overruled and UK entry into the single currency fixed for 2005.

    Stage one would have been the transition from the pound to the euro. The most important part of this process, to fix the right level for the pound to join at, proved quite a test for the new chancellor, Charles Clarke, the man chosen by Blair to replace Brown, who was now sitting on Labour's backbenches.

    Sterling had already been overvalued in the early 2000s, with hot money attracted into London by a combination of relative high interest rates and a prolonged period of strong growth. The UK government feared that joining the euro at the wrong rate would penalise British manufacturers, while those already in the single currency were concerned that too cheap a rate for sterling entry would hand an added competitive advantage to the UK's strong financial services sector. Despite attempts by the new governor of the Bank of England, Mervyn King, to drive down the level of the pound, when the time came for the euro to be adopted it was clear that the exchange rate was too high. That, said Britain's new partners in the single currency, was the penalty paid for failing to join from the outset.

    Stage two of the process would have been the bubble phase. Having ceded the right to conduct its own monetary policy, the UK had to accept the interest rate the European Central Bank (ECB) set for the eurozone as a whole. As one of the bigger members of the club, Britain carried weight at the discussions in Frankfurt, but monetary policy proved to be far too loose for a country already in the early stages of a housing boom and where the balance of trade was deteriorating year by year.

    As in Spain and Ireland, a spectacular bubble developed in the housing market, fuelled by excessively low lending rates, an "anything goes" mentality among lenders and lax regulation. Even outside the euro, the UK had quite a boom going in the housing market in the mid-2000s. Inside, it would have been like the wild west.

    When the crash came in 2007 it was a spectacular one. The financial markets imploded, the banks stopped lending and cheap credit dried up. The housing market collapsed, unemployment rose, tax receipts shrivelled and the government's budget deficit went through the roof. Speculation that the UK might leave the euro, as it had left the European exchange rate mechanism in 1992, meant investors demanded a high premium for holding UK government debt. Benchmark bond yields rose, first to 5%, then to 6%. When they hit 7%, Blair had no choice but to ask for help from the troika – the International Monetary Fund, the ECB and the EU.

    Severe conditions were attached to the loan, the biggest the IMF had ever organised, including deep cuts in welfare and pensions and wage reductions across the public sector. Deprived of the safety valve of currency depreciation, Britain had no choice but to do what Spain, Greece, Ireland and Portugal were doing and drive down domestic costs to make the economy more competitive.

    Unlike in Spain, Greece, Ireland and Portugal, however, there was no deep attachment in Britain to Europe as a political identity. Far from it. As a result, the buildup to the general election of 2010 was marked by street protests even more widespread and angry than the poll tax riots of 1990. The opposition Conservative party went into the campaign pledging a referendum on whether Britain should leave the euro and won by a landslide. The number of Labour MPs fell to under 100, its worst performance since the 1930s. Nigel Farage's UK Independence party made spectacular gains.

    In the referendum that followed the election, the vote was overwhelmingly in favour of exit. The financial markets responded by selling the bonds of any other eurozone country struggling to cope with the rigours of austerity programmes demanded by the European commission in Brussels and the ECB in Frankfurt. By then, that meant pretty much every country apart from a hard core that included Germany, Austria and Finland.

    The market turbulence caused by Britain's exit proved terminal for the euro. Bond yields rose sharply across the single currency as investors realised they had underpriced the risks of a country leaving the club. Outside the euro, life was not exactly a bed of roses for the UK, but after a deep and painful recession economic recovery began.

    That, in short, is what would have happened had Blair won and Brown lost in 2003. The boom would have been bigger and so would the bust. Britain would have destroyed the euro on departure, and would now be on the point of leaving the EU altogether. The idea that Farage might be the next prime minister would be quite credible.

    Britain and the euro: what if we'd joined? | Business |