Thursday, April 30, 2015

'We won't surrender': Firebrand Greek minister risks fresh schism with Europe

By Mehreen Khan 29 April 2015

Syriza's radical Leftist energy chief warns Grexit will land a 'mortal blow' to monetary union

Alexis the Saviour: time is running out for Greece's Leftist premier to avert a insolvency

Hopes that a revamped Greek bail-out team would finally break a two-month deadlock with creditors took a fresh blow on Wednesday, as the Leftist government's firebrand energy minister pledged "no surrender" to international lenders.

Highlighting a deep schism within the ruling party over Greece's future in the single currency, Panagiotis Lafazanis said there could be "no compromise" with creditor powers, who were seeking "subordination and surrender" from his government.

"Our government will not bow down, neither will it surrender," wrote Mr Lafazanis in a Greek newspaper. "Syriza will not accept an agreement that would be incompatible to its radical commitments."

A popular figurehead of the party's radical Left Platform, Mr Lafazanis attacked the Troika for "water-boarding" the Greek economy, choking its people into submission.

"If our 'partners' and the IMF believe that they will blackmail us using the refusal of financing as a weapon, and that they will terrorise the Greek people forever using the 'bogeyman' of default and of a national currency, they are woefully deluded."

The energy minister, who has ties with Moscow, has been one of the fiercest critics of the Troika's plans to undercut Athens' promises to address Greece's "humanitarian crisis" through raising wages and pensions for the poorest.

Syriza's energy chief has pushed the country's towards the Kremlin (Source: AFP/Getty)

He added the country could gradually get on its feet after a euro exit, but warned monetary union would be "subjected to a grave and mortal wound" should Greece be forced out.

The intervention comes amid hope that Athens was edging closer to agreeing the basis for its reforms-for-cash programme, after a two-month hiatus that has pushed the country towards insolvency.

A newly established Greek bail-out team, headed by Oxford-educated minister Euclid Tsakalotos, was due to present a draft reform list to officials in Brussels on Wednesday.

The appointment of the softly-spoken Marxist economist came after Brussels had grown increasingly exasperated by the stalling tactics of finance minister, Mr Varoufakis.

But insisting he was still at the forefront of talks, the "rock-star" former academic said he remained "in charge of the negotiations with the euro group".

Mr Varoufakis's comments came after he was attacked by a group of self-styled anarchists at an Athens restaurant with his wife on Tuesday night. The finance minister managed to emerge unscathed from the episode, after group of hooded individuals threw glass objects at the couple.

Stark new figures released on Wednesday showed that Greek bank deposits had fallen to a 10-year low, as people were continuing to pull money and assets out of the financial system.


Bank deposits fell by a further €2.5bn in March, with more than €26bn having fled the country since December 2014.

Depleted deposits have been partially offset by ever-increasing amounts of emergency bank funding (ELA) from the European Central Bank.

The ECB was forced to plug the gap once again on Wednesday, raising its ELA limit by a further €1.4bn. Nearly €77bn has now been pumped into Greek banks, which have been cut off from ordinary loans since February.

Head of the Eurozone's finance ministers, Jeroen Dijsselbloem, said the ECB would not consider loosening its grip over the country until a deal was struck.

"The Greek government gambled that if it negotiated with us, the ECB would open its cashier windows," said the Dutch finance minister.

"But there will be no easy access to the ECB's windows until there's a solid agreement with the Euro group," said Mr Dijsselbloem. "That's been made clear to them time and time again."

"Without further loans, Greece won't make it, that's the reality."

'We won't surrender': Firebrand Greek minister risks fresh schism with Europe - Telegraph

Wednesday, April 29, 2015

Greek finance minister denies being sidelined from debt talks

Helena Smith in Athens and Ian Traynor in Brussels Wednesday 29 April 2015

Yanis Varoufakis renews outspoken attack on Eurozone partners despite being replaced as leader of bailout negotiating team

Greek finance minister Yanis Varoufakis

Greece’s finance minister, Yanis Varoufakis, has come under fire for failing to come up with a comprehensive list of economic reforms that are needed if the country is to get vital loans to avoid going bankrupt. Photograph: AP

The Greek finance minister has denied that he has been sidelined from talks with Greece’s creditors on Tuesday as he resumed outspoken attacks on the country’s Eurozone partners.

Greek finance minister Yanis Varoufakis replaced as leader of debt talks

Syriza-led coalition appoints economics professor in leading role to overcome mounting European opposition to his controversial colleague

Read more

Preserving his reputation for combativeness, Yanis Varoufakis chastised Eurozone governments for failing to honour their promises and rubbished reports that he would no longer be participating in negotiations to avert the bankruptcy of Europe’s most indebted state.

Speaking to reporters as he arrived for work on his motorbike, Varoufakis said: “When we shake hands and say this means A and not B, it means A and not B. Unfortunately, the other side has not shown such an attachment to keeping its word. It seems that in Europe we all need to try more to restore confidence.”

After three months of turbulent talks, and with cash reserves running perilously low, Greece’s leftist-led coalition reshuffled its negotiating team on Monday.

In a move that was interpreted as the beginning of the finance minister’s political demise, it was announced that the British-educated economist, Euclid Tsakalotos, would be the pointsman between Athens and foreign lenders at the EU, the European Central Bank and the International Monetary Fund.

But asked if the government’s move would mean he would be less visible, Varoufakis shot back with a rhetorical: “The finance minister? The man who is responsible for the political negotiating group?”

Euclid Tsakalotos

Greece’s alternate foreign minister, Euclid Tsakalotos. Photograph: Reuters

Greece’s Eurozone creditors, however, are hopeful the reshuffle will make a difference. “It should be helpful,” said an EU official involved in the negotiations with Greece. He ascribed the apparent sidelining of Varoufakis to the fiasco in Latvia last Friday when several Eurozone countries rounded on the Greek finance minister, who then made matters worse by tweeting about being the target of Eurozone “hatred”.

In Brussels the new team named by the Greek prime minister, Alexis Tsipras, was viewed as “moderate” and “sensible”. Officials welcomed the greater involvement of Giorgos Houliarakis , an ally of the pragmatic deputy prime minister Yannis Dragasakis. Houliarakis has been involved in much of the talks with the so-called “Brussels Group” of financial technocrats doing the spadework on the conditions for resuming lending to Greece. Athens is seeking a life-saving €7.2bn in further funding before seeking a third bailout this summer.

Regardless of the substance of his arguments, Varoufakis has been deemed a disaster in the negotiations by his counterparts. What started as a clash between a new left-wing anti-austerity government in Athens and German fiscal hawks in February quickly spread into Greek isolation ranged against the other 18 countries of the Eurozone, largely because of what was seen as know-it-all grandstanding by Varoufakis.

“They made every mistake in the book,” said a senior EU diplomat. “They solidified Eurozone opinion behind the Germans. Everything that Varoufakis has done has been calculated to alienate.”

Alexis Tsipras

Alexis Tsipras, who insists Varoufakis is an ‘important asset’. Photograph: AFP/Getty

However, Tsipras voiced support for Varoufakis on Monday, describing him as “an important asset” for his Syriza party-led administration. A passionate opponent of austerity, Varoufakis has set the agenda for bailout talks since the radical leftists assumed power in January.

“I will admit that there is a negative climate,” Tsipras said. “Yanis Varoufakis is an important asset for the government and the country. He has annoyed [people] because he speaks the language of finance ministers, of economics, better than they do.”

Now that negotiations were in their final phase, criticism was only to be expected, Tsipras said. “Now that we are in the final stretch, we need to reorganise our teams in order to have full control and the best effectiveness possible,” he said.

Government insiders insisted the reshuffle was tantamount to window-dressing, aimed at placating the bodies that had blamed Varoufakis for the lack of headway.

Among those critics were the head of the euro group of Eurozone finance ministers, Jeroen Dijsselbloem, and the European Central Bank. The ECB was also singled out for criticism by the Greek premier.

Greece’s pressing liquidity problem, he said, had been exacerbated by the ECB’s “politically and ethically unorthodox” decision to prohibit the country issuing short-term government debt.

Graffiti by Greek street artist Achilles is seen on a wall of an abandoned house in central Athens, on Wednesday, April 22, 2015. Graffiti by Greek street artist Achilles in central Athens. The country remains in crisis mode as it continues talks with creditors. Photograph: AP

On Tuesday Dijsselbloem hit back saying Athens should not have been surprised by the ECB’s move. “The Greek government gambled that if it negotiated with us, the ECB would open its cashier windows, relax the rules,” the Dutchman said in a television interview. “There will be no easy access to the ECB’s windows until there is a solid agreement with the Euro group. That’s been made clear to them time and time again.”

Despite the standoff, the Tsipras administration has pledged to present reform proposals to legislators in Athens by Thursday in an attempt to facilitate talks.

But while Tsipras emphasised that an interim deal to unlock bailout funds would be concluded this week or next, he also raised the prospect of further political turmoil if creditors persisted in making demands deemed unacceptable by his anti-austerity administration. “If I find myself in a difficult position – I hope I don’t – that pushes me beyond the limits [of his mandate] I will resort to the people, obviously not through elections but with a referendum. We should not be afraid of the people.”

Reacting to the prospect of a referendum, Dijsselbloem said Greece did not have the time to conduct a plebiscite. The country faces a tight deadline of debt repayments starting with a €780m loan instalment to the IMF on 12 May, the day after a crucial euro group summit.

“It would cost money, it would create great political uncertainty, and I don’t think we have the time,” he said. “And I don’t think the Greeks have the time for it.”

Greek finance minister denies being sidelined from debt talks | Business | The Guardian

Tuesday, April 28, 2015

Creditors rule out massive third bail-out for embattled Greece

By Mehreen Khan 27 April 2015

Prime Minister Alexis Tsipras shuffles his bail-out personnel team as clock ticks in debt drama

A European Union flag and a Greek national flag fly beneath the Parthenon temple on Acropolis Hill in Athens

Into the shadows: Finance minister Yanis Varoufakis has been sidelined in Greece's future bail-out negotiations Photo: Kostas Tsironis/Bloomberg

Europe's creditor powers have ruled out another "big" bail-out programme for Greece as the country edges ever-closer to an unprecedented default on its international lenders.

With relations between finance minister Yanis Varoufakis and his Eurozone counterparts reaching a fresh nadir on Friday, the head of the Euro group Jeroen Dijsselbloem said there would be no repeat rescue package of the magnitude agreed in 2010 and 2012.

It had been widely thought that cash-strapped Athens would require a fresh package of loans worth around €50bn to €60bn when its current programme ends in June.

However, Mr Dijsselbloem told Dutch newspaper de Volkskrant any new bail-out would be of a “completely different order” to the current €240bn rescue package.

Since its election in January, Greece's Syriza-led government has been seeking a "new contract" with its creditors, pleading for relief on a €330bn debt mountain, and a relaxation of the austerity measures the country has been subject to since 2012.

Greece's grand plan: default and stay in the euro
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Failure to agree a new bail-out package would further call into question Greece's long-term future in the currency union. The country faces another key period of debt redemption in July and August, when €6.8bn of government bonds held by the European Central Bank are due to mature.

Defaulting on the central bank would likely lead to the ECB pulling the plug on the country, warn analysts.

More immediately, Athens is scrambling to find the cash it needs to pay its public sector salaries and pensions worth €1.7bn at the end of the month. The Leftist government also faces a €960m loan repayment to the International Monetary Fund in the first two weeks of May.

But the government's attempts to force local government bodies to transfer their excess cash reserves to the Bank of Greece hit a buffer on Monday as municipalities said they would resist the measure until it was officially passed into law.

Athens' finance ministry estimates the raid could raise €1.5bn - €2bn for the state's coffers, helping tide the government over until the end of May.

Under pressure from Brussels, Prime Minister Tsipras has been forced to resort to drastic measures as Greece's bail-out standoff has escalated. Tensions reached breaking point last week when Mr Varoufakis was reportedly "hammered" for his failure to deliver on promises to reform the economy at a meeting in Riga.

In a bid to revive talks, the Greek premier moved to set up a new negotiating team which will be notionally headed by Mr Varoufakis and include prominent government officials such as Syriza's shadow finance minister and chief economics adviser Euclid Tsakalotos.

An Oxford-educated economist, Mr Tsakalotos is expected to take a more prominent role in negotiations with the Brussels Group. Greek markets rallied on the news of the minor reshuffle, closing 4.5pc, while yields on three-year government debt fell by nearly 4pc.

Jeroen Dijsselbloem (left) said there were "big, big problems" with Greece's current attempts to release bail-out cash

In a hint that he may be sidelined in further negotiations, Mr Varoufakis vented his frustrations on social media at the weekend, quoting Franklin Roosevelt in "welcoming the hatred" of his counterparts.

But in a sign that a compromise may be near, the Leftist government is reported to be ready to scrap plans to raise the minimum wage when it presents a fresh reform list to Brussels on Wednesday, according to reports in Germany's Bild.

A minimum wage hike has been a cornerstone of Syriza's pre-election pledge to end Greece's "humanitarian crisis", but has proven to be a major obstacle for creditors, who are demanding a raft of revenue-raising measures including VAT hikes and public sector privatisations.


Greece has been forced to undergo a painful process of "internal devaluation", slashing wages in a bid to gain competitiveness at the expense of its northern creditor member states.

But despite the adjustment, new figures from Eurostat showed the country had the highest rate of underemployment in Europe. A staggering 72.1pc of all part-time employees in Greece wanted to work more hours in 2014, compared to the EU average of 22.2pc.

Conservative estimates of Greece's parlous finances expect the government to run out of cash by mid-May. In the absence of fresh bail-out money, there is a 50pc chance of "some form of Greek sovereign default," according to Stephanie Flanders of JP Morgan Asset Management.

"Carefully handled, a partial default does not have to cause lasting damage to Greece or European markets. Nor does it have to lead to a Greek exit from the Eurozone," said Ms Flanders. "But at a minimum, investors should be prepared for a messy few months for Greek financial markets."

A Greek default would also be a "systemic event for markets", said analysts at Goldman Sachs.

"Peripheral spread volatility is likely to increase as time goes by, as investors will associate a higher probability of default to a higher probability of Grexit," said Silvia Ardagna, at Goldman Sachs.

Creditors rule out massive third bail-out for embattled Greece - Telegraph

Greek finance minister hints at strained EU relations: 'I welcome their hatred'

Helena Smith in Athens Monday 27 April 2015

Yanis Varoufakis quotes Franklin D Roosevelt in a statement that seems to confirm he received a dressing-down from Eurozone ministers on Friday

Yanis Varoufakis, centre, and other ministers at the eurozone meeting in Riga, Latvia, on Friday.

Yanis Varoufakis, centre, and other ministers at the Eurozone meeting in Riga, Latvia, on Friday. Photograph: Dmitris Sulzics/AP

The gulf between Greece and its creditors widened yet further on Sunday with the crisis-hit country’s finance minister brazenly tweeting that he has become a target of hate.

Upping the ante in what has increasingly become a war of nerves, Yanis Varoufakis took on his opponents by making use of one of Franklin D Roosevelt’s most memorable lines. “FDR, 1936: ‘they are unanimous in their hate for me; and I welcome their hatred’. A quotation close to my heart (& reality) these days,” he wrote.

The intervention appeared to confirm reports that Varoufakis had received an excoriating dressing-down from exasperated Eurozone counterparts in Riga on Friday. One participant felt fit to describe the celebrity finance minister as “a time-waster, a gambler and an amateur”.

Highlighting just how strained relations have become, the anti-austerity politician stayed away from an official dinner following the euro group – the latest in a litany of missed deadlines to reach a cash-for-reform deal to keep the loan-dependent country afloat.

The increasingly ugly game of brinkmanship intensified as prime minister Alexis Tsipras’s radical-left Syriza coalition – elected on a pledge to end the painful cuts enforced on Athens in return for aid – warned of the risk of default if creditors continued to “asphyxiate” Greece by starving it of liquidity.

“We aren’t bluffing,” Syriza’s parliamentary spokesman Nikos Filis insisted at the weekend. “In July and August we have to pay a lot. We won’t be able to pay €20bn without having been financed.”

Attributing the deadlock in negotiations to the determination of lenders not to see other anti-austerity parties rise in Europe, he added: “The issue is essentially political. It’s not only limited to an economic negotiation. They don’t want the new Greek government, it doesn’t suit them. They’ve said it openly.”

Greek prime minister Alexis Tsipras (right) talks to DPM Yannis Dragasakis, who said   Athens might be forced 'to take measures that until now we have tried to avoid'.

Greek prime minister Alexis Tsipras (right) talks to DPM Yannis Dragasakis, who said Athens might be forced ‘to take measures that until now we have tried to avoid’. Photograph: Giorgos Panagakis/Demotix/Corbis

Earlier, the country’s deputy prime minister Yannis Dragasakis said Athens might be forced “to take measures that until now we have tried to avoid” if the political uncertainty continued.

With cash reserves running out fast and bankruptcy looming, the government has raised the spectre of electing to pay public sector pensions and salaries over debt repayments to the International Monetary Fund and European Central Bank.

“There is clearly an imperative need for an interim agreement to be concluded in the first days of May, if not within April,” Dragasakis, who heads the administration’s economic policy, told Avgi newspaper, Syriza’s mouthpiece.

“We are mainly requesting that the current liquidity problem be recognised as a problem of common responsibility and that it be jointly addressed.”

The Greek government may want to take [negotiations] to the wire, but does it know where the wire is?

The three-month-old coalition has frequently blamed the ECB for cutting off the Greek economy’s oxygen by forcing the country’s banks to survive on weekly handouts of emergency assistance, and limiting their lending to the state.

Greece has been given until the next meeting of Eurozone finance ministers on 11 May to deliver a comprehensive package of reforms to unlock €7.2bn in short-term aid held over since last summer. The government has repeatedly said it wants a deal but has adamantly refused to cross “red lines” that would further scale back pensions, trim workers’ rights and pave the way to privatisations opposed by far-left factions in Syriza.

“There is a great sense of urgency for all of us. Time is running out,” the euro group chairman Jeroen Dijsselbloem said after Friday’s meeting. “But there is a great determination among our Greek colleagues.”

Reflecting on the strained relations, the defence minister Panos Kammenos, who heads Anel, the coalition’s junior right-wing partner, did not rule out a referendum being called if a deal wasn’t concluded and there was rupture with Europe. “In the event that they try to enforce an informal exit on us, a plebiscite could happen,” he told Mega TV. “Wolfgang Schäuble has a very hostile stance towards our country,” he said of the German finance minster, who hinted on Saturday that Europe had prepared contingency plans to deal with a possible Greek exit from the Eurozone. “He [treats] Europe as if it is his own shop. If Mr Schäuble’s views are imposed there will not be a solution.”

What happens if Greece can’t pay its debts?

The standoff between a left-wing government and the financial powers of the EU is near to breaking point. What if the worst happens?

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While the vast majority of Greeks agree that austerity is self-defeating, there is a growing sense that the gridlock in talks is also counter-productive. Tensions with lenders have spurred a mini-run on Greek banks, with the real economy coming to a standstill. A Kapa research poll published in the Sunday Vima newspaper showed that 72% wanted the country to strike a deal with creditors, versus 23% who were in favour of a clash.

“The Greek government may want to take [negotiations] to the wire, but does it know where the wire is?” said a senior EU official.

“It is playing with fire. With no endgame in sight, of course the EU has contingency plans. It would be derelict of it not to.”

In the absence of progress, the Greek prime minister has turned personally to the woman who was once his greatest rival, the German chancellor Angela Merkel, for help. Shifting his attention from Brussels, Tsipras has placed hope in a political solution ultimately being sealed with Berlin, the provider of the bulk of Greece’s €240bn bailout programme.

Greek finance minister hints at strained EU relations: 'I welcome their hatred' | World news | The Guardian

Greece tries to ease tensions with lenders by reshuffling negotiating team

Helena Smith in Athens Tuesday 28 April 2015

Syriza-led coalition appoints economics professor in leading role to overcome mounting European opposition to his controversial colleague

Insiders say Greek finance minister Yanis Varoufakis still holds a lot of sway in negotiations, despite Alexis Tsipras appointing a new coordinator.

Insiders say Greek finance minister Yanis Varoufakis still holds a lot of sway in negotiations, despite Alexis Tsipras appointing a new coordinator. Photograph: Ints Kalnins/Reuters

Greece moved to inject fresh momentum into problem-plagued talks with creditors on Monday, reshuffling its negotiating team to try and defuse tensions over its outspoken finance minister.

Hopes that a compromise deal was imminent helped rally the markets, as the FTSE rose to a new record high in London, despite Athens insisting that Yanis Varoufakis would continue to supervise talks.

In a bid to ease tensions with lenders, the Syriza party-led coalition said the minister of international financial relations, Euclid Tsakalotos, would take over the coordination of the new team. The appointment will see the economics professor, who was raised in the UK, assuming a more active role in face-to-face negotiations with creditors.

Reacting to the news, a senior European Union official confided that it had become “impossible” to do business with Varoufakis. “It had got to the point where eyes roll,” he said. “People had got sick and tired of being lectured about austerity and the effects of the crisis. Any sympathy for Greece was eroded by his failure to draft concrete proposals.”

However, one well-placed Athens official insisted that Varoufakis’s role had been upgraded “in many ways”. The official added: “To make him resign would be to retreat and the government would never do that.”

Three months after his elevation to power, prime minister Alexis Tsipras has come under extraordinary pressure to remove Varoufakis. Yet last night Tsipras said that his finance minister “is an important asset for the government, and [with creditors] he speaks their language better then they do”. In a wide-ranging interview aired on Greek TV, Tsipras rejected suggestions that his government had any intention of sacrificing the politician. Now that negotiations with creditors were in the final straight, Greece had to reorganise its negotiating team, the PM said.

Varoufakis, the academic-turned-politician who has set the anti-austerity administration’s negotiating agenda from the outset, was rounded on by Eurozone finance ministers at an explosive meeting on Friday. Upbraided for his brash style and reckless brinkmanship, Varoufakis hit back with a tweet that borrowed one of US president Franklin D Roosevelt’s more memorial lines: “They are unanimous in their hate for me; and I welcome their hatred.”

The German finance minister Wolfgang Schauble had led the opposition against him with last week’s clash leaving Greece looking ever more isolated in its battle to keep bankruptcy at bay. Berlin has made clear that Athens will have to provide a detailed list of reforms if it is to unlock €7.2bn (£5.1bn) worth of rescue funds to avert default on debt payments in May.

Tsakalotos is expected, along with Varoufakis, to represent Greece at the next euro group meeting of finance ministers on 11 May, a make-or-break date for the government to persuade creditors at the European Union, European Central Bank and the International Monetary Fund to release funds. On 12 May it must meet a debt payment of €780m (£558m) to the IMF.

But while mild-mannered and respected, the Oxford-educated Tsakalatos is also tough, and unlikely to want to cross any of the “red lines” Tsipras’ Syriza party has set in its bid to change Greece’s economic course.

This month he told the Guardian: “I am optimistic that an interim deal will be struck if not in April then sometime soon but they [creditors] cannot expect us to enforce measures that not even the previous [pro-bailout] government could do. It is unreasonable, for example, to ask us to further lower pensions.”

After months of negotiations failing to make headway, Monday’s announcement was, however, seen as a conciliatory move. Greek shares rallied with the Athens stock exchange closing the day up 4.4%. Two-year bonds yields also fell 250 basis points to a two-week low of 23.55%.

Earlier in the day, the government had faced calls to lay off Varoufakis with immediate effect. Accusing the 54-year-old finance minister of narcissism, a former Greek foreign minister, Dora Bakoyannis, blamed him for leading Greece down a dangerous path where it was now looking into the abyss of a potential Eurozone exit. “He has to resign to make things easier for Mr Tsipras and to liberate him so that it doesn’t seem that he is being sacked on the orders of people abroad,” she told SKAI news.

“I am not at all sure that Mr Varoufakis has not adopted the logic of the drachma. He is an impediment for Greece, a drag on the talks and he has to go.”

The finance minister’s refusal to attend last week’s dinner for Eurozone finance ministers – when the debt-crippled country was so dependent on loans from participants – was unforgivable, she said.

But insiders insisted that the politician still enjoyed Tsipras’ confidence, even if the young premier was now reaching out to the German chancellor Angela Merkel in an effort to reach a political solution.

With his high popularity ratings at home, Varoufakis is credited with internationalising the country’s debt problem and raising questions over austerity economics.

“They [creditors] couldn’t counter his economic arguments rationally so they went for him claiming he didn’t understand Eurozone rules and regulations, that his reforms weren’t good enough,” said one official. “Tsipras knows this is not about Varoufakis, but his government, because it has dared to take on the system that is Europe’s neoliberal doctrine. He knows that if one goes the other goes too, which is why Varoufakis is here to stay.”

Greece tries to ease tensions with lenders by reshuffling negotiating team | World news | The Guardian

Sunday, April 26, 2015

'Time is running out for Greece,' Euro officials warn as crucial talks stall

Elizabeth Anderson

By Elizabeth Anderson, and Szu Ping Chan 24 April 2015

Eurozone officials criticise 'amateur' Greek finance minister Yanis Varoufakis, warning that time is running out to stop Greece going bankrupt

A shoe shiner tries to keep warm next to an hourglass graffiti in Athens, Monday, Feb. 20, 2012. Eurozone finance ministers are set to meet on Monday in Brussels where close to a euro 130 billion ($171 billion) bailout to help Greece avoid bankruptcy will be decided in the wake of huge protests against austerity measures called for by the Greek caretaker government. (AP Photo/Thanassis Stavrakis)

The Greek government is trying to unlock the €7.2bn remaining in its bail-out package Photo: AP

Time is running out for Greece, officials have warned at a crucial Eurozone meeting in which finance minister Yanis Varoufakis was heavily criticised for stalling over urgent measures needed to release vital financial aid.

Jeroen Dijsselbloem, president of the Euro group, said there were some "big, big problems to be solved" before Greece's creditors would release badly needed funds to the country.

The are "still wide differences to bridge on substance", he said on Friday, adding that there would be no partial disbursement of funds to help Greece avoid a euro exit.

"A comprehensive and detailed list of reforms is needed," he said. "A comprehensive deal is necessary before any disbursement can take place. We are all aware that time is running out."

Mr Dijsselbloem also admitted that talks in Riga, Lativa, had been tense and at times heated, following reports that some Eurozone finance chiefs had accused Mr Varoufakis of wasting time and gambling with Greece's future.

"I can't tell you how discussions took place, but I'll be frank, it was a very critical discussion," Mr Dijsselbloem told reporters. "We came to an agreement two months ago. Today we hoped to hear positive results and an agreement to which we could make a decision, and we are still far from that. So it was a very critical discussion, and it showed a sense of urgency around the room."

Yanis Varoufakis, Greece's finance minister, addresses reporters in Riga, Latvia, following a Euro group meeting (Photo: EPA)

Euro-area finance chiefs said that Mr Varoufakis’s handling of the talks was irresponsible and accused him of being a time-waster, a gambler and an amateur, Bloomberg reported.

Mr Varoufakis also described the talks as "intense", adding that discussions had stalled over demands for pension cuts as well as the size of surplus targets to unlock aid.

“These are differences and they are the reason we haven’t come to an agreement as yet, but we should not focus on the differences; we should also primarily focus on the process of convergence,” said Mr Varoufakis.

He added: “An agreement - as it has been proven already - will be difficult, but it will happen and it will happen quickly because this is the only option we have."

It came as Mario Draghi, the president of the European Central Bank, warned that soaring Greek government bond yields were eroding the value of the collateral that the banks trade for funds.

“The higher are the yields, the bigger is the volatility, the more collateral gets destroyed,” he said, adding that the ECB would “carefully monitor” the haircuts imposed on Greek banks’ collateral.

Luis de Guindos, Spain's economy minister, said the lack of substantial progress on a deal had been "a let down for everyone". He said: “It’s a message of urgency. The Greek government has to, in some ways, improve its relation with the institutions."

In a blog post published by Mr Varoufakis today, he said that "while the current disagreements with our partners are not unbridgeable", there are still fundamental differences over the level of wage and pension cuts that creditors want to enforce.

"Our task is to convince our partners that our undertakings are strategic, rather than tactical, and that our logic is sound. Their task is to let go of an approach that has failed," wrote Mr Varoufakis.

However, officials today said that negotiations needed to move more swiftly to reach a deal by June.

Greece's current €240bn programme expires at the end of June. Before then, the Greek government is trying to unlock the remaining €7.2bn to prevent the country from bankruptcy.

Watchers had long given up hope of a deal being struck at today's finance ministers' meeting in Riga.

Arriving at the meeting this morning, Valdis Dombrovskis had said that progress had "not been sufficient to reach any conclusion", as 19 finance ministers gathered in a meeting that was supposed to end months of deadlock over whether to unlock more cash for debt-addled Greece.

"Progress in technical negotiations has not been sufficient to reach any conclusion during this Euro group here in Riga," said Mr Dombrovskis, the EU Commissioner for the Euro.

Meeting on the sidelines of a European Council meeting in Brussels yesterday, Greece's defiant Prime Minister Alexis Tsipras reportedly told German Premier Angela Merkel that his nation has made enough sacrifices to satisfy its creditor's demands and that Europe needs to "now do its part."

Despite agreeing to hurry up the negotiations, Mr Tsipras and Ms Merkel are thought to have found no common ground over the implementation of labour market reforms, pension cuts and tax hikes from the Leftist government. Far left government Syriza, headed by Mr Tsipras, has so far refused to agree to the comprehensive list of reforms set out by Eurozone officials.

However, Greece has said it will aim to meet an ambitious budget surplus target of 1.5pc of GDP this year.

The country is widely expected to slip back into recession this year as economic confidence has been decimated by its prolonged bail-out stalemate.

Germany, the chief funder of Eurozone bailouts, has taken a hard-line approach to Greece's financial woes this year and officials have repeatedly expressed concern that Greece isn't doing enough to meet its bail-out requirements.

Greek markets recently tanked to their lowest level since the country underwent a private sector debt restructuring in 2012, as the beleaguered government resorted to increasingly desperate measures to raise funds in the absence of fresh bail-out cash from its international creditors.

On Monday, an emergency presidential decree forced up to 1,500 local government bodies to transfer their excess cash reserves to the Bank of Greece.

As the stalemate risks running into another month, the risk of a Greek default rises along with an exit from the single currency.

• Europe's debt mountain just got bigger

'Time is running out for Greece,' Euro officials warn as crucial talks stall - Telegraph

Friday, April 24, 2015

Germany is becoming relaxed about Grexit – perhaps too relaxed

Charles Grant Friday 24 April 2015

Many EU member states and the US still fear the consequences of Greece leaving Europe. They need to get their voices heard in Berlin

alexis Tsipras Meets  and angela Merkel In Berlin

Side-eye … Greek prime minister Alexis Tsipras and chancellor Angela Merkel at crisis talks in Berlin in March. Photograph: Sean Gallup/Getty Images

In Berlin, views on Greece’s possible exit from the Eurozone are shifting. “We have never been closer to a Grexit, and we are close,” said a senior official. The last time a Greek departure looked likely, in 2012, Angela Merkel worried that it would provoke panic in financial markets and pulled back from the brink. This time, Germany’s leaders think a Grexit would not destabilise the Eurozone.

Merkel’s officials say that she would be willing to compromise with Greece – if prime minister Alexis Tsipras, whose Syriza party was elected in January, came up with a serious reform programme. Germany wants his socialist government to commit to fighting corruption, improving tax collection, strengthening fiscal discipline, modernising labour markets and attacking vested interests. But three months after being elected, Tsipras seems unwilling or unable to do any of these things.

Germany is losing patience. Until Greece comes up with a viable plan, Merkel will block the release of existing bailout funds, and ensure there is no new money. Meanwhile, the Greek government is struggling to repay foreign debts and to pay salaries and pensions. A Greek default, which could easily lead to a Grexit, is looming.

German officials are remarkably sanguine about the impact of a Grexit on the rest of the Eurozone

One key point for Merkel, say officials, is that Germany should not be blamed. A recent visitor reports her as saying: “If Grexit happens, people will see the cause was that Greece failed to do its homework, not that we withheld solidarity.” In this blame game, Merkel is – at least for now – succeeding. Many of those – including France and Italy, and to some degree the European Commission and the International Monetary Fund – who agree with Greece that Germany has imposed excessive austerity, have been alienated by Syriza’s chaotic style of governing, its extreme rhetoric and its inept diplomacy. Countries such as Finland, the Netherlands, Slovakia and Estonia are pushing Germany to take a hard line. So are Spain and Portugal, proud to have carried out painful reforms.

Some German officials think Greece would be better off out. “As an economist, I am not sure Greece should stay in the euro,” said one. It is structurally uncompetitive and could stagnate like southern Italy, he believes. Although Latvia, Lithuania, Spain and Ireland had understood the need for change, “sometimes the pressure to reform does not work”, and he worries that keeping Greece in at all costs could undermine European cohesion.

Advocates of a Grexit believe that if Greece had an autonomous monetary policy and a weaker currency, the economy – which has shrunk by a quarter since the crisis began – could recover more rapidly than if it remained locked in an austerian Eurozone. Yet leaving the euro would mean millions of contracts having to be rewritten; and foreign debt (in euros or dollars) would balloon when measured in new drachma, forcing companies and banks into default. Inflationary pressure and financial chaos would ensue. The deeper institutional and structural problems of the Greek state and economy would remain unresolved, constraining long-term growth prospects.

As for the impact on the rest of the Eurozone, German officials are remarkably sanguine. German taxpayers are liable for around €70bn of Greece’s €240bn of official debt, the loss of which, they say, would be manageable. Over the past five years, the EU has created the European stability mechanism, with €500bn for helping troubled banks or governments, while the European Central Bank has unveiled a bond-buying scheme for emergencies. So the officials not expect systemic threats to the Eurozone.

“Spain, Portugal and Ireland would be alright because they have done their homework,” said one German official. When pressed, he said that if a Grexit drove the financial markets to demand a premium before lending to another country, Germany would reassure them by proposing more integrated Eurozone policy-making.

Greek Eurozone exit edges closer as markets brace for Athens default

As Eurozone officials prepare for further talks on Greece, investors are sceptical that Athens can agree reforms that will unlock further bailout funds  Read more

But such attitudes may be too nonchalant. A Grexit would demonstrate that the euro lacked the political foundations to ensure its permanence, and the markets’ reaction is unknowable. The ESM lacks the resources to bail out, says, Italy. Those worried that a Grexit could trigger a partial unravelling of the Eurozone include the IMF, the European Commission, the ECB, France, Italy and the Obama administration. The US also frets about the geopolitical context: what if a bust-up between Athens and its partners fuelled a Greek-Russian rapprochement?

These governments and institutions are urging Merkel to be patient with Athens, and to explore every option for compromise. If a Grexit triggered significant economic or political damage, they would put much of the blame on Germany. The US has long understood that in its role as the transatlantic alliance’s hegemon, it must accept some costs for the greater good of the alliance’s stability. It expects as much from the EU’s hegemon.

But in Berlin, which plays a decisive role in Eurozone crisis management, the key decision-makers believe Greek membership of the euro is becoming unsustainable. Germany does not always listen to voices in other capitals. Its friends should make every effort to help it to see the bigger picture.

Germany is becoming relaxed about Grexit – perhaps too relaxed | Charles Grant | Comment is free | The Guardian

Thursday, April 23, 2015

Greek markets hit by jitters as Athens fights emergency cash raid

By Mehreen Khan 22 April 2015

Stocks fall to their lowest level in three years on fears Greece's plans to raid local coffers will be blocked by municipalities

The government plans to generate up to €2bn by seizing reserves in commercial banks

Greek markets have tanked to their lowest level since the country underwent a private sector debt restructuring in 2012, on fears the government will run out of cash to pay its public sector wage bill and service international debts.

Athens stocks dipped towards 700 in early morning trading, after the country's deputy finance minister said his government faced at least a €400m shortfall to make wage and pensions payments in April.


The government has resorted to increasingly desperate measures to fill their coffers in the absence of fresh bail-out cash from its international creditors.

On Monday, an emergency presidential decree forced up to 1,500 local government bodies to transfer their excess cash reserves to the Bank of Greece.

The measure, which was pushed for by Brussels, has been met fierce resistance in the country. Giorgis Kaminis, the mayor of Athens, said he would fight the confiscation law, attacking it as "unconstitutional".

“We’re determined to use all political and legal means we can to repudiate the content of the decree,” the Union of Municipalities and Communities said in statement on Tuesday night.

The raid could generate an estimated €1.2bn to €2bn for the treasury by seizing reserves in commercial banks and shifting them to the central bank in Athens.

But Greece's labour minister said his government would seek alternative solutions should mayors and local governors resist the measures.

In a further sign of domestic troubles for the Leftist government, approval ratings for Syriza's negotiating strategy have fallen to just 45pc in April, down from 72pc in February.

The debt impasse has also seen the country's economic fundamentals degenerate. Figures from Eurostat show that 73.5pc of people who were unemployed in Greece in 2014, had been out of work for more than a year, compared with 67.1pc in 2013. Seven out of the ten EU regions with highest share of long term unemployment are also in Greece.

Pressure on the government's coffers has grown ahead of a meeting of Europe's finance ministers on Friday. The European Central Bank is reported to have demanded Greek lenders take a 50pc haircut on the collateral they use to access the emergency life support from the ECB.

However, ECB governor Benoit Coeure denied allegations that the institution was "blackmailing" the country, insisting the ECB would continue funding lenders as long as they remained solvent.

Greek bank stocks fell to an all-time low on Tuesday on fears the ECB was ready to pull the plug.

But according to reports, the central bank hiked its cap on emergency funds by a further €1.5bn today, taking the total emergency liquidity assistance to €75.5bn.

"The euro area needs Greece just as Greece needs the euro," said Mr Coeure.

"An overwhelming majority of the Greek population want to keep the euro. It is the responsibility of the Greek government to take the appropriate steps to ensure its policies are in line with these clear preferences," he told the paper."


A working group of Europe's finance ministers is due to meet in Brussels today, ahead of a meeting of the Euro group in Riga on Friday.

But Thomas Wieser, a top EU official, all but ruled out hope of a deal being reached by the euro group at the end of the week: "The clock is ticking. There won't be a new list in Riga, but over the course of May it must finally be reached."

Failure to reach an agreement would be "catastrophic" for Greece, said finance minister Yanis Varoufakis, who hinted that the two sides were gradually getting closer to striking a deal to unlock €7.2bn of bail-out cash.

Greek markets hit by jitters as Athens fights emergency cash raid - Telegraph

Wednesday, April 22, 2015

Greek bank shares slide to record low as ECB considers pulling the plug

By Mehreen Khan 21 April 2015

European Central Bank draws up plans to limit emergency assistance as Alexis Tsipras gears up to meet Chancellor Merkel

Greek banks have been under the squeeze as people have drawn their money out in droves

Shares in Greece's stricken banks fell to an all-time low on Tuesday after fears the European Central Bank was planning to finally pull the plug on the country's lenders.

A memo drawn up by the ECB's staff proposed capping the emergency assistance (ELA) that has been keeping lenders alive since the Syriza-led government entered office at the end of January.

Bank stocks fell by 4pc on the news, capping off a torrid run which has seen more than 50pc wiped off the value of lenders since the start of the year.


ELA has been drip fed to the country's banks as the Leftist government in Athens has struggled to meet the bail-out conditions demanded from its international creditors.

The assistance is provisional on Greek banks remaining solvent, but capital flight has seen banks hit the ceiling on the funds on an almost weekly basis.


Central bank president Mario Draghi has insisted Greek banks will continue to receive ELA. However, other members of the Governing Council have suggested the liquidity assistance should not continue after the summer. Any decision to remove the life-support would require a two-thirds majority among the bank's governing board.

Should the ECB pull the plug, Greek banks will go bust in a matter of months, said rating's agency Standard & Poor's.

"In the absence of support from the European authorities, we believe that a default of these Greek banks appears inevitable within the next six months," said S&P.

With the clock ticking on the country's future, Greek prime minister Alexis Tsipras is due to meet with Chancellor Angela Merkel on Thursday.

The pair last met during an official visit to Berlin by the Greek premier earlier this month. It is thought the Leftist government sees Ms Merkel as their best hope for reaching an agreement before a series of crunch repayments to the IMF are due at the beginning of May.

Continued reliance on emergency funding has seen Greece's Euro system liabilities top €110bn over the last few months. These Target2 liabilities at the European Central Bank raise the cost of a Grexit for the rest of the Eurozone, including Germany, the bloc's biggest lender.


With Athens’ liquidity crisis becoming desperate, the government issued an emergency decree forcing all local government bodies to transfer their cash reserves to the Bank of Greece on Monday.

The move, which has caused consternation for Mr Tsipras at home, was pushed for by the Brussels Group of lenders, who urged the government to seize the funds if they wanted to continue paying out public sector wages and pensions in May.

The cash transfer will add an estimated €1.2-€2bn to the government's coffers helping the country stay afloat for at least another six weeks.

Athens’ precarious future in the Eurozone has also raised alarm in Washington, with the White House's chief economic adviser saying that a Grexit would jeopardise the fragile confidence in the global economy.

"A Greek exit would not just be bad for the Greek economy, it would be taking a very large and unnecessary risk with the global economy just when a lot of things are starting to go right,” said Jason Furman.

The comments directly contradict those of the German finance minister Wolfgang Schaeuble who has played down the prospect of contagion, insisting markets had fully priced in the costs of Greece becoming the first country to leave the monetary union.

Brussels officials have now all but dismissed hope that an agreement to release €7.2bn worth of emergency cash will be secured at a euro group meeting on Friday.

The group’s president Jeroen Dijsselbloem, warned Athens they were running out of time and money, but insisted Grexit was “not an option”.

With a release of bail-out money looking increasingly unlikely, Greece has been courting funds from the Kremlin.

The head of Russian-backed Gazprom Alexei Miller visited Athens on Tuesday for “constructive” talks over a proposed gas pipeline running through the country.

Prime Minister Alexis Tsipras welcomes the head of the Russian energy giant Gazprom, Alexei Miller (Source:ANA)

It is thought that Moscow stands ready to provide up to €5bn to the cash-strapped economy, as an advance payment for the pipeline dubbed “Turkish Stream”.

Greek bank shares slide to record low as ECB considers pulling the plug - Telegraph

Tuesday, April 21, 2015

Athens demands cash reserves from public sector funds

Katie Allen Tuesday 21 April 2015

Prime minister Alexis Tsipras’s administration is forcing central government entities to transfer cash to the central bank to help keep the country afloat

Greek flags flutter in an Athens street as the  government remains locked in strained negotiations with creditors. Greek flags flutter in an Athens street as the government remains locked in strained negotiations with creditors. Photograph: Yorgos Karahalis/AP

The Greek government has issued a decree forcing public sector bodies to transfer idle cash reserves to the central bank in a sign of how severe the country’s cash crunch has become.

The order came as the country’s finance minister, Yanis Varoufakis, issued a stark warning to Eurozone neighbours that they were playing with fire as Athens edges closer to a debt default.

Fears of a Greek exit from the Eurozone have increased as signs grow that the country is on the brink of bankruptcy. The state is scrambling to find funds to pay almost €2bn (£1.4bn) in wages and pensions and almost €1bn to the International Monetary Fund in the coming weeks.

The language in Monday’s presidential decree provides an insight into just how tight finances have become for Greece’s recently elected anti-austerity government, led by Alexis Tsipras’s Syriza.

“Central government entities are obliged to deposit their cash reserves and transfer their term deposit funds to their accounts at the Bank of Greece,” the news service Bloomberg quoted the decree on the government gazette website as saying.

The “regulation is submitted due to extremely urgent and unforeseen needs”, it said.

Greece owes money to the IMF, the European Central Bank (ECB) and the European commission following two bailouts totalling €240bn in 2010 and 2012.

Athens is waiting for the final €7.2bn payment under the most recent bailout package, but the money has been held up after the country’s left-wing government scrapped previous commitments to privatise state assets and cut welfare provision.

Economists have predicted that without the rescue funds, Greece is unlikely to make the salary and pensions payments and settle its dues with the IMF. They say Greece is edging closer to a default on its debt obligations that could precipitate the country’s exit from the Eurozone.

Varoufakis used one of his frequent media appearances to say that contagion would be inevitable if Greece were to leave the Eurozone.

“Anyone who toys with the idea of cutting off bits of the Eurozone hoping the rest will survive is playing with fire,” he told the Spanish TV channel La Sexta.

“Some claim that the rest of Europe has been ring-fenced from Greece and that the ECB has tools at its disposal to amputate Greece, if need be, cauterise the wound and allow the rest of Eurozone to carry on.

“I very much doubt that that is the case. Not just because of Greece but for any part of the union,” he said.

Eurozone finance ministers meet for further talks on Greece on Friday, but no breakthrough is expected. Focus is already shifting to early May when IMF payments are due.

With money running out, Greece has been trying to convince its international creditors to release the last chunk of rescue funds. Many of its fellow Eurozone countries, however, and Germany in particular, say they first want clearer commitments to reforms from Tsipras and his government.

There are growing worries on the financial markets that the slow progress in negotiations means Greece will not be able to meet May’s debt deadlines. Yields on Greece’s government bonds have been rising while those on German bonds fell again on Monday, meaning their price rose, as investors continued to chase safe-haven assets.

After the gloomy tone at last week’s IMF spring meetings in Washington on Greece and the Eurozone's prospects, the fund’s top man in Europe, Poul Thomsen, struck a more optimistic note on Monday. Talks over the weekend between Greece and the IMF, the ECB and the European commission had made some progress, he told Germany’s Handelsblatt newspaper.

“There has been a little bit more impetus in the negotiations between the three institutions and the Greek government for several days,” Thomsen said. “That’s a good development and gives us reason to hope.”

There were also encouraging comments from the ECB vice-president, Vitor Constancio, who played down the prospect of Greece leaving the Eurozone.

“We are convinced at the ECB that there will be no Greek exit,” he told the European parliament.

He added a note of caution, however, for anyone expecting ECB support for Greece and its banks to be unlimited. “We have been forthcoming, but I cannot promise … that we will fund Greece whatever the situation and the amount and the conditions,” he said.

Athens demands cash reserves from public sector funds | Business | The Guardian

Monday, April 20, 2015

Eurozone crisis: Grexit edges closer as markets brace for Athens default

Katie Allen Monday 20 April 2015

As Eurozone officials prepare for further talks on Greece, investors are sceptical that Athens can agree reforms that will unlock further bailout funds

The Greek finance minister, Yanis Varoufakis,  speaking at the Brookings Institute in Washington.  Greece is due to repay almost €1bn to the IMF in early May.The Greek finance minister, Yanis Varoufakis, speaking at the Brookings Institute in Washington. Greece is due to repay almost €1bn to the IMF in early May. Photograph: Paul Richards/AFP/Getty

Eurozone officials meet for further crunch talks on Greece this week amid warnings that time is running out for the country to avoid defaulting on its debts and being jettisoned from the single-currency bloc.

Deputy finance ministers will convene on Wednesday to pave the way for talks among finance chiefs in the Latvian capital, Riga, at the end of the week, a Greek government official told Reuters.

But investors are increasingly sceptical that a rescue deal can be reached between Greece and its creditors. Financial markets do not expect a breakthrough at that meeting of the so-called Euro group – the Eurozone's finance ministers – and focus is already shifting to early May when Greece is scheduled to repay almost €1bn (£700m) to the International Monetary Fund – a sum most experts say Athens will not be able to raise.

Greece’s recently elected left-wing-led government has so far failed to present a package of reforms to the IMF and its Eurozone partners that those creditors deem serious enough to unlock the remaining bailout funds.

“Although time is running short, there are clear indications that the Euro group meeting in Riga on 24 April might not bring a breakthrough,” said Reinhard Cluse, an economist at the bank UBS.

“In the absence of a deal in the next few weeks, the government might not be able to avoid default, which – we fear – would likely raise the risk of ‘Grexit’ [a Greek exit].”

Greece faces a series of repayments and interest payments on its debts in the coming weeks as well as its usual pensions and public-sector salary obligations. Experts say money is running out.

“As to how much funds they have left to pay back maturing debt, it is almost zero,” said Gabriel Sterne at the consultancy Oxford Economics. “It is more of a question of what barrel they can still scrape to find some money to stave off default.”

Greece owes money to the IMF, the European Central Bank (ECB) and the European commission following two bailouts in 2010 and 2012.

Athens is waiting for the final €7.2bn payment under the second rescue package, but that money has been held up after the new anti-austerity government scrapped previous commitments to privatise state assets and cut welfare provision.

Germany in particular has made it clear that it wants strong commitments to reforms. The country’s finance minister, Wolfgang Schäuble, has said there is not enough detail from Greece for rescue funds to be released and has expressed scepticism that any progress will be made in Riga.

There was, however, some support for Greece’s position at last week’s IMF meeting in Washington where Poul Thomsen, head of the fund’s European department, said the reforms being demanded from Athens should be slimmed down.

Further ahead, economists warn that a €7.2bn package would merely buy some time for Athens but by no means guarantee Greece could remain in the Eurozone – something polls suggest most Greeks want.

Even if Greece could get help to meet payments to the IMF on 1 May and 12 May, a “really big crunch” looms in July and August when €6.7bn of bonds held by the ECB mature, said Alastair Winter, chief economist at the broker Daniel Stewart.

“Nobody in Greece – or outside for that matter – is facing up to the reality that a lot more than the final €7.2bn will be needed,” said Winter. “The result will be growing chaos in Greece, and discord and disarray in the Eurozone in the coming months.”

Such concerns are growing on financial markets. Jitters about Greece in effect becoming bankrupt and being forced to leave the currency union pushed up the yields of government bonds from other countries on the Eurozone's periphery last week. Yields were all higher – meaning prices were down – on Portuguese, Spanish and Italian bonds on Friday.

At the same time, yields on benchmark 10-year German government bonds, or bunds, fell to a record low of 0.05%, reflecting their perceived safe-haven status among investors. Yields on shorter dated German bonds are already negative, meaning people are in effect paying the German government to park money with it.

The Greek gridlock was likely to dominate market moves again this week, said economists at Daiwa Capital Markets.

“A fraught week lies ahead, primarily for Greece, but also perhaps for euro-area equity markets and bond markets in the euro-area periphery. And negative yields on 10-year bunds seem likely to be reached,” they wrote in a research note.

While economists appear divided over whether a Greek exit from the Eurozone would lead to full-scale break-up of the monetary union, the ECB president, Mario Draghi, has sought to allay such fears.

Draghi said at the IMF’s meetings in Washington over the weekend that financial buffers were sufficient to prevent contagion spreading to other weak economies in the currency union. But he warned that Europe would be entering “uncharted waters” that made the outcome of a default uncertain.

Eurozone crisis: Grexit edges closer as markets brace for Athens default | World news | The Guardian

Fears grow of Greek euro exit after IMF meeting

Phillip Inman Sunday 19 April 2015

ECB chief warns Europe would be entering ‘uncharted waters’ if Greece defaults on its debts

ECB press conferenceMario Draghi, head of the European Central Bank, addresses a press conference in Washington on 18 April 2015. Photograph: Pete Marovich/EPA

The European Central Bank has raised the prospect of Greece crashing out of the euro after it said financial buffers were sufficient to prevent contagion to other weak economies in the currency union.

ECB president Mario Draghi said funds were sufficient to cope should Athens default on its debts, but warned that Europe would be entering “uncharted waters” that made the outcome of a default uncertain.

The intervention comes only weeks before Greece is due to agree a new rescue deal with its creditors. Negotiators in Brussels have become increasingly exasperated with the stance of the radical left Greek administration, which they accuse of failing to present concrete proposals for reform to allow the release of vital bailout funds.

Speaking in Washington at the International Monetary Fund’s spring meetings, Draghi said: “The short-term danger of contagion [from a Greek exit] is difficult to assess, but we have enough buffers in place. And even though they were designed for different circumstances, they are sufficient. But we are entering uncharted waters.”

Draghi, who met Greek finance minister Yanis Varoufakis in Washington for informal talks, said there had been progress in “formulating a well-functioning policy dialogue” between Greece and the troika of lenders – the EU commission, ECB and IMF.

He also supported an earlier call from the IMF for EU negotiators to slim down their list of demands during debt talks with Greece amid fears that time is running out to reach a deal.

In a move seen widely as offering an olive branch to Greece, Poul Thomsen, head of the IMF’s European department, said the reforms being demanded from Athens in exchange for a vital €7.2bn (£5.2bn) in rescue funds should be simplified and slimmed down.

But Draghi said the aim of talks was still to reach “a comprehensive package within which the policies can be monitored”.

The radical left Syriza administration has so far resisted demands that reforms should be monitored by Brussels and aid tied to detailed targets.

Last week the IMF rebuffed a call for a delay in debt payments due next month. Despite denials from the Greek finance ministry, it is understood that Varoufakis asked for a delay while talks continued. Little is known about the state of Greece’s finances, but there are fears that in the next few weeks it could run out of money to pay welfare bills and public sector wages if it is forced make scheduled debt repayments.

Draghi said ECB funds would continue to be channelled to the Greek central bank to maintain the viability of the country’s banking sector, which has suffered a massive outflow of funds during the crisis.

Asked about the consequences of Greece defaulting on its loan repayments, he said: “I don’t want to even contemplate such an event because the Greek leaders have said they will always meet their commitments.”

Varoufakis claimed the support of Barack Obama as he prepared to leave Washington following a whirlwind tour of newsroom studios and bilateral talks during the IMF meetings. The conversation with Obama was brief, according to Varoufakis, who said that Obama expressed his desire for flexibility on all sides.

In a speech on Saturday to the IMF’s steering committee, US Treasury secretary Jacob Lew said a Greek default would “create immediate hardship” for the country and damage the world economy, but sources close to the Treasury distanced him and the White House from offering support to Athens’s negotiating stance.

Lew warned South Korea, Germany, China and Japan to do more to increase consumer demand in their own countries instead of relying on exports to the US and elsewhere for growth.

Eurozone finance ministers have become increasingly frustrated at delays over a new package and many think a Greek exit is likely. More talks are due in the Latvian capital Riga next week at a Eurozone finance ministers’ meeting. German finance minister Wolfgang Schäuble says agreement is unlikely.

Fears grow of Greek euro exit after IMF meeting | World news | The Guardian

Russia denies striking gas deal to net Greece €5bn - Telegraph

By Mehreen Khan, & Andrew Trotman 18 April 2015

Kremlin says it has not reached an agreement to provide a €5bn sweetener to Athens for a planned gas pipeline that runs through the country

A deal between Russia and Greece is expected to be signed on Tuesday

Russia has denied providing up to €5bn to Greece for a planned gas pipeline, in a move that would significantly ease Athens' cash crisis.

According to reports in Der Spiegel, Moscow was ready to provide advanced payment to Greece in assent for its "Turkish Stream" project.

The magazine quoted a senior Syriza minister saying the deal would "turn the tide" for the debt-stricken country, and could be signed as early as Tuesday.

However, the Kremlin later denied it had reached an agreement for any financial aid in advance of future profits from the pipe's transit fees.

Russia's RIA news agency said there was no sweetener on the table, citing government spokesman Dmitry Peskov.

Tsipras risks schism with Europe after warning of new Cold War with Putin

Isolated Greece pivots east to Russia, China and Iran. But will it work?

Greek Prime Minister Alexis Tsipras held talks with Russian president Vladimir Putin in Moscow earlier this month.

During his visit to the Kremlin, Mr Tsipras insisted Greece was not a “debt colony”, but a “sovereign nation with the indelible right to carry out its own foreign policy”.


Germany's finance minister Wolfgang Schauble said he had no objection to any deal with Moscow, but that ultimately it would not "fix Greece's reform problems."

Beijing has also sought to invest in Greece's port infrastructure and bought up €100m worth of short-term government bonds last week.

Greek Energy Minister Panagiotis Lafazanis told Greek television no deal would be reached with "the neo-liberal, neo-colonial powers which rule EU & IMF unless Greece really threatens their deep economic and geo-strategic interests."

Mr Lafazanis, who heads up the Left Platform of Syriza, recently hailed a new dawn in Greco-Russia relations and has invited the likes of state-sponsored Gazprom to drill for oil off the Greek coast.

The Left-wing Syriza government in Athens is running out of money to meet the next €1.7bn bill for salaries and pensions later this month.

With the coffers running dry and hopes of an agreement by the end of the month fading, the government faces a further near €1bn IMF bill in early May.

Mr Putin said last month that he stood ready to assist Athens by pumping investment into the country's energy and transport sectors.

“Just because Greece is debt-ridden, this does not mean it is bound hand and foot, and has no independent foreign policy,” said Mr Putin.

Russia denies striking gas deal to net Greece €5bn - Telegraph

How sleepy Finland could tear apart the euro project

By Mehreen Khan 18 April 2015

Europe's biggest cheerleader for austerity is heading to the polls, and its stance on Greece threatens to catalyse a break-up of the union

Helsinki Marked on Map

Finland's stricken economy has been strangled by the euro just as much as Greece

Finland is the unlikely stage for the latest turn in Greece’s interminable debt drama this weekend.

With events having decamped temporarily to Washington DC, Athens will be keeping half an eye on developments in Helsinki, where the Nordic state of just 5.4m people heads for the polls on Sunday.

In the five years since Greece’s financial woes were revealed to the world, it has been sleepy Finland which has emerged as the most trenchant critic of EU largesse to the indebted Mediterranean.

The outcome of the country’s general election could now determine Greece’s future in the monetary union

Getting tough on the Greeks

In a leaked memo seen last month, it was revealed that the Finns had already drawn up contingency plans for a Greek exit from the euro.

Although ostensibly a sensible measure for any finance ministry to contemplate, the document confirmed the Finns' position as the most uncompromising of the EU’s creditor nations.

The reputation is well-deserved.

At the height of Greece’s bail-out drama in 2011, Helsinki negotiated an unprecedented bilateral agreement with Athens, receiving €1bn in collateral in return for supporting a rescue deal.

A year later, the Finns were prime candidates to become the first dissenters to voluntarily break the sanctity of monetary union. “We have to be prepared,” the country’s then foreign minister told the Telegraph three years ago.

Finnish PM Alexander Stubb meeting Germany's Angela Merkel last month

Greece's current impasse is also partly a result of Finnish obstinacy.

Helsinki was one of the main obstacles to securing a longer extension to Greece's bail-out late last year. The eventual compromise of a three-month, rather than six-month reprieve, has seen the new Leftist regime scramble desperately for cash since February.

With the situation in Athens deteriorating by the day, both Finland's prime minister and central bank governor have eschewed high-minded rhetoric about European unity, to insist creditors should be ready to pull the plug on Greece.

Strangled by the euro

But unlike its fellow creditor giant Germany, Finland is more economic laggard than European powerhouse.

Having been mired in a three-year recession, the country heads to the polls with economic output still 5pc below its pre-crisis levels.

Finland has suffered an economic downturn of almost Greek proportions.

The boon from falling oil prices and launch of Eurozone QE will still only see the economy expand at a paltry 0.8pc this year, worse only to Italy and Cyprus.


Stagnating growth saw the country stripped of its much coveted Triple-A sovereign debt rating last year. The International Monetary Fund now recommends a cocktail of structural reforms and fiscal consolidation that would make officials in Athens bristle.

"There is no sympathy for Greece any more, especially because our own economy is struggling," says Jan von Gerich, strategist at Nordea bank in Helsinki.

"If there was a referendum on a bail-out deal tomorrow, it would fail."

The tale of the Finnish economy proves competitiveness is not merely the plague of southern Europe.

At the heart of the country's woes are stifling wages, which have risen by 20pc, while the crisis-hit countries have slashed their labour costs.


Unemployment has shot up to nearly 9pc, while the country’s debt and deficit levels will both fall foul of euro-area limits this year.

Much like its fellow northern counterparts, Finland has also fallen into a demographic trap. It is now the fastest ageing country in the world, topping Japan in the race to get old.

Weak productivity and an ageing population, all trapped in the strictures of a monetary union, make Finland a microcosm for much of Europe's future economic woes, says Karl Whelan, a professor of Economics at University College Dublin.

“The future for growth in Europe appears to be Finnish” says Mr Whelan.

The euro has also robbed the economy of the freedom to devalue its currency - the tried and tested instrument the Finns have used to extricate themselves from the midst of their deepest depressions.

The Finns were one of the first economies to follow Britain’s lead and abandon the inter-war Gold Standard in 1931. They also moved to a free floating exchange rate at the height of a banking crisis following the collapse of the Soviet Union in the early 90s. In the aftermath of both episodes, the country was able to get back on its feet through reflationary export-led booms.

But faced with political and economic crisis in neighbouring giant Russia, the country’s current and likely outgoing premier Alexander Stubb, has bemoaned a “lost decade” under the monetary union.

Blocking another bail-out

The run-up to its last elections saw the unprecedented rise of the Eurosceptic True Finns, who were ostracised from the coalition-making process for their fierce resistance to Greek aid.

This time round, the party - which has been re-branded as just The Finns - has taken a more subdued approach. Their charismatic leader Timo Soini has refused to categorically state whether or not he would block a new debt deal in a bid to make the Finns more palatable to any future coalition partner.

Unprecedented among left-leaning parties in Europe however, Finland's Social Democrats now lead the charge against a third Greek bail-out.

But it is The Centre Party who are on course to become the largest in the parliament. The race for second place will be fought over by the Social Democrats and The Finns. Whatever the outcome, the position of finance minister will be occupied by the head of the junior coalition party.

The Centre Party's Juha Sipila is on course to become Finland's new Prime Minister

And should Greece need a third bail-out this summer, as the parlous state of its coffers suggests, then the Finns stand ready to throw sand in the wheels of a fresh agreement, says Moritz Kraemer, chief rating’s officer at Standard & Poor's.

“The Finns will have a very conservative line as before,” says Mr Kraemer.

“They want stringent conditions attached to any bail-out deal and could be put the test very quickly when the new parliament gathers at the end of the month. They might have something to vote on very soon.”

Any insistence on another preferential 2011-style deal from the Finns could cause another major political schism in Europe.

Unlike the first ad hoc rescue deals secured at the height of the crisis, the Eurozone now has a rule-based bail-out mechanism in place through its European Stability Fund. Brussels will be loathe to give the Finns any kind of preferential creditor status over the rest of the Eurozone, adds Mr Kraemer.

“It will be communicated to the Finns that they have to play by the rules,” says Mr Kraemer.

But the nature of the rescue mechanisms still gives disproportionate veto power to individual member states, says Mr von Gerich.

"Even the European Stability Mechanism needs unanimity among all member states unless there are really exceptional circumstances," he says.

The only saving grace for the prospect of another political meltdown in the Eurozone, is that Athens shows no signs of completing its existing bail-out, let alone agreeing a new deal.

"This is all for the day after tomorrow" says Mr Kraemer. "The task at hand is still to get Greece through to June, before anything else can be negotiated."

How sleepy Finland could tear apart the euro project - Telegraph