After Eurogroup, it is no longer given choice to Greece

When I start writing this post, an agreement has been reached at the Euro Summit. We don’t have details yet but it’s probably close to the Eurogroup deal reached yesterday.
Following the Eurogroup’s press release, Greece will have no other choice than being under guardianship by the Eurozone. Its sole degree of freedom is to make default and to exit from the Euro Area.
Discussions during the week-end were violent at the Eurogroup meeting between the dove (France) and the hawks (Schauble). At the end, the hawks have won. Continue reading

Temporary exit of Greece: it’s an illusion. 

The notion of temporary exit from the Eurozone is a nonsense. It is just a way for Germany to push Greece out definitely. 

Out of the Euro Area and willing to come back implies that a country has to dramatically reduce the imbalances that led to its temporary exit in a environment which will not be the one of the common currency. With its new currency its interest rates would be much higher.  

Efforts to be made to satisfy Eurozone criteria would be too important. The temptation would then to make efforts to take advantage of the devaluation of the currency in order to reshape the economy. 

In other words a temporary exit is a polite manner for Germany to “fire” Greece definitely. But would Greece be an isolate case or the first of a long list?

The Public Debt to GDP ratio in Greece

The ratio of public debt to GDP is amazing when it is decomposed.
GDP since 2009 was down by more than 20%. During this period the debt has not grown so much.
In other words, the profile of the ratio of Public Debt to GDP reflects mainly the drop of the economic activity. This is the consequence of the austerity policy that was imposed to Greece by the troika. (See here for the Greeks’ effort)
We can then understand that the debt relief discussion that will come after the agreement on yesterday’s proposals by Tsipras is just a counterpart of this persistent austerity.
070715krugman1-blog480Source Paul Krugman (see here)

Greek proposals: Ingredients for a deal?

The document in pdf format is MarketFlash_10_07_2015EN

The program, which has been presented by Alexis Tsipras to the troika, reflects the will to catch an agreement as soon as next Sunday during the meeting of the European Chiefs of government. Measures are expected to be approved in order to keep Greece in the Euro Area. Its aim is to get EUR 50bn on three years in order to repay Greek’s debt.

All the proposals that have been made by the Prime Minister are close to those on which the troika agreed on before the referendum.
The expected profile for the Greek public finance is to converge to a primary budget surplus of 3.5% of GDP in 2018. This surplus will be less than 1% this year. It will then not feed the debt anymore. Continue reading

Remarks by President Donald Tusk after the Euro Summit of 7 July 2015 on Greece

The official press release can be found here

I will read out what was agreed by leaders at tonight’s Euro Summit:

1. We met tonight to discuss the serious situation in Greece. We noted that the euro area authorities stand ready to do whatever is necessary to ensure the financial stability of the euro area as a whole.

2. Following the Greek referendum, Prime Minister Tsipras committed to present a new request for a programme within the framework set by the ESM Treaty, including strict policy conditionality.

3. We agreed to urgently examine whether it is possible to establish a basis for finding an agreement that respects existing commitments and our common rules.

4. The Greek government will on Thursday 9 July at the latest set out in detail its proposals for a comprehensive and specific reform agenda for assessment by the three Institutions to be presented to the Euro Group.

5. The Heads of State or Government will meet on Sunday 12 July.


Let me add a few words from my own perspective. All sides of the negotiations share the responsibility for the current status quo. That is why today I called on all leaders to try to find consensus, which will be our common success, with no losers or winners. If this does not happen it will mean the end of the negotiations with all the possible consequences, including the worst-case scenario, where all of us will lose. Our inability to find agreement may lead to the bankruptcy of Greece and the insolvency of its banking system. And for sure, it will be most painful for the Greek people. I have no doubt that this will affect all Europe also in the geopolitical sense. If someone has any illusion that it will not be so, they are naive.

The stark reality is that we have only five days left to find the ultimate agreement. Until now, I have avoided talking about deadlines. But tonight I have to say loud and clear that the final deadline ends this week. All of us are responsible for the crisis and all of us have a responsibility to resolve it.

Greece, Negotiations and the ECB

The document in pdf Version is Oxi-En-July6

The “no” has won at the Greek referendum on July the 5th.
The Prime Minister, Alexis Tsipras, who went to a clash with the troika, is now the strong man in Greece. He made a call for a “no” vote and he has been followed by the Greeks with a large margin as the “no” had more 60% of the ballots. The “no” mustn’t be understood as a rejection of the Eurozone but as a deep disagreement with the economic options that were proposed by the troika. On this issue, the main point is that the troika’s proposals extend austerity policies until at least 2018 (time to converge to the primary budget balance target). The risk associated with this strategy is to create conditions that could extend the recession that has started in 2009 and that has reduced the GDP level by 25%.

The question now will be to restart negotiations.
Clearly the balance of strength between negotiators has changed. The “no” at the referendum has given legitimacy to Alexis Tsipras to negotiate and to create pressures on the troika. He has a clearer mandate taken from the results of the referendum. The agreement that has been made with other Greek’s parties on his capacity to negotiate for Greece clearly shows that he is, without doubt, the strongest representative for Greece. He can push the troika as he thinks that European countries fear a Grexit as it could create troubles on the European construction and weaken institutions. Continue reading