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IMF: Greek rescue isn’t working October 10, 2012

Posted by Yilan in Germany, Yunanistan.
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The international bailout of Greece is doing the nation more harm than good and needs to be radically restructured if it is to be saved. This is the recent conclusion of The Institute of International Finance, a global association of financial institutions, and the International Monetary Fund.
Or as skeptics of the effort to rescue Greece would say, the organizations have figured out something that economists, and anyone who can do basic math, have been saying for more than a year. Here is what the Financial Times reported exactly a year ago:

The degree of financial pain confronting the Greek population is twice as severe as that in Ireland and Portugal, fuelling concerns that the drastic austerity program imposed by lenders could smother growth in the eurozone’s weakest economy.

In case you’ve forgotten, Greece is bankrupt. Its government is only barely staying in business thanks to international funding. Athens is trying to reach agreement with the European Central Bank, European Union and IMF on $18 billion in government spending cuts, which would put the nation in line for another $40 billion in bailout funds.

These negotiations are an attempt by international lenders to get Greece to adhere to a spending plan that the nation agreed to earlier this year when the EU approved a second bailout. Yet there is reason to think that the EU knew at the time this plan was not going to work.

Under the best-case scenario for this plan, Greece’s debt would rise to 120 percent of GDP by 2020. That is an unsustainable figure, and that’s if everything went right. The scenario was based on projections that had the Greek economy recovering. It was not based on a Greek economy that was contracting at a rate of 7 percent a year, the rate at which it was shrinking last February when Greece and the “troika” agreed to the plan.
The IMF said Monday that Greece’s failing economy had forced it to revise its estimate of the country’s public debt for 2013 from 160.9 percent of GDP, as the fund stated in April, to 181.8 percent.

The bailout plan was never going to help Athens become financially solvent. A 2011 study by UBS said, “To achieve an actual 50 percent reduction in the debt, Greece would need to implement a 100 percent haircut, i.e. repudiate its debt totally.” The 75 percent haircut the bondholders actually accepted probably cut the Greek debt only by 30 to 40 percent.

So what has the bailout plan managed to do? Here’s The Guardian’s description of comments last Friday by Greek Prime Minister Antonis Samaras:

Resorting to highly unusual language for a man who weighs his words carefully, the 61-year-old politician evoked the rise of the neo-Nazi Golden Dawn party to highlight the threat that Greece faces, explaining that society “is threatened by growing unemployment, as happened to Germany at the end of the Weimar Republic.”

There are two primary reasons the Greek economy has shrunk by about a fifth since 2008. First is the punishing austerity measures demanded in exchange for the bailouts. The company’s public and private sectors are both drastically cutting spending at the same time. This on its own guarantees a recession.

The other reason is that Athens can’t spend most of the bailout money it gets on helping its people. Most of the money it gets is required to go right back to international lenders, like the IMF, that have loaned the nation money. If you see a problem in this approach, then you clearly have what it takes to be head of an international finance organization. Christine Lagarde has been the IMF’s managing director for 15 months and apparently just noticed it.

Thousands of protesters descend on Athens as Germany’s Merkel meets with Greece’s Samaras October 10, 2012

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 Protesters burn a flag emblazoned with a swastika during a demonstration against the visit of German Chancellor Angela Merkel in central Athens.

  Prostesters, dressed as Nazis, wave a Greek and a swastika flag as they ride in an open-top car in Syntagma Square in Athens as they protest against the visit of Germany’s Chancellor Angela Merkel, Oct. 9.
 Greece’s Prime Minister Antonis Samaras (R) and Germany’s Chancellor Angela Merkel speak before their meeting at the Maximos mansion in Athens, Oct. 9.

German Chancellor Angela Merkel got a hostile reception Tuesday when she made her first visit to Greece since its debt crisis erupted three years ago.

But she praised the current Greek government for covering “much of the ground” required for recovery.

“I hope and wish that Greece remains a member of the eurozone,” Merkel said. “As partners, we are working hard to achieve that.”

Her visit triggered protests attended by some 50,000 demonstrators in Athens. The rallies were mostly peaceful, but police briefly clashed with several dozen demonstrators and detained nearly 200 people throughout the day.

As Europe’s largest contributor to the bailout fund that has rescued Greece from bankruptcy, Germany is viewed by many Greeks as the primary enforcer of the austerity measures the Greek government enacted in exchange for emergency aid.

Greece has depended on bailouts from Europe and the International Monetary Fund since May 2010. To get the loans, it has implemented a series of deep budget cuts and tax hikes, while increasing retirement ages and facilitating private sector layoffs. To date, Greece has received €240 billion ($310 billion) in bailout loans and has renegotiated a €110 billion deal on the repayment of some of its bonds.

However, Athens must pass further austerity measures worth €13.5 billion over the next two years to qualify for its next rescue loan payment — without which the government will run out of cash next month.

Merkel’s stop in Athens was welcomed by the Greek government as a much-needed boost for the country’s future in Europe — but protesters viewed it as a harbinger of further austerity and hardship.

Dozens of youths broke away from the peaceful rally and threw rocks and flares at riot police, who responded with pepper spray and stun grenades, in clashes that were relatively minor.

More than 7,000 police had cordoned off parks and other sections of city to keep demonstrators away from the German leader.

As a helicopter buzzed overhead, thousands of protesters, chanting “History is written by the disobedient” gathered in front of Greek parliament. One group of demonstrators burned a Swastika and threw it onto a police barrier, while a group of special forces reservists appeared in uniform and chanted “Merkel out of Greece” in time to their march.

“I have no doubt that (Merkel) has good intentions, and wants to help, but that won’t solve Europe’s problem,” retired teacher Irini Kourdaki said.

Greece raises security for Angela Merkel visit October 10, 2012

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German chancellor flies in amid tight security as protesters hurl rocks and stones to denounce the ‘architect of austerity’

Anti-Merkel protests in Athens, Greece

Greek protesters hold anti-German banners outside the parliament building before Angela Merkel’s arrival in Athens. Photograph: Aris Messinis/AFP/Getty Images

Europe‘s most powerful leader, Angela Merkel, flew into crisis-hit Greece on Tuesday amid tight security as thousands of demonstrators gathered to protest against the debt-laden country’s austerity programme.

The German chancellor touched down at Athens wearing a lime-coloured jacket – the same one she wore for Germany’s win over Greece at the Euro 2012 football tournament – and smiled broadly as her host, the Greek prime minister, Antonis Samaras, welcomed her with a red-carpet reception.

But before Merkel’s cavalcade even left the airport, tens of thousands of demonstrators converged on the capital’s central squares to denounce the woman most identified with the punitive measures blamed for record levels of poverty and unemployment.

Rocks and stones were lobbed at riot police, who were reported to have used pepper spray against protesters. As the chants of angry demonstrators echoed around Syntagma square, where Greek police estimated 250,000 demonstrators had gathered, helicopters flew overhead as one of the tightest security operations got under way.

Although the chancellor will spend barely six hours in the country, her presence has resulted in frogmen patrolling the seas, snipers guarding rooftops and an estimated 7,000 policemen, including elite riot units, securing the boulevards on which her cavalcade will pass.

“We will give her the welcome she deserves,” warned Alexis Tsipras, Greece’s main opposition leader, as he joined protesters denouncing the “architect of austerity” in Syntagma square, Athens’ central plaza. “The policies she represents are dangerous and criminal,” said the radical leftist, adding that the growth through austerity approach favoured by Berlin to resolving the nation’s debt woes were not only counterproductive but doomed to failure.

Prominent among the protesters flanking Tsipras were leading figures from Germany’s left opposition who also flew into Athens to express their solidarity for Greek workers and pensioners who have been hardest hit by relentless rounds of EU-mandated tax increases and pay cuts.

With the German media likening Athens to a “war zone”, despite Merkel’s spokesman describing the talks as a “normal visit” to an EU country, the stakes could not be higher.

For cognoscenti of the debt drama that has rocked the eurozone since exploding beneath the Acropolis in late 2009, the visit is crucial for the German leader as she gears up for general elections in September 2013.

Eager to soften her image as an austerity warmonger in the runup to the polls, the chancellor has gone on a charm offensive, speaking often of the pain she feels for the difficulty ordinary Greeks have had to endure as a result of their country’s profligacy.

But nearly three years into the crisis, with Greece engulfed in its worst recession since the second world war, the visit is also seen as being long overdue. Although German officials insist Merkel’s descent on the Greek capital should be viewed as “an act of solidarity” – and further proof of the chancellor’s desire to keep debt-stricken Greece in the family of eurozone nations – there is, among Greeks at least, little light at the end of the tunnel.

After the biggest debt write-down in the history of world finance and two bailouts worth a mammoth €240bn (£195bn), the country is not only far from being saved but slipping inexorably into social meltdown.

As Samaras tries to negotiate new budget cuts with international lenders – the price of further aid from the EU and IMF – his fragile coalition not only faces anger on the streets but a political climate that has become increasingly radicalised.

Last week the conservative leader warned that democracy might be at risk in a country that has seen the neo-Nazi Golden Dawn party surge in popularity since elections in June. He appealed for Athens’s next cash injection – at €31.5bn not only one of the biggest but vital to keeping the liquidity-starved economy alive – to be made before public coffers dried up completely “by the end of November”.

But analysts say Merkel’s room for manoeuvre is limited. As she entered talks with Samaras, Greek officials repeated their hope that the chancellor would at least guarantee the next loan disbursement. But even that is far from sure. The German leader faces formidable opposition from her constituency over facilitating aid conditions for a nation often portrayed as feckless and lazy by the German press.

Instead Merkel is expected to tell Samaras that while Berlin is not about to cut Athens loose, the new round of belt-tightening – at €13.5bn the equivalent of more than 5% of GDP – and the implementation of further reforms is the only way of ensuring that Greece remains in the eurozone.

Greece Braces for Visit by Merkel October 9, 2012

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German Chancellor Angela Merkel visits Greece while the country remains locked in negotiations with its creditors over a package of austerity measures. Dow Jones’s Jenny Paris discusses the latest developments.

The Greek capital was bracing for a security clampdown as Prime Minister Antonis Samaras welcomed German Chancellor Angela Merkel on Tuesday on her first visit to Athens since the debt crisis began.

In a sign of the reception Ms. Merkel is likely to receive on her seven-hour stopover in the Greek capital, several thousand demonstrators gathered in the city’s main Syntagma Square on Monday evening, blaring revolutionary music from loudspeakers and holding banners decrying planned government austerity measures, which many Greeks blame on Ms. Merkel.

German Chancellor Angela Merkel will visit Athens on Tuesday but she will likely be met with mixed reaction from the Greeks, Charles Forelle discusses on Markets Hub.

One banner, modeled on the German flag and written in German, read: “Angela don’t cry. There is nothing left in the larder to take.”

Fearing wider protests will cast a shadow on the leaders’ effort to promote an image of renewed solidarity, police were expected to dispatch some 7,000 officers, coast-guard personnel, sharpshooters and navy divers, in what is being billed as the biggest security operation since then-President Bill Clinton came in late 1999.

The police presence will be bolstered by six-foot-high metal barriers outside Parliament, two police helicopters, and 10 extra riot-police units—with a water cannon on standby, according to state-owned television. Police have banned all gatherings Tuesday in a one-square-kilometer area encompassing the prime minister’s office and the German Embassy, while staff inside Greece’s tightly guarded Parliament building have been told not to show up for work.

Many analysts expect the chancellor to reaffirm Greece’s place inside the euro zone—something that looked in doubt just a few months ago—and express her sympathy for the sacrifices made by Greeks in an austerity push that has driven the economy into a five-year recession and unemployment to record highs.

The visit comes amid a recent thaw in relations between Ms. Merkel and Mr. Samaras—a longtime critic of the austerity measures that are a quid pro quo for Greece’s latest €173 billion ($224.3 billion) bailout—whom Ms. Merkel blamed for undermining the previous government’s reform efforts.

But since coming to office in June at the head of a three-way coalition, Mr. Samaras has changed tack and now supports the bailout, something that has won him the backing of the German chancellor.

Ms. Merkel—facing a German electorate deeply skeptical over Greece’s bailout—is expected to renew her warnings to Greece that it must abide by its reform program. Few expect her to offer any specific proposals to ease the pain of Greece’s adjustment.

A Greek pensioner protesting against austerity cuts, confronted riot police in Athens as tensions built on Monday, the eve of German Chancellor Angela Merkel’s visit to Greece.

“The fact that she is coming to Athens now is an indication that she sees Greece’s future in the euro zone and she’s not about to pull the plug on support,” said David Lea, a London-based analyst at Control Risks, an independent risk-consulting firm in London. “I don’t think any concrete measures will come out of it,” he added. “It’s more of a symbolic visit.”

Her visit also comes as Greece remains locked in negotiations with a visiting troika of international inspectors from the European Commission, the International Monetary Fund and the European Central Bank on some €13.5 billion worth of austerity measures the country must take over the next two years to cut its budget deficit.

An agreement on those measures, as well as other structural reforms, are a precondition for Greece to receive the next tranche of aid promised under the terms of its bailout. If it doesn’t receive that next 31.5 billion aid tranche, the Greek government risks running out of money in November.

Although the details of the austerity package are still being negotiated, the measures are expected to bite deeply, slashing pensions across the board and further paring back wages and bonuses in the public sector. In the face of those cutbacks, most Greeks view Ms. Merkel’s visit as a mixed-blessing.

“Merkel’s visit is clearly provocative,” said 52-year-old telecommunications worker Antonis Panagiotakopoulos, who was participating in Monday’s protest, saying her visit had more to do with German elections set for next year than her interest in the fate of Greeks. “She comes to us with a carrot and a stick.”


France, Germany accused of ‘black campaign’ against Turkey’s EU bid May 16, 2011

Posted by Yilan in EU, European Union, France, Germany, Turkey.
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Prime Minister Recep Tayyip Erdoğan.
Prime Minister Recep Tayyip Erdoğan.

Prime Minister Recep Tayyip Erdogan said there is a “black campaign” led by France and Germany to “destroy Turkish determination to become a member of the European Union,” Bloomberg reported Thursday.

“They want Turkey to give up,” Erdoğan said in an interview in Ankara with journalist Charlie Rose from the U.S. public broadcaster PBS that aired Wednesday night.

“Let me put it very clearly: France is number one, secondly Germany” in opposing Turkey’s EU membership, he said.

Turkey has been “at the doors of the European Union for more than 50 years and there is still a European Union that does not accept Turkey as a member,” Erdoğan said. He added that Turkey remains committed to joining, although the EU continues to “change the rules of the game.”

“It’s not honorable. They don’t stick to their promises,” he said.

‘Hamas not a terrorist group’

In the same interview, Erdoğan also expressed his belief that Hamas is not a terrorist organization, saying he felt the recently penned Palestinian reconciliation agreement between Hamas and Fatah was an essential step toward Mideast peace.

Erdoğan’s comments came one day after Hamas’s Gaza strongman, Mahmoud Zahar, said that while his organization would accept a Palestinian state within the 1967 borders, it would never recognize Israel. He said this was because of the damage such a move would do to Palestinian refugees in the “diaspora,” according to a report by Israeli newspaper Haaretz.

Commenting on the recently achieved unity agreement between rival Palestinian factions Fatah and Hamas, the Turkish prime minister said he did not feel Hamas was an obstacle in achieving Mideast peace.

“Let me give you a very clear message: I don’t see Hamas as a terror organization. Hamas is a political party,” Erdoğan told PBS. “It is a resistance movement trying to protect its country under occupation.”