******************** POSTING RULES & NOTES ******************** #1 YOU MUST clip all extraneous text when replying to a message. #2 This mail-list, like most, is publicly & permanently archived. #3 Subscribe and post under an alias if #2 is a concern. *****************************************************************
Greece prepares for debt default if talks with creditors fail by Kerin Hope and Tony Barber, Athens Financial Times [full text], April 13 pm Greece is preparing to take the dramatic step of declaring a debt default unless it can reach a deal with its international creditors by the end of April, according to people briefed on the radical leftist government’s thinking. The government, which is rapidly running out of funds to pay public sector salaries and state pensions, has decided to withhold €2.5bn of payments due to the International Monetary Fund in May and June if no agreement is struck, they said. “We have come to the end of the road . . . If the Europeans won’t release bailout cash, there is no alternative [to a default],” one government official said. A Greek default would represent an unprecedented shock to Europe’s 16-year-old monetary union only five years after Greece received the first of two EU-IMF bailouts that amounted to a combined €245bn. The warning of an imminent default could be a negotiating tactic, reflecting the government’s aim of extracting the easiest possible conditions from Greece’s creditors, but it nevertheless underlined the reality of fast-emptying state coffers. Default is a prospect for which other European governments, irritated at what they see as the unprofessional negotiating tactics and confrontational rhetoric of the Greek government, have also begun to make contingency plans. In the short term, a default would almost certainly lead to the suspension of emergency European Central Bank liquidity assistance for the Greek financial sector, the closure of Greek banks, capital controls and wider economic instability. Although it would not automatically force Greece to drop out of the eurozone, a default would make it much harder for Alexis Tsipras, prime minister, to keep his country in the 19-nation area, a goal that was part of the platform on which he and his leftist Syriza party won election in January. Germany and Greece’s other eurozone partners say they are confident that the currency area is strong enough to ride out the consequences of a Greek default, but some officials acknowledge it would be a plunge into the unknown. Greece’s finance ministry on Monday reaffirmed the government’s commitment to striking a deal with its creditors, saying: “We are continuing uninterruptedly the search for a mutually beneficial solution, in accordance with our electoral mandate.” In this spirit, Greece resumed technical negotiations with its creditors in Athens and Brussels on Monday on the fiscal measures, budget targets and privatisations without which the lenders say they will not release funds needed to pay imminent debt instalments. The government is trying to find cash to pay €2.4bn in pensions and civil service salaries this month. It is due to repay €203m to the IMF on May 1 and €770m on May 12. Another €1.6bn is due in June. The funding crisis has arisen partly because €7.2bn in bailout money due to have been disbursed to Greece last year has been held back, amid disagreements between Athens and its European and IMF creditors over politically sensitive structural economic reforms. These included an overhaul of the pension system, including cuts in the payments received by Greek pensioners, and measures to permit mass dismissals by private sector employers. Although debt reduction was a central theme of Syriza’s successful election campaign, the government changed tune after taking office and insisted that it would meet all its obligations to the IMF. However, Yanis Varoufakis, finance minister, made clear last week that the government took the view that its top priority should be to meet its domestic commitments, including an obligation to continue paying pensions to citizens. ### Greece: why something has to give by Paul Mason Channel 4 News, April 13 <http://blogs.channel4.com/paul-mason-blog/syriza-verge-nervous-breakdown/3571> . . . But after three weeks of detailed negotiations, 24 April is beginning to look like a deadline: Nikos Theocharakis, head of fiscal policy at the Greek finance ministry, is reported to have told Eurogroup negotiators that Greece might run out of cash thereafter. . . . The depth of Syriza’s attachment to the euro was demonstrated when its economics guru Euclid Tsakalotos addressed MPs at Westminster last month. Faced with encouragement to leave the euro from left-wing Labour MPs, Tsakalotos pointed out the experience of the British and French left in the 1980s with what he called the “dead end” of national economic solutions. So Syriza’s leadership is wedded to the eurozone but the eurozone is currently configured to smash Syriza. . . . Publicly Varoufakis has adopted a tone not just of conciliation but of reconstruction with the eurozone. Privately, however, his advisers – and these are the some of the most centrist people in and around Syriza – are shocked by the level of hostility they met inside the eurozone. That wing of Syriza that is basically left-social democratic was existentially attached to the euro. Now that existential belief in the euro is being shaken. And the danger for the eurozone is, such a process can be replicated among an entire people if the evidence is marshalled convincingly. If pushed over the edge – either by the failure of a short-term debt auction or the simple shortfall of receipts – Varoufakis will have no trouble triggering capital controls, emergency taxation of big business and the inauguration of a second currency. . . . Greece would attempt, at first, to default without leaving the eurozone. But the default would throw European politics and the economy into chaos. The already deflating, semi-stagnant eurozone would face another 12-18 months on the pause button until the banking system absorbed a Greek default. So in the next two weeks there is an increased danger of “Graccident” – a partial default caused not by Syriza’s strategy but by the ECB miscalculating the meagre supply of financial oxygen it is allowing into the Greek banks, or by a week’s bad receipts at the finance ministry. Greeks this weekend flocked to their churches to celebrate the Orthodox Easter. Alexis Tsipras, still riding a 71 per cent popularity rating, used the occasion to speak of rebirth and renewal. But among some, the response to the greeting “Christ is risen” was the joking “Send him to Brussels to negotiate!” But with the Easter pause over, negotiations are approaching a critical stage. If Greece is forced into an accidental default, damage to the euro project and to the EU’s image would be massive. A central bank seen to be colluding in the bankruptcy of banks it is supposed to supervise, and willing the breakup of a currency union it is supposed to be running, would tarnish the ECB’s reputation for a decade. <http://blogs.channel4.com/paul-mason-blog/syriza-verge-nervous-breakdown/3571> REPORT: Greece is getting ready to default by Mike Bird Business Insider, NYC April 13 . . . The situation is now so grim that Morgan Stanley analysts think "full membership" of the eurozone is no longer the most likely outcome for Greece, and 45% chance of Grexit: "Unfortunately, continued full membership of the euro now has become an outside scenario for us with a subjective probability of only 40% (see What Are the Implications of Grexit for Europe, March 17, 2015). Either an exit from the euro or a suspension of the membership via the introduction of capital controls instead seem more likely to us, with a subjective probability of 25% and 35%, respectively. Given that we see the risk of Grexit rising to 60% once the country is forced to impose capital controls, we compute a total probability of 45% for a Grexit." <http://www.businessinsider.com/report-greece-is-getting-ready-to-default-2015-4> _________________________________________________________ Full posting guidelines at: http://www.marxmail.org/sub.htm Set your options at: http://lists.csbs.utah.edu/options/marxism/archive%40mail-archive.com
