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Tuesday, February 07, 2012

Greek end-game: Day 2 (or rather 700)

The end-game in Greece continues to rumble on into another day of negotiations. On the rhetoric front, matters have heated up as well. Neelie Kroes, the Dutch EU commissioner told De Volkskrant, "It's always said, if you let one nation go, or ask one to leave, the entire structure will collapse. But that is just not true."

Talks between the leaders of the Greek political parties will continue at 2pm GMT today, after Greek Prime Minister Lucas Papademos held talks with the EU/IMF/ECB troika late into the night yesterday. Unfortunately, it doesn’t seem as if much was achieved. We expect that the issue of this new debt repayment account for eurozone bailout funds was broached and developed with the (likely reluctant) Greek authorities. Essentially, this funnels more funds into paying off Greek debt rather than using it to boost competitiveness or improve governance in anyway.

Following the talks Greek Finance Minister Evanagelos Venizelos was surprisingly blunt, saying, "Unfortunately the negotiations are so tough that as soon as one chapter closes, another opens."

As we noted yesterday, some progress was made towards deal between the Greek political parties, as they agreed in principle to 15,000 additional public sector job cuts, a reduction in the minimum wage and supplementary pensions. However, these cuts still do not meet the demands made by the troika, while the details of how they will be implemented are still to be ironed out.

We will continue to update this blog with developments in Greece throughout the day.


Denis Cooper said...

It's a pity Kroes and others didn't seriously consider the feasibility of Greece leaving the eurozone without that precipitating a complete collapse, BEFORE they embarked on illegal bail-outs with the sole purpose of keeping Greece in the eurozone.

But then the real motivation for the eurozone bail-outs, accurately described by Christine Lagarde herself as "major transgressions" of the EU treaties, has always been primarily political and not economic.

Here's Barroso on the EU as "the first non-imperial empire" in July 2007:


"Sometimes I like to compare the European Union as a creation to the organisation of empires ... the empires ... because we have dimension of empires. But there is a great difference ... the empires were usually made through force, with a centre that was imposing a diktat, a will on the others ... and now we have what some authors call the first non-imperial empire ... "

Well, we haven't yet got to military force, but we certainly now have something very close to "a centre imposing a diktat, a will on the others".

martin blaiklock said...

Since 1998 the European Investment Bank (EIB) has lent to Greece around Euro 15bn, all in the name of economic development and new infrastructure. Whilst some of these loans will have been repaid in the interim, much will remain outstanding. As the economic development has clearly failed to come about, is it not reasonable that the EIB, along with private lenders, etc., take a 'hit' on their loans to Greece too??
[PS Next call is to review Ireland, Portugal and Spain in the same context!!].

Rik said...

1. Meeting paretyleaders postponed to tomorrow (wednesday).
2. @Blaiklock
Anyway there will be a second haircut 120% is unsustainable and will never be met as well. Which means E-institutions will get one as well. IMF senior and hardly any Privates left.
3. 15 000 civil servants is a joke. In 2010 was agreed that before 2015, 150 000 should be fired. We should year end 2012 be at 75 000 or something close to that.
4. First Greece should get its house in order before you can talk realistically about growth. More money now likely means simply more consumption with most of the money going abroad for imports.
5. Kroes is of course completely right. See the markets they hardly change whether at that moment the news from Greece is good or bad. A default could be a sort of non-event (sort of bank-stresstest).

Unknown said...

There are only one lesson to take from the greek crisis, the Euro do not work!

Next we will have the portuguese crisis, and the lesson will be the same.

And in the future we will have the spanish, italian, belgian, cipriot, etc., crisis. Really the Euro do not work.