World Press View: Greek Debt Drama Plays Out Big Time

When Greek Premier Alexis Tsipras came to the UN’s General Assembly annual opening in New York he brought his country’s crisis with him, world press reports say.

Some excerpts:

Tsipras May be Greece’s Unlikely Saviour

Australian Financial Review/Richard Holden

Last week, the man who led Greece to the brink of financial Armageddon, Alexis Tsipras, was returned to power in Greek elections. Is it a case of “Here we go again?”

Actually, perhaps not.

Recall that Tsipras was the Prime Minister who led a government that played chicken with the European Central Bank, International Monetary Fund, and European Commission over the solvency of the Greek financial system just a few months ago.

Greece defaulted on loans it owed to the IMF and then refused to take the required fiscal measures to secure new financing. This led to credit in the Greek economy drying up, capital controls being put in place, and the real economy basically grinding to a halt  …

While these events were well under way Tsipras took the bizarre step of calling a referendum, so the Greek populace could vote on the deal being offered by the so-called troika.

Calling the referendum effectively tore up the quite sensible deal that was on the table, used up precious time, and caused people to question Tsipras’ bona fides and his judgment.

With all this history, shouldn’t we be terrified at the prospect of this man being at the helm again, particularly when compared to the seemingly sensible New Democracy leader Evangelos Meimarakis, the main alternative?

There are a number of reasons to think that this time will be different.

First, beginning with the firing of Yanis Varoufakis, Tsipras has functionally ridded his Syriza party of its extreme left wing, who wanted nothing more than for Greece to get off the euro, no matter what the cost …

During the events of August – as the Greek economy sat on the precipice – I was strongly critical of Tsipras in this newspaper. He made a number of rookie mistakes, with significant consequences, and he took advice from the wrong people – most notably the misguided Varoufakis.

Greece, Europe and the world were very lucky to avoid a disaster.

But to paraphrase John Maynard Keynes, when I get new information I update my views. It seems that Tsipras has done so. And so have I.

And in an interesting addendum, so have capital markets. Greek bond yields reflect comfort in the election outcome.

Greek Crisis Still Dragging Down Europe

Market Watch/Satyajit Das

In an interview in June 2012 with the Australian Broadcasting Service,a bit less than two years before he became Greek finance minister, Yanis Varoufakis stated that “the Greek economy is finished.” The prediction may well be realized.

The protracted and often chaotic attempts to resolve the Greek debt issue has created uncertainty and paralysis that has worsened Greece’s position. Banking controls combined with economic, political and social instability is continuing to inflict damage on the country.

Suppliers, especially foreigners, now demand payment in advance. Businesses are closing. Jobs are being lost. Travel advisories by many countries warning of potential problems may affect tourism.

Following their government’s lead, individual Greeks are withholding debt repayments, either because they cannot make them or they believe they can negotiate a debt reduction. By one estimate, perhaps as much as 70% of Greek mortgages are in default.

Economic activity has slowed, with the economy probably having slipped into recession — reversing the modest growth in 2014. The primary budget surplus has fallen, perhaps slipping into deficit. The banking system is fragile, vulnerable to any reduction in ECB liquidity support. In essence, the economy has deteriorated and the outlook is now poor.

For Greece’s creditors, any victory may also prove Pyrrhic in nature.

The primary objectives of the 2009 European bailouts were to ensure survival of the eurozone and avoid European banks having to take large losses on their Greek exposures. Assistance to the peripheral economies was always incidental to these primary motives.

Far from succeeding, the strategies have made the problem bigger. This is the result of confusing solvency and liquidity problems.

Endless Greek Debt Drama Finally Hits U.S.

CNBC/Nasos Koukakis

Pope Francis is a hard act to follow, but for Greek Prime Minister Alexis Tsipras, who has been in New York since Sunday, getting European “rock star” treament isn’t the goal. Tsipras is in New York seeking more generous friends than he has found in the euro zone to help relieve Greece’s massive debt burden.

Hat in hand and hitting the United Nations and Clinton Global Initiative, the Greek prime minister is hoping to form intergovernmental alliances that favor a “market friendly” restructuring of Greek debt held by the members of the euro zone, including the European austerity “hard line” members led by Germany.

In his speech at the UN Summit on Sunday, Tsipras said, “We can not speak effectively for aid to developing countries, or loans in developed countries, unless we address the debt issue as an international challenge at the heart of our global financial system. In all forums, including this one here, we should talk about how the restructuring or reconfiguration of the debt can be associated with the development.”

Notably, Tsipras cited the 1953 deal for Germany’s external debt as an example.

At the Clinton Global Initiative annual meeting in New York, Tsipras called upon the world community and Greek Americans to support the reconstruction efforts in Greece. “We will fulfill our promises, but it is also important for the other side to fulfill its promises to ease the public debt,” he said, adding that solving the debt crisis is a prerequisite for attracting investors in Greece.

Answering questions posed by President Bill Clinton, Tsipras said growth with social cohesion and tackling the high unemployment rate are the only ways for Greece to overcome its financial crisis.