As Greeks now know, former Premier George Papandreou was wrong when he said, “The money is there,” and the new crisis proves it.
Greece Struggles To Make Debt Math Work
Bloomberg – Nikolaos Chrysoloras, Rebecca Christie, Vassilis Karamanis
Having lost market access, Greece’s only lifeline is emergency loans extended by euro-area member states and the International Monetary Fund. Failure to secure an agreement with them on the disbursement of funds has triggered a liquidity squeeze, raising doubts about the country’s solvency, as well as the sustainability of its nascent economic recovery.
“There’s no chance the quarrel won’t affect the economy” said Haris Theoharis, a lawmaker for Greece’s River party and a former secretary of public revenue. “Every investment has been put on hold, pending the result of the talks,” he said by phone on Wednesday.
Greek Finance Minister Yanis Varoufakis said that the country has an alternative plan to plug its financing shortfall in March, without specifying what it was.
“We go into the negotiations with optimism, with especially good preparation, and I believe there won’t be a development,” Varoufakis said in Athens, on Wednesday. The answer to the question of whether “there is an alternative is that there is one,” he said.
Austerity is Not Greece’s Problem
Livemint – Richardo Hausmann
So the problem is not that austerity was tried and failed in Greece. It is that, despite unprecedented international generosity, fiscal policy was completely out of control and needed major adjustments. Insufficient spending was never an issue.
From 1998 to 2007, Greece’s annual per capita GDP growth averaged 3.8%, the second fastest in Western Europe, behind only Ireland.
But by 2007, Greece was spending more than 14% of GDP in excess of what it was producing, the largest such gap in Europe—more than twice that of Spain and 55% higher than Ireland’s. In Spain and Ireland, though, the gap reflected a construction boom; euro accession suddenly gave people access to much cheaper mortgages. In Greece, by contrast, the gap was mostly fiscal and used for consumption, not investment …
Too much of the debate since then has focused on what Germany, the European Union, or the International Monetary Fund must do.
But the bottom line is that Greece needs to develop its productive capabilities if it wants to grow. The unfocused set of structural reforms prescribed by its current financing agreement will not do that. Instead, Greece should concentrate on activist policies that attract globally competitive firms.
Can Greece Avoid Going Bankrupt This Month?
The Telegraph – Mehreen Khan
Markets have grown more optimistic that the country’s immediate future in the eurozone will be secure until the summer, but reality is beginning to bite for Athens’ cash-strapped new government.
March represents a crucial four weeks for Syriza. Greece is due to make a €1.5bn repayment of its loans to the International Monetary fund this month. Its first €300m payment is due on Friday, in addition to more than $4.5bn in short-term bond redemptions that will also mature later this month.
Given that the country will not receive its bail-out cash until April at the earliest, the new Leftist government has already hinted that it may have to delay fulfilling its obligations to the IMF.
Should it fail to make its loan repayments, Greece would join an ignominious list of international pariahs and war-torn failed states, and become the only developed economy to renege on its commitments to the Fund in 70 years …
Finance minister Yanis Varoufakis has sought to calm the tensions by vowing to “squeeze blood out of stone” in order to pay back the IMF. “We shall do it,” he told the Associated Press earlier this week. But the Greeks are running out of options fast.
Where Greece Hopes To Find Cash
The bank … is one of the big three institutions, along with the IMF and the European Commission, who must make sure Greece sticks to the terms of its 240-billion-euro ($265-billion) bailout, and the extension that the country’s new leaders have just agreed.
But new promises of more spending by Greece’s left-wing government to tackle the “humanitarian crisis” in the country got a chilly reception from the ECB’s president Mario Draghi.
“It is far from certain that the bank is ready” to give Greece the helping help that it expects with its creditors, said economist Carsten Brzeski of ING bank.
Athens would like to borrow more money in short-term bonds called treasury bills, its only real means of raising cash on its own.
But neither the ECB nor the other two members of the “troika” that hold Greece’s purse strings are ready to raise the ceiling of 15 billion euros it is allowed to raise in this way.