World Press View: Another Fine Mess Greece Got Into

Greece has dug itself into such a deep hole it’s unlikely it will be able to recover even with more aid from international lenders, world press reports say.

Some excerpts:

Greece “Next to Clueless” as Cash Runs Short

Sky News – Ed Conway

The moment the people of Lamia realised things had really hit rock bottom was when the firefighters started turning up on their doorsteps.

They went from house to house through the small, sleepy town about 200km north of Athens, knocking on doors and asking for contributions.

The brigade’s funding has fallen so far that they now have little option but to go begging for cash.

Some households gave them a few pennies. Some donated odds and ends from their homes. Some even gave them new tyres for their trucks, which had been worn down to destruction.

The police have been doing something similar for some time.

It is fitting that we use a Greek word, paradox, to describe when moments seem oddly contradictory and self-defeating.

Everywhere you look in Greece today, there are paradoxes aplenty: the country’s bailout lenders urge Athens to crack down on corruption and combat the black market but their austerity only serves to push firefighters and police into seeking under-the-counter payments.

The creditors want the country to raise the pension age; but over the past five years the average retirement age has actually fallen, as unemployment rose and laid-off workers took up their pensions rather than seeking more work.

But in the end it mostly comes back down to growth. Greece is facing a depression worse than anything ever recorded in a developed economy. The total income generated by the country and its people has fallen by a quarter.

Crisis Intensifies as Greece Defers IMF Payment

The Irish Times – Suzanne Lynch

The Greek crisis entered uncharted territory tonight after Athens deferred payment of €300 million due to the International Monetary Fund on Friday.

Greece is instead proposing to pay four instalments due to the fund this month in a single payment at the end of the month.

The IMF confirmed the Greek authorities had informed the institution that it planned to bundle the country’s June payments into one, which is due on June 30th.

The proposal to bundle the payments was confirmed just hours after IMF managing director Christine Lagarde said she expected Greece to meet the €300 million payment due tomorrow.

The deployment of a seldom-used but legal device may buy Greece time as it struggles to agree a new reform deal with lenders.

But it also indicates the country’s precarious financial position, more than four months after the Syriza-led government swept to power in January’s general election.

Greece was last month forced to tap its reserves at the IMF to meet a €750 million payment.
The last debtor country to bundle payments to the IMF was Zambia in the 1970s.

The €300 million payment is the first of four repayments totalling €1.6 billion due to the IMF this month.

Pushing Greece Out Could Be Europe’s Final Act

Project Syndicate – Joseph Stiglitz

European Union leaders continue to play a game of brinkmanship with the Greek government. Greece has met its creditors’ demands far more than halfway.

Yet Germany and Greece’s other creditors continue to demand that the country sign on to a program that has proven to be a failure, and that few economists ever thought could, would, or should be implemented.

The swing in Greece’s fiscal position from a large primary deficit to a surplus was almost unprecedented, but the demand that the country achieve a primary surplus of 4.5% of gross domestic product was unconscionable.

Unfortunately, at the time that the “troika” — the European Commission, the European Central Bank, and the International Monetary Fund — first included this irresponsible demand in the international financial program for Greece, the country’s authorities had no choice but to accede to it.

The folly of continuing to pursue this program is particularly acute now, given the 25% decline in GDP that Greece has endured since the beginning of the crisis.

The troika badly misjudged the macroeconomic effects of the program that they imposed. According to their published forecasts, they believed that, by cutting wages and accepting other austerity measures, Greek exports would increase and the economy would quickly return to growth. They also believed that the first debt restructuring would lead to debt sustainability.

The troika’s forecasts have been wrong, and repeatedly so. And not by a little, but by an enormous amount. Greece’s voters were right to demand a change in course, and their government is right to refuse to sign on to a deeply flawed program.

Having said that, there is room for a deal: Greece has made clear its willingness to engage in continued reforms, and has welcomed Europe’s help in implementing some of them.

A dose of reality on the part of Greece’s creditors — about what is achievable, and about the macroeconomic consequences of different fiscal and structural reforms — could provide the basis of an agreement that would be good not only for Greece, but for all of Europe.