quinta-feira, 26 de janeiro de 2017
Whispers of ‘Grexit’ start again
Whispers of ‘Grexit’ start again
With Athens, EU creditors, and the IMF deadlocked on the bailout talks, some fear a renewed crisis.
By SIMON MARKS 1/25/17, 5:08 PM CET Updated 1/26/17, 9:25 AM CET
ATHENS — Two years ago, Alexis Tsipras, the then 40-year-old leader of Greece’s Syriza party, swept to victory in snap elections claiming an end to the “vicious cycle of austerity” and years of “humiliation and suffering.”
Now a veteran prime minister, his campaign words couldn’t seem hollower.
Halfway through its seventh year on financial life support from its European partners, doubts are again mounting over not only the stability of Greece’s government but its commitment to the long list of demanding reforms involving its labor force, state-owned businesses and banking sector. The country is in a race against time to make sure it can raise money on capital markets on its own by mid-2018 — the end date of its current €86 billion bailout package.
As Greece lurches forward with the difficult reforms, the Eurogroup of EU finance ministers is expected to conduct a “stocktaking” of the Greek program on Thursday at a meeting in Brussels.
But in dozens of conversations with shopkeepers, business owners, students and the unemployed in Athens in recent days, it’s clear that the Greeks’ disappointment with Tsipras’ broken or undelivered promises is overwhelming.
“We’re sick of politicians,” said Christos Kotsakis, who works at a newspaper kiosk in downtown Athens. “No matter who’s voted in, it’s the same old game. Left wing or right wing, nothing changes and Tsipras is no different.”
Syriza’s main opposition party, New Democracy, smells blood with opinion polls giving Tsipras’ party its lowest levels of support since its convincing victory in the January 2015 elections. Tsipras’ leadership is also eroding from the insubordinate behavior of members of his own party who oppose the reforms, as seen earlier this month when his transport minister, Christos Spirtzis, decided to skip the signing ceremony of the state-owned TrainOSE railway network’s takeover by Italy’s Ferrovie Dello State Italiane for €45 million.
The biggest problem for Tsipras, however, is the still lackluster state of the economy. Although the official GDP growth figure for 2016 is not out yet, a November estimate by the European Commission put it at -0.3 percent.
What little growth momentum 2016 saw was, in the most part, generated by a record-breaking tourism season in terms of the number of new arrivals, according to Jens Bastien, an independent economic analyst based in Athens and former member of the Commission’s task force on Greece. But he said the sector has limited room for additional growth — be it due to power cuts on popular islands like Santorini or poor infrastructure at provincial airports.
Credit flows to businesses have not yet turned positive, after years of decline.
Limitations in the tourism sector are not being countered by growth elsewhere. There is still no pick-up in construction permits, and the retail sector continues to stagnate. Consumer spending is also restrained by recent tax hikes on both property and wages. Moreover, credit flows to businesses have not yet turned positive after years of decline.
As a result, the Greek finance ministry’s estimate of 2.7 percent GDP growth for 2017 is “not shared by many, neither in Greece nor on the creditor side — it is seen as too optimistic,” Bastien said.
Interviews with economists and senior banking officials in Greece underline just how far the country has to go before Tsipras’ promise of an end to the country’s suffering comes true.
One reason credit has not begun flowing again is the staggeringly high levels of non-performing loans (NPLs) still on bank balance sheets. Current NPLs are equivalent to 50 percent of Greek bank portfolios, which amounts to slightly more than €100 billion.
“We were supposed to have legislation in force, allowing the banks to deal effectively with the NPLs two years ago,” said a senior official at Piraeus Bank. “This is something that is still not ready to be implemented. The result is that NPLs keep going up.” According to Bastien, large parts of Greece’s NPL stock was not being dealt with due to fears that banks would attract legal complaints after foreclosing people’s property.
Love or hate the IMF
While policymakers dither in Athens, the Eurogroup finance ministers in Brussels must also sort out their differences with the International Monetary Fund on how best to go forward with the current bailout package.
Maturing government debt and interest payments between January and July will cost the Hellenic government more than €13 billion, according to an EU source close to the talks. To secure the next bundle of cash, EU creditors are demanding that Greece takes concrete steps to fulfill its reform promises.
But the IMF has been arguing that the EU’s current package is unsustainable because it doesn’t contain significant debt relief and until this is addressed, the Washington-based global financial firefighter won’t sign on to the latest Greek rescue mission.
Countries such as the Netherlands and Germany are loath to provide Greece with anything other than short-term debt relief measures such as “smoothening” the country’s “repayment profile.” The trouble is, a failure to bring the IMF on board could result in huge delays to the bailout program’s implementation because the German and Dutch parliaments have insisted on its participation.
The IMF also believes the EU creditors’ budget surplus target of 3.5 percent of Greece’s economic output by 2018 is too ambitious. But in turn, it wants Athens to make further cuts to pension handouts once the program is over.
“The Greek government, including Tsipras, should really think if it is in its own best interests to continue to advocate that the IMF leaves the program … If the IMF were to leave, you are losing your most important advocate for debt relief,” Bastien said.
All the conflicting demands have left the bailout talks in a stalemate. To break the deadlock, Germany’s Finance Minister Wolfgang Schäuble recently suggested that the European Stability Mechanism, the EU’s bailout fund, take over the IMF’s duties as overseer of the program — a scenario that the ESM’s Managing Director Klaus Regling has even called “Plan B.”
But an IMF exit would be a painful alternative, EU sources said, as the current bailout package would have to be ripped up, rewritten, and approved by the German parliament — a risky strategy especially as German elections draw near. “Just a discussion about an IMF exit would help the [Alternative for Germany],” the Berlin official said, referring to the far-right, Euroskeptic party.
Last Friday, Schäuble and IMF chief Christine Lagarde met on the margins of the World Economic Forum in Davos and discussed the Greek conundrum. Both reaffirmed their commitment to keep working together ahead of this week’s Eurogroup meeting, sources in Berlin and Brussels said, calming rumors of a breach — for now.
But should the impasse on the Greek bailout continue and the IMF decides to pull out, some fear talk of a possible “Grexit” could even start creeping back into the debate.
If the IMF doesn’t participate, “I think we’re going to go back to Schäuble’s suggestion that we take a break from the euro,” said the banking official at Piraeus Bank. “And that, I believe, would be very bad.”
Bjarke Smith-Meyer contributed reporting from Brussels.