Greece debt crisis: Tsipras facing eurozone deal revolt

July 15, 2015 – 30 minutes ago

Greek MPs are debating tough economic measures they must approve by the end of the day in order for an €86bn eurozone bailout deal to go ahead.

The new legislation includes tax rises and an increase in the retirement age.

As debate continued, protesters threw petrol bombs at police during an anti-austerity protest close to parliament, and police responded with tear gas.

PM Alexis Tsipras has said he does not believe in the deal, but has urged MPs to agree to the measures.

The vote is expected to pass with opposition help, despite a revolt from some hardliners in the ruling left-wing Syriza party.

Pro-European opposition parties have pledged to vote for the measures.

Hardliners in the ruling left-wing Syriza party are likely to vote against, and the junior coalition party has offered only limited support.

“If I don’t have your support it will be hard for me to remain as prime minister,” Mr Tsipras has told his MPs, as government estimates suggest between 30 and 40 will oppose the measures.

Opponents of the deal took to the streets of Athens ahead of the vote, and unions and trade associations representing civil servants, municipal workers and pharmacy owners held strike action.

More than half of the members of Syriza’s central committee have signed a statement condemning the bailout agreement, describing it as a coup against their nation by European leaders.

The possible bailout was agreed in Brussels on Monday by eurozone members, though one of Greece’s creditors, the International Monetary Fund (IMF), has suggested in a report that it does not go far enough – and that Greece will need some of its debts to be written off.

Greece’s economy has shrunk by 25% in the last five years amid austerity measures designed to curtail its ballooning public sector debt.

In order to begin negotiations over a third bailout worth €86bn (£61bn; $95bn) over three years, Greek MPs need to approve measures including:

  • The ratification of the eurozone summit statement
  • VAT changes including a top rate of 23% to take in processed food and restaurants and; a 13% rate to cover fresh food, energy bills, water and hotel stays; and a 6% rate for medicines and books
  • The abolition of the VAT discount of 30% for Greek islands
  • A corporation tax rise from 26% to 29% for small companies
  • A luxury tax rise on big cars, boats and swimming pools
  • And end to early retirement by 2022 and a retirement age increase to 67

Monday’s announcement of a possible deal was met with anger among many in Greece, who called it a “humiliation”.

The Greek constitution states that a government must have a majority – 151 seats out of 300.

But if it loses a vote, the government can still function in a minority capacity as long as the opposition does not call a vote of confidence and as long as the numbers don’t fall below 121.

The number of anti-bailout MPs is known to be at least 30 within Syriza’s 162-seat coalition.

The question is whether there will be more than 41.

If the numbers go below 121, Prime Minister Alexis Tsipras’s government will be severely damaged and will likely look to opposition parties to join a national unity government.

Mr Tsipras has said he does not believe in the deal, though he agreed to it.

In a television address on Tuesday, he called the proposals “irrational” but said he was willing to implement them to “avoid disaster for the country” and the collapse of the banks.

As parliamentary committees considered the details of the laws, Deputy Finance Minister and Syriza member Nadia Valavani announced her resignation, saying: “I’m not going to vote for this amendment, and this means I cannot stay in the government.”

And tempers flared when former Finance Minister Yanis Varoufakis was heckled with shouts of “You got us here” while addressing one committee.

The jeers came when he said he doubted the deal could work, and compared it to the conditions imposed on Germany in the Treaty of Versailles after World War One.

Meanwhile, French MPs have overwhelmingly backed the Greek bailout deal. Because of their constitutions, several eurozone members, including Germany, must ratify the deal in their parliaments before it can proceed.

Banks stay shut

Greece faces an immediate cash crisis. Banks have been shut since 29 June.

Mr Tsipras has warned banks are unlikely to reopen until the bailout deal is ratified, and this could take another month.

The European Commission has formally proposed a short-term €7bn loan for Greece through the EU-wide European Financial Stability Mechanism (EFSM).

Use of the EFSM for eurozone rescues has been opposed by Britain and other countries which are not part of the euro but are European Union members.

One British official in Brussels told the BBC the UK government had no objection in principle to the use of the EFSM – as long as British taxpayers’ money was ring-fenced from any liability.

Valdis Dombrovskis, a senior European Commission official, said it was working to protect non-euro states from any negative financial consequences should the loan not be repaid.

‘Need for debt help’

The IMF report was written before the eurozone reached a deal with Greece in the early hours of Monday. It was shared with eurozone leaders in advance, but made public only on Tuesday.

It predicts that, in two years’ time, Greek debt will reach close to 200% of GDP (national income) which could “only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far”.

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It recommends a “very dramatic extension” on the maturity of Greece’s debts, “with grace periods of, say, 30 years on the entire stock of European debt”.

“Other options,” it says, “include explicit annual transfers to the Greek budget or deep upfront haircuts (debt write-offs)”.

Germany, the largest contributor to Greek rescue funds, and a number of other eurozone countries have long resisted any talk of haircuts and debt relief.

The European Commission published its own assessment on Wednesday, taking a more optimistic view of Greece’s debt sustainability than the IMF but also suggesting debt relief.

The Commission’s report says rescheduling the debt is possible, but only if Greece implements the reforms being demanded by its creditors. It rules out debt write-offs.

Analysis – by Chris Morris, BBC News, Brussels

The IMF report highlights a massive flaw in the deal hammered out so painfully between Greece and the rest of the eurozone: the numbers don’t add up.

It believes that without a restructuring of the Greek debt, it will keep on rising.

But the point about this deal is – once again in the eurozone, it was a case of politics trumping economics.

The desire to keep the eurozone together was stronger (for now) than the economic forces threatening to pull it apart.

There was plenty of talk about debt restructuring during the negotiating process, but not on the scale that the IMF is suggesting.

Officially, there will be a discussion of restructuring only after a first review of the new bailout is successfully concluded.

That is several months down the line.

But, while the IMF report doesn’t comment directly on Monday’s deal (because the report had already been written by then), it certainly implies that the IMF may feel it is unable to take part in the new bailout programme for Greece.

And that would leave a large hole – both in terms of numbers and political credibility.

Greek crisis will shake IMF

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European Union Lowers Growth Forecasts as Business Confidence Sags

“The economic and employment situation is not improving fast enough,” said Jyrki Katainen, the European Commission vice president for jobs and growth. Credit

“The economic and employment situation is not improving fast enough,” said Jyrki Katainen, the European Commission vice president for jobs and growth. Credit

“The economic and employment situation is not improving fast enough,” said Jyrki Katainen, the European Commission vice president for jobs and growth.

The Times – 5 November 2014

BRUSSELS — European Union officials on Tuesday sharply lowered growth forecasts as member states like France, Germany and Italy showed weak economic performance, and as business confidence suffered from heightened geopolitical risks.

Growth is expected to be a meager 1.3 percent in the 28-member bloc this year, instead of the 1.6 percent predicted in the spring, said the European Commission, the union’s executive arm. And the economy is not expected to get much better in 2015, when growth in Germany, the region’s economic engine, is expected to grind down to about 1 percent.

“The economic and employment situation is not improving fast enough,” Jyrki Katainen, the European Commission vice president for jobs and growth, said in a statement accompanying the closely watched economic forecast.

The European Commission’s Report on Economic Growth [PDF]
Shipping containers in the Hamburg harbor. Gross domestic product in Germany shrank by 0.2 percent from the first quarter.
Eurozone Recovery Stalls, With Weakness in Germany and France.
Shop windows in Rome advertise sales. The latest economic news dashed hopes that Italy was emerging from a decade of stagnation.
Italy Falls Back Into Recession, Raising Concern for Eurozone Economy.
Olli Rehn, the European Union’s commissioner for economics and monetary affairs, said growth this year is expected to flatline in the 28 countries of the Union.  E.U. Predicts Anemic Growth and High Unemployment in 2014.

Unless there are additional signs of growth and job creation in the next five years, “people could despair of the European project,” Pierre Moscovici, the European commissioner for economic and monetary affairs, said at a news conference on Tuesday.

The recovery on the Continent continues to lag those in the United States and Britain. Over the next two years, annual growth in Britain is expected to be close to 3 percent, and the unemployment rate is projected to be 5.5 percent in 2016, according to the data released Tuesday. The unemployment rate in the European Union is not expected to fall below double digits, where it has been since 2012, until 2016.

The gloomier outlook will most likely raise expectations for the European Central Bank to take additional steps to stimulate the economy, though economists said they did not expect policy makers to take action at a meeting on Thursday.

The report on Tuesday did not take into account how the European economy might get a boost from a 300 billion euro, or $375 billion, plan to invest public and private money into infrastructure projects. Jean-Claude Juncker, who took office this month as president of the European Commission, has pledged to present that package before the end of the year.

But how much of an effect that would have on lackluster growth remains to be seen. The spending program is unlikely to “change the whole world,” Mr. Katainen said, but “its contribution can be significant.”

The lower forecasts, especially in the 18-nation euro area, where the commission cut its projection for growth this year to 0.8 percent from an earlier 1.2 percent, are a measure of how quickly optimism about a recovery has dissipated. France has failed to grow as hoped, and Italy struggles to make overhauls. There are also signs that the German economy is stalling.

In one of the more drastic downgrades for 2015, the commission lowered Germany’s forecast for growth by nearly a full percentage point to 1.1 percent.

Among the problems facing European economies like Germany is the prospect of a “new cycle of sanctions and countersanctions” related to the restrictions that the United States and the European Union imposed on Russia in retaliation for its role in the Ukraine crisis, and reciprocal moves by Moscow, European Union officials said.

Those tensions “could pose a larger roadblock to European growth prospects than currently envisaged in the forecast,” the officials said in a report accompanying the forecasts.

The tensions might also “have triggered a wait-and-see attitude among firms,” the officials wrote in a section of the report that focused on Germany.

Germany is expected to post growth of 1.3 percent this year, down from an earlier forecast of 1.8 percent. The French economy is expected to grow 0.3 percent this year, down from an earlier estimate of 1 percent.

Italy appeared to stand out as a poor performer: Its economy was predicted to shrink 0.4 percent this year compared with a forecast in May for growth of 0.6 percent.

The commission also expressed concerns about inflation, which it said would remain very low this year and would not come close to the target of just under 2 percent anytime soon. It projected an annual inflation rate of 1.6 percent in the European Union in 2016.

“With confidence indicators declining since midyear and now back to where they were at the end of 2013, and hard data pointing to very weak activity for the rest of the year, it is becoming harder to see the dent in the recovery as the result of temporary factors only,” officials wrote in their report.

The commission said it expected growth rates to improve somewhat in 2015, rising to 1.5 percent in the European Union and to 1.1 percent in the eurozone.

Even so, weaker-than-expected growth this year is likely to make it much harder for countries like France and Italy to achieve the bloc’s mandated targets to keep budget deficits and government debt in check.

France and Italy could face disciplinary action and steep fines if they fail to show that they are making sufficient effort to bring their economies in line with European budgetary rules. Mr. Katainen said those recommendations would be published by the end of this month.

Over all, the commission said, the most recent figures indicate a slow fading of the legacy of the sovereign debt crisis, with many member states still weighed down by high unemployment, high debt and low output.

That prompted Mr. Katainen, the commission vice president, to call on member states to agree on the €300 billion spending plan to bolster demand.

“Accelerating investment is the linchpin of economic recovery,” he said.

Germany also “can play a significant role stimulating the euro area and E.U. economy” by saving less and spending more, Mr. Katainen said.

German medium-size businesses are already feeling the negative impact of Western sanctions imposed against Moscow, as Russia is turning towards Asia-Pacific nations for high-tech machinery and engineering systems.

“The innovative German machinery makers and engineering companies, mostly medium and small businesses, are being hit the hardest,” Volker Treier, deputy managing director of the German Chambers of Commerce (DIHK) said, as quoted by the Business Insider Tuesday.

Treier said he expects German exports to Russia to fall by about 20 percent in 2014.

“On the one hand, they are being directly hurt by the sanctions imposed by the European Union or due to lacking clarity about how they should be implemented. On the other hand Russian firms that placed the orders are facing higher financing costs due to a credit crunch and ruble’s devaluation,” Treier explained.

On Tuesday, the German-Russian Foreign Chamber of Commerce (AHK) said that, based on a new survey of German businesses operating in Russia, the so-called Mittelstand companies (small-scale businesses that form the backbone of Germany’s economy) were being hit badly by the fallout from Western sanctions, particularly in the industrial manufacturing sector.

“China is the distinct beneficiary” of Europe’s sanctions policy toward Russia, AHK President Rainer Seele said, as quoted by The Wall Street Journal Tuesday.

Moscow ready to expose ‘Kiev in two weeks’ spin with Barroso call transcript

President Vladimir Putin.(RIA Novosti / Alexei Druzhinin)

President Vladimir Putin.(RIA Novosti / Alexei Druzhinin)

Published time: September 02, 2014 15:43

 Vladimir Putin’s remark about “taking Kiev in two weeks” was taken out of context and its meaning was distorted, Moscow said, adding that it’s ready to publish the president’s conversation with the European Commission head.

Moscow may reveal the full recording of the controversial phone call if European Commission president, Jose Manual Barroso, doesn’t object in the next two days, Russia’s permanent representative to the EU, Vladimir Chizhov, said.

La Repubblica newspaper earlier reported that outgoing European Commission president, Jose Manual Barroso, disclosed the content of his telephone conversation with the Russian president before the EU summit, which took place in Berlin at the weekend.

According to the Italian daily, Barroso quoted Putin as saying: “If I want to, I can take Kiev in two weeks” after the issue of the presence of Russian troops in Ukraine was raised.

The EU official said that it was a “threat” by the head of the Russian state, which may be fulfilled in case of further European sanctions against Russia.

Presidential aide, Yury Ushakov, stressed that whether these words concerning Russian troops taking Kiev were pronounced by Putin or not, “this quote was taken out of context and had a very different meaning.”

Ushakov slammed Barroso for even sharing the details of a high-level phone call, saying that the EU Commission president’s behavior is “incorrect and goes beyond the bounds of diplomatic practices.”

“If that was really done, it is not worthy of a serious political figure,”
he added.

European Commission President Jose Manuel Barroso.(AFP Photo / Odd Andersen)

European Commission President Jose Manuel Barroso.(AFP Photo / Odd Andersen)

Barroso, who has headed the European Commission since 2004, will be replaced at the helm of the EU’s executive branch by Luxembourg’s former prime minister, Jean-Claude Juncker.

Relations between Russia and Western countries have deteriorated over the situation in Ukraine.

Moscow is being accused of escalating the conflict by supporting the rebel forces in Ukraine’s southeastern Donetsk and Lugansk regions.

The allegations, repeatedly denied by the Russian side, have never been backed up with any proof.

In late August, Ukrainian President Petro Poroshenko sounded the alarm over the presence of Russian troops in the country.

Moscow refuted his claims, with OSCE observers saying that they had not seen any Russian military presence around the Ukrainian border.

The EU and the US have already imposed sanctions against dozens of senior Russian officials, companies and banks.

Russia responded by banning imported agricultural products from the US, EU, Norway, Canada, and Australia.

The one-year embargo introduced on August 7 applies to meat, pork, fish, fruits, vegetables and dairy products.

Putin reveals NATO chief secretly recorded their talk, leaked it to media

Vladimir Putin says that current NATO General Secretary Anders Fogh Rasmussen secretly recorded and leaked a private conversation with him, when he was the head of the Danish government.

“During his time as Prime Minister he once requested an unscheduled meeting with me, and we met and talked. As it turned out, he had a voice recorder on him, and surreptitiously recorded our conversation, and leaked it to the press,” the Russian president recounted during his annual TV hotline.

“I couldn’t believe my ears and eyes – what nonsense!”

Vladimir Putin says that current NATO General Secretary Anders Fogh Rasmussen secretly recorded and leaked a private conversation with him, when he was the head of the Danish government.

“During his time as Prime Minister he once requested an unscheduled meeting with me, and we met and talked. As it turned out, he had a voice recorder on him, and surreptitiously recorded our conversation, and leaked it to the press,” the Russian president recounted during his annual TV hotline.

“I couldn’t believe my ears and eyes – what nonsense!”