Greece May Get Cruel Reward For Its Success

Greece reported recently that it has reached a primary budget surplus, the Holy Grail of austerity, meaning that once you exclude interest payments on the country’s massive debts, the country is finally taking in more revenue than it spends.

This news should be worthy of a ticker-tape parade, after three years of Draconian retrenchment and a partial writedown of privately held Greek debt. Cruelly, however, the main beneficiary of a return to primary surplus may not be Prime Minister Antonis Samaras and his pro-bailout government, but the main opposition Syriza party, which is pushing for the country to refuse further austerity measures and declare a moratorium on its debt payments. Read more of this post

Lies, Crime and Greek Statistics

Last week, prosecutors brought felony charges against Andreas Georgiou, the head of the Greek statistics office, and two employees for allegedly falsifying Greece’s 2009 fiscal data. The prosecutors have made a curious choice of villain. Read more of this post

Thought It Was Safe to Forget Greece? Think Again

Just before Christmas, I met with former Greek Finance Minister George Papaconstantinou, and he talked about how excited he was to spend the holidays abroad, where — unlike in Greece — he could roam freely without a security detail. His holiday didn’t go quite as expected. Read more of this post

OSI likely, but not to give Greece a new lease on life in the EZ

Ever since the introduction of PSI (private sector involvement) in Greece, there has been talk of OSI (official sector involvement) occurring down the line. Mention of OSI in Greece has only intensified since the IMF openly advocated it last week. This was not the first time the IMF had spoken in favor of Greek OSI, but the fact that it was mentioned against a backdrop of protracted negotiations between the Greek government and the troika (the ECB, IMF and European Commission) made some wonder if OSI is imminent. I do think we will see OSI in Greece, but I expect it to accompany Greece’s exit from the Eurozone rather than returning Greece to public debt sustainability within the common currency area. Read more of this post

Beware the unintended consequences in Greece

Greece will be back in the spotlight of the EZ crisis in September for sure, but it has been creeping onto the stage in August as well. Even before the troika conducts its quarterly review on Greece’s progress in hitting the targets set out in the bailout program, there are a few indications that progress hasn’t been good. This week, the government imposed a spending moratorium and reports surfaced that prime minister Samaras will propose to the troika that Greece’s fiscal targets be relaxed. These are obviously not encouraging signs, but they have potentially huge implications for Greece going forward that extend beyond just the next troika review. Read more of this post

Greek Elections: Returning to the Unsustainable Status Quo

New Democracy (ND) just barely pulled ahead of the anti-bailout, left-wing Syriza in the election on June 17th. According to Greek law, the party in first place wins 50 bonus seats in parliament. With roughly 85% of the votes counted and Syriza having conceded defeat, it looks like ND will have 130 seats, Syriza 71, Pasok 33, the Independent Greeks 20, Golden Dawn 18, the Democratic Left 16 and the KKE 12. The markets will view a ND victory as good news, but is it really? I expect the rally to be short, as this election has just returned us to the utterly unsustainable status quo. Read more of this post

Greek Politics: A Step Towards the Exit

All eyes were on France going into the weekend of May 6th, but it turns out the Greek elections have much bigger potential implications for the future of the eurozone (EZ). Last Sunday marked a seismic shift in Greek politics, in which the two main political parties—New Democracy (ND) and Pasok—together failed to win an absolute majority for the first time since the collapse of the military dictatorship in the 1970′s. The path forward for Greece is unclear, but even the best possible scenario doesn’t look good. Read more of this post

Why Greece could be better off outside the EZ

Last week I wrote about the difficulty of doing business in Greece, and the role that the government plays in perpetuating the bureaucracy. Does all of this mean that Greece is doomed? Not necessarily. Returning to the drachma would be ignominious for Greece, but it need not decimate the country and may be the only realistic way of spurring the kinds of structural reforms that are essential if Greece is to make a sustainable recovery. Read more of this post

Note from Athens: Feeling on the ground has palpably changed

I travel to Athens about once every six months and speak with as many contacts as I can, including top policymakers, bankers, journalists, economists and academics. On my most recent trip in mid-February, the feeling on the ground had palpably changed in a number of ways that have supported my view that Greece will eventually default and exit the eurozone, but probably not before late 2013. Read more of this post

German proposal for Greece’s compliance: accelerating eurozone exit

At the top of my list of to do’s for the past few weeks has been to update the post on Greek PSI that I wrote just before Christmas to include some more recent developments, such as the prospect of ECB participation. Last night, Peter Spiegel from the Financial Times (@SpiegelPeter) published the German government’s proposal for Greece’s “improvement of compliance” with the terms of the bailout, and all of a sudden Greek PSI positively pales in comparison. According to Germany’s proposal, whatever the result of the PSI deal, Greece will need to “legally commit itself to giving absolute priority to future debt service” and “accept shifting budgetary sovereignty to the European level”. If the Greek government is not willing to do this, the troika would presumably turn off the taps of bailout money and Greece would default. With no access to market or official financing, Greece would be forced to exit the eurozone. Read more of this post

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