Greece

Prime Minister Alexis Tsipras at a cabinet meeting Sunday night in the Greek parliament

There has been lots of analysis on a new list of economic reforms that the Greek government sent to its bailout monitors over the weekend, including this incredibly comprehensive report from the Athens-based analytical website Macropolis.

But before everyone goes concluding that this is the final list that eurozone creditors will rule on, remember: nothing has been submitted yet to the eurogroup – the committee of 19 eurozone finance ministers that will ultimately rule on whether the reforms are sufficient to unlock the remaining €7.2bn in bailout funds Athens desperately needs.

And tonight’s “deadline” for bailout monitors to approve a submission, and then forward it onto the eurogroup, is nothing more than a self-imposed one; in reality, there is no deadline other than the date when Athens eventually runs out of cash.

People on both sides of the negotiations say that despite three days of talks, the list is not comprehensive as yet. “There was no such thing as an original list,” insists an official from one of the bailout monitoring institutions. “There were contributions, tables, pieces of paper.”

Indeed, on the Greek side, some involved in the discussions say a fuller, longer, and more detailed document is in the works. They argue the issue is not, as many among the bailout monitors claim, a lack of detail. The issue is getting all the details – some 72 reforms, according to one person in the Athens camp – into a well-organised document, in English, without mistakes in substance or politics. Read more

Tsipras, at right without tie, and Merkel, left in red, at Thursday's Greece discussion in Brussels

If you didn’t know what the standoff over Greece’s bailout was all about, Alexis Tsipras, the new Greek prime minister, has provided an excellent primer in a letter sent a week ago to his German counterpart, Chancellor Angela Merkel, who he is scheduled to meet Monday night in Berlin.

Our story about the March 15 letter, which the FT obtained a copy of, can be found here. But as is our normal practice, we thought we’d provide readers of the Brussels Blog a bit more detail – including a copy of the letter, which we’ve posted here.

It’s worth noting that eurozone officials say a similar letter was sent to a select group of other leaders, including François Hollande, the French president; Mario Draghi, the European Central Bank chief; and Jean-Claude Juncker, president of the European Commission.

For those who are having a hard time following every twist an turn in Tsipras’ dispute with his bailout lenders, the letter is filled with a lot of jargon and references to multiple previous exchanges of letters, which can be confusing even to a Greek crisis veteran. For that reason, below is an annotated version of the Tsipras letter, which is our modest attempt to explain its intricacies to the uninitiated.

The letter starts off by referring to a February 20 agreement by the eurogroup – the committee of all 19 eurozone finance ministers which is responsible for overseeing the EU’s portion of Greece’s €172bn bailout. That was the meeting where ministers ultimately agreed to extend the Greek bailout into June; it was originally to run out at the end of February, and the prospect of Greece going without an EU safety net had spurred massive withdrawals from Greek bank deposits, which many feared was the start of a bank run. Read more

Protesters outside the Greek finance ministry in Athens during a visit by the troika in 2013

Among the issues plaguing deliberations over the way forward on Greece’s bailout is how the country’s international creditors can verify its economic and fiscal situation without sending monitors to Athens– which would look very much like the return of the hated “troika”.

Alexis Tsipras, the new Greek prime minister, has declared the death of the troika – which is made up of the European Commission, European Central Bank and International Monetary Fund – but for now, the troika isn’t really dead. The re-branded “institutions” must still evaluate Greece’s reform programme and give it a signoff before any of the remaining €7.2bn in bailout can be disbursed.

But the new Greek government has resisted anyone from the “institutions” showing up in Athens; they were originally supposed to show up this week, but officials said Greek authorities blocked the visit. In a letter Thursday to Jeroen Dijsselbloem, the Dutch finance minister and eurogroup president, Yanis Varoufakis, the Greek finance minister, suggested an alternative to a return of “the institutions” to Athens: have them meet in Brussels instead. Wrote Varoufakis:

As for the location of the technical meetings and fact finding and fact-exchange sessions, the Greek government’s view is that they ought to take place in Brussels.

But Dijsselbloem’s response to Varoufakis on Friday, in a letter obtained by the Brussels Blog, suggests officials from the “institutions” may be showing up in Athens after all. Wrote Dijsselbloem: Read more

Dijsselbloem, left, speaks with Varoufakis during a finance ministers' meeting in February

During a 45-minute interview in his Dutch finance ministry office in The Hague, Jeroen Dijsselbloem, chairman of the eurogroup, offered up a detailed recounting of his month-long negotiations with Athens to secure last week’s agreement extending Greece’s €172bn bailout by four months – as well as his views of what might come next.

Portions of that interview have been be published on the Financial Times website here and here, but as is our normal practice at the Brussels Blog, we thought we’d offer up a more complete transcript of the interview since some of it – including previously undisclosed details about the three eurogroup meetings needed to reach a deal – was left on the cutting room floor and may be of interest to those following the Greek crisis closely. The transcript has been edited very slightly to eliminate cross-talk and shorten occasionally long-winded questions from the interviewer.

The interview started on Dijsselbloem’s decision to travel to Athens to meet Greek prime minister Alexis Tsipras just days after the January 25 elections – a visit that was overshadowed by a tension-filled press conference between Dijsselbloem and his Greek counterpart, Yanis Varoufakis, which spurred a market sell-off: Read more

Varoufakis (right) and Schäuble shake hands ahead of Wednesday night's eurogroup meeting

[UPDATE] In response to our post below, the Greek government this morning has denied it ever agreed to the text we got our hands on. “At no point in time did the Greek delegation give consent to the text that has been published,” said Nikos Pappas, the prime minister’s chief of staff. Our account is based on several sources from multiple delegations, so we stand by our story. However, Greek officials insist the text they agreed to Wednesday night was actually an earlier version than the final statement we published. These officials say the agreed draft was changed before it was to be issued at a late-night press conference by Jeroen Dijsselbloem, the eurogroup chairman, prompting their veto. The drama continues…

Wednesday night’s breakdown in talks between Greece and the other 18 eurozone finance ministers happened at such the last minute that many of the participants in the eurogroup meeting – including Wolfgang Schäuble, the powerful German finance minster – didn’t even know it had happened, since they had already left the building.

According to several officials involved in the talks, Yanis Varoufakis, the Greek finance minister, had agreed to a joint statement with his colleagues, a statement that was even signed off by Greece’s deputy prime minister, Yannis Dragasakis, who was also in Brussels for the gathering.

Once agreed, the eurogroup meeting broke up and Schäuble and several of his colleagues headed out the door. But officials said Varoufakis put in one last call back to Athens to inform them what he had just agreed to – and government officials vetoed the statement.

We at Brussels Blog got our hands on the statement and have posted it below. In many senses, it has a little bit for everyone. For eurozone officials, who were pushing Athens hard to request an extension of the current €172bn bailout, which expires at the end of the month, it leaves open the option to “explore the possibilities of extending” the programme.

For Varoufakis, there’s even the word “bridge” mentioned in the final paragraph – though not in the sense the Greek minister probably wanted, which is as part of a bridge financing deal. Read more

Finance minister Yanis Varoufakis speaks before the Greek parliament on Tuesday

One of the unmentioned problems looming over the current Greece standoff is the fact that Athens will need a third bailout, regardless of what happens in a week’s worth of Brussels meetings that start on Wednesday. Eurozone officials say that both Yanis Varoufakis, the new Greek finance minister, and his boss, Alexis Tsipras, have acknowledged that in private meetings.

Just four months ago, it appeared that Athens wouldn’t need another full-scale EU bailout and would be given a line of credit instead. That’s because at the time it appeared the Greek government was making progress in convincing private credit markets to fund its fiscal needs. That is no longer the case.

Eurozone officials are understandably reluctant to estimate the size of another Greek bailout – and not just for political reasons. Trying to guess how much Athens will need without digging through Greece’s books is a fraught affair, especially since tax revenues have reportedly begun to dry up and it’s been months since the troika did their last full-scale analysis.

But that shouldn’t prevent Brussels Blog from doing some spit-balling. According to a very quick-and-dirty back-of-the envelope estimate, a third Greek bailout could run as much as €37.8bn if Varoufakis’ plans are adopted in full. Are Greece’s 18 eurozone partners prepared to cough up that kind of money in the current environment? Read more

Jean-Claude Trichet, right, with the parliament's economic committee chair, Sharon Bowles

The troika of bailout lenders has not been getting much love at the European Parliament’s ongoing inquiry into its activities in recent weeks. But the criticism is not just coming from MEPs in the throes of election fever. Predictions of the troika’s demise have come from some unexpected quarters, including current and former members of the European Central Bank executive board.

During the hearings, MEPs have particularly criticised the troika — made up of the International Monetary Fund, European Commission and the ECB — for its overly optimistic growth forecasts for bailout countries, which have been repeatedly revised downwards. Perhaps unsurprisingly, they have also suggested that the troika be subject to greater parliamentary oversight.

Hannes Swoboda, the Austrian social democrat who heads the centre-left caucus in the parliament, went further, saying the body is undemocratic, hostile to social rights and that the EU would be better off without it. Read more

Did tight-fisted budget policies in Germany help make the eurozone crisis deeper and more difficult for struggling bailout countries like Greece and Portugal?

That appears to be the conclusions of a study by a top European Commission economist that was published online Monday – but then quickly taken down by EU officials.

Our eagle-eyed friend and rival Nikos Chrysoloras, Brussels correspondent for the Greek daily Kathimerini, was able to download the report and note its findings before the link went dark (Nikos kindly provided Brussels Blog a copy, which we’ve posted here).

Shortly after being contacted by Brussels Blog, officials said they would republish the 28-page study, titled “Fiscal consolidation and spillovers in the Euro area periphery and core”, once a few charts were fixed. And as Brussels Blog was writing this post, it was indeed republished here.

Still, the paper’s day-long disappearance looks suspicious given the hard-hitting nature of its findings. For some, they may not be surprising. Many economists have argued that it was the simultaneous austerity undertaken by nearly all eurozone countries over the course of the crisis that pushed the bloc into a deeper recession than predicted, hitting Greece and other weak economies particularly hard.

But coming from the European Commission’s economic and financial affairs directorate – which was responsible for helping administer Greek and Portuguese bailouts as well as provide semi-mandatory policy advice to other eurozone economies – the criticism of Berlin is unexpected, to say the least. Read more

My big fat Greek presidency it will not be. When Athens takes the reins of the EU’s rotating presidency in January, the government will manage the event like a family throwing a frugal wedding.

That is only to be expected since Greece’s crisis-hit economy is now enduring its sixth year of recession, the public coffers are bare and unemployment is nearing 30 per cent. Dishing out huge amounts of cash to impress visiting diplomats would likely provoke outrage from a citizenry that is increasingly unhappy with the EU, as it is.

So how frugal is Greece planning to be? The government has set a €50m budget for the six-month affair, down from the €60m to €80m spent by predecessors like Ireland,Cyprus,Denmark and Lithuania. Officials say they are hoping that the final bill comes to even less.

The Greeks have found a few simple ways to cut costs. They will limit the number of ministerial meetings that will be held in their country to just 13 – keeping as much of the work in the EU’s Brussels headquarters as possible. All of the Greek meetings will be hosted in Athens. Read more

Greek finance minister Stournaras, left, with IMF chief Lagarde at Monday's eurogroup meeting

In an interview with five European newspapers published Thursday, Jeroen Dijsselbloem, the Dutch finance minister who heads the committee of eurozone finance ministers, said his eurogroup will need to look at whether Greece needs additional bailout aid in April 2014.

This will surprise some members of the troika, particularly the International Monetary Fund, who were pushing for a reckoning much more quickly amid signs the €172bn second Greek bailout is running out of cash much sooner than anticipated.

Once the €3bn in EU aid contained in a new €4.8bn tranche approved this week is paid out, total EU outlays will reach €133.6bn — out of a total €144.6bn committed (the IMF puts up the rest). So just €11bn left in the EU’s coffers. Further evidence that cash is leaving too quickly is contained in the latest report on Greece’s rescue prepared by the European Commission, which our friends and rivals at Reuters obtained and helpfully posted for everyone to see.

As Brussels Blog noted earlier, there is no more EU cash left in the programme for the second half of next year, even though the bailout was originally supposed to contain enough until the end of 2014. But this chart in the new report makes clear that cash may run out even quicker than that: Not only is the third and fourth quarters of 2014 completely unfunded, now there’s only €1.5bn left for the second quarter, too. Read more

Greek prime minister Antonis Samaras, centre, holds a cabinet meeting this week.

Just how off track is Greece’s €172bn second bailout? When the FT reported that a new €3bn-€4bn financing gap had opened up in the programme, EU and International Monetary Fund officials went out of their way to insist there wasn’t a gap at all.

“There is no financial gap. The programme is fully financed for at least another year, so there is no problem, on the premise that we reach a final agreement on the review in July,” said Jeroen Dijsselbloem, the Dutch finance minister who chairs the eurogroup.

IMF spokesman Gerry Rice weighed in with a written statement: “If the review is concluded by the end of July 2013, as expected, no financing problems will arise because the program is financed till end-July 2014.”

Notice the caveats, however. Both Dijsselbleom and Rice say there won’t be a shortfall – as long as the IMF is able to distribute its next €1.8bn aid tranche before the end of July. Why? Because of the new financing gap, which means the Greek programme essentially runs out of money in July 2014. The IMF must have certainty that Greece is fully financed for 12 months or it can’t release its cash, so after July, it must suspend its payments. Read more

Finance ministers MIchael Noonan of Ireland, center, and Vito Gaspar of Portugal, right, with the EU's Olli Rehn at January's meeting.

After Greece last year won a restructuring of its €172bn rescue that included an extension of the time Athens has to pay off its bailout loans, Ireland and Portugal decided they should get a piece of the action, too.

So at the January meeting of EU finance ministers in Brussels, both Dublin and Lisbon made a formal request: they’d also like more time to pay off their bailout loans. According to a seven-page analysis prepared for EU finance ministry officials a few weeks ago, though, the prospect is not as straight forward as it may seem.

The document – obtained by the Brussels Blog under the condition that we not post it on the blog – makes pretty clear that while an extension might help smooth “redemption humps” that now exist for Ireland (lots of loans and bonds come due in 2019 and 2020) and Portugal (2016 and 2021), it’s not a slam dunk case. Read more

Over the course of the eurozone crisis, the relationship between EU leaders and credit-rating agencies has been, at best, a love-hate one, with officials frequently lashing out at the three major sovereign raters for the timing and severity of their downgrades.

So it was probably with some Schadenfreude that those same officials learned of the news that the US Justice Department will soon file a civil suit against Standard & Poor’s – arguably the most prominent of the rating agencies – for misleading investors when it gave gold-plated endorsements to US mortgage-related securities before the 2008 financial crisis.

But what happens when S&P starts pointing out that some of the most criticised eurozone policies – the austerity measures aimed at forcing internal devaluations in struggling peripheral countries – may be working? The silence thus far has been deafening. Read more

Greek prime minister Samaras takes questions after last month's EU summit in Brussels.

When eurozone leaders finally reached agreement on an overhauled €173bn bailout of Greece last month, Antonis Samaras, the Greek prime minister, declared the prospect of his country leaving the euro to be over: “Solidarity in our union is alive; Grexit is dead.”

But late on Friday, someone decided to resurrect it: the International Monetary Fund. In its first report on the Greek bailout since last month’s deal, the IMF was unexpectedly explicit on the risks that Greece still faces, including the potential for full-scale default and euro exit.

In fact, the 260-page report includes a three-page box explicitly dedicated to examining the fallout if Greece were to be forced out of the euro, which we’ve posted here. The box, titled “Greece as a Source of Contagion”, concludes that while the eurozone has improved its defences, it still remains hugely vulnerable to shocks that would come following Grexit. Read more

IMF chief Christine Lagarde arrives at Monday's eurogroup meeting where Greek deal was struck.

When eurozone finance minsters announced their long-delayed deal to overhaul Greece’s second bailout early Tuesday morning, there was much they didn’t disclose.

The most glaring was how big a highly-touted bond buyback programme would be, a question dodged repeatedly at a post-deal news conference. But there were other things that were left out of a two-page statement summing up the deal, including how much the European Central Bank was making on its Greek bond holdings, profits that will be returned to Athens as part of the agreement.

It turns out, those were not the only – or even the biggest – unanswered questions left after the early-morning deal. As we report in today’s dead-tree edition of the FT, ministers failed to find enough debt relief measures to get to the purported Greek debt target of 124 per cent of economic output by 2020, far above the 120 per cent target set in February.

In reporting our story, we relied heavily on a leaked chart that we got our hands on (which we’ve linked to here) that lays out in great detail the assumptions built into the new programme. A quick review of the chart comes after the jump… Read more