Closed Live – Countdown begins for Greece

With the clock ticking towards Sunday and an emergency summit of all 28 EU members, Greece has only days to reach an agreement with its creditors or face bankruptcy.

All eyes on Wednesday were on Alexis Tsipras as he addressed the European Parliament and submitted a fresh bail-out application, even as European Commission president Jean-Claude Juncker said preparations were in place for humanitarian aid for Greece in the event of “Grexit”.

Angela Merkel, German chancellor, had insisted that Athens come up with a full range of reforms that could cover a multi-year rescue programme.

Good morning. We await Greek PM Alexis Tsipras’s appearance in the chamber of the European Parliament in Strasbourg.

Here he comes. Shaking hands with MPs, to applause from some.

President of the European Council Donald Tusk takes to the floor.

“I will not discuss the rights and the wrongs of the Greek referendum,” Tusk says. “It is necessary to move on. Let bygones be bygones.”

“I have no doubt that this will affect Europe, also in the geopolitical sense. If someone will be under the illusion that is is not so, then they are naïve,” Tusk says.

Tusk finishes, swivels round to chat amiably with Tsipras, who is sitting directly behind him.

Tsipras making introductory remarks.

“It is no exaggeration to say that my country over the past five years has been transformed into an austerity laboratory,” Tsipras says.

“We demand an agreement with our neighbours, one that gives us a sign we are exiting from the crisis which will demonstrate light at end of tunnel,” Tsipras says.

“The proposals of the Greek government for the funding of its obligations and restructuring of its debt are not designed to provide an extra burden for European taxpayers,” Tsipras says.

“Our proposal is submitted and put to the eurogroup and today we are working with support arrangements. We have undertaken to bring forward concrete proposals in detail and I’m confident we will be able to meet obligations in best interests of Greece and the eurozone,” says Tsipras.

Tsipras makes repeated references to the “oligarchy and cartel of vested interests” that have prevented reform in Greece in the past.

Tsipras clearly attempting to frame the Greek problem as a European one – referring to Greece’s debt crisis as a European debt crisis that requires a European solution.

Tsipras finishes, to applause.

But clearly nothing new in his speech, solution-wise.

Good morning. Worth noting as Tsipras finishes up some comments on the Grexit status quo from the head of the French central bank, Christian Noyer, this morning on French radio.

“We have maintained a lifeline to the Greek banks, but we have rules and we have stretched their interpretation to their maximum. We can’t increase indefinitely our risks because if the catastrophe materialises it’s the taxpayers who are going to pay. “

“The Greek economy is on the edge of catastrophe. A deal absolutely must be found on Sunday because it will be too late after that and the consequences will be serious..there could be riots… and chaos in the country”.

“The ECB will be forced to stop providing liquidity to the Greek banks if there is no prospect of an political agreement on a (bailout) programme, then our rules force us to stop completely, or when the banking system collapses, which will happen if Greece defaults on all its loans.”

He hinted that the 20 July date when a ECB loan payment is due could be moved if a deal is reached that include funding to cover the amount.

Meanwhile the EU’s Economic Affairs Commissioner Pierre Moscovici told France 2 TV an agreement with Greece was possible but it was up to its government to make credible proposals to its fellow eurozone members.

“I think a solution must be found by Sunday and I believe it can be. The ball is clearly in the Greek authorities’ court.”

Tsipras is open-shirted as usual, wearing a large, not austerity-sized watch on his wrist.

Artis Pabriks, a Latvian MEP and former foreign minister, is less than impressed at Tsipras’ remarks:

Also worth noting that the FT newsdesk really enjoyed the enthusiasm many of you showed in giving us headline suggestions yesterday – see my tweet below. Think we’ve had enough? Are Eucliding? More suggestions welcome today.

Meanwhile, turning our attentions to markets, FastFT’s Joel Lewin has been looking at UK Gilts this morning, which have been continuing their stonking run, as the 10-year yield this morning sailed below 1.80 per cent for the first time since April.

Gilts are thriving off the Greece crisis, as investors run for the cover of safe haven plays. The 10-year yield has fallen almost 0.4 percentage points in the last three weeks, outpacing even the mighty German Bunds, the eurozone benchmark and the big beast of safe havens in Europe.

The 10-year Gilt yield fell 0.03 percentage points at the open to 1.79 per cent, and now stands at 1.81 per cent.

The backlash to Tsipras this morning is coming thick and fast. Manfred Weber, German MEP for the CSU spoke after Tsipras and absolutely lambasted him.

More from Mr Weber courtesy of Joel Lewin here:

The prime minister of Greece should apologise for those utterly unacceptable statements. Unfortunately he has passed over them in silence. You are destroying confidence in Europe.

You’re talking about dignity. But dignity means truth and honesty. You have said that the banks are closing because the evil ECB is ratcheting up pressure. You said the banks would be open on Tuesday it is now Wednesday, you are not being honest with the Greek people.

Mr Tsipras, the extremists of Europe are applauding you. Fidel Castro wrote a message to congratulate you on your triumph. It seems to me you are surrounding yourself with the wrong friends

If you’re talking about a debt haircut, be honest. Its not extraneous financial institutions that will pay

It’s Portugal, they will pay 3bn, Spain, 24bn. It’s the nurses in Poland. You have to think about the dignity of people in other European countries.

How can you tell Bulgaria in terms of solidarity that Greece cannot countenance further cuts, when in at least 5 other European countries the standard of living is lower than in Greece. When it comes to hope, people in the continent need hope in the future. Latvia sat in your position in 2009, but the parties there didn’t resort to a referendum, they sorted out their fiscal budget, now they’ve got faith in the future

It seems you’re not standing for hope in your approach.

The PM of Slovakia is also thinking about a referendum because the citizens are sick of shelling out for the Greeks. Europe is not a sum of national views. You engage in confrontation, we engage in compromise.

You are looking for failure. We are looking for success.

Guy Verhofstadt, president of the Alliance of Liberals and Democrats for Europe and the former prime minister of Belgium, isn’t that impressed either.

He has just tweeted about his outburst here:

Some more measured comments now, but it appears that emotions are still running high:

Nigel Farage, Ukip MEP, speaks of an “irreconcilable bridge” between Greece and Germany.

Farage: “Mr Tsipras, your country should never have joined the euro but big business – [...] Goldman Sachs – forced you in.”

Now Marine Le Pen

Tsipras listening, impassively. He looks tired.

Amid the chaos, the FT newsdesk has been noting some of the questions coming from readers surrounding the Greek debt crisis. This Q&A with Martin Sandbu, one of the paper’s economics gurus, is well worth a read.

I’ve also put some of the highlights below.

Do you think a solution can be found to save the face of both positions?

For the creditors, they need to be able to justify a debt restructuring to their voters. I think they can, if they emphasise two things. The first is that the Greeks will not get “new money” — it is only a question of giving them more time to pay back. This requires the debt restructuring to eschew nominal “haircuts” and focus on very long repayment extensions at very low interest rates. The second is that the International Monetary Fund now explicitly demands a restructuring. So the eurozone creditors can “blame” the IMF and explain to voters that they needed to compromise with the fund.

Could this be done in a face-saving way? I think so. For Greek prime minister Alexis Tsipras, the landslide in the referendum has brought political capital he can afford to spend. Firing Yanis Varoufakis as finance minister is a step in that direction. If Mr Tsipras gets the sort of agreement I outlined in a previous post, he can wave the debt relief in front of his voters and say their defiance paid off and that he can recommend this honourable compromise in the spirit of constructive collaboration with the creditors.

Would a Grexit cause a domino effect and would other countries exit the eurozone?

In the short run, a domino effect can be staved off. It is clearly the intention of leaders of other euro countries to quarantine Greece and to protect other vulnerable members from immediate market contagion.

The greater danger is in the long run. If one country has left the euro, it will be forever impossible to claim that an exit cannot happen. Markets will always price in a possible euro exit — and with a higher probability than before over the long run. So financing costs for the periphery will go up, in the best-case scenario.

The worst case is a return of the self-fulfilling runs on countries that we saw in 2010-12. It is worth remembering that these were not just about the risk of sovereign defaults, but about the risk of countries leaving the euro.

Can Greece ever balance its budget — ie bring in enough taxes to cover domestic expenditure?

Greece’s primary government budget balance has been in (small) surplus since late 2013. The discussion is all about getting more taxes in, or cutting spending, to service the debts.

Successive speakers – MEPs – are being given as little as one minute to speak as the debate over Greece continues.

Mohamed El-Erian, chief economic adviser to Allianz, has blogged for the FT, here:…orrible-economics/

ECB governing council to hold conference call this afternoon, writes Peter Spiegel, our Brussels bureau chief:

MEPs continue to take their turn speaking, one minute at a time. This could go on …

Quite evenly divided in the chamber between anger at perceived Greek sleight of hand and at perceived EU harshness towards Greek people.

Interesting blog post by FT Alphaville colleague Joseph Cotterill examining how creditors dealt with German debt in 1953. Hypocrisy here somewhere, he asks?


Now, so-called “catch-the-eye” procedure in the chamber. Chamber president only allows five MEPs to speak.

Remarkable how rambling and unfocused are the speeches of many MEPs. Or maybe not.

Greek authorities have submitted a formal request for a new bailout to the eurozone’s €500bn bailout fund, officially starting a four-day dash to find an agreement that would keep Greece in the eurozone. The FT’s Peter Spiegel has filed to FastFT

Chamber president urging an MEP to speak more slowly “so that the interpreters can keep up”.

Tsipras gets the floor

But we have an interruption from an MEP first …

“I think that this debate should have happened quite some time ago because the debate we have held here today isn’t only about the future of Greece, it’s about the future of the eurozone,” Tsipras says. Juncker looks on, hand holding chin.

Again, Tsipras framing this as a European – not just Greek – problem.

Tsipras would make a good MEP if this all ends badly for him. His speeches fit right in, in terms of tone and content, with what I’ve heard from many incumbent MEPs so far.

“I have no other hidden plan. And I am really putting my cards on the table in saying this,” says Tsipras.

Now Tsipras now making comparison with London conference debt relief for Germany in 1953, and how this showed the “most significant [European] solidarity”.

Tsipras now saying that it was “us” – his government – that started to crack down on tax evasion, smuggling etc, unlike previous governments.

“A lot of people are talking about a Greek tragedy,” Tsipras says. Refers to Sophocles tragedy Antigone … and now we have Juncker on his feet. His turn …

Juncker: “It was a mistake to leave the negotiating table” [applause]

Juncker is speaking in German by the way.

MEPs with red “Oxi” (No) banners sitting to Juncker’s right

Juncker: “A lot of what happened has not been said”. Implication is that stuff that took place behind closed doors in recent weeks should now come out? Now Donald Tusk …

Tusk is reading from notes: “It is simply impossible to keep spending over a long period of time much more than one earns. This is the source of the crisis in Greece, not the common currency.”

“If you want to help your friend, do not humiliate him,” Tusk says. The reaction on Tsipras’ face very telling. Suggested thought bubble above him: “Tell me about it”.

Ok, now the debate is over. Tsipras rises, and greets various MEPs as he walks through the chamber.

It’s a bit like the procession of a US president through the chamber after a State of the Union speech. Hugs, handshakes.

Greece’s letter applying for an ESM grant is circulating. The main points are:

1. Greece is applying for a three year loan to meet its debt obligations and ensure financial stability.
2. Detailed reform proposals to be set out Thursday
3.Immediate reforms, possibly next week, will include tax reform measures and “pension related measures”
4. Greece seeks affordable financing by the end of the loan period, and “welcomes an opportunity” to explore measures to put public debt on a sustainable footing.
5. Greece reiterates commitment to remaining within eurozone and respecting its rules.

More details on Greece’s ESM letter soon, when we’ve had a chance to read it properly…

Here’s Peter Spiegel’s blog post on the ESM letter…ut-request-letter/

Peter Spiegel writes that the letter “includes some interesting clues as to where Athens is headed.”

“First of all, Greece is seeking a three-year programme and not a two-year bailout that was requested last week.

“The letter also suggests Athens is willing to “immediately implement…as early as the beginning of next week” some of the things that creditors were demanding during negotiations on its old €172bn rescue, which expired June 30 – including tax reforms and pension system overhaul.

“One other key sentence in the letter: debt relief. Although it does not spell it out in so many words, the letter from the finance ministry makes clear Athens is anticipating a third bailout will include some kind of restructuring so that Greece’s sovereign debt levels, which have begun to rise again, will start to fall to more sustainable levels.…ut-request-letter/

So, we now have some reaction from Germany, where Stefan Wagstyl, our chief correspondent, writes that Berlin is sticking to its tough line over a possible new Greece rescue programme.

It is insisting that the Greek plan must be detailed and comprehensive, and arrive on time.

Martin Jäger, the finance ministry spokesman, said the proposal, which is due tomorrow, must be “a precise presentation of the contents of the reform procedures which Greece plans to set in motion”

Just to be clear, he added: “It will not be enough to write a letter and say there that Greece wants an ESM programme.” And again: “It’s as clear as daylight for us that the real examination procedure can only begin when the whole package is on the table and we also know what we are supposed to examine.”

All perfectly correct, of course, in terms of EU, eurozone and ESM rules, writes Stefan Wagstyl. But Athens will not find the tone at all encouraging.

Meanwhile the European Central Bank’s governing council meets in about half an hour to discuss Greece’s request for emergency liquidity assistance (ELA). That currently stands at about €89bn.

Some tweeting attempting to lighten the mood appears to be kicking around the Twittersphere (courtesy of one of our readers, Psychomum):

Meanwhile, also important to remember that on the other side of the world:

No wonder Chinese authorities have taken drastic action today to try to prop up sinking stocks by banning listed company shareholders with big stakes from selling shares and using central bank money to bolster the market.

The brutal market sell-off seen in recent days has wiped more than $3 trillion off China’s main exchanges.

Back on the ground in Europe (or more accurately in the air) . . . the shutdown of the Greek banking system has prompted at least one airline to issue its pilots with more than €10,000 to take on any flight to Greece. Swiss evening paper Blick Am Abend reports that Swiss airline, Edelweiss, a subsidiary of Germany’s Lufthansa, is giving its cockpit crew a cash box, to pay for jet fuel, landing fees and handling charges in Santorini, Mykonos, Kos and Crete.

And here are some pretty strong comments from earlier from US Treasury secretary Jack Lew who has said it would be a mistake for European leaders to allow an uncontrolled crisis in Greece.

There’s a lot of unknowns if this goes to a place that completely melts down in Greece. I think that is a risk that the Europeans and global economy don’t need. I think geopolitically it would be a mistake.

Speaking at the Brookings Institution in Washington, he said the Greek crisis did not, however, pose an “immediate threat” to the US.

Pointing to the prospects for a deal, he added:

I don’t think any prime minster of Greece could sell all of the additional fiscal measures plus the structural reforms that are needed without some sense of what the debt sustainability looks like.

I don’t think there are a lot of European government that could sell any kind of new package without some sense that there’s going to be reliable implementation of the agreements.

Those kind of things can be coordinated.

In terms of the stock markets, the relief rally in Europe in response to the 5-day pause in trying to fix Greece continues but worldwide the continued woes in China are weighing heavily on sentiment as these charts show:

Here’s Europe:

contrast that to the Americas:

and the Asian markets:

given you this global picture:

Emoticon Just in from Anne-Sylvaine Chassany, who reports on the apparently ceaseless optimism of the French that a deal between Athens and its creditors is “within reach.” Quelle surprise.

Allowing Greece to leave the eurozone would be an admission of helplessness,”

French Prime Minister Manuel Valls said on Wednesday to parliament in a dramatic speech.

“France refuses it. On Thursday, Greece will present us proposals, and Saturday we will reconvene. The destiny of Europe is at stake.”

Mr Valls said that parliament would vote on the agreement next week.

If you haven’t done so, I highly recommend signing up for Free Lunch, a pithy and super-smart digi-master class in tackling complex economics by Martin Sandbu delivered daily to your inbox.

In his latest post, published today, Martin looks at what happens when the ECB starts thinking like a private bank.

He notes that:

If the ECB measures risk the way a private bank does, it is doing something wrong. Liquidity risk is by definition not something a central bank – the ultimate provider of liquidity at will – should worry about. As for credit and market risk, what is the greatest hit that might afflict Greek banks’ loan book? The continuing depression of the Greek economy and its exit from the euro. But the biggest cause of either is the strangling of the banking system by the central bank itself.

It is perverse for the ECB to violate its treaty objectives with reference to a risk its own actions are making much, much worse. It is, in effect, dealing with risk not as a public institution of prime importance, but as a private bank, and an arch-conservative one at that. If the euro really does split, this will have been the main, and entirely avoidable, reason.

As if markets chaos on two continents wasn’t enough, America wants in on the action. NYSE trading was just halted in all securities due to technical difficulties. Updates to follow, its website says.

Our DC bureau chief sums up newsroom sentiment nicely:

Aside from a computer glitch on Wall Street, we have a bit more from the FT’s Barney Jopson in DC on today’s intervention by Jack Lew, the US Treasury, on Greece.

Barney reports:

The US Treasury secretary has said European leaders must give Greece debt relief to end the country’s deepening crisis as he warned that a full meltdown could cause hundreds of billions of dollars of economic damage.

Jack Lew issued the Obama administration’s most strident call yet for EU leaders and the Greek government to forge a compromise on Wednesday, saying Athens needed to play its part by giving the rest of Europe confidence that it would fulfil a new set of reform pledges.

“In the next few days what we’ll see is can the parties come together and build enough trust that Greece will take the actions that it needs to take so that Europe will restructure the debt in a way that is more sustainable,” Mr Lew said.

“I certainly have ideas about how you can do that,” he added. “But it’s … a lot to do in a short period of time and I’ve said over and over again that the risk of an accident goes up dramatically when you create more of these kind of life and death deadlines.”

Speaking at a Brookings Institution event in Washington, Mr Lew lamented that Greece and European leaders had earlier been within “a couple of billion dollars” of reaching a deal but were now creating economic risks on a far larger scale.

“For any of us who have participated in budget and fiscal policy discussions, you wouldn’t usually buy hundreds of billions [of dollars] of risk for a couple of billion dollar gap,” he said.

“There’s a lot of unknowns if this goes to a place that completely melts down in Greece. I think that is a risk that the Europeans and global economy don’t need. I think geopolitically it would be a mistake.”

Mr Lew said the Greek prime minister could not accept new fiscal and structural reforms without being able to show voters that the country’s debt would be sustainable, and that no European government could support a deal without assurances that it would be properly implemented.

This just in from Claire Jones in Frankfurt. The European Central Bank has maintained Greek banks’ liquidity lifeline at just under €89bn, according to a person familiar with the matter.

The governing council, made up of the ECB’s top six officials and heads of the central banks of the 19 eurozone member states, held a conference call this afternoon to discuss whether to approve a request from the Bank of Greece for additional emergency liquidity assistance. A majority of at least two-thirds of the council’s voting members was needed to block the request.

The ECB has capped ELA at just under €89bn since the end of June. Earlier this week, it tightened the screw on Greece’s biggest lenders by asking them to stump up more collateral in exchange for the emergency loans.

Mohamed El-Erian, chief economic adviser to Allianz and chair of President Barack Obama’s Global Development Council, has this view of the ECB’s decision:

And if you missed it earlier, have a read of this piece by the FT’s Chief Germany correspondent, Stefan Wagstyl, on the ramifications for Athens in losing its last big ally in Germany, Sigmar Gabriel, the vice chancellor and leader of the Social Democrats

Tom Holland a British writer and historian is in Greece visiting some ancient sites and is urging others to come to support the economy:

and this Tweet gives you a better idea of how deserted Mycenae is:

For any process junkies out there, here is the letter from the European Stability Mechanism, the emergency loan agency that acts a backstop of any ailing eurozone states, asking the European Commission and the European Central Bank to review the bail-out request submitted by Greece earlier.

Procedurally the ESM would have to send a request to the International Monetary Fund, as the third monitor, to assess the Greek application too but the eurocrats don’t seem to have shared it with the wider world

So we’re going to wrap up the blog on a day that started with Alexis Tsipras, the Greek prime minister, trying to sell his side of the story to the European Parliament with mixed results.

The big moment of the day, however, was the simple one-page request by Athens to the eurozone’s €500bn bailout fund, the European Stability Mechanism, for a new three-year programme.

In it, the Greek authorities vowed to “set out in detail its proposals for a comprehensive and specific reform agenda” by Thursday.

This is meant to kick-start what looks set to become the fastest of fast-tracked applications for a bailout in history, given that a programme would normally takes weeks or months to negotiate.

Most of the due diligence work is not likely to take place till Friday ahead of a Saturday meeting of the eurozone’s 19 finance ministers, in the guise of the board of the European Stability Mechanism, who will have to decide whether formal negotiations can begin.

If they don’t give the green light then all leaders of the 28 European Union states will meet in Brussels on Sunday in an attempt to sort out some kind of deal. For the complete lowdown on the countdown do read Peter Spiegel’s piece here.
There is still a long way to go but so little time.

Thank you again for joining us.