NEWS,17.06.2012

Greeks vote in election that could decide euro's fate

Greeks have gone to the polls in an election that could decide whether their heavily indebted country remains in the euro zone or heads for the exit, potentially unleashing shocks that could break up the single currency.In an election fought over the punishing austerity package demanded by international lenders as the price of keeping Greece from bankruptcy, opinion polls showed the radical leftist SYRIZA party, which wants to scrap the deal, running neck and neck with the conservative New Democracy, which broadly backs it.The European Union and International Monetary Fund have insisted that the conditions of the 130 billion bailout accord agreed in March must be accepted fully by a new government or funds will be cut off, driving Greece into bankruptcy.All parties say they will keep Greece in the single currency, but SYRIZA leader Alexis Tsipras believes the agreement can be renegotiated without Greece having to leave, betting that European leaders cannot afford the turmoil that would be unleashed by cutting a member of the euro zone loose.On the right, establishment heir and New Democracy leader Antonis Samaras says rejection of the EU/IMF bailout would mean a return to the drachma and even greater calamity, although he, too, wants to renegotiate some aspects of the package.Opinion polls show Greeks, weary after five years of deep recession, overwhelmingly favour remaining in the euro, but there is bitter anger over repeated rounds of tax hikes, slashed spending and sharp cuts in wages.Many voters are also furious with New Democracy and the other traditional ruling party, the now severely weakened PASOK, blaming them for decades of corruption, waste and inefficiency."It's the first time I feel depressed after voting, knowing that I voted again for those who created the problem, but we don't have another choice," said 66-year-old English teacher Koula Louizopoulou."I voted for the bailout because these are the terms that will keep us in Europe," she said.A win for Greece's national soccer team in a game on Saturday at the Euro 2012 championships provided some lift for voters but there was little sign of enthusiasm at the polling booths, which close at 7pm. Exit polls will follow soon after voting ends.'Staring into the abyss' "It's obvious the country is now staring into the abyss," leading Greek daily Kathimerini said in a front-page editorial on Sunday, calling for the creation of a New Democracy-led "unity" coalition to keep the country in the euro.The party gaining the most votes wins an automatic 50-seat advantage but neither New Democracy or SYRIZA is expected to win an outright majority and whoever emerges as top party will have to hold coalition negotiations with smaller groups.European leaders weighed in on the eve of the vote - a re-run of an earlier election on May 6 that produced no clear winner - some of them openly urging Greeks to reject SYRIZA or risk undermining the very foundations of the single currency.But whoever wins power may find their tenure is short-lived and, despite the insistence of EU politicians, some adjustment of the bailout terms may be inevitable if Greece is to cut a public debt amounting to 165 percent of gross domestic product."It is a scenario I see as likely and if that is the condition presented for Greece to stay and then move on, I would say it is probably something that should be attempted," Angel Gurria, head of the Organization for Economic Cooperation and Development.Central banks from Tokyo to London are readying arsenals to defend banks and national currencies against any post-election turmoil. The result will dominate a meeting of the Group of 20 world economic powers on Monday and Tuesday in Mexico.Finance officials in the euro zone have discussed limiting the size of withdrawals from ATM machines, imposing border checks and introducing euro zone capital controls as a worst-case scenario.Euro zone officials have hinted they might give a new Greek government someleeway on how it reaches debt targets set by the EU/IMF bailout package, but there would be no change to the targets themselves.Euro zone paymaster Germany warned Greeks on Saturday the bailout would not be renegotiated."That's why it's so important that the Greek elections preferably lead to a result in which those that will form a future government say: 'Yes, we will stick to the agreements'," Chancellor Angela Merkel told a party conference of her Christian Democrats.A Greek exit from the single currency would heap further pressure on two far larger European economies - Spain has already received up to 100 billion euros to save debt-riddled banks and Italy could be next to seek a bailout.German warning Anger with the establishment parties New Democracy and PASOK propelled SYRIZA and its youthful leader, a former Communist student protest organiser, from the obscure radical fringe to a shock second place on May 6.The far-right Golden Dawn party also won seats in the first election, underscoring the fragmentation of a stressed society wrestling with unemployment of almost 23 percent and plummeting living standards.Five years of recession and more than two years of acute crisis have started to fray the edges of Greek society, undergoing its severest test since the overthrow of the military dictatorship in 1974.The streets of central Athens are scarred by repeated waves of protests, some hospitals are short of vital medicines and reports of suicides caused by the crisis have become routine.Five opinion polls published before a blackout two weeks ago put New Democracy narrowly ahead. Two other polls had SYRIZA leading.But analysts say Samaras, 61, will find it hard to govern for long with an empowered SYRIZA protesting at the gates. Tsipras, if he wins, will inherit a country on the verge of bankruptcy.He has ruled out a government of national unity and promised to nationalise banks and halt privatisations.Some global businesses and banks are already in retreat.Europe's biggest retailer Carrefour said on Friday it was selling up in Greece, a day after French bank Credit Agricole moved to take direct control of its Albanian, Bulgarian and Romanian units from its Greek bank Emporiki.

NEWS, 03.06.2012.

Greece leftist party's debt-free vision

 

 

No debt repayments, higher salaries and freedom from EU-IMF tutelage: Greece under the radical leftists, who are poised to win a June 17 election, seems a world removed from its current recession nightmare.The Syriza party has pledged to tear up Greece's loan agreement with the EU and the IMF, which is currently keeping the country on its feet but at the cost of an unprecedented wave of austerity cuts and structural reforms.If implemented, such a programme, which would also mean the nationalisation of banks and a halt to privatisation, could well mean Greece's ejection from the eurozone, potentially sending shockwaves through the global economy.Fed up with two years of salary and pension cuts, Greek voters on May 6 punished larger parties associated with the bailout and catapulted Syriza to second place, within striking distance of the top.Opinion polls show that the radical leftists, only the fifth party in 2009, could even emerge as the victors in this month's repeat ballot.The condensed programme of the loosely-knit coalition of moderate Communists, Trotskyists, ecologists and other leftist groups was announced on June 1.In it, the party's leading minds set out their vision for a more equitable Greece, liberated from the excesses of capitalism, heavy industry and political corruption.Under Syriza's blueprint, state loan repayments to service a debt of over €350bn are to be frozen to free funds for social support programmes.The privatisation of major public companies - a key condition of the EU-IMF bailout deal - is to be suspended as well.Greek banks that draw on European support funds to recapitalise themselves after a landmark state debt cut brokered by the previous government in March will be "nationalised and socialised."And the EU-IMF bailout deal, dubbed here the "memorandum," which the leftists say has brought only recession and misery to Greece, is to be rejected and redrawn from scratch."The first act of the government of the Left will be to annul the memorandum and its application laws," Syriza's 37-year-old leader Alexis Tsipras said on Friday."We will seek a new renegotiation of the debt at European level, aiming to drastically reduce it, or a debt moratorium and a suspension of interest payments until conditions for the stabilisation and recovery of the economy are created," Tsipras said during a presentation of the party's revised programme.A previous version of Syriza's platform, drawn up in April, had pledged to outlaw offshore company dealings and shut down NATO bases in Greece.The revised version released on Friday plans a withdrawal from NATO operations, starting from Greece's mission to Afghanistan, and a future "disengagement" from the military alliance altogether."At a time when the international balance shifts and US hegemony increasingly comes into question, the policy of Euro-Atlanticism and complying with NATO war plans has no future," said senior party member Thodoris Dritsas.The older parties Syriza decimated on May 6, the socialist Pasok and the New Democracy conservatives, have dismissed its programme as unrealistic and Tsipras as an arrogant demagogue still wet behind the ears."Those who speak of a one-sided rejection of the bailout are like children playing with matches inside an armoury," New Democracy leader Antonis Samaras said during a presentation of his party's own programme on May 31.Syriza's leading economist Yiannis Dragasakis, a former junior finance minister in 1990, believes Greece could take a political decision to reject the loan agreement and dump unwanted labour reforms yet still retain vital EU-IMF loans."Some elements of the bailout deal can be rejected unilaterally. Others require cooperation to do so," he said in a recent televised interview.Even European MP Daniel Cohn-Bendit - a left-wing icon and staunch critic of Greece's bailout terms - recently dismissed Syriza's plans to reverse wage cuts as "idiotic"."Europe will give no more money, Greek coffers are empty," he told a Greens news conference on May 23, after Tsipras had visited Paris and Berlin."It's like asking someone 'how would you like to commit suicide, with a gun or an axe?'" he said.In March, Syriza sued Germany's Bild newspaper for a million euros ($1.26m) after it allegedly portrayed Tsipras as a "half-criminal" who "openly supports violent anarchists.""Will these radicals soon be governing Greece?," the tabloid asked its readers.

ECB rate cut eyed as euro crisis bites

 

The European Central Bank may cut interest rates again soon as the eurozone debt crisis deepens, but it will continue to insist that it is up to governments to find a lasting solution, analysts say.ECB watchers predict the central bank - which will hold its regular policy-setting meeting next week on Wednesday instead of Thursday owing to a public holiday - will not alter borrowing costs just yet this month.But it could act in July as deepening fears about Greece and possible contagion to other countries push the 17 countries that share the euro back into recession, the analysts predicted. "The further escalation of the eurozone crisis has intensified the pressure on the ECB to take further remedial action," said Capital Economics' chief European economist Jonathan Loynes."But while president (Mario) Draghi may hold open the prospect of further support of the region's banks after the meeting on June 6, he is likely to insist again that it is up to national policymakers to address their broader economic and fiscal problems," Loynes said. The ECB has never hesitated to act from the very beginning of the crisis.It quickly reversed last year's rate hikes to bring eurozone borrowing costs back down to an all-time low of 1.0% and embarked on a hotly contested programme of indirectly buying up the bonds of debt-mired countries.Most recently, in two so-called long-term refinancing operations (LTROs) in December and February, it pumped more than €1.0 trillion into the banking system to avert a dangerous credit squeeze in the euro area.Nevertheless, ECB officials have all along insisted that such measures cannot cure the root cause of the crisis - profligate spending by governments."Can the ECB fill the vacuum of lack of action by national governments on fiscal growth? The answer is no," Draghi said again during a hearing at the European parliament last week.The ECB argues that its overriding priority, even in times of crisis, is to keep a lid on inflation in the single currency area.The latest data indicate that price pressures are indeed under control - area-wide inflation slowed to 2.4% in May from 2.6% in April and in Germany, the bloc's biggest economy, inflation slowed to 1.9%, its lowest level in 17 months.Further up the inflation pipeline, too, the money supply expanded by just 2.5% in April, a sharp slowdown compared with the previous month, despite the huge amounts of liquidity pumped into the system via the ECB's anti-crisis measures."With the inflation threat receding, the ECB has more scope to stimulate the economy," argued Berenberg Bank chief economist Holger Schmieding.The ECB will also publish its latest quarterly staff projections on inflation and economic growth on Wednesday.They are likely to be revised downwards, "leaving the door open for further policy accommodation," said Newedge Strategy analyst Annalisa Piazza.She saw a "60% chance" that the ECB would trim its rates by a quarter of a percentage point to 0.75% as early as this month.Nevertheless, "the timing of a rate cut is highly uncertain," the analyst cautioned.While the "weaker fundamentals and increasing stress in financial markets fully justify a quarter-point cut this week, the ECB might decide a later cut is the best tactical option" as borrowing costs are already at record lows and the full effects of the anti-crisis measures have yet to unfold, she argued.Berenberg Bank's Schmieding, too, saw a "good case" for a quarter-point rate cut.But the bank would probably wait until July by which time the outcome of the Greek parliamentary elections on June 17 will be known, the economist argued.Greece is heading to the polls for a second time in six weeks after an inconclusive vote on May 6. And with the radical leftist Syriza party, chief opponent of a massive EU-IMF bailout accord, tipped to win this time, the election could lead to Greece quitting the single currency. Commerzbank economist Michael Schubert also predicted the ECB would hold rates steady again this week, "not least because it wants to maintain the pressure on politicians."Nevertheless, ECB chief Draghi would "leave the door wide open for further action," Schubert said.