Ambrose Evans-Pritchard y su seguimiento sobre Grecia

ECB risks crippling political damage if Greece forced to default

If Greece defaulted, the German people would discover instantly that a large sum of money committed without their knowledge and without a vote in the Bundestag had vanished

Anybody who thinks the loan package forced on Greece in 2010 was fair treatment should read the protests by every member of the IMF Board from the emerging market nations

By Ambrose Evans-Pritchard 8:54PM GMT 18 Feb 2015 Comments 80 Comments

The political detonating pin for Greek contagion in Europe is an obscure mechanism used by the eurozone's nexus of central banks to settle accounts.

If Greece is forced out of the euro in acrimonious circumstances - a 50/50 risk given the continued refusal of the creditor core to acknowledge their own guilt and strategic errors - the country will not only default on its EMU rescue packages, but also on its "Target2" liabilities to the European Central Bank.

In normal times, Target2 adjustments are routine and self-correcting. They occur automatically as money is shifted around the currency bloc. The US Federal Reserve has a similar internal system to square books across regions. They turn nuclear if monetary union breaks up.

The Target2 "debts" owed by Greece's central bank to the ECB jumped to €49bn in December as capital flight accelerated on antiestéticars of a Syriza victory. They may have reached €65bn or €70bn by now.

A Greek default - unavoidable in a Grexit scenario - would crystallize these losses. The German people would discover instantly that a large sum of money committed without their knowledge and without a vote in the Bundestag had vanished.

Events would confirm what citizens already suspect, that they have been lied to by their political class about the true implications of ECB support for southern Europe, and they would strongly suspect that Greece is not the end of it. This would happen at a time when the anti-euro party, Alternative fur Deutschland (AfD), is bursting on to the political scene, breaking into four regional assemblies, a sort of German UKIP nipping at the heels of Angela Merkel.

Hans-Werner Sinn, from Munich's IFO Institute, has become a cult figure in the German press with Gothic warnings that Target2 is a "secret bailout" for the debtor countries, leaving the Bundesbank and German taxpayers on the hook for staggering sums. Great efforts have made to discredit him. His vindication would be doubly powerful.

An identical debate is raging in Holland and Finland. Yet the figures for Germany dwarf the rest. The Target2 claims of the Bundesbank on the ECB system have jumped from €443bn in July to €515bn as of January 31. Most of this is due to capital outflows from Greek banks into German banks, either through direct tras*fers or indirectly through Switzerland, Cyprus and Britain.

Grexit would detonate the system. "The risks would suddenly become a reality and create a political storm in Germany," said Eric Dor, from the IESEG business school in Lille. "That is the moment when the Bundestag would start to question the whole project of the euro. The risks are huge," he said.

Mr Dor says a Greek default would reach €287bn if all forms of debt are included: Target2, ECB's holdings of Greek bonds, bilateral loans and loans from the bail-out fund (EFSF).

Markets remain relaxed. Yields on Portuguese, Italian and Spanish debt have been eerily calm. Investors are betting that the ECB could and would contain any fallout as its launches €60bn a month of quantitative easing, simply blanketing the bond markets of EMU crisis states.

This ignores the great unknown. Would the Bundestag or Holland's Tweede Kamer, or any creditor parliament, continue to let their national central banks supply unlimited Target2 credits to Latin bloc states via the ECB nexus once the system had blown up in Greece.

As a practical matter, the ECB itself would be in trouble. Any Target2 losses must be shared, according to the ECB's "capital key". The Bundesbank would take 27pc, the French 20pc, the Italians 18pc and so on, but these are uncharted waters.

"I do not believe that the Germans would allow the Bundesbank or the ECB to carry on with negative capital. They would demand recapitalisation and consider it a direct loss to the German state," said Mr Dor.

If so, Chancellor Merkel would face an ugly moment - avoided until now - of having to go to the Bundestag to request actual money to cover the damage. Other forms of spending would have to be cut to meet budget targets.

Syriza's leader, Alexis Tsipras, holds a stronger hand than supposed, and he is not shy in playing it. His speech to the Greek parliament on Tuesday night was flaming defiance. "We are not taking even one step back from our promises to the Greek people. We will not compromise, and we won't accept an ultimatum,” he said.

"There is a custom that newly-elected governments abandon their election promises. We intend to implement ours, for a change," he said, basking in approval from 82pc of Greek voters.

The new Greek plan to be submitted to Brussels is scarcely different from the proposals already rejected by the EMU finance ministers on Monday. The elemental demand is that there must be no further austerity. This has not changed.

The Eurogroup insists that the primary budget surplus be raised from 1.5pc of GDP in 2014, to 3pc this year and 4.5pc next year. As Nobel economist Paul Krugman says, they want to force a country that is already reeling from six years of depression - with the jobless rate still near 50pc - to triple its surplus for no other purpose than paying off foreign creditors for decades to come. They are doing to Greece what the Western allies did to a defeated Germany at Versailles in 1919: imposing unpayable and mutually-destructive reparations on a prostrate nation.

The antiestéticar of the Northern bloc is that austerity discipline will collapse across southern Europe if Greece wins concessions, but collapse is exactly what is needed for Europe to escape from a debt-deflation trap and prevent a second Lost Decade.
"It has become an ideological battle over austerity. Conservative governments want to ram though their retrenchment policies whatever the cost," says Sven Giegold, a German Green MEP.

Many of the attacks on Syriza are caricature. Athens is not taking on more public workers. It is rehiring 3,500 people "unjustly fired", offset by reductions elsewhere. "On privatisation, the government is utterly undogmatic," said finance minister Yanis Varoufakis.

"We are ready and willing to evaluate each project on its merits alone. Media reports that the Piraeus port privatisation was reversed could not be further from the truth," he told his Eurogroup peers. What Syriza will not do is carry out a "firesale" of assets at giveaway prices in a crushed market.

Talk of a debt write-off is a red herring. The Greeks are not asking for it. Mr Varoufakis wants a bond switch to "GDP-linkers" tied to future economic growth rates. He would probably settle for lower interest payments by stretching maturities.

The issue that matters is the primary surplus. Do the creditors wish to risk an EMU break-up and all that could ***ow in order to extract their last pound of flesh regardless of history's verdict?

Anybody who thinks the loan package forced on Greece in 2010 (with the collusion of the Greek elites) was fair treatment should read the protests by every member of the IMF Board from the emerging market nations. With slight variations, all said Greece needed debt relief from the outset, not fresh loans that stored greater problems. All said the bail-out was intended to save foreign banks and the euro itself at a time when there were no EMU defences against contagion, not to save Greece.

"The scale of the fiscal reduction without any monetary policy offset is unprecedented," said Arvind Virmani, India's former representative to the International Monetary Fund, according to leaked minutes. "It is a mammoth burden that the economy could hardly bear. Even if, arguably, the programme is successfully implemented, it could trigger a deflationary spiral of falling prices, falling employment and falling fiscal revenues that could eventually undermine the programme itself." This is exactly what happened.

Jean-Claude Juncker, the European Commission chief, implicitly recognises that Greece has a legitimate jovenlandesal claim on Europe. He is quietly helping Syriza, just as France is quietly helping to shift the balance in the Eurogroup. The united front against Greece is a negotiating posture. It will fray under pressure.

Whether the EMU powers can resolve their own deep differences before Greece runs out cash - within a week, reports Ekathimerini - is an open question. Francesco Garzarelli, from Goldman Sachs, said he is "more worried" now than at any time since the start of the EMU crisis.

"The risk of a miscalculation in the negotiations remains high and will peak between now and month-end. Should Greece drop out of the single currency, the risk would become systemic. We doubt that even the major markets would be unaffected," he said.

On balance, and with little conviction, my view is that Chancellor Merkel will ultimately overrule the debt collectors and will yield in order to save Germany's 60-year investment in the diplomatic order of post-war Europe. It is a view shared by German eurosceptics such as Gunnar Beck, a legal theorist at London University.

"Germany's leaders can't let Greece leave the euro, and the Greeks know it. They will die in a ditch to defend the euro. This is our Eastern Front, our Battle of Kursk, and I'm afraid to say that it will end in unconditional surrender by Germany," he said.

Hacer clic para expandir...

Greece defiant as Germany tears up last-ditch EMU compromise on austerity


'There is no macro-economic argument for further fiscal tightening. The only reason for doing so is on punitive grounds,' says Greece's Yanis Varoufakis

Failure to agree a deal could set off a chain-reaction in Greece as capital flight accelerates, leading ineluctably to a sovereign default and ejection from the euro Photo: EPA

Ambrose Evans-Pritchard By Ambrose Evans-Pritchard8:24PM GMT 19 Feb 2015 Comments1 Comment

Greece has vowed to reject any demands for further austerity at a last-ditch meeting with eurozone creditors on Friday, even though the country risks running out of money by next week without a deal.

Yanis Varoufakis, the Greek finance minister, said there can be no agreement if the EMU creditor powers continue to insist that Greece sticks to the terms of its EU-IMF Troika bail-out and increase its primary budget surplus from 1.5pc to 4.5pc of GDP by next year.

“We have bent over backwards to reach an accord. We are perfectly prepared to refrain from any moves that would jeopardize financial stability or Greek competitiveness. But what we cannot accept is that the fiscal adjustment, agreed by the last government, be carried through just because the rules say so,” he told The Telegraph.

The defiant stand by the Leftist Syriza government raises the risk of an irreversible showdown when finance ministers from the Eurogroup converge on Brussels on Friday for yet another emergency meeting.

While there is mounting irritation in EU circles over Germany’s refusal to give ground, and signs of a Franco-German rift are emerging, the Greeks are on thin ice. Failure to agree a deal could set off a chain-reaction as capital flight accelerates, leading ineluctably to a sovereign default and ejection from the euro.

“We have already done more fiscal tightening than has ever been done by any country in peace-time, and Greece is still in depression with declining nominal GDP. There is no macro-economic argument that can be made for further tightening,” said Mr Varoufakis.

“The only reason for doing so is out of ideology or on punitive grounds. All we are seeking is a way to end the debt-deflation cycle and restore the credit circuits of the Greek economy,” he said.

Mr Varoufakis sent a fresh proposal on Thursday to Jeroen Dijsselbloem, the Eurogroup’s chief, stating that Syriza is willing to “honour Greece's financial obligations to all its creditors” and desist from any “unilateral actions” in exchange for bridging finance and a six-month interim arrangement. The Greek offer included the crucial proviso that Syriza will limit austerity to “appropriate primary fiscal surpluses .. that take into account the present economic situation”.

EU officials said the text was prepared in conjunction with Mr Dijsselbloem on Wednesday night. He drafted eight bullet points that would be “palatable” to the Eurogroup. These were accepted by the Greeks.

The plan had the enthusiastic support of the Jean-Claude Juncker, the European Commission’s chief. French president François Hollande also backed the compromise, going so far as to telephone Greek premier Alexis Tsipras on Thursday morning to congratulate him on the breakthrough.

Diplomats thought there was a “done deal”. The German finance ministry then issued a statement rejecting the text out of hand, causing consternation. “The letter from Athens offers no substantial solution. It focuses on bridge financing without meeting the conditions of the programme,” it said. Berlin later described the Greek demarche as a “Trojan Horse”.

It is far from clear whether German finance minister Wolfgang Schäuble has majority backing for a position that could lead to the break-up of monetary union by the end of the month – with unknown risks of financial and political contagion - or whether he has overplayed his hand. There is a loose parallel with developments at the European Central Bank, where a noisy German-led bloc was outmanoeuvred by a Franco-Italian alliance on quantitative easing.

Greece has quietly kicked the issue of debt relief into touch, and agreed to work with the various components of the Troika so long as the term is not used. It has yielded so much ground that there was uproar within the Syriza party in Athens on Wednesday night. A mutiny was narrowly quelled.

“Syriza have made a lot of mistakes and there isn’t much sympathy for them in the Eurogroup,” said Simon Tilford, at the Centre for European Reform. “But at the same time frustration is increasing at the intransigence of the Germans. Not every country is relaxed at the prospect of Greece being ejected from the euro. That would be the start of the real political crisis in Europe, not the end of it.”

The EMU-wide politics are complex. Madrid is insisting on an extremely tough line with Greece because it antiestéticars that any concessions to Syriza would be further grist to the mill of Spain’s Leftist Podemos party, which is pulling far head in the polls. Slovakia and the Baltic states are broadly aligned with Germany.

Officials at the International Monetary Fund and the Commission admit privately that the Troika’s fiscal targets have been overtaken by events and no longer make any sense. The Eurogroup nevertheless reiterated its demand for strict compliance with the old demands last Monday.

Greece is now prostrate. Tax arrears have reached €76bn and are rising by €1.1bn a month. “Greece is totally bankrupt. The ECB’s constant talk against us is causing a self-fulfilling deposit flight in the banks. It is so bad that anything could happen,” said one Greek official.

Germany appears to be working from the assumption that Syriza has no legitimate case and should abandon its election pledges, despite having won a landslide election victory with a mandate for radical change. Critics say this fails to acknowledge that the tectonic plates are shifting across Europe as electorates lose patience with austerity policies that have led to a longer slump than the 1930s.

Jacob Lew, the US Treasury Secretary, called Mr Varoufakis this week to urge a compromise and avert a potential disaster for the Greek people, but he has also called on the creditor powers to be more flexible. Washington has warned that Europe faces a “lost decade” if it persists with contractionary policies, a view shared by Britain, China and Japan.

Syriza's leaders say Greece has gone as far as it possibly can to assuage creditors but has reached its limits. They await the verdict in Brussels with weary fatalism. “Whatever happens we are not going to accept humiliation or become a debt colony of the Eurogroup. We will uphold our sovereignty,” said one official.

Hacer clic para expandir...