[Marxism] Greece: talk of debt default, Graccident

Dayne Goodwin daynegoodwin at gmail.com
Tue Apr 14 02:52:24 MDT 2015

Greece prepares for debt default if talks with creditors fail
by Kerin Hope and Tony Barber, Athens
Financial Times [full text], April 13 pm

Greece is preparing to take the dramatic step of declaring a debt
default unless it can reach a deal with its international creditors by
the end of April, according to people briefed on the radical leftist
government’s thinking.

The government, which is rapidly running out of funds to pay public
sector salaries and state pensions, has decided to withhold €2.5bn of
payments due to the International Monetary Fund in May and June if no
agreement is struck, they said.

“We have come to the end of the road . . . If the Europeans won’t
release bailout cash, there is no alternative [to a default],” one
government official said.

A Greek default would represent an unprecedented shock to Europe’s
16-year-old monetary union only five years after Greece received the
first of two EU-IMF bailouts that amounted to a combined €245bn.

The warning of an imminent default could be a negotiating tactic,
reflecting the government’s aim of extracting the easiest possible
conditions from Greece’s creditors, but it nevertheless underlined the
reality of fast-emptying state coffers.

Default is a prospect for which other European governments, irritated
at what they see as the unprofessional negotiating tactics and
confrontational rhetoric of the Greek government, have also begun to
make contingency plans.

In the short term, a default would almost certainly lead to the
suspension of emergency European Central Bank liquidity assistance for
the Greek financial sector, the closure of Greek banks, capital
controls and wider economic instability.

Although it would not automatically force Greece to drop out of the
eurozone, a default would make it much harder for Alexis Tsipras,
prime minister, to keep his country in the 19-nation area, a goal that
was part of the platform on which he and his leftist Syriza party won
election in January.

Germany and Greece’s other eurozone partners say they are confident
that the currency area is strong enough to ride out the consequences
of a Greek default, but some officials acknowledge it would be a
plunge into the unknown.

Greece’s finance ministry on Monday reaffirmed the government’s
commitment to striking a deal with its creditors, saying: “We are
continuing uninterruptedly the search for a mutually beneficial
solution, in accordance with our electoral mandate.”

In this spirit, Greece resumed technical negotiations with its
creditors in Athens and Brussels on Monday on the fiscal measures,
budget targets and privatisations without which the lenders say they
will not release funds needed to pay imminent debt instalments.

The government is trying to find cash to pay €2.4bn in pensions and
civil service salaries this month.

It is due to repay €203m to the IMF on May 1 and €770m on May 12.
Another €1.6bn is due in June.

The funding crisis has arisen partly because €7.2bn in bailout money
due to have been disbursed to Greece last year has been held back,
amid disagreements between Athens and its European and IMF creditors
over politically sensitive structural economic reforms.

These included an overhaul of the pension system, including cuts in
the payments received by Greek pensioners, and measures to permit mass
dismissals by private sector employers.

Although debt reduction was a central theme of Syriza’s successful
election campaign, the government changed tune after taking office and
insisted that it would meet all its obligations to the IMF.

However, Yanis Varoufakis, finance minister, made clear last week that
the government took the view that its top priority should be to meet
its domestic commitments, including an obligation to continue paying
pensions to citizens.

Greece: why something has to give
by Paul Mason
Channel 4 News, April 13
. . .
But after three weeks of detailed negotiations, 24 April is beginning
to look like a deadline: Nikos Theocharakis, head of fiscal policy at
the Greek finance ministry, is reported to have told Eurogroup
negotiators that Greece might run out of cash thereafter.
. . .
The depth of Syriza’s attachment to the euro was demonstrated when its
economics guru Euclid Tsakalotos addressed MPs at Westminster last
month. Faced with encouragement to leave the euro from left-wing
Labour MPs, Tsakalotos pointed out the experience of the British and
French left in the 1980s with what he called the “dead end” of
national economic solutions.

So Syriza’s leadership is wedded to the eurozone but the eurozone is
currently configured to smash Syriza.
. . .
Publicly Varoufakis has adopted a tone not just of conciliation but of
reconstruction with the eurozone. Privately, however, his advisers –
and these are the some of the most centrist people in and around
Syriza – are shocked by the level of hostility they met inside the

That wing of Syriza that is basically left-social democratic was
existentially attached to the euro. Now that existential belief in the
euro is being shaken. And the danger for the eurozone is, such a
process can be replicated among an entire people if the evidence is
marshalled convincingly.

If pushed over the edge – either by the failure of a short-term debt
auction or the simple shortfall of receipts – Varoufakis will have no
trouble triggering capital controls, emergency taxation of big
business and the inauguration of a second currency.
. . .
Greece would attempt, at first, to default without leaving the
eurozone. But the default would throw European politics and the
economy into chaos. The already deflating, semi-stagnant eurozone
would face another 12-18 months on the pause button until the banking
system absorbed a Greek default.

So in the next two weeks there is an increased danger of “Graccident”
– a partial default caused not by Syriza’s strategy but by the ECB
miscalculating the meagre supply of financial oxygen it is allowing
into the Greek banks, or by a week’s bad receipts at the finance

Greeks this weekend flocked to their churches to celebrate the
Orthodox Easter. Alexis Tsipras, still riding a 71 per cent popularity
rating, used the occasion to speak of rebirth and renewal. But among
some, the response to the greeting “Christ is risen” was the joking
“Send him to Brussels to negotiate!”

But with the Easter pause over, negotiations are approaching a critical stage.

If Greece is forced into an accidental default, damage to the euro
project and to the EU’s image would be massive. A central bank seen to
be colluding in the bankruptcy of banks it is supposed to supervise,
and willing the breakup of a currency union it is supposed to be
running, would tarnish the ECB’s reputation for a decade.

REPORT: Greece is getting ready to default
by Mike Bird
Business Insider, NYC
April 13
. . .
The situation is now so grim that Morgan Stanley analysts think "full
membership" of the eurozone is no longer the most likely outcome for
Greece, and 45% chance of Grexit:

"Unfortunately, continued full membership of the euro now has become
an outside scenario for us with a subjective probability of only 40%
(see What Are the Implications of Grexit for Europe, March 17, 2015).
Either an exit from the euro or a suspension of the membership via the
introduction of capital controls instead seem more likely to us, with
a subjective probability of 25% and 35%, respectively. Given that we
see the risk of Grexit rising to 60% once the country is forced to
impose capital controls, we compute a total probability of 45% for a


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