Impasse: "Athens insists it will never give in to demands for more pension and wage cuts"

Greece and creditors fail in 'last attempt' to reach deal


European Union officials blamed the collapse on Athens, saying it had failed to offer anything new to secure the funding it needs to repay 1.6 billion euros ($1.8 billion) to the International Monetary Fund by the end of this month. Greece retorted it was still ready to talk, but that EU and IMF officials had said they were not authorized to negotiate further. Athens insists it will never give in to demands for more pension and wage cuts. "This is very disappointing and sad. It was a last attempt to bridge our differences but the gap is too large. One can discuss a gap, but this is an ocean," said a person who was close to the talks. Both sides acknowledged the talks had lasted less than an hour, although even here accounts differed: Greece put the length at 45 minutes, EU officials at half an hour. Following what it called this "last attempt" at a solution, the EU's executive Commission said euro zone finance ministers would now tackle the issue when they meet on Thursday. With no technical deal apparently possible, the ministers are likely to have to make difficult political decisions on Greece's membership of the currency bloc. Failure to keep Greece in the euro, after years of arduous negotiations and two emergency bailouts totaling 240 billion euros, would send it lurching into the unknown and mark a historic blow to the EU's most ambitious project.
Comment: Getting interesting.


  1. Partial GREXIT? Europe Asks if Greece Could Default Without Exiting Euro

    Comment: I doubt it would work:

    Any scenario where Greece fails to secure new funds from its international creditors would likely see the government issue a sort of parallel currency to pay wages and government contractors for some time, even as it keeps the euro as its legal tender, experts say.

    “It’s the simple answer when you run out of cash,” says Harold James, a professor at Princeton who specializes in Europe’s financial history.

    Parallel currencies have been around for centuries. In the late Middle Ages, merchants in Florence and the Netherlands paid local laborers and suppliers in silver coins while settling bigger transactions in gold—without a fixed exchange rate between the two.

    In a world where foreign-exchange trades are conducted in split seconds, managing two separate currencies would pose more challenges.

    Like in California, which issued IOUs in 2009 when a budget impasse left it unable to pay tax refunds, vendors and local governments, Greece’s parallel currency would likely take the form of debt issued to its own citizens.

    But the Greek government would face immediate doubts over whether its new currency, or IOUs, would ever be converted into euros. That would make it less like California and more like Argentina, which defaulted on its sovereign debt in 2002.

    Public entities facing budget problems issued a variety of IOUs, which sank below face value because of doubts about their creditworthiness and whether the exchange rate to the dollar would hold. It didn’t.

    Complicating matters further, Athens would also depend on the European Central Bank—one of the first creditors likely to be jilted by a default—to provide at least some emergency funding to help Greek banks survive accelerating deposit outflows.

    This kind of uncertainty would likely lead to an immediate depreciation of the new currency against the euro, with a black market in which physical euros would trade at a much higher price than that set up the government.

    If the government at the same time resorts to capital controls and stops depositors from withdrawing their euro savings, a third exchange rate might emerge, with different prices for notes and coins and euros held in bank deposits. In contrast to Cyprus, which introduced capital controls in 2013 when its two biggest banks went bust, Greece wouldn’t have international bailout funds to help buffer the hit of severely constrained liquidity on its economy.

    “It’s very, very disruptive. People will not do transactions that they would usually have done. So economic activity would drop off quite quickly,” Mr. James says.

    Foreign companies might also be skeptical of doing business in the new currency, leading to shortages of products like medicine or spare parts for cars and machinery.

    Perhaps most important, keeping the parallel currency credible would force the Greek government to do the very thing it has been fighting against: cutting government spending. “The only way it would really work is if it comes with a strict fiscal program,” Mr. James says.

    That is why most economists and many policy makers believe that even if Greece were to go down that path it would eventually have to give up on the euro and the parallel currency would take over. In economics, the phenomenon is described as Gresham’s law: “Bad money drives out good.”

    “You will not get the benefit from exiting the euro and having your own monetary policy,” says an official involved in the negotiations on Greece’s finances.

  2. This doesn't help: Greece Prime Minister Alexis Tsipras Remains Defiant on Creditor Demands:

    Greek Prime Minister Alexis Tsipras on Monday expressed defiance over demands by his country’s creditors, insisting lenders soften their calls for pension cuts, though a senior government official said Athens was prepared to return to talks at any time.

  3. One can see where Tsipras is the main "problem":

    Tsipras says lenders seeking to 'humiliate' Greek government:

    Greek Prime Minister Alexis Tsipras defied what he called an attempt to "humiliate" his government on Tuesday, saying that an insistence by international lenders on further cuts was politically motivated.

    He said he wanted a deal that would put an end to talk of Greece leaving the eurozone but said his government had been elected to end austerity, restating the position he has maintained since talks with lenders broke down on Sunday.

    "The mandate we have got from the Greek people is to end austerity policy," he told lawmakers in his leftist Syriza party.

    "In order to achieve that, we have to seek a deal which will spread the burden evenly and which will not hurt wage earners and pensioners."

    Tsipras's comments appeared to deepen the deadlock between Athens and its creditors, amid growing signs that Greece could be heading for a default that would push it towards exiting the eurozone.

    He said the European Central Bank was insisting on financial "strangulation" for Greece and blamed the ECB and European Union for resisting offering debt relief.

  4. Imagine retiring at 51:

    A Greek paradox: many elderly are broke despite costly pensions

    Despite years of reforms, many Greeks can still retire early, especially workers in the public sector and professions classified as hazardous such as the army.

    One high profile example is Fofi Gennimata, who became the leader of the opposition PASOK party last weekend. She is a former bank clerk with three children who applied for a pension last year aged just 51. Her office says she has stopped taking the pension payment since becoming a member of parliament.

    Greece's state spending on pensions is three times' higher as a proportion than Germany's, and critics accuse Greece of wanting a soft life at somebody else's expense.

  5. Quote from link in previous reply:

    On average Greek men now retire at 63 and women at 59, according to government data. In Germany, the average retirement age for those receiving an old age pension in 2014 was 64 years. But that figure goes down to 61.3 years once those taking early retirement on health grounds is taken into account, according to 2013 data


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