See you at The Agora

It was October 2011 and Greece had just gone through the most explosive summer in its recent history. Early in the summer, protests that had started reluctantly and peacefully at Syntagma Square turned into something more pronounced with masses of Greeks surrounding Parliament. They were met with outright violence by the Greek police. After a brief respite in August, social tension rose again during September and at the start of October.

Greece was right in the thick of its crisis. It was consistently ridiculed in the northern European media, especially Germany. Greeks were berated as a people, the medicine prescribed by the troika was not working for reasons that have now been admitted by the administering doctors and the austerity policies were having a progressively stronger hold on the economy and society.

It was in the environment created by these unprecedented developments that this blog come into existence. What started on occasion as a diary, on others as a punchbag for venting emotions, evolved and grew beyond any expectations.

ANFAir play

When you read that foot-dragging might leave Greece short of 2 billion euros, you probably instantly think that those pesky Greeks are up to no good, again. Well, not this time. The shortfall lies with Greece’s eurozone creditors as national central banks (NCBs) did not roll over their Greek debt, the so-called ANFA holdings.

This special relationship between Greece and the central banks across the eurozone started early in 2012, prior to the conclusion of the PSI. Then, a law passed through Greek Parliament converted the ECB and NCBs Greek debt holdings into new paper with identical coupons and maturities, which was subsequently excluded from the PSI. A clause was inserted stipulating that the bonds eligible for the debt exchange were those issued before the end of 2011. It was that simple.

As the wolf bursts into the flock, so we come

Extracts from The Dark Charisma of Adolf Hitler by Laurence Rees. Given recent political developments in Greece, food for thought:

Even though Nazi membership stood at around 100,000 in 1928, there seemed little objective chance of a breakthrough for the party. The lowest point was the election of May 1928 when the Nazis polled just 2.6 per cent of the vote. More than 97 per cent of the German electorate still rejected Adolf Hitler and his policies.

Honey I shrunk the Greeks

It was Tuesday the 28^th of June 2011. The Greek Parliament was starting a two days session for the debate and vote of the Medium Term Fiscal Strategy – Mesoprothesmo in Greek – and the demonstrators were gathering by the thousands at Syntagma square to protest against yet another austerity package demanded by the troika. The entire world was looking at Greece. The balconies of the hotels around the square were filled with camera crews and numerous journalists in the crowd were interviewing protesters.

Around midday, I was standing at the spot in the picture when a journalist followed by a cameraman approached two teenage girls standing next to me. Politely he introduced himself, he was from a Danish channel and asked them if they thought that Greek MPs should reject the proposed austerity package, a question to which the girls without much thought responded to saying yes. He then went ahead reminding them of the blatant blackmail from the troika that failing to pass the new measures Greece would not receive the program tranche and will be led to a messy default.

It was at that point that I found myself spontaneously stepping in and asked him why he thought that this ultimatum was the only option. Why he thought this type of blackmail was acceptable between partners, who was really benefiting from this ‘bailout’ program and why given Greece’s mounting debt problems a debt restructuring that would lift large portion of Greece’s fiscal efforts was not considered as a realistic option.

We need to talk about unemployment

At the Organization of Economic Cooperation and Development (OECD) Council of Ministers in Paris on Wednesday, Greek Finance Minister Yannis Stournaras challenged the institution’s forecast that Greece will remain in recession next year, which would mean a seventh straight year of contraction. Stournaras thinks the OECD will be proved wrong. There isn’t a Greek in the world who doesn’t hope he will be proved right.

The OECD’s recent Economic Outlook contains some alarming messages for Greece, messages that are in contrast with the recent wave of positivity from the government and upbeat assessments from the media domestically and abroad. The Paris-based organisation does not see a return to growth in 2014 but predicts a further economic contraction of 1.2 percent, a gap from Stournaras’s projections that translates into about 3.6 billion euros of economic output. It goes as far as suggesting that additional financing from the EU/IMF program will be required for Greece so automatic stabilizers are allowed to kick in if the recession turns out to be deeper than initially anticipated.

Drinking from the bitter cup

Out of all the visits to my homeland during the crisis, the trip at the end of summer of 2011 was the one that gave me the sense that Greece’s social fabric was close to tearing point. In June of that summer, the protests of thousands of Greeks outside Parliament were met with extensive repression and police brutality. The scenes of clouds of tear gas remained in people’s minds and the distinctive smell lingered for those who participated in the protests. It was evident that Papandreou’s government had lost all contact with society.

In early September of that year, the disagreement over how to rectify the fact that the deficit had deviated from set targets led to the hasty departure of the troika, Greece was entering a long period of uncertainty and that summer was the most tumultuous period of the crisis in social terms.

You can’t know where you are going, until you know where you’ve been

The Exchange Rate Mechanism (ERM) was initiated in 1979. It was an exchange rate system based on fixed parities with fluctuation bands. Each member had to maintain its exchange rate within narrow fluctuations of all the other countries that were part of the scheme. The first years were rocky with many exchange rate realignments but after 1987 only two realignments took place. There was such a sense of stability in the system that member states began discussing tightening the bands further and moving to the next stage, the adoption of a common currency, with 1997 being the target year.

Taking a macro snapshot

“Seems to be this assumption that if you accurately report that the data is getting better (in Greece) you’re Olli Rehn”, said to me the other day someone whose opinion I regard highly and got me thinking. The comment coincided with the successful conclusion of the troika’s inspection last week which was followed by a wave of positive publicity efforts by the Greek government which even included Prime Minister Samaras addressing the nation.

Could it be possible that consumed by the crisis we are missing the turn of events and the small signs of improvement that start emerging though unnoticed? Are the good news simply lost as the crisis tests the Greek social fabric?

What follows is a handful of charts of some of Greece’s main macroeconomic indicators and surveys that give a snapshot of the current state of the economy. The shaded area in the charts represents May and June 2012 when the country’s place in the eurozone never looked more precarious from a combination of domestic and foreign factors and players. What followed was a period of intense negotiations with the troika that concluded in the end of November last year. In effect, Greece had a period of relative calmness just in the last four months.

Apples, pears and oRehnges

“People have been comparing apples with pears and coming up with oranges,” EU Economic and Monetary Affairs commissioner Olli Rehn said patronisingly in the press conference after the Eurogroup meeting in Dublin last Friday, urging people not to rely on leaked documents. That was part of his response when he was asked how the Cyprus bailout went, within a matter of weeks, from a total of 17 billion euros – as was initially communicated – to 23 billion euros – as the leaked draft document of the financing aspects of the program revealed.

Catchphrases seem to be the only way that Olli Rehn can explain this discrepancy. Yesterday, he gave the same response in the session of the European Parliament where he was battered by MEPs over the handling of the crisis in Cyprus and the damage it inflicted on Cypriots.

Another sorry debt sustainability analysis

The debt sustainability analysis (DSA) along with other documents related to the program for Cyprus was leaked today on the wires first by Reuters and then the actual documents were published in the Brussels blog of the FT.

The DSA is as expected based on massaging numbers and ignoring risks to arrive at a baseline scenario with a debt to GDP ratio that would give the troika the argument to call it sustainable and get everyone to commit to yet another EU bailout program.

Given the extent of the damage that was inflicted on Cyprus there is something that deserves at least a mention.