At the last minute, Greece requests a third bailout

The Greek PM Alexis Tsipras has made a dramatic bid for a financial lifeline.

http://www.newstatesman.com/politics/2015/06/last-minute-greece-requests-third-bailout

Greece has requested a third bailout just before a key repayment deadline on its existing debt. Just before its deadline to repay €1.6bn to the International Monetary Fund, the Greek prime minister Alexis Tsipras reportedly made the request to the eurozone’s €500bn rescue fund, the European Stability Mechanism (ESM).

In a statement from Tsipras’ office, the PM said his government was seeking “a viable solution, under the end, aimed at staying in the euro”. This would not be an extension of the country’s current bailout, which expires at midnight, but a new programme, and would likely include some measure of debt restructuring.

Greek public debt currently stands at €323bn, and fears that it will default and have to exit the eurozone persist. Banks are closed in the country at the moment, with cash withdrawals capped at €60 a day. A referendum is due to take place on Sunday, where the Greek people will vote on whether to accept the proposals from their country’s creditors.

The European Commission has stated that if funds were to be released via the ESM, Tsipras and his government would have to back a “yes” vote in the referendum. The PM has previously hinted that he would resign if the result is a “yes”.

Zizek's Modern How-To Guide

Who thinks Greece is doing the right thing? Krugman does!

 

http://en.protothema.gr/who-thinks-greece-is-doing-the-right-thing-krugman-does/

A lot of people are pointing fingers at Greece’s leaders with claims that they are acting irresponsibly, but Nobel-prize winning U.S. economist Paul Krugman said Greece is doing the right thing.

He argues that the financial noose around Greece’s neck has strangled the Greek economy. Every loan comes attached with spending cuts, austerity and damage to the Greek economy.

In the past, in every situation Greece has caved, becoming little more than a “financial slave state mired in an economic depression. There is no way Greece will ever be able to cut its way to prosperity,” says Krugman. Given that Europe refuses to restructure Greece’s debt in a sustainable way and allow the country to try to grow its way out of its misery, Greece has no choice but to default and withdraw.”

Despite Greek PM A. Tsipras being called “weak” to put the question to the test, Krugman notes that he is being smart by not making the decision single-handedly. Rather, he is forcing his own government and people to make the decision with him, democratically via a referendum. This will improve Tsipras’ own odds of surviving the messy and scary period to come.

The current Euro structure, in which country governments control their own spending but borrow in a single currency, will never work over the long-term unless, says Krugman, unless states like Germany subsidize the poorer ones much like the richer states in the United States subsidize the poor ones. This concept is a no-go for Europe’s elite and this means that weak states like Greece are better off on their own.

Writing for his blog in New York Times, Krugman notes he would vote ‘no':

I would vote no, for two reasons. First, much as the prospect of euro exit frightens everyone — me included — the troika is now effectively demanding that the policy regime of the past five years be continued indefinitely. Where is the hope in that? Maybe, just maybe, the willingness to leave will inspire a rethink, although probably not. But even so, devaluation couldn’t create that much more chaos than already exists, and would pave the way for eventual recovery, just as it has in many other times and places. Greece is not that different.

Second, the political implications of a yes vote would be deeply troubling. The troika clearly did a reverse Corleone — they made Tsipras an offer he can’t accept, and presumably did this knowingly. So the ultimatum was, in effect, a move to replace the Greek government. And even if you don’t like Syriza, that has to be disturbing for anyone who believes in European ideals.

Paul Krugman: Breaking Greece

http://krugman.blogs.nytimes.com/2015/06/25/breaking-greece/

I’ve been staying fairly quiet on Greece, not wanting to shout Grexit in a crowded theater. But given reports from the negotiations in Brussels, something must be said — namely, what do the creditors, and in particular the IMF, think they’re doing?

This ought to be a negotiation about targets for the primary surplus, and then about debt relief that heads off endless future crises. And the Greek government has agreed to what are actually fairly high surplus targets, especially given the fact that the budget would be in huge primary surplus if the economy weren’t so depressed. But the creditors keep rejecting Greek proposals on the grounds that they rely too much on taxes and not enough on spending cuts. So we’re still in the business of dictating domestic policy.

The supposed reason for the rejection of a tax-based response is that it will hurt growth. The obvious response is, are you kidding us? The people who utterly failed to see the damage austerity would do — see the chart, which compares the projections in the 2010 standby agreement with reality — are now lecturing others on growth? Furthermore, the growth concerns are all supply-side, in an economy surely operating at least 20 percent below capacity.

Talk to IMF people and they will go on about the impossibility of dealing with Syriza, their annoyance at the grandstanding, and so on. But we’re not in high school here. And right now it’s the creditors, much more than the Greeks, who keep moving the goalposts. So what is happening? Is the goal to break Syriza? Is it to force Greece into a presumably disastrous default, to encourage the others?

At this point it’s time to stop talking about “Graccident”; if Grexit happens it will be because the creditors, or at least the IMF, wanted it to happen.