Category Archives: Greece

EU urges Greece to ‘stop wasting time’ on reform

Greek Finance Minister Yanis Varoufakis (L) talks to Belgian Finance Minister Johan Van Overtveldt and Eurogroup Chairman Jeroen Dijsselbloem at an Euro zone Finance Ministers meeting (Eurogroup) in Brussels March 9, 2015. REUTERS-Yves Herman

(Reuters) – The head of euro zone finance ministers has urged Greece to “stop wasting time” and buckle down to serious talks and implementation of a reform programme to secure urgently needed fresh funds from its international creditors.

“Little has been done since the last Eurogroup (meeting two weeks ago) in terms of talks, in terms of implementation,” Eurogroup chairman Jeroen Dijsselbloem said on arrival for a meeting of ministers of the 19-nation currency bloc.

“We have to stop wasting time and really start talks seriously,” he said, adding that euro zone partners stood ready to support Greece if it continued on the economic reform path.

Euro zone officials were not persuaded by a letter sent by outspoken Greek Finance Minister Yanis Varoufakis on Friday outlining seven planned measures. They said it was only a starting point and no basis for releasing frozen bailout money.

Varoufakis irritated EU partners in a weekend newspaper interview by dangling the prospect of a referendum.

Dijsselbloem said earlier the steps outlined were “far from complete”, adding that it would be very difficult to complete the reform programme during the four-month extension of Greece’s European Union/International Monetary Fund bailout that runs until end June.

Shut out of capital markets and with international loans frozen against a background of falling tax revenues, Greece could run out of cash later this month.

Hardline German Finance Minister Wolfgang Schaeuble told reporters Athens must start implementing its obligations and refrain from unilateral changes to its commitments.

Varoufakis, who wants a negotiated restructuring of Greece’s debt to official lenders, was quoted by Italy‘s Corriere della Sera on Sunday as saying the leftist-led government could call a referendum or early elections if European partners rejected its debt and growth plans.

The finance ministry later clarified that the Marxist former academic had been replying to a hypothetical question and that any referendum would “obviously regard the content of reforms and fiscal policy” and not whether to stay in the euro.

French Finance Minister Michel Sapin said on leaving Paris for the meeting that while he was not worried about a risk of Greece defaulting, “things are serious”.

A source at the European Central Bank said the cash position of Greek banks, on a drip-feed of emergency funding, appeared to be stabilising after heavy deposit outflows from December to late February. The ECB would not allow Greece to increase its issuance of short-term treasury bills because it could not allow monetary financing of the government, the source said.

A senior politician in German Chancellor Angela Merkel’s conservative bloc said Greece would be better off outside the 19-nation euro zone, suggesting that Schaeuble privately agreed.

“By leaving the euro zone, as Finance Minister Schaeuble has suggested, the country could make itself competitive again from a currency perspective with a new drachma,” former transport minister Peter Ramsauer, a member of the Bavarian Christian Social Union (CSU), wrote in Bild.

Merkel and Schaeuble have both said publicly they want to keep Greece in the currency area. But in a sign that German sentiment may be shifting, Ramsauer said a temporary “Grexit” would be a “great opportunity” for the country to boost its economy and administration “making it fit to return to the euro area from a position of strength”.

GREEKS WANT TO STAY

Seeking European support for his government’s efforts to alleviate deep hardship caused by austerity, leftist Greek Prime Minister Alexis Tsipras will meet European Commission President Jean-Claude Juncker on Friday.

A Greek official said they would discuss how Greece can use EU funds to tackle what he called the humanitarian crisis.

Juncker has been trying to mediate between the new Athens government and its EU creditors, notably Germany, but his efforts have irritated Berlin, the euro zone’s main paymaster, which is keen to avoid sending mixed messages to Greece.

German Deputy Finance Minister Steffen Kampeter said in a radio interview he did not expect substantial decisions on Greece at Monday’s Eurogroup meeting because ministers were waiting for more financial details on the reform plans.

He criticised Varoufakis’ talk of a referendum or returning to elections, saying it would only delay what needed to be done.

An opinion poll on Monday showed a large majority of Greeks want Athens to reach a compromise deal with lenders to avoid having to leave the euro.

Some 69.6 percent of Greeks say the new leftist-led government should look for an “honourable compromise” to resolve the crisis, according to a Marc survey for the newspaper Efimerida Ton Syntakton. Only 27.4 percent of those questioned wanted Greece to refuse any compromise, even if that meant having to leave the euro zone.

Tsipras won power in January promising to renegotiate the bailout package and end austerity, but was forced to accept a four-month conditional extension to avert bankruptcy.

(JAN STRUPCZEWSKI AND INGRID MELANDER with Additional reporting by Robin Emmott, Tom Koerkemeier, Renee Maltezou and Robert-Jan Bartunek in Brussels, Toby Sterling in Amsterdam, Stephen Brown and Noah Barkin in Berlin, Steven Scherer in Rome and Angeliki Koutantou in Athens; Writing by Paul Taylor Editing by Jeremy Gaunt.)

Greece: it’s never as simple as you think!

Greece has one more condition to meet to get the next 2.5 billion euro (2.15 billion pounds) sub-tranche of bailout money from the temporary euro zone bailout fund EFSF on July 29, the chairman of euro zone finance ministers Jeroen Dijsselbloem said on Wednesday.

“Greece has satisfactorily implemented the prior actions required for the release of the next disbursement under the financial assistance programme, except for one action whose adoption by the Greek Parliament needs to be completed by Thursday, 25 July,” Dijsselbloem said in the statement.

“Subject to confirmation of compliance with the last outstanding prior action, national procedures may thereafter be finalised and are expected to be completed by 29 July,” the statement said.

“Once this process has been satisfactorily concluded, the EFSF will be authorised to release the first sub-tranche of the next instalment, amounting to 2.5 billion euros,” it said. (R)

The risks of a Greek Collapse

While Greece seems to be engrossed in its “success story,” the country’s partners appear more concerned with its “stability story,” in other words whether or not the country will stay on an even keel. There are several reasons why this is what they are most interested in.

Portugal is on the brink of a major political crisis; Italy seems unable to find solutions to its problems, and an out-of-control collapse in Greece would complicated this already tenuous situation. There are also broader geopolitical reasons. The Americans and the Europeans are becoming quite frightened by the chaos in the Middle East, especially at a time when Israel is particularly isolated. Their stance toward Turkey has also changed as they grow more and more concerned by the instability there and Prime Minister Recep Tayyip Erdogan’s arrogant behavior. A Greek “accident” is seen as very dangerous in such a climate. Of course there are those who expect Greece to fail, but argue that even if does, it will find a way to get back on its feet. The majority of international observers and officials, however, do not take the possibility of a Greek collapse so lightly.

So what is the problem? The Greek political system and public administration are nowhere near achieving reform targets, even when these are lowered. The international community is aware that it can exert pressure on Athens until the end of the year when Greece hobbles to a primary surplus. But, as that time approaches and it feels that it only has a few more months to exert influence, the more pressure it will apply. And this is where the danger lies: Greece’s creditors may cause the crash by applying too much pressure.

In the middle of it all are the markets, either in the form of large funds willing to invest in the new low-cost Greece or in the form of lenders who would like to see the Greek bond market operate again.

Prime Minister Antonis Samaras believes that maintaining calm is the top priority. He hopes that an excellent summer in terms of tourism, public works projects due to begin imminently, the TAP pipeline and some good investment news will create a positive climate come the fall.

At the same time he is equally aware that the people are about to be hit with a cascade of taxes and that if these are not collected the fiscal gap will be hard to manage. No one can predict whether there will be a sense of positive shock or an even greater feeling of misery in the fall.

All of this, meanwhile, is taking place ahead of an anticipated clash between Berlin, the International Monetary Fund and Brussels right after the German elections over whether Greece should receive a further debt writedown and a different policy mix.

©Alexis Papachelas : Ekathimerini.com

The Eurocrisis isn’t just Financial.

The Eurozone crisis has managed to morph from a plain old currency crisis to a debt crisis, an economic crisis and now, a full-blown political crisis – although no-one seems to have noticed…….. and it’s not just the Eurozone:

In the United Kingdom, people are making increasingly indiscreet noises about the Prime Minister’s leadership capabilities and the Chancellor’s questionable competence, as the cold hand of political instability makes a (so far) half-hearted grab for No 10. Currently it looks as if there is already a swing to the right. Nigel Farage and UKIP no longer look like a bunch of extremist Right-wing loonies and as they gain respectability and seats, they will pose a genuine threat to the status quo.

Here’s a quick Grand Tour:

Greece’s political problems are well-documented and this is where the recent polarisation of national politics began with the success and increasing support of the right-wing Golden Dawn Party. Greece is on its knees.

In France  there’s the scandal of a Minister and his secret Swiss Bank account with the consequent  investigation of all Ministers – shades of the UK’s MP expenses outrage. President Hollande is keeping a very low profile because , let’s face it….he came to the table without any ideas. His mere presence has allowed Marine le Pen and her Right-wingers to re-emerge blinking into the sunlight, ready to build on her father’s legacy.

Germany’s Bundeskanzlerin Merkel is no longer odds-on to win her autumn election and so, in order to placate her detractors, countries such as Cyprus are being put through the debt-wringer and effectively having to bail themselves out! All in the cause of extra Brownie points for the Merkelator.

Many are anticipating more resignations from within the Cypriot government. Michalis Sarris, the Cypriot finance minister who negotiated Cyprus’s bailout agreement with international creditors has already gone.

Portugal’s Constitutional Court has kicked into touch some of the austerity measures imposed on the country by the Eurozone moneylenders. Now the politicians are wondering about how to plug the fiscal gap and Prime Minister Coelho may resign.

Belgium took 535 days to form a government after its last election and now has a 6-party Cabinet.

Italy is struggling to form a government and will most likely hold another election after President Napolitano comes to the end of his tenure as Head of State on May 15th. Goodness only knows what the reaction of not only the Eurozone but of the Markets would be  should Silvio Berlusconi (again) rise from the dead! Italy’s political scene has become so surreal that  ONE QUARTER of the vote in the recent election went to a protest movement headed-up by Beppe Grillo – a comedian!

Spain’s politicians, including its Prime Minister are mired in corruption scandals – and now there are anti-Royalist demonstrations as a direct result of the king’s daughter being implicated in a government financial rip-off. Mind you, affluent Spaniards have already pulled about $100 billion out of their Spanish bank accounts. They started running early. It’s only a matter of time before the Basques and Catalans start to make their separatist noises.

The difficulty is that one would normally expect the emergence of the Right to be counterbalanced by a strong showing from the political Left. But what Europe has are weak governments , compounded by even weaker oppositions. No European political party in government has over 50% of the vote……. and the less said about the European Union’s politicians, the better! They seem to have elevated ineptitude into an art form.

Currently, Britain’s Left is being driven by Ed Miliband and the New-Old-New-Who-Knows-Who-Cares Labour Party. They earn their salaries through the medium of being critical. They have shown themselves to be totally bereft of a coherent, cohesive strategy and will be directly responsible for the future success of UKIP.

Leadership (or a lack of it) within Germany’s Social Democratic Party will be the main factor which could give Merkel another few years of power. If that happens, the rest of the Eurozone should begin to consider itself as no more than a motley collection of Vassal States……there to do Germany’s bidding. Unless of course, Germany accepts George Soros’ advice and leaves the Euro.

France does not enjoy having a Socialist President and it is right to be sceptical. President Hollande is now totally ignored by Merkel and is doing what he does best – he keeps out of the way as Germany tightens its stranglehold.

Hollande could have been the Eurozone’s great hope but unfortunately is way out of his depth. France now has a negative bond rating  by all three rating services and has lost much of its international respect. It’s precarious banking system is just waiting (like many others) to go “pop!”

The Main Event this year will be Merkel’s re-election so the Eurozone states must not expect any major policy changes until then – and when she wins? More of the same – but without the compassion!

What of Europe’s medium to long-term future? Without some sort of political quantum leap, it will inevitably  descend into a collection of  Third World states but with running water, TV and a banking system totally independent of its economy and probably with its own flag.

CYPRUS Robbery

For 24 hours, the world has been focused on the Cypriot small savers who are likely to lose  a slice of their cash to the god Euro. However, there are others who may lose a lot more.

According to Moody’s, the Cyprus debt crisis has endangered many Russian banks who work with companies owned by Russian oligarchs who are registered in Cyprus. They stand to lose BILLIONS if the Cypriot government defaults.

HERE’S what Spiegel said about all this last November.

As usual, Eurozone politicians have allowed a drama to develop into a potential tragedy.

Greece: The Russians are coming.

There is  little doubt that the Eurozone has been so inward-looking over the last few years that the big-picture has eluded it.

Two years ago, I wrote about possible Chinese interest in Greece but it would seem that I was wrong. It is the Russians who appear to be first in the queue.

This is what the Vice President of the Russian Chamber has to say about the Eurocrisis: “This has not been a crisis of the Greek economy but of the European Union and Greece has been chosen as its victim”.

There is massive interest among Russian business people about opportunities in Greece.

In the next few weeks, Russia will be the first country in which Greece’s Investment Bill is presented – after it has been debated in the Greek Parliament.

Unlike Greece’s Euro “partners”, the Russians are showing great interest and confidence in the Greek economy and the Greek people.

The Greek Development Ministry’s General Secretary Tsokas and Simon Kedikoglou (a government spokesman) have already had discussions in Moscow about cooperation with Russian investors. Greek agriculture, tourism, alternative energy sources, pharmaceuticals and even holiday homes for the Russian middle classes were on the agenda.

Whereas Greece’s European ” friends’ ” main focus has been on maintaining the Greek banking system and the “intangibles”, it would seem that there are others who are willing to do what should have been done by Europe in the first place – they’re investing in the Greek economy.

ECONOMIC CHAOS ?

The piece below is over 2000 words long and I have just completed it for a client .

It is about the random nature of an economic system.

Have you ever wondered why ALL economic predictions are wrong? Have you noticed that in spite of a proven record of error, economists and politicians continue to bang their heads against the forecast-wall and refuse to do anything else but continue to predict outcomes which by now, they must realise will be incorrect?

They certainly use all the latest computer models which have been empirically derived and used for many years.

So, are there any incorrect assumptions about “fundamentals”?

Is the economic process Stochastic (a sequence of random variables)? Or is it Deterministic (when the output of a system is totally dependent on its initial state and  subsequent inputs – and therefore, predictable)?

(Mind you, to add to the confusion, deterministic systems may occasionally produce random  and therefore unpredictable results. )

Is economics a question of Stochasticity v Determinism?

Why do I ask the question? Because there appears to be a total absence the ‘stable equilibrium’ predicted by classical economists.

On the contrary, Market Economics behaves like a collection of dynamically unstable systems. The instability is attributed to external ‘shocks’ rather that any fault in the basic concept. There is what can only be described as ‘non lineality’.

One solution to this ‘non-lineality’ is CHAOS THEORY!

So far, no real evidence has been produced of ‘low – dimensional’ Chaos in economic processes but there are definitely discrepancies between the ‘expected’ according to classic economic models and the ‘observed’. Just look at any economic prediction within your memory. It was probably incorrect.

We still have a ‘mechanistic’ view of the world and economics as a ‘hangover’ from 18th century SCIENCE.

Scientific thinking is very simple: ‘Measure, predict and adjust until you no longer have any more surprises. Then keep measuring to confirm that what you measured in the first place can be replicated’.

Economics was conceived on that same principle . It was established as a ‘science’. That’s where the Determinism crept in.

It was at this time that man first considered the possibility of his own intellect being so unconstrained that he would eventually understand the ‘Universe and everything’ through the medium of scientific reasoning.

This principle was applied to all sorts of activities and thinking – including economics.

The so-called ‘Enlightenment Policy’ would help man in his pursuit of happiness. Especially in the sciences. Science was cool and now in the early 21st Century it is enjoying a bit of a revival.

Of all the subjects on offer, Physics became the admired Paragon for Enlightenment and so it continues.

The way Physics works is simple: Carefully describe an environment and you should be able to predict the outcomes of any experiment conducted within that environment.

Likewise in Economics:  Know the initial environment and you should be able to predict outcomes based on subsequent inputs.

The belief stemming from that philosophy is that EVERYTHING is governed by ‘NATURAL LAWS’ which are a set of ‘cause-effect’ regularities. That means that everything can be predicted.

These same principles have been applied to Economics.

A simple scientific rule is that ‘The state of any system is a consequence of what it was in the preceding moment…..and so on.’

In the beginning, random occurrences had no place in such linear thinking. Everything was governed by Mathematics and Laws.

However, there is one major flaw in the way that we ‘do’ science: That is our ignorance of the CAUSES which generate phenomena and events.

For instance, we know the effects of gravity – which we can measure but we don’t really know the CAUSE.

However, in spite of our ignorance of the exact causes of events added to the imperfection of our analyses, we still cannot have 100% certainty about the vast majority of phenomena.

Economists also appear to have forgotten both the imperfection of analysis and their ignorance or (at best) of the exact CAUSES of events.

What is the solution? What is to be done about our comparative blindness?

Our ‘crutch’ is the science of probability. Chance.

Current economic thinking is a throwback. In economics, the world is still viewed as totally deterministic.

‘STOCHASTIC’ is non-existent – as is uncertainty because uncertainty is treated as ignorance or a failure to understand the deterministic rules of a very complex system.

Yet, with ALL our processing power, no-one has yet been able to establish those rules which should  predict outcomes.

So, as Chaucer wondered in The Nonnes Priest Tale – Travelling from A to B:  Freewill or Predestination?

Looking at the unpredictability of economic outcome, we move from linear to non-linear dynamics, from certainty to probability, from Economic Theory to Chaos Theory.

Theories of economics have been shaped by the assumption of ‘Rational Man’ who behaves in accordance with a known set of rules.

The evolution of economics into a science was ‘booted’ into becoming a science when it was ‘mathematicised’. Formulae arrived and suddenly, it became a bona fide branch of Applied Mathematics.

Many of the original people who translated economics into a mathematical form were physicists, engineers and mathematicians…… and it still shows. At that time, their view of the world was ‘linear’.

Does that work in economics? The short answer is ‘no’. That is why economists are struggling, interpreting and making excuses.

Marshall in his ‘PRICIPLES’ compared the study of economics to the study of tides. The number of variables affecting tides means it is impossible to create a consistent dynamic picture.

Even nowadays, there isn’t enough processing power to generate an accurate picture of such a dynamic system, especially as the number of variables affecting such a system is, for all intents and purposes – infinite.

Imagine random stones being thrown into the sea or small outcrops of rock or variations in the seabed. They all have an effect on the ‘shape’ and speed of the tide.

And so it is with an economic system: lots of rocks, stones and other variables.

It is not possible to formulate or predict a picture of such an infinitely dynamic system.

Currently, economic theory appears to predict that any shock to such a dynamic system will (obviously) have an effect on the system but that it will ultimately converge-to or seek either a new equilibrium or ‘tend’ towards its original equilibrium because, after all – that’s what ‘systems’ are supposed to do!

Economic Theory assumes a tendency towards stability and equilibrium with certain ‘oscillatory happenings’ on the way.

So we have a situation where economic thought was (and still is, in most cases) linear, deterministic and quasi-dynamic. That is to say, the ‘set-in-concrete’ notions of certainty, invariant economic laws and sameness……………..rather than approximation, probability and infinite variety.

For instance, the Bank of England  predicts an inflation rate one year ahead, based more on hope than fact or perceived fact. But when such predictions are (always!) wrong, there is no revisiting of the thought process, merely another prediction with little or no basis in anything-in-particular.

Often, both ‘inputs’ and predicted outcomes are decided by committee and vote!

All predictions appear to be based on an assumption of an ultimate convergence of economic process to stability, via those periodic cycles which, although not understood are treated with a certain sense of fatalism.

Chancellors are so locked into predictions based on erroneous facts that they will even massage their outcomes in order to land somewhere near the expected landing point – purely in order to retain credibility not only for themselves but also for ‘the system’.

What cannot possibly be countenanced are the random fluctuations of what is most likely a permanently unstable economic system. We don’t do that sort of thing because it may suggest a lack of control!

Let’s have a look at non-linear Economic Dynamics.

Actual (REAL) economic results indicate little resonance with the symmetry and regularity suggested by a linear mechanistic dynamic system. (Something that moves predictably along a pre-determined path).

On the contrary, fluctuations and movements are totally unpredictable. That means that regular Deterministic Laws cannot apply.

If we look at an economic situation in say, the Eurozone at a particular point in time, we may try to predict an outcome in say, 10 years’ time.

However, a small variant or an incorrect assumption in our analysis of the initial economic situation will have an effect on the ultimate outcome. The earlier that variation occurs, the more devastating will the effect be.

For instance Greece’s hidden debt at the time of its accession to the Eurozone, undetected at the time, is having a huge effect on the Eurozone’s economic outcome.

Meanwhile,  the economists, bankers and politicians crave and need the comfort of ‘stability’.  They know that the further the Eurozone travels from the initial conditions at Greece’s entry into the Euro, the more anomalies“The Greek Effect” will generate. It’s a self-amplifying issue.

Consequently, the bulk of the  work of Eurozone politicians is  now concentrated on creating a series of ‘faux’ stabilities.

It is the fallout from Stochasticity which is causing  fear with Determinism being their comfort and shelter.

It was only 60 years-or-so ago that stochastic considerations were appended to classical economic theory.

But the so-called New Classical Macroeconomics was no more than a compromise. “Let’s introduce a Factor X because we can no longer ignore it.”

Yet, the economists still needed their ‘models’ – because deep down they were still the mathematicians and physicists of old.

A formula was devised (SLUTSKY) which took the linear dynamic business cycle model and added random (not necessarily economic) terms which attempted to explain the real ‘actualités’!

At last, an attempt had been made to explain ‘exogenous shocks’ to an economic system by the introduction of nothing more than random error terms.

But  what was REALLY missing in classical economic reasoning was the concept of  NON-LINEARITY.

So, the battle was between a Linear Model with a Stochastic Term (a fiddle factor) versus a pure Non-Linear Model.

Obviously by now – 200 years from the beginning, we have to assume that the evidence for linearity in economics has been overestimated!

So, if we agree that we do need a new non-linear model of econonomics, what are we searching for? What are the other ingredients and how do we ‘work them in’?

Do we want a synthesis of economics, psychology, politics and sociology? Or do we simply stick to the notion of determinism?

Human evolution is viewed as a random process (although the way it is often expressed makes it seem as if scientists view it an ‘inevitable linear’).

The evolution of an economic system is also pretty random, except that, applying psychology, politics and sociology, it can never be a system that can develop naturally. (For example, Survival of the Economically Fittest).

Mind you, economists have already had several attempts at introducing the concept of non-linear economics.

Followers of Keynes developed theories which generated Real Business Cycle Theory but any exogenous shocks to the new non-linear system were considered as merely ad hoc disturbances.

Economists could NOT break away from LINEAR THINKING. Linear thinking was being applied in an attempt to imprison a loose and free system, which tended to CHAOS.

The result? More economic models that you can shake a stick at!

It is only fair to say that our understanding of economic phenomena has been greatly enhanced by all these models and formulae…… but still no cigar. No General Theory of Economics. No equivalent of E =mc2….+εe

So Chianella, Pun, Goodwin, Kaldor, Baldrin, Woodford, Barmal, Benhabib etc have all done their bit but we’re still NOT QUITE there.

Unfortunately, for all intents and purposes, many of the models did no more than introduce the concept of economic ‘white-noise’.

Chaotic systems generate their own randomness without need for external input. Therefore in a chaotic system, predictions can ONLY be very short term and even if there were deterministic rules within such a chaotic system, an inability or failure to 100% ‘book’ the initial conditions of the system will always yield forecasting errors.

This all suggests that economic forecasting (except that on a very short time-scale) is a nonsense. PLUS – the bigger the system, the bigger the CHAOS.

That would suggest that a proposal such as a EUROPEAN ECONOMY is a flawed concept because there is very likely to be an exponential amplification of Chaos.

The dynamic of a mega-economy is very different to a housewife balancing the books at home – although economists are still applying the same principles to both.

Unfortunately so far, classical economists continue to resist economic chaotic concepts.

The reason for this apparent intransigence is simple: it is very difficult to extract evidence of chaotic dynamics from economic data – especially on a meaningful scale. Especially if another dose of chaos is injected into the ‘mix’ by erroneous or spurious data.

In order to predict in a chaotic system a VAST (infinite) amount of data is required – far more than is normally available and so far, the search for Chaos in economics has not been successful.

Meanwhile it is Chaos which is making long-term economic forecasting totally impossible and increasingly sophisticated and precise measurement of ‘initial conditions’ incredibly difficult and potentially prohibitively costly.

If we imagine an economy to be like a cloud – subject to all those forces that clouds are subject to, we can  see the impossibility of a mathematical model which can predict the size, shape and exact direction of the cloud or even its shape and volume as it travels.

Its ultimate shape will always remain a mystery.

Politicians, bankers and economists ought to be able to say ‘I don’t know’ without us constantly expecting magic answers which do not exist.

For example: ‘Mr Chancellor or Mr Banker – what will be the effect on the economy of billions in Quantitative Easing?’ Correct answer? ‘We don’t know.’

“The initial conditions of a system are always uncertain, while Chaos guarantees that these uncertainties make prediction impossible.”  (Heisenberg)

THAT is the essence of Chaos within an Economics System.

The Greek question. It’s all Greek.

The Hellenic Telecommunication Organisation (OTE) is to sell a euro benchmark Bond in order to finance itself and redeem previous bond issues which mature both this year and next.

So, what are its chances of successfully issuing the bond in the international bond markets?

Quite good!  OTE is 40% owned by Deutsche Telecom – although that is NOT the only reason.

CONFIDENCE is the new Euro buzzword.

Even Greece’s Central Bank Governor Provopolous is feeling it. He says that the worst of Greece’s crisis is over because Greek 10 year bond yields have no dropped below 10%! That’s a bankers measure of “confidence!!

In spite of a falling GDP (a further contraction of 4% is expected this year) , unemployment at 26% (and rising), strikes and a very cold Greek winter, according to Mr Provopolous “There is improved confidence” and  “We have turned the corner”.

The bank Governor seems to be confusing the ECB’s promise to “do what it takes” to save the Eurozone with internal “confidence”.

In fact, as a result of last year’s declaration of love for the Eurozone by Mario Draghi, ALL  Eurozone bond yields have fallen. Greek economic policies have  had very little to do with what so far, appears to be the “Miracle of 2013” ……..when Markets are rising and bond yields are falling. The Athens Stock Exchange (ASE) has risen by over 10% since the beginning of the year!

In reality, all the unusual market activity further reinforces that fact that the dislocation between the REAL economy and the virtual money-printing-driven economy is more-or-less complete. The Markets are performing in spite of the economy and NOT because of it.

“Confidence” is all very well…but confidence in what exactly?

Economic recovery or the ability to borrow more?

Whilst Greek politicians are pointing to the fact that Greek bank deposits are increasing, have they forgotten the 50 billion euro recapitalisation which Greece’s largest four banks are still awaiting?

Only THREE MONTHS ago (October 29th  2012), the Greek banking sub index tanked by 13.59% as a result of the unresolved recapitalisation. It remains unresolved.

The only change has been the European Union’s temporary rescue fund which  has “earmarked” about 50 billion euros for the Greek banks….and there will be another delay in paying the money over. There always is. June 2013 is the latest estimate.

The “confidence” cannot possibly be related to any future growth of the Greek economy because that cannot happen until the banks have been mended.

Apart from the bank recapitalisation, there is another EU-IMF allocation of 31.5 billion euros for the banks to “restore their balance sheets” so that they can at least think about participating in Greece’s economic recovery.

Greek bankers and politicians may well be feeling “confidence” but can they honestly say when Greece’s 5-year recession (depression) will be coming to an end?

It looks as if Greece’s recovery is firmly embedded  in the future . Permanently.

It’s STILL all Greek!

Eurozone Ministers have arrived at a “pact” in respect of Greece. The pact allows the release of those much-needed loans that have taken up so much of the Eurozone’s time and energy. You may think that this is all very good news for the Greek people.

However, the central core of the agreement is that Greek Public Debt should fall to 124% of  Gross Domestic Product by 2020 and is to be achieved via a raft of more debt-cutting steps and continuing austerity.

This “tentative” agreement should see the release of up to €44 billion in bailout funds to Athens, otherwise….. formal insolvency beckons.

Once again, we are going to be witnessing a process of German dissidence, the continued rise of the IMF, performance-related stage payments, delays etc….as the Greek funding is parsimoniously unlocked in three increasingly painful stages.

The formal decision and an agreement on how these disbursements are to be managed will me made by 13th December. One thing that we can be sure of is that each payment will involve a similar process of troika visits, meetings and procrastination.

Apart from cuts to the interest rate which Greece is having to pay on all of its loans, there will be an 15 year extension of the bilateral and EFSF loans plus a deferral  of 10 years on interest payments on EFSF loans.

So what difference will all of the above make to the average Greek in the street?….NONE.

Yesterday, Bank of Greece Governor George Provopolous said that the Greek economy is expected to grow in 2014. He feels that by then,  Greece’s fiscal problems will have been eliminated.

He did not specify how the country’s political, social and institutional issues will have been dealt-with.

The main effect is that the Markets will now enjoy a few more days in the Greek sunshine…….as they await the next cloud………

Eurozone Meetings Merrygoround

This week, Angela Merkel meets Herman Van Rompuy, Mario Monti meets Francois Hollande who also meets David Cameron.

The new Meeting Season seems to indicate that Eurozone leaders have decided that meeting in plenary will be punctuated by the new craze of meeting in pairs.

I thought that it may be useful to compute how many meetings 0f TWO, could be managed by 20 politicians.

They are:  the 17 Eurozone leaders + Van Rompuy + Barroso + Cameron = 20.

So, how many meetings would  20 politicians generate if they met in pairs?

Using the formula n!/(r!(n-r)!)……… (n = number of leaders and r = 2,  as they meet in pairs)

The total number of “pair meetings” achievable by 20 politicians is  20!/(2!(20 – 2)!) = 190

We have to double that, because they each will want to meet twice so that each one has TWO meetings with every one. (One Home and one Away).

Therefore 20 politicians can generate 380 meetings – if they confine themselves to meeting TWO at a time.

That of course is on TOP of the monthly Eurozone Crisis Meetings, EU meetings and special meetings – for instance, when Spain decides to take the €500 billion we all know it needs or the next time Greece is (once again) about to go down the Grexit toilet.

We can see therefore that any attempt to solve the European Crisis would only serve to interfere with what is already a very heavy meeting schedule.

Venizelos’ Oral Plan

Here is a 10-point “plan” for a strategic framework, presented to the Greek Parliament by PASOK leader Evangelos Venizelos. He described  his 10-point proposal as a plan for an “integrated national strategy”. (I have highlighted certain words in BOLD.)

1. There is need for immediate actions by Greece in the period of August-September that will concern high-level contacts with the leaders of the EU member states and also the institutional partners (European Commission, European Central Bank and International Monetary Fund), and also for shielding the domestic front. The national negotiating team must be formed and the opposition called on to contribute to the effort. Venizelos said it would be a “mistake” and “insult to the country” for it to be said that it has been inert with respect to the structural changes, adding that the changes effected from 2010 to the present are “unprecedented” and the reproduction of such stereotypes at Greece’s expense must stop.

2. The country must manifest its strong determination to promote structural changes, and noted the 77 obstacles pinpointed by the Fund for privatisations, which he stressed need to be immediately eliminated through legislation.

3. The end fiscal target must immediately be confirmed, so that from a deficit of 11.5 billion euros we will go to a primary surplus, and a 2.6 percent growth rate must be achieved.

4. The fiscal adjustment period needs to be extended to 2016.

5. It is necessary to draft an updated programme for the period 2012-2016, so that the 2012 budget may be closed and a draft budget drawn up for 2013, which should be tabled in parliament in early October.

6. A proposal should be drawn up for full itemisation of the programme for 2012-2014, without across-the-board cuts that affect small and medium incomes.

7. Improvement of the macroeconomic climate which, if improved, will enable an easier implementation of the second stage of fiscal adjustment in 2014-2016.

8. Immediate and tangible measures must be taken to increase employment in tandem with a reduction of the cost of money, as well as measures to control prices.

9. Measures must be taken to reinforce social cohesion.

10. The international communications framework that is negative towards Greece must change, in cooperation with the partners.

The “must be” phrase is the one which gives the illusion of action but in fact means absolutely nothing. It is not even a statement of intent. You will notice (in bold above) that Venizelos is using exactly the language which I outlined HERE .

Political pronouncements would carry far more gravitas if they sometimes contained dates and more definite verbs. For example, looking at just ONE of the items on Mr Venizelos’ shopping list:

See the wording of No 8 (above)…NO amount…NO date…..in fact, NOTHING definite. Here’s a slight modification:

The original:

8. Immediate and tangible measures must be taken to increase employment in tandem with a reduction  of the cost of money, as well as measures to control prices.

A modified version:

8. Directly through the Treasury, we are allocating €5 billion to be available to employers, specifically for them to hire new people. This money is available now and the employer will be paid the equivalent of six months of the new employees salary on Day 1 of that employee joining the business. This facility will be open only to those employers with an annual turnover of under €500,00 per year.  All start-up businesses will be completely tax-exempt for 12 months.

(The figures are only for illustration purposes but they do shed some light on the difference between empty political words and a PLAN.)

It looks as if Mr Venizelos continues to practice exactly what Eurozone politicians have been indulging themselves in for the last FOUR years:

ORAL POLITICS :  Words WITHOUT actions.

Merkel Gives No Ground on Demands for Oversight in Debt Crisis

(Bloomberg) — Chancellor Angela Merkel gave no ground on Germany’s demands for more European control over member states in return for joint burden-sharing as she conceded that the bloc has yet to master the debt crisis.

The German leader said yesterday she hadn’t softened her stance at last month’s summit in Brussels and that a so-called banking union involving a bloc-wide financial overseer will have to include joint oversight on a “new level.” She chided member states who had sought to slow moves toward greater central control “since the first summit” in the 30-month-old crisis.

“All of these attempts will have no chance with me or with Germany,” Merkel said in an interview with broadcaster ZDF in Berlin.

Two weeks after a European Union summit aimed at bridging differences over crisis resolution, euro leaders are still squabbling over details of how to lift the bloc out of the turmoil. Merkel hardened Germany’s position that any attempt to share burdens in Europe — such as jointly issued euro bonds or common banking bodies — must first be met with greater cooperation and a handover of some sovereignty to Brussels.

The euro fell to its lowest level against the U.S. dollar in more than two years last week, sliding to as low as $1.2163 on July 13. Europe’s most credit-worthy government bonds climbed, with German two-year note yields down to a record minus 0.052 percent, as investors sought havens from the euro crisis.

Diverging rates and capital outflows within the 17-member monetary union signal that the single currency is “slowly unraveling,” Stephen Gallo, senior foreign-exchange strategist at Credit Agricole SA in London, told Bloomberg Television’s “The Pulse” in a July 13 interview.

’Unraveling’

“The whole project is unraveling, that’s what’s essentially happening now,” Gallo said.

While Merkel said that Europe is on the “right course” toward putting an end to the crisis, euro-area leaders “haven’t solved the problems conclusively.”

German lawmakers will interrupt their summer vacations and return to Berlin on July 19 to vote to approve 100 billion euros ($122 billion) in rescue loans to Spain. After Spanish Prime Minister Mariano Rajoy last week announced 65 billion euros in welfare cuts and tax increases, Merkel reiterated yesterday that financial assistance would not be doled out without conditions.

“Whoever receives assistance and where liabilities are taken over, there has to be control,” Merkel told ZDF.

Banks

French President Francois Hollande, Italian Prime Minister Mario Monti and Spain’s Rajoy have pressed for faster action, including joint liabilities, while Merkel has called jointly issued debt the “wrong way” to fix the crisis. Merkel last month castigated a blueprint for the summit by EU President Herman Van Rompuy as too focused on “collectivization.”

Euro officials this month have also sparred over the timetable for establishing a euro-wide bank supervisor, a benchmark required before they implement one of the decisions from the June 28-29 summit — direct bailout funding for banks. Investors have viewed such a step as a way to sever the link between banking debt and sovereign debt.

Euro-area finance ministers will confer on Friday, July 20, to complete an agreement on Spain’s bank bailout. On July 10, the minister’s announced 30 billion euros of aid would be made available by the end of this month.

Klaus Regling, who heads the euro’s bailout funds, told Welt am Sonntag yesterday that governments could avoid liability for bank rescues under proposals for a regional supervisor. That contradicts German Finance Minister Wolfgang Schaeuble, who said July 9 that he expects governments to guarantee loans even if they go directly to banks, Welt said.


Surrendering Sovereignty

Merkel said leaders hadn’t yet reached an agreement on the terms for bank rescues.

German Bundesbank President Jens Weidmann said euro leaders had caused damage by failing to define more clearly their conclusions at the summit. He told Dutch newspaper Het Financieele Dagblad on July 14 that euro nations “should discuss giving up sovereignty with the same openness as the question of how to resolve the debt problem collectively.”

As governments in Spain and Italy struggle under the burden of higher borrowing costs, Weidmann, Germany’s chief central banker and a European Central Bank GoverningCouncil member, told Boersen-Zeitung that Italy’s higher yields don’t justify a request for bailout assistance. Euro bailout funding should be deployed only as a last resort, he said.

Italy

“If Italy stays the course on reforms, it’s on a good path,” Weidmann told the newspaper in an interview. Asked whether the euro area’s third-largest economy needs to tap the fund, he said, “No, I don’t see Italy in that situation.”

Italian Prime Minister Mario Monti has sought a “debt shield” against spillover from a Spanish banking crisis.

Euro-area leaders have given Spain an extra year, until 2014, to drive its budget deficit below the euro limit of 3 percent of gross domestic product, a concession that may foreshadow leniency for other indebted states in the bloc.

In Greece, an MRB poll published in Athens-based Real News newspaper showed that almost three-quarters of Greeks want Prime Minister Antonis Samaras’s coalition government to insist on a renegotiation of the country’s international bailout.

Seventy-four percent in the survey said the government should insist on discussing the terms even if negotiations steer toward the prospect of Greece leaving the euro; 15.5 percent said the government should stick to current conditions.

Volker Kauder, the parliamentary leader of Merkel’s Christian Democratic Union, told Welt am Sonntag that he doesn’t want to give Greece more time to meet economic targets.

Merkel, asked the same question during the ZDF interview, said she would await a report by Greece’s international creditors, known as the troika.


With assistance from Tony Czuczka in Berlin, Paul Tugwell in Athens, Guy Johnson in London and Fred Pals in Amsterdam. Editor: Dick Schumacher.
To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

Νύχτα των Κρυστάλλων ?

“Greeks are lazy, Greeks are corrupt, Greeks are dishonest, Greeks refuse to obey the rules……”

Are they? Do they?

Hearing that certain countries are already thinking about “doing something” about future Greek immigration sent a shiver down my spine.

The Eurozone  states and their limp politicians are beginning to treat Greeks like pariahs – in the same way that the Nazis treated the Jews in the 1930s.

What will be the the natural conclusion? Make no mistake – it could be tragic.

Is there going to be the modern equivalent of the 1938  Kristallnacht ?

Will Greek-owned shops and businesses all over Europe be vandalised because of negative anti-Greek Eurozone propaganda?

Kristallnacht was the starting point for intense economic and political persecution of Jews – with the end game being played-out during WW2.  No  further reminders needed.

Then,  as now, it all started with an excuse. In 1938, it was the assassination of German diplomat by a Polish Jew.

The 2012 excuse is nothing more than an anticipated refusal of Greece to comply with over-strict German-inspired ” necessary” austerity rules.

Anticipated refusal.

Propaganda is a very powerful device. Let us hope therefore that the gradually amplifying and insidious vilification of the Greek people does not result in yet another European catastrophe.

Greek Texas Hold ‘Em

The Greek Syriza leader has the measure of the Eurozone sheep.

You may not agree with his politics but Alexis Tsipras is THE ONE that Eurozone leaders do NOT want to negotiate with.

They have been bluffing that they’re “ready” for a Greek Euro exit. It’s all talk!

They are NOT ready and Tsipras KNOWS IT . He also knows that a Greek exit (forced or otherwise ) would not-only create economic and banking havoc but that the after-shocks would be felt all around the world.

He’s willing to call their bluff because he realises that countries such as China  & Russia are standing-by and would immediately move in with investment.

Your call.

Greek party leaders seek deal as bankruptcy looms

By NICHOLAS PAPHITIS
Associated Press

ATHENS, Greece (AP) — Greek party leaders on Tuesday will seek a long-delayed agreement on harsh cutbacks demanded to avoid looming bankruptcy, amid intense pressure from its bailout creditors to reach a deal, a general strike disrupting public services and thousands of protesters taking to the streets of Athens.

Heads of the three parties backing the interim government will confer with Prime Minister Lucas Papademos on new income cuts and job losses, which Greece’s eurozone partners and the International Monetary Fund are demanding to keep the country’s vital rescue loans flowing.

A general strike against the impending cutbacks stopped train and ferry services nationwide, while many schools and banks were closed and state hospitals worked on skeleton staff.

Police said up to 14,000 people took part in two peaceful anti-austerity demonstrations in Athens. The separate marches were to converge on central Syntagma Square, outside Parliament, which has been the focus of demonstrations over the past two years of economic pain.

On Monday, Prime Minister Lucas Papademos’ government caved in to demands to cut civil service jobs, announcing 15,000 positions would go this year, out of a total 750,000. The decision breaks a major taboo, as state jobs had been protected for more than a century to prevent political purges by governments seeking to appoint their supporters.

Athens must placate its creditors to clinch a euro130 billion ($170 billion) bailout deal from the eurozone and the IMF and avoid a March default on its bond repayments.

Among the measures the EU and IMF are pressing Greece for is a cut in the euro750 ($979) minimum wage to help boost the country’s competitiveness. This reduction would have a knock-on effect in the private sector – because private companies also base their salaries on the minimum wage – and even unemployment benefits. Unions and employers’ federations alike have deplored the measure as unfair and unnecessary.

“It is clear that there is a lot of pressure being put on the country. A lot of pressure is being placed on the Greek people,” Finance Minister Evangelos Venizelos said during a break in talks with EU-IMF debt inspectors late Monday.

He called on coalition parties to work more closely together.

“To save Greece … will involve a huge social cost and sacrifices,” Venizelos said. “On the other hand, if the negotiations fail, bankruptcy will lead to even greater sacrifices.”

“No one is as strong as Hercules on his own to face the Lernaean Hydra,” a swamp monster in Greek mythology, he said. “We must all, together, fight this battle, without petty party motives and slick moves.”

A disorderly bankruptcy by Greece would likely lead to its exit from the eurozone, a situation that European officials have insisted is impossible because it would hurt other weak countries like Portugal.

But on Tuesday, the EU commissioner Neelie Kroes, in charge of the bloc’s digital policies, said Greece’s exit wouldn’t be a disaster.

Kroes told Dutch newspaper De Volkskrant that “It’s always said: if you let one nation go, or ask one to leave, the entire structure will collapse. But that is just not true.”

Greece has been kept solvent since May 2010 by payments from a euro110 billion ($145 billion) international rescue loan package. When it became clear the money would not be enough, a second bailout was decided last October.

As well as the austerity measures, the bailout also depends on separate talks with banks and other private bondholders to forgive euro100 billion ($131.6 billion) in Greek debt. The private investors have been locked in negotiations over swapping their current debt for a cash payment and new bonds worth 50 percent less than the original face value, with longer repayment terms and a lower interest rate.

Greek government officials say they expect private investors to take losses of an estimated 70 percent on the value of their bonds.

The EU-IMF bailout will also provide an estimated euro40 billion ($52 billion) to protect Greek banks from immediate collapse. Domestic lenders and pension funds hold some 34 percent of the country’s privately-owned debt.

However, the bailout has to be secured for the deal with private investors to go ahead as about euro30 billion from the bailout will be used as the cash payment in the bond swap deal.

Greece’s coalition party leaders held a first key meeting on the austerity measures on Sunday, and postponed a second round of talks by a day so Papademos could complete negotiations with EU-IMF debt inspectors that ended early Tuesday.

The leaders have already agreed to cut 2012 spending by 1.5 percent of gross domestic product – about euro3.3 billion ($4.3 billion) – improve competitiveness by slashing wages and non-wage costs, and re-capitalize banks without nationalizing them. But the details remain to be worked out.

Creditors are also demanding spending cuts in defense, health and social security.

European Commission spokesman Amadeu Altafaj Tardio said Monday that Greece was already “beyond the deadline” to end the talks.

Also Monday German Chancellor Angela Merkel warned that “time is pressing,” and “something has to happen quickly.”

While Greece remains cut off from international bond markets – where it would have to pay interest of about 35 percent to sell 10-year issues – it maintains a market presence through regular short-term debt sales.

On Tuesday, the public debt management agency said Greek borrowing costs dropped slightly as the country raised euro812 million ($1.06 billion) in an auction of 26-week treasury bills. The coupon was 4.86 percent, compared to 4.90 percent in a similar auction last month, while the auction was 2.72 times oversubscribed.

Derek Gatopoulos in Athens and Gabriele Steinhauser in Brussels contributed to this report.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

EU official: Greece needs extra $20 billion

By GABRIELE STEINHAUSER

BRUSSELS (AP) — Greece needs about an extra euro15 billion ($20 billion) to get its debt down to manageable levels — and the rest of 17-country eurozone is being asked to help foot the bill.

Debt-ridden Greece is close to a deal with private investors to reduce its debt burden by about euro100 billion and that — plus an agreement to enact deep spending cuts — could pave the way for a euro130 billion bailout from its European partners and the International Monetary Fund. But on Thursday a European Union official said this plan was not enough to help fix Greece’s problems, which are getting worse as the effects of the recession take hold.

In order to bring Greece’s debt burden to a sustainable level — 120 per cent of its economic output in eight years’ time — the country’s international debt inspectors calculate that Greece needs an additional euro15 billion — a shortfall it believes should be made up by the rest of the 17-country eurozone, the European official. The official spoke on condition of anonymity because of the sensitivity of the matter

The extra money, in theory, could come either from the other euro countries or by having the European Central bank, its national counterparts and state-owned banks like France’s Caisse de Depots taking a loss on their Greek bond holdings, the official said. Analysts estimate that the European Central Bank holds euro50 billion to euro55 billion in Greek bonds by face value but it can’t simply write them down without breaking the EU treaty, which prohibits the bank from financing governments. Writing off a debt would be, in effect, transferring money directly to a government.

The new push for Greece’s public and government creditors to take a cut on their investments — dubbed the official sector involvement, or OSI — is a new front in the battle to save the country from a potentially devastating default. So far the eurozone and the International Monetary Fund have given billions in bailout loans to the struggling country, but they haven’t been asked to take losses.

It is also an acknowledgment that Greece’s economy is in such a dire state that the country’s debt inspectors — the so-called troika of the Commission, the European Central Bank and the IMF — are having a hard time finding more ways in which Athens can save money.

Greece has been at the heart of Europe’s debt crisis since it revealed in 2009 that its debt was far larger than its official estimates. It piled on the debt during a decade in which the government overspent and its economy was growing. Those fortunes turned when the world went into recession in 2008.

The challenge now is reducing the debt at a time when the economy is shrinking. Spending cuts, tax increases and the general uncertainty of the crisis have already pushed Greece into a deep recession, which in turn has eliminated many of the gains from the austerity measures.

Asking private creditors like banks and investment funds to share the burden of saving Greece was the first reaction to this problem; getting the public sector creditors involved is the next.

The official said a deal with private creditors to take losses on their holdings will have to be announced before the end of the week to make sure it can be implemented before Athens has to pay back euro14.5 billion in bonds on March 20.

Experts from national finance ministries will examine the details of the deal on the so-called private sector involvement — or PSI — on Friday, and will likely also discuss how the euro15 billion gap can be closed, the official said.

People familiar with the tentative deal have said it would see investors take losses of more than 70 percent of their holdings. On top of having to accept a 50 percent cut in the face value of their bonds, investors will also receive lower interest rates of between 3.5 per cent and 4.5 per cent and give Greece 30 years to pay back the debt.

If agreed, the deal would end negotiations with bondholders that started this summer and have become increasingly tenuous in recent weeks.

Getting public creditors like central banks or sovereign wealth funds to take a hit may be even more controversial, since any losses or foregone profits ultimately come out of taxpayers’ pockets. Germany, the strongest economy in the eurozone, is also one of the strongest opponents of OSI.

Germany’s finance minister, Wolfgang Schaeuble, said on n-tv television Thursday that he didn’t see the need for “any extra contributions from the public sector; we’re carrying everything anyway.”

Schaeuble didn’t address the issue of the euro15 billion funding gap.

The majority of the ECB’s Greek bonds were bought at a discount in the summer of 2010, when the central bank was trying to stabilize their prices. Even though it is bound by the rules of the EU treaty, it could find a way to give up the substantial profit it would earn by holding the bonds to maturity. It could do that by selling the bonds to the eurozone bailout fund or to Greece at the knockdown prices it bought them for.

However, the ECB has so far given no indication that it is willing to do so, with some of its governing board members saying that giving up on profits would clash with the bank’s ban.

Alternatively, eurozone states could boost their bailout loans beyond the promised euro130 billion, or provide some, more-limited, relief by further lowering interest rates on these loans.

Analyst Carsten Brzeski at ING in Brussels said the ECB and President Mario Draghi might be open to giving up the profits on the bonds. But the bank will wait to take action so it does not appear to be acting at the request of politicians.

The bank is legally independent and the EU treaty forbids it to take instructions from government officials.

“I think Draghi could live with it, but they will not bow very easily,” said Brzeski. “It has to look like it is their own idea, their own initiative.”

While officials have stressed the need for Greece’s financing to be set before the bailout goes through, the main players have been flexible before and “it’s not as hardball as it looks.”

On the official side, “someone will have to bite the bullet, or everyone,” he said. European officials are trying “to have everyone take part in the burden sharing and thereby get the ECB involved.”

The euro130 billion second bailout package also still depends on labor market reforms that the EU and IMF are asking Greece to implement. Unions and employers resumed talks on Thursday over troika demands to lower wage costs in the private sector and possibly lower the minimum wage.

AP Business Writer David McHugh contributed from Frankfurt.

German Chancellor Angela Merkel is one of the Euro leaders who appears to be slightly too relaxed about the fact that the Greek government has not yet finalised an agreement with creditors in respect of its Sovereign Debt.  Now there is the rumour of a German Government memo indicating that Eurozone Banks are just about ready and able to cope with a Greek default. If that is the case then it would seem that the Greeks have been “played” while Euro reorganisation has been taking place behind their backs. The latest wheeze is the IMF expressing dissatisfaction about Greece’s progress in implementing those draconian austerity measures. That means that Greece’s next tranche of bailout money is nowhere near being agreed. It is now possible that even if Greece does capitulate and agree to everything that the IIF demands, it is still not guaranteed a bailout. Tempus Fugit.