How the world sees Greece
 Deutsche Welle (press release) | Greece's Other Crisis: Refugees Businessweek It was one more incident on the front lines of Greece's other crisis: the influx of illegal immigrants and war refugees from Afghanistan and Syria. The drowned bodies of at least 18 people trying to enter Greece were found off Lesbos on Dec. 15. “It's ... Greece: Refugees Want to Go Home |
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Forecasts of collapse, 'Grexit' and even civil war proved unfounded but Greek society is under immense pressure
You cannot look upon 2012 as anything other than a momentous year for Greece. During those 12 months, it agreed a second massive bailout, carried out an unprecedented restructuring of its public debt, held two tumultuous national elections, was led by three prime ministers, had a fifth straight year of recession and saw unemployment climb to a eurozone high of 26%.
As epic as these events proved, though, they barely lived up to Greece's billing in some reports. Spurred on by analysts' predictions, such as the one by Citigroup's chief economist William Buiter that Greece would leave the eurozone at the start of 2013, a plethora of commentators predicted that 2012 would be its last in the single currency. The forecasts were accompanied by musings about what level of chaos would accompany the "Grexit". Some reports focused on the destabilising effect on the country's economy and society, while others heralded the imminent return of cheap island holidays.
An inconclusive general election in May convinced many observers that Greece was about to be reunited with the word it had introduced to the world: chaos. The failure to agree on a coalition government after the May polls, prompting a new election in June, triggered a bank run and intense speculation about an imminent collapse. Plummeting support for Greek political mainstays conservative New Democracy and centre-left Pasok, the rising popularity of anti-austerity Syriza and the emergence of neo-Nazi Golden Dawn was interpreted by some as evidence that Greece was destined for a clash of extremes, which even led commentators such as James Poulos in Forbes to raise the possibility of a new civil war.
Civil war never materialised, and neither did a euro exit or collapse. There were many times last year when Greeks could take very little about their future for granted, but the most ominous predictions often seemed driven by morbid fascination rather than measured analysis. In 2012, Greece teetered on the edge of leaving the eurozone but never strayed over the line. Its economy was battered but not beaten. The political system experienced a seismic shift but democracy did not disappear between the faultlines. And society's fabric had frayed but was not worn completely.
Nevertheless, Greece finds itself in a precarious situation at the start of 2013. To maintain its euro membership, the government had to agree to another round of confidence-sapping austerity measures from which its eurozone partners, Germany in particular, refuse to waver. Between now and 2016, Athens will have to implement a minimum of €18bn in cuts and tax hikes. That's the equivalent of roughly 10% of GDP and comes after three years of similar measures, which produced the biggest fiscal adjustment achieved by any OECD country for the last 30 years.
This produced remarkable fiscal results. New figures from Greece's finance ministry show the country on course to produce a primary surplus for 2012, its first since 2002. But this adjustment strangled the economy. Businesses closed at an alarming rate and about 1,000 jobs were lost every day. At the end of 2012, Greece's economy had contracted by about 20% from its 2008 peak.
This decline is putting immense pressure on Greek society. Joblessness, which some experts believe will reach 30% this year, means families are trying to provide a safety net for their loved ones at the same time as wages and pensions are being slashed. More Greeks are living at the margins of society, cut off from welfare and facing rising healthcare costs. In this environment, the extremism of Golden Dawn, which offers food and jobs to Greeks, has flourished. Its racism has made life hell for immigrants and fuelled much-criticised sweep operations by the government.
The governing coalition is an odd alliance of former rivals New Democracy and Pasok, with the moderates of Democratic Left. Its parliamentary majority has already been eroded due to a tense vote on the latest austerity package. The prime minister, Antonis Samaras, has pinned his hopes on rebuilding trust with Greece's lenders through a policy of full co-operation. He believes that with continued eurozone funding and support, Greece will weather another year of recession and banish lingering doubts about its future in the euro.
It is a high-risk strategy as public scepticism about the EU-IMF formula is overwhelming and Syriza has already risen to first place in opinion polls. The leftists have stepped up attacks on the political establishment following allegations that a former Pasok finance minister doctored a list of Greeks with Swiss deposits to remove the names of his relatives.
In recent weeks, the eurozone has shown a greater commitment to keeping Greece in the single currency but the country's precarious economic, social and political situation means it will not be a straightforward process. Perhaps the greatest wish Greeks could have for 2013 is for some certainty about their future: to be able to know that the worst of their troubles are behind them, that structural reforms will change the unsustainable economic model of the past, while creating a fairer society, and that recovery is in sight. There is very little about Greece's condition that can provide them with this comfort. The only thing they can be certain of is that 2013 won't be a year for predictions.
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 Spiegel Online | Japan's Growing Sovereign Debt Time Bomb Spiegel Online The eyes of the financial world are on Greece and other heavily indebted euro-zone countries. But Japan is in even worse shape. The country's debt load is immense and growing, to the point that a quarter of its budget goes to servicing it. The ... |
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 The Economist | Did a former finance minister tamper with evidence to protect his family? The Economist The names on the USB stick, which were leaked to a Greek investigative magazine, read like a roll-call of Greece's internationally educated business and professional elite. The new disk, now in the hands of a financial prosecutor, contains the names of ... Greek Official Resigns Amid Bank Scandal Lagarde List Shows Runaway Tax Evasion Consequences of the Papaconstantinou affair |
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Consider it a mea culpa submerged in a deep pool of calculus and regression analysis: The International Monetary Fund's top economist today acknowledged that the fund blew its forecasts for Greece and other European economies because it did not fully understand how government austerity efforts would undermine economic growth.
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How politics and economics interact nationally and globally is one of the important questions for 2013 and beyond
Watching America's leaders scramble in the closing days of 2012 to avoid a "fiscal cliff" that would plunge the economy into recession was yet another illustration of an inconvenient truth: messy politics remains a major driver of economic developments.
In some cases during 2012, politics was a force for good: consider prime minister Mario Monti's ability to pull Italy back from the brink of financial turmoil. But, in other cases, like Greece, political dysfunction aggravated economic problems.
Close and defining linkages between politics and economics are likely to persist in 2013. Having said this, we should also expect much greater segmentation in terms of impact – and that the consequences will affect both individual countries and the global system as a whole.
In some countries – for example, Italy, Japan, and the US – politics will remain the primary driver of economic-policy approaches. But elsewhere – China, Egypt, Germany, and Greece come to mind – the reverse will be true, with economics becoming a key determinant of political outcomes.
This duality in causation speaks to a world that will become more heterogeneous in 2013 – and in at least two ways: it will lack unifying political themes, and it will be subject to multi-speed growth and financial dynamics that imply a range of possible scenarios for multilateral policy interactions.
With an election looming in Italy, the country's technocratic interim administration will return the reins of power to a democratically elected government. The question, both for Italy and Europe as a whole, is whether the new government will maintain the current economic policy stance or shift to one that is less acceptable to the country's external partners (particularly Germany and the European Central Bank).
Monti may or may not be involved in the new government. The further removed from it he is, the greater the temptation will be to alter the policy approach in response to popular pressures. This would involve less emphasis on fiscal and structural reforms, raising concerns in Berlin, Brussels, and Frankfurt.
Japan's incoming government has already signalled an economic-policy pivot, relying on what it directly controls (fiscal policy), together with pressure on the Bank of Japan, to relax the monetary-policy stance, in an effort to generate faster growth and higher inflation. In the process, officials are weakening the yen. They will also try to lower Japan's dependence on exports and rethink sending production facilities to lower-wage countries.
The economic impact of politics in the US, while important, will be less dynamic: absent a more cooperative Congress, politics will mute policy responses rather than fuel greater activism. Continued congressional polarisation would maintain policy uncertainty, confound debt and deficit negotiations, and impede economic growth. From stymieing medium-term fiscal reforms to delaying needed overhauls of the laboor and housing markets, congressional dysfunction would keep US economic performance below its capacity; over time, it would also eat away at potential output.
In other countries, the causal direction will run primarily from economics to politics. In Egypt and Greece, for example, rising poverty, high unemployment, and financial turmoil could place governments under pressure. Popular frustration may not wait for the ballot box. Instead, hard times could fuel civil unrest, threatening their governments' legitimacy, credibility, and effectiveness – and with no obvious alternatives that could ensure rapid economic recovery and rising living standards.
In China, the credibility of the incoming leadership will depend in large part on whether the economy can consolidate its soft landing. Specifically, any prolonged period of sub-7% growth could encourage opposition and dissent – not only in the countryside, but also in urban centres.
Then there is Germany, which holds the key to the integrity and unity of the eurozone. So far, Chancellor Angela Merkel has been largely successful in insulating the German economy from the turmoil elsewhere in Europe. Unemployment has remained remarkably low and confidence relatively high. And, while growth has moderated recently, Germany remains one of Europe's best-performing economies – and not just its paymaster.
While some would have favored greater policy activism, Merkel's Germany has provided a steady anchor for a eurozone struggling to end bouts of financial instability and put an end to questions about its survival as a well-functioning monetary union (one that aspires to becoming much more). A change in German leadership would, therefore, raise questions about Europe's policy underpinning.
How politics and economics interact nationally and globally is one of the important questions for 2013 and beyond. There are three scenarios: good economics and effective politics provide the basis for a growing and more cooperative global economy; bad economics interact with dysfunctional politics to ruin the day; or the world muddles through, increasingly unstable, as a tug of war between economics and politics plays out, with no clear result or direction.
Part of the answer depends on what happens in three countries in particular – China, Germany, and the US. Their economic and political stability is essential to the well-being of a world economy that has yet to recover fully from the 2008 global financial crisis.
Current indications, albeit incomplete, suggest that the three will continue to anchor the global economy in 2013. That is the good news. The bad news is that their anchor may remain both tentative and insufficient to restore the level of growth and financial stability to which billions of people aspire.
Mohamed el-Erian is CEO and co-CIO of PIMCO, and the author of When Markets Collide
© Project Syndicate 2012
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 Kathimerini | Greek Bank Deposits Rise In November For Third Consecutive Month Wall Street Journal ATHENS--Greek bank deposits rose for a third consecutive month in November, as the country's greater political stability during the last few months helped to underpin confidence in the sector. The Greek central bank said Thursday that total deposits ... Greek bank deposits up in November, but credit shrinks Greece's Titan unlocks bond markets to raise 200 mln euros |
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Third Point Rose 21% in 2012 After Bet on Greek Bonds Bloomberg Daniel Loeb's $9.3 billion hedge fund Third Point LLC ended 2012 up 21 percent, boosted by its bet that European policy makers would keep Greece in the euro by continuing to support the indebted country. Third Point gained 3.6 percent in December, ... |
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Greek Bank Lending Continues to Fall in November Fox Business Net lending to Greek businesses and households in November shrank 4.6% on the year, as demand for bank loans continued to slide, data from the Bank of Greece showed Thursday. The decline was roughly in line with the 4.8% decline in October and a ... |
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FRANKFURT (Reuters) - Consumers and firms' deposits in banks in troubled euro zone member states remained mainly stable in November, European Central Bank data showed, indicating that worst fears of bank collapses or even a euro zone exit are receding. The ECB managed to calm financial markets by announcing a new government bond purchase plan in September, which has since brought down sovereign bond spreads for countries such as Italy and Spain. Private-sector deposits at Italian banks rose by 0.1 percent to 1.443 trillion euros in November after falling almost 2 percent in October. ...
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• London shares edge down as markets sober
• UK mortgage lending boost
• Greek police probe Lagarde list
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eKathimerini, Greece: Lagarde list probe unveils large-scale tax evasion Focus News eKathimerini, Greece: Lagarde list probe unveils large-scale tax evasion. 03 January 2013 | 13:38 | FOCUS News Agency. Home / Southeast Europe and Balkans. Athens. A number of Greeks holding accounts at a Geneva branch of HSBC are suspected of ... |
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 Quartz | Greece living up to most corrupt EU country rating Quartz On the afternoon of Dec. 21, a woman attempted to cash a check for €147,600 ($195,363) at a Greek bank. It could have been a very merry Christmas, but instead she and four others were arrested and implicated in a multi-million euro embezzlement scheme ... Marketing Greece to Promote Tourism Scandal Hits Greek Tourism Agency |
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 IBTimes.co.uk | Golden Dawn Accuses Greek President Karolos Papoulias of Being a 'Traitor' IBTimes.co.uk The Greek Neo-Nazi party Golden Dawn has lashed out at the country's president Karolos Papoulias after he denounced fascism, accusing him of being a traitor and a sold-out politician. In his New Year's Day message to the nation, the 83-year-old ... |
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FinMin: Prospects for Greece better in 2013 than in 2012 ForexLive (blog) FinMin: Prospects for Greece better in 2013 than in 2012. By Jamie Coleman || January 2, 2013 at 15:21 GMT. || 0 comments || Add comment. Well, you got that much going for you… Greek economy improving; Must meet conditions for debt deal tranches to be ... |
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Happy New Year Germany: Greece needs a new bailout ForexLive (blog) Happy New Year Germany: Greece needs a new bailout. By Gerry Davies || January 3, 2013 at 07:18 GMT. || 0 comments || Add comment · Zerohedge. I had been hoping for a rest from the Greek saga. Well at least a little one :(. Share and Enjoy: ... |
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Greek Cyprus apologises to Egypt over envoy's footwear row www.worldbulletin.net Greek Cypriot media reported the ambassador agreed to undergo security screening but objected to removing her boots. In a heated debate that followed, media reported, a police officer was slapped and the ambassador was manhandled by police. |
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 Kathimerini | Guest Commentary: Greece--Outstanding tax debt worth €55 billion, primary ... DailyFX The good news from Greece is that the country already reached a primary surplus (a surplus excluding interest payments) in these months: January-November. A surplus of 2.3 billion euros countered a deficit of 3.6 billion in the same period 2011. Greece posts primary budget surplus Greece finally can look forward to the future Troika Says 80% Greek Debt Uncollectible |
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