Europe's Populist Left

[Sheilbh]

Tsipras going to announce Dmitris Avramopoulos as candidate for President. Former ND Minister from the liberal wing of the party, currently Commissioner. Nice way of showing national unity/statesmanship and getting to appoint a SYRIZA Commissioner.

[Sheilbh]

Apparently weekend technical talks went badly. Big differences.

But today's not really considered a hard deadline and there were a few good signs. I think a setting out the stalls phase really.

[MadImmortalMan]

The groundhog sees his shadow, signifying six more months of Eurozone market-jacking.

[Sheilbh]

Well that went well.

My bet at the minute: capital controls and the program ends on the 28th of Feb as scheduled with no replacement. Followed by negotiations and insanely the Eurogroup did leave themselves open to a third bailout - because that's what everyone needs

But there's still hints that there is a deal.

(Edit: In fact, maddeningly, everyone could probably write out roughly what a likely deal would look like we just have to have this absurd playing to the base ('as long as the Greece government doesn't want a program I don't have to think about options')).

The groundhog sees his shadow, signifying six more months of Eurozone market-jacking.

This still seems reasonably accurate:

I completely underweighted the possibility they would flail around for three years. I thought it was just inconceivable to me they would let it get as bad as they ultimately did. But the early premonitions of that were in that initial debate. They were lied to by the Greeks. It was embarrassing to them because the Greeks had ended up like borrowing all this money and they were mad and angry and hey were like: "Definitely get out the bats." They just wanted to take a bat to them. But in taking a bat to them, they were feeding a fire that was in its early stages. There were a lot of dry tinders.

Edit: Both sides saying 'there is no plan B'.

[celedhring]

So we're heading towards the "crappy deal at 5 am in a hotel in Brussels right before the deadline" scenario?

[Sheilbh]

So we're heading towards the "crappy deal at 5 am in a hotel in Brussels right before the deadline" scenario?

Was there ever any doubt that's where it would end up?

After all, the best decisions are made when you're sleep-deprived and emotional. It's why Monnet designed it like this.

[Jacob]

From the internet:

Europe's actual recovery plan for Greece:

Step 1) Bring Varoufakis to Che Guevara's level of fame
Step 2) Have them sell t-shirts

[Archy]

So we're heading towards the "crappy deal at 5 am in a hotel in Brussels right before the deadline" scenario?

Was there ever any doubt that's where it would end up?

After all, the best decisions are made when you're sleep-deprived and emotional. It's why Monnet designed it like this.

Sounds a lot like the Belgian decission System.

[Sheilbh]

The new anti-corruption minister:

INSIGHT-PM Tsipras declares war at home on Greece's 'oligarchs'
Tue, Feb 17 13:00 PM GMT
By Stephen Grey

ATHENS, Feb 17 (Reuters) - Greece's new anti-corruption minister is not a politician, but he is in tune with the new crusading mood.

International attention on Greece since the Syriza party took over has focused on the leftist government's fight against an austerity package imposed from abroad.

But Panagiotis Nikoloudis, 65, a supreme court prosecutor and specialist on economic crime, is spearheading another battle declared by Syriza: this one on the home front, against some of the wealthy businessmen who dominate Greek political and economic life.

Speaking to parliament last week, Nikoloudis denounced an elite that included a "handful of families who think that the state and public service exists to service their own interests."

Such businessmen influence politicians and state officials or abuse their control of the media to unfairly win state contracts, change regulations to their advantage or escape prosecution for illegal conduct, critics say.

Prime Minister Alex Tsipras has announced radical measures aimed at what he calls the "oligarchs", including re-licensing private TV channels, ending "crony" bank loans for the well-connected, exercising the state's voting rights in the case of majority shareholdings of private banks, unwinding some key privatisations and aggressive tax audits of those with offshore bank accounts.

"We have made the decision to clash with a regime of political and economic power that plunged our country into the crisis and is responsible of Greece's depreciation on an international level," Tsipras told parliament last week.

Finance Minister Yanis Varoufakis has been equally blunt, declaring that his government will "destroy the oligarchy" in order to increase tax revenues, open markets and spur economic growth.

So far, no-one has been named in the crackdown, and few of Greece's top entrepreneurs have commented publicly.

But deals under scrutiny include the privatisation of the national lottery and planned sell-off of state shares in major ports.

Energy Minister and Syriza party member Panagiotis Lafazanis told parliament last week the government would seek the cancellation of the "scandalous purchase" of the old Athens airport, Hellenikon, by Lamda Development, a company controlled by the family of Greece's richest businessman, Spiros Latsis.

Latsis has not been personally criticised by Syriza.

Lamda responded with a statement last week lamenting "the discouraging message to the long-term private international investors that our country desperately needs."

Asked by Reuters to comment further, Latsis did not respond.

Businessman Yannis Vardinoyannis, whose family has interests in oil refining, shipping and the media, said in a statement to Reuters that Tsipras had a "valid point" in attacking "a certain regime that has played a significant role in influencing in a negative and corrupt way Greece's business environment", and that tackling corrupt practices would be good for economic growth and business confidence.

He also noted that "owning and operating a globally successful organization does not classify you as an 'oligarch'".

"We have faith in our new Government and I personally welcome this type of approach where fair play, the law and regulations will prevail," he said.

NOT JUST TARGETING THE RICH

Syriza under Tsipras has long been critical of how a handful of Greek families play a dominant role and enjoy political patronage in key sectors of the economy.

But some critics say the Syriza government should make a clearer separation in its public rhetoric between its drive against illegal activity like corruption and tax evasion and its wider political agenda to curb the power of the rich, which could scare away investors and spur capital flight.

Nikoloudis told Reuters in an interview he was not accusing the wealthy in general.

"I would be crazy to think like that," he said.

He is still waiting to be given a new office, staff or a budget. But, speaking at his old office, he said previous investigations into oil smuggling, banking fraud and tax evasion had identified perpetrators who were wealthy businessmen with political patrons.

"So I don't attack the rich, but the people I've found committing crime just happen to be rich," he said.

As a non-political outsider with a clean record, Nikoloudis is a popular appointment among Greeks who believe corruption is deeply embedded in society. He has a reputation for action, and says the financial intelligence unit, which he led until now, developed a system of audits that identified over 20,000 people whose assets do not match their tax declarations.

George Sourlas, a senior official at the justice ministry and a former conservative MP and deputy speaker of the parliament, said he "had to admit" the anti-corruption measures put forward by Tsipras were "very impressive so far."

Sourlas praised Tsipras's promise to curb oil smuggling, a racket in which un-taxed fuel for export or commercial shipping is diverted and sold instead for domestic consumption, evading sales tax due. Previous governments have been aware of the racket for years but did nothing, Sourlas said.

"The smugglers have the support of political power and a relationship with all political parties," he said, declining to elaborate.

TAX REVENUES

University professor Dimitris Mardas has been appointed deputy finance minister to spearhead measures to tackle both un-taxed revenues and corrupt procurement.

In an interview, he outlined the programme he has in mind to defeat the smugglers, from installing GPS systems on fuel barges in ports to new incentives for customs officers to forcing refineries to hand over more data.

Mardas said he hoped to recover a billion euros of missing annual revenue just from tackling fuel smuggling.

But sceptics question if Syriza's hopes for a windfall of tax revenues from the crackdown are realistic.

Harry Theocharis, a former chief tax collector and now a newly-elected MP for a centrist party, said Mardas was exaggerating the revenue lost by smuggling.

The bigger problem, he said, was that tax evasion and corruption in general extends well beyond the rich. But going after evasion by professionals or other restrictive practices such as unfair barriers to professions maintained by trade unions could threaten Syriza's political support.

Nikoloudis has acknowledged that targeting the richest and most powerful would not eliminate tax evasion.

In fact, he found the biggest companies in Greece were the most scrupulous in paying their taxes, unlike many self-employed people. "Specifically everyone who has a hotel or a taverna on an Aegean island systematically commits tax evasion."

An attack on corrupt behaviour by powerful interests was perhaps more about justice than revenue-raising, he said.

"Even if we accept that some people will take their money and go abroad, I would prefer to take that risk instead of seeing the economy of my country based on dirty money and corrupt enterprise."

Not every oligarch would be challenged, and not all crimes of the past could be prosecuted.

"I am not going to fight everyone. I don't want to break my nose. I want to change the system. That's my ambition." (Additional reporting by Nikolas Leontopoulos; Editing by Sonya Hepinstall)

Meanwhile more details have emerged from the Eurogroup. Basically the normal kabuki theatre of the Eurogroup is that there's an agreed statement even if it says nothing and papers over divisions. Lately the Eurogroup FinMin meetings haven't managed even that. Generally (with the partial exceptions of Cyprus and Ireland) because the bailout country wants and needs a loan the big issue is over how much and they agree to anything to get it. The best source for the thinking of the Eurogroup has always been Peter Spiegel of the FT who gets leaks of draft proposals at an astonishing rate.

This has now changed because the Greeks actually have a position and there are negotiations. If I had to guess they're the ones briefing and leaking to Paul Mason. So there are two sides leaking and spinning. The talks ended and there was no statement. Spiegel got the Eurogroup statement that the Greeks rejected as 'completely unacceptable'. Then Mason reported that there had been another draft statement that the Greeks had agreed to - which the Eurogroup totally denied. Then a couple of versions leaked (one from the day the before the meeting and the second from the end of the meeting) which had been produced by Moscovici. The Eurogroup position is now that that document was discussed and did exist but it wasn't agreed - the Greek (or Commission briefing) is that Djisselbloem as chair of the Eurogroup withdrew it from discussion.

There's not much difference of substance between the two. They both contain significant concessions from the Greeks. Especially that the program would be extended in some way and the government wouldn't move ahead with any of their plans during talks. The only difference that I think matters is that the Moscovici draft (which apparently also had the support of Draghi and Lagarde but was opposed by Germany and Spain especially) talks about all of this happening in the movement to a 'new agreement', while the Djisselbloem draft has those concessions but it's all about extending the current program.

So the basic division now seems to be that the Greeks want a new agreement (involving what we all know: substantially lower primary surpluses, replacement of 30% of the reforms, social measures - explicitly mentioned in Moscovici, but I think less important and a new form of oversight). The Eurogroup want the current program to be extended beyond its expiry on 28 February and once it's expired there will be 'flexibility' in its implementation (it's far less clear what this 'flexibility' means). One other interesting point is that both drafts include a little throwaway line to do with use of HFSF funds, but I think it may be indicative of a larger trend in the negotiations, that says the Eurogroup is agreeing to a request by the ECB, the IMF and the European Commission.

Hugo Dixon who has generally been very pro-Eurogroup in this has said that this looks like a mistake by the Eurogroup because the Moscovici draft did include important concessions and if Greece now defaults and leaves the Euro they have a credible argument that a newly elected government wasn't even given the chance or time to come up with their plans.

As I say the substantial difference seems quite small. So a deal should be attainable - Varoufakis has spoken of the European ability to pull a deal out of every seeming impasse.

However Greece is apparently going to request an extension of the program's loan facility but will not agree to extend, implement or complete the program. Tsipras has now also started to announce social measures and roll-backs of some reforms that will be introduced to Parliament this week - ie. we offered not to do anything unilateral, now we will. Which all looks like damage control to me. There are also reports from Athens (where, remember, Syriza are now polling at 45% and would have a clear majority) that if a deal can't be reached this time the government will resign and go to a snap election.

I think there'll still be a deal and it'll be decided at the head of government level, despite all the Eurogroup FinMin sound and fury. But it also looks like the chances of Grexit have increased and I don't think anyone can really predict the consequences of that

Oh and Greek inflation is now -2.8% which won't help any debt dynamics.
On the positive side everything in the Core is peaceful and proceeding well.
http://www.reuters.com/article/2015/02/17/us-france-economy-idUSKBN0LL00320150217

French Prime Minister Manuel Valls defied critics from left and right on Tuesday by declaring he would ram a flagship economic reform bill through parliament by decree, bypassing backbench rebels but exposing his government to a no-confidence vote.

Oh

Taking a step back a bit I think there's a couple of interesting angles on the Greek talks (one cause for optimism is France and Italy still seem to care and be optimistic, according to Berlin correspondents the BMF is furious which is more negative) but the biggest seems to be the potential Euro-Eurogroup conflict. The Commission seems to be staking out a very different position than the Eurogroup and, for all his faults, Juncker's a smart operator, has a lot of space to move and will have a definite (federalist) vision. It seems to me that an interesting thing that may develop over the next few months is the Commission (and possibly ECB) whose duty is to the European Union and the Euro and the 'European Project' having more disagreements with the Council. I doubt Juncker's 'questions' document will be the last we'll see of it.

Edit: And a useful reminder of Greek austerity:

Spending was increasing 2007-09 so it's worse than it looks and I think, regardless of how clean your politics are, that cuts on that scale will have humanitarian/social consequences.

Edit: And the Eurozone need to start outlining what happens in the case of a disorderly exit from the program. It wasn't envisaged and I don't think has been planned for, it's not enough as Schaeuble keeps saying that at midnight on the 28th 'that's it'.

This is the context in which Djisselbloem and the Eurogroup are instead amazingly considering a third Greek bailout.

[Sheilbh]

Eurogroup still insisting on old fiscal targets. German Finance Ministry's rejected Greece's extension application - which was expected, but maybe not only three hours after it was made. So far there's no sign that Eurogroup willing to compromise at all.

Meanwhile Bundesbank voted against extending ELA (to solvent banks) and they look like the source for stories that the ECB governing council discussed capital controls - which the ECB have denied strongly.

Edit: Apparently German rejection wasn't expected. Greek language softened and Djisselbloem on board for using it as starting point for tomorrow's negotiations. Several journalists pointing out the total radio silence of non-German leaders since BMF statement.

[Duque de Bragança]

http://www.reuters.com/article/2015/02/17/us-france-economy-idUSKBN0LL00320150217

French Prime Minister Manuel Valls defied critics from left and right on Tuesday by declaring he would ram a flagship economic reform bill through parliament by decree, bypassing backbench rebels but exposing his government to a no-confidence vote.

Oh

Don't worry, just some political posturing by Valls. As for the economic reform bill, being prepared by a guy from Rotschild banking, under a president who said he hated the rich and was an enemy of high finance, I'm not sure if it's really good for the real economy.

[Sheilbh]

Juncker and the SPD have come out and said Greek offer a 'positive sign'.

[Admiral Yi]

At some point surely Greece needs to stop the foreplay and word games and put a debt reduction number on the table.

[Duque de Bragança]

And then there is this:

It's missing at least Die Linke for Germany. That's being charitable and not counting the pro-Putin wing of the SPD.

[Martinus]

Incidentally, there was an interview with Le Pen in a Polish right wing rag recently. She said (or at least that's what the cover claimed, as I don't buy that rag) that if her party wins, they are going to roll back the gay marriage in France. Any truth to that, or is this just empty posturing (I assume that it would have been a constitutional nightmare to do something like this, even if there was a political will).