Source: abc.net.au
A exit from the euro currency and a return to a form of the old Greek drachma is now being openly canvassed in the event of a no vote at the weekend. But Dr Helmut Schmeiding, chief economist at the Berenberg Bank in London, says a decision by Greece to print its own money would spark more economic and social chaos.
Source: news.com.au
FORGIVING debt, if done right, can get an economy back on its feet.
The International Monetary Fund certainly thinks so, according to a new report in which it argues Greece should get help.
But Germany, another major creditor to Greece, is resisting — even though it knows better than most what debt relief can achieve.
After the hell of World War II, the Federal Republic of Germany — commonly known as West Germany — got a massive helping hand with its debt from former enemies.
And who was among its creditors then? Greece.
Roles reversed … In this February 27, 1953 photo, the German Debts Agreement is signed in London. Source: AP
The 1953 agreement, in which Greece and about 20 other countries effectively wrote off a large chunk of Germany’s loans and restructured the rest, is a landmark case that shows how effective debt relief can be. It helped spark what became known as the German economic miracle.
So it’s perhaps ironic that Germany is now among the countries resisting Greece’s requests for debt relief.
GREECE CRISIS: PM Alexis Tsipras and his government are ‘ready to quit’
Greek Finance Minister Yanis Varoufakis claims debt relief is the key issue that held up a deal with creditors last week and says he’d rather cut off his arm than sign anything that doesn’t tackle the country’s borrowings.
The IMF backed the call to make Greece’s debt manageable with a wideranging report on Thursday that also blames the Greek government for being slow with reforms.
Despite years of budget cuts, Greece’s debt burden is higher than when its bailout began in 2010 — over AU$479 billion, or 180 per cent of annual GDP — because the economy has shrunk by a quarter.
Here’s a look at when Germany got debt relief, and if such action might help Greece.
Global push … Protesters in Paris hold Greek flags as they rally in support of the people of Greece. Source: AFP
FORGIVE US OUR DEBTS
1953’s London Agreement, hammered out over months, was generous to West Germany. It cut the amount owed, extended the repayment schedule and granted low interest rates.
And crucially, it linked West Germany’s debt repayment schedule to its ability to pay — tying repayments to the trade surplus it was running and expected to run. That created an incentive for trading partners to buy German goods.
The deal effectively blocked claims for reparations for the destruction the Nazis inflicted on others.
But it wasn’t a one-way street.
“The London Agreement gave Germany sweeping debt forgiveness and protection from creditors, in exchange for pro-market reforms,” said Professor Albrecht Ritschl of the London School of Economics.
Cash-strapped … Greeks line up for free sandwiches at a shop in the port city of Thessaloniki. Source: AP
West Germany was able to borrow on international markets again, and, free of onerous debt payments, saw its economy grow strongly.
Development activists cite that case when arguing for easier terms for troubled countries today.
“The same opportunity should be given to Greece that was given to Germany in 1953,” said Eric LeCompte, executive director of debt relief organisation Jubilee USA.
Greece has had some relief. Private sector bondholders lost 53 per cent of face value in a 2012 restructuring, and remaining debts have been stretched out.
Now most of Greece’s debt is owed to bailout creditors. While they, notably the IMF, have indicated that the debt load should be made more manageable, little has been done of late.
On tenterhooks … Protesters have demonstrated in front of the Greek parliament in Athens. Source: AFP
NOT CHARITY
The German debt forgiveness was driven by the United States, which pressed others to get a deal — British creditors gave up two-thirds of what they were owed.
It wasn’t charity. The U.S. needed a strong West Germany as an ally against the perceived threat of the Soviet Union.
Yale University Professor Timothy Guinnane warns against making too many comparisons, partly because Germany was so much more important geopolitically than Greece today.
And Germany had economic pedigree, being a big exporter. Greece, on the other hand, hasn’t, and isn’t. That’s partly why Germany in particular is insisting on reforms to make Greece more competitive — if they are enacted, then it’s indicated it would be open to help out on the debt front.
“The U.S. was basically the last man standing after the war and essentially decided to cut Germany’s debt in half,” Guinnane said. “It was a hard-nosed decision ….. it’s wrong to say it was an act of generosity.”
No deal … A protester bears ”NO” on her wrist ahead of Sunday’s referendum on the bailout package. Source: AFP
LESSONS LEARNED
Still, there are echoes from the German case that are relevant to Greece today.
The deal to help Germany was based on a realistic way for the country to pay its debts — Greece’s Varoufakis has suggested debt repayments be linked to growth. Over the bailout years, Greece has had to meet debt commitments even though its economy was in a depression.
Germany’s deal also acknowledged that mistakes after World War I in imposing punitive conditions helped boost extremists. In its misery, Greece has seen votes go to radical parties of left and right, including Nazi-inspired Golden Dawn.
“It’s deeply ironic that it’s forcing Greece into a position that’s prompting the rise of extremist parties,” said Guinnane.
In crisis … The Greeks have staged protests as the country missed its IMF loan repayment deadline. Source: AFP
CHANGE AHEAD?
One of the reasons why relations between Greece and European creditors deteriorated is the disagreement over what to do about the country’s debts. It’s difficult for anyone, especially those that have endured austerity too, to accept a lower return.
But there are signs of movement as Sunday’s referendum nears in Greece on recent reform proposals from the country’s creditors.
Cyprus has said it could consider writing off 330 million euros ($370 million) in rescue loans to Greece. The U.S., while not directly involved, has consistently advocated debt relief.
The IMF came out most forcefully on Thursday, arguing in a report that Greece needs large-scale debt relief alongside more than 60 billion euros ($67 billion) in financing between June 2015 and the end of 2018. Given the recent economic shock related to the capital controls and the referendum uncertainty, Greece’s needs will likely be significantly higher, the IMF said.
It blamed the current government for being slow on reforms and privatisation, but said it was clear the debt needed to be made more manageable.
“A significant haircut could possibly do it,” an IMF official said, on condition of anonymity in line with department rules. “So could an extension, so Greece would not have to go back to the markets for a very long time.”
One option the IMF mentioned was doubling the grace period on Greece’s loans from EU countries to 20 years and the subsequent repayment period to 40.
“Greece needs a sort of breathing space,” the IMF official said.
Source: newsroom
Greek-Australian communities are bracing themselves for an influx of new Greek immigrants from the “old country”, as talks with between the SYRIZA government and creditors remain at an impasse.
More than 10,000 ethnic Greeks with Australian citizenship rights have already shown an interest in leaving for Australia.
The director of the Greek Centre in Melbourne, George Menidis, says he has received many requests from Greece residents seeking a better future.
“I expect a huge influx over the upcoming years. There is a clear sense of an imminent rift between Greece and the EU”, according to the president of the Greek student’s association, Tas Sgardelis.
On his part, Greek Australian Senator Arthur Synodinos stresses that a Grexit would result in a “desertification” of the country.
Academic
Source: news.com.au
Atlantis Marine Park was supposed to boost Western Australia’s tourism market. Picture: Tor Lindstrand. Source: Flickr
IT WAS supposed to be Western Australia’s answer to the glittering Gold Coast. A theme park built off the back of Perth’s economic boom. But just nine years after opening, it shut its doors and is now abandoned and ruined.
Atlantis Marine Park sat 60km north of Perth in the small fishing town of Two Rocks. Built in 1981, it was part of Alan Bond’s ambitious plan to build a resort and residential area called Yanchep Sun City, a proposed satellite city to support a population of 200,000.
It was hoped that Perth’s massive expansion would be matched with a growth in tourism and even Japanese investors were brought in as financial backers.
Strange shaped objects litter the abandoned grounds. Picture: Tor Lindstrand. Source: Flickr
Statues have been left to ruin. Picture: Tor Lindstrand Source: Facebook
Atlantis Marine Park was initially a huge success with families from WA and beyond flocking to the park to watch the live dolphin shows, swim in the pools, ride pedal boats and have their obligatory photo with King Neptune, a huge statue at the entrance to the park.
However in 1990, just nine years after opening, Atlantis shut its doors. Western Australia’s boom never eventuated and the 1987 stock market crash put a halt to prosperity.
Atlantis closed due to financial difficulty and was left abandoned. It has since been damaged by vandals and has become overgrown and derelict.
Vandals and neglect have seen the area left in tatters. Picture: Tor Lindstrand Source: Flickr
The former marine park is now a wasteland. Picture: Tor Lindstrand Source: Flickr
Old statues can still be found scattered throughout the grounds as well as broken walls and concrete pools. For years it was a no man’s land, popular with dog walkers.
However just last month the iconic King Neptune was restored to its former glory after a petition by locals who started an online campaign for something to be done with the ruins.
The mammoth statue was cleaned, sealed and repainted. Taking 11 men and 70 litres of paint, the restoration took two weeks to complete. Volunteers cleared the gardens and fixed the broken fences and the park is now open to the public on weekends.
The site is currently owned by the property developers Fini Group and a plan has been put forward to develop the area into a mix of retail, commercial and public open spaces including the preservation of King Neptune.
The King Neptune statue has been restored to its former glory. Source: Facebook
Random head statues are dotted around the grounds. Source: Facebook
Vandals have graffitied what is left. Picture: Tor Lindstrand Source: Flickr
It is hoped the abandoned buildings will be developed into a retail and housing complex. Picture: Tor Lindstrand Source: Flickr
Atlantis Marine Park in its heyday. Source: Facebook
Source: News.com.au
Greek pensioners worried over capital controls
GREECE yesterday became the first developed nation to default on a loan from the International Monetary Fund, missing a €1.6 billion ($A2.19 billion) repayment to the global crisis lender.
Greece joins the company of Zimbabwe, Somalia and Sudan in falling behind in its payments to the IMF. Zimbabwe was the last country to default in 2001, Somalia has been in arrears since 1987, and Sudan since 1984.
Greece currently owes its official lenders €242.8 billion ($A350.74 billion), Reuters calculates, which includes €220 billion ($A317.80 billion) from two bailout loans from the IMF and European governments made since 2010.
The missed payment marks the first time a eurozone country has defaulted on a loan from the IMF and sets a new record for the size of a missed payment, previously held by Sudan.
Greece is now almost certain to miss a much bigger, €3.5 billion ($A5.06 billion) repayment to the European Central Bank due on 20 July, and ratings agency Fitch says it views a default on government debt held by private creditors as “probable”.
Tim Harcourt, the J.W. Nevile Fellow in Economics at the UNSW Business School, said a Grexit was still not a certainty. “World trade is dependent on stable economies that can pay their way, and the euro has done a lot to facilitate that. The drachma may still not return to Greece,” he said.
Greece has imposed capital controls with the banks being closed until the referendum and a daily limit of 60 euros has been placed on cash withdrawals from ATMs. Source: Getty Images
Greece could still restart talks with creditors, and Mr Harcourt added that the consequences of missing an IMF payment were more reputational than practical. “Well they can’t invade, can they? They just get annoyed, say ‘naughty, naughty, naughty’, and that’s about it.
“But at the end of the day, a 67-year-old factory worker in Frankfurt doesn’t want to pay the pension of a 51-year-old Greek public servant in Athens, so the whole European model needs rethinking. And squeezing Greece until the pips squeak through more austerity measures is hardly going to boost growth in Greece and gain the confidence of creditors.”
Mr Harcourt said that the direct trade effects on Australia would be minimal. “We export more to Christmas Island than we export to Greece. Australia if anything will probably benefit in terms of human capital if we get an influx of skilled, educated Greeks moving here as we did in the 1950s,” he said.
Overnight, the 19 eurozone finance ministers announced they were putting any further talks on hold until the result of Sunday’s referendum. In a televised address yesterday, Greek prime minister Alexis urged citizens to vote ‘No’, saying it would not mean that Greece would have to leave the euro, as many European officials have argued.
As Argentines closely watch the 2015 financial turmoil in Greece, recalling their worst crisis 14 years ago, the architect of the South American country’s recovery has offered a word of advice. Source: AP
Rather, Tsipras insisted, it would give the government a stronger negotiating position with creditors. “There are those who insist on linking the result of the referendum with the country’s future in the euro,” Tsipras said. “They even say I have a so-called secret plan to take the country out of the EU if the vote is ‘No.’ They are lying with the full knowledge of that fact.”
Meanwhile, Argentina, recalling its own financial crisis 14 years ago, has offered a word of advice to Greece: renegotiate your debt.
Former Argentine economy minister Roberto Lavagna, who is credited with playing a key role in his country’s recovery after its $US100 billion debt default in 2001, told The Associated Press that a “strong restructuring” of its debt is the way to help Greece come out of its crisis and avoid conflict within the European Union.
“It’s not the definitive condition … but it is necessary [to avoid a political conflict],” he said. “Democracy is worth more than markets.”
So as Greece heads towards a possible exit from the shared currency, with bills from the IMF piling up, how are those other countries doing?
ZIMBABWE
Zimbabwe was the last country to default on their debt to the IMF, and life there is still tough. Here, a young boy dressed as a soldier stands guard while holding a wooden gun during the opening of the 23rd session of the Junior Parliament of Zimbabwe in Harare. Source: AP
Period in arrears: 2001-present
Amount outstanding: $A145,493,206
Under president Robert Mugabe, Zimbabwe suffered nearly a decade of economic meltdown, marked by a period of hyperinflation which peaked at 500 billion per cent in 2008, forcing the country to abandon its worthless currency.
Earlier this month, Zimbabwe announced it would start exchanging quadrillions of local dollars for a handful of US dollars. Bank accounts with balances of up to 175 quadrillion Zimbabwean dollars would be paid $US5.
Last year, the IMF ruled out lending more money to the southern African nation as it was still in arrears on previous loans from the IMF, the World Bank and the African Development Bank.
IMF outlook: “Zimbabwe’s economic prospects remain difficult. Growth has slowed and is expected to weaken further in 2015. Despite the favourable impact of lower oil prices, the external position remains precarious and the country is in debt distress.”
SOMALIA
Somalia remains one of the poorest nations in the world after defaulting on their IMF loan in 1987. The country is also one of the world’s most dangerous. Here, a Somali soldier stands guard next to the site where Al Shebab militants carried out a suicide attack in Mogadishu on June 21, 2015. Source: AFP
Period in arrears: 1987-present
Amount outstanding: $A430,127,345
Racked by more than two decades of conflict in which its economy and infrastructure were devastated, Somalia only resumed relations with the IMF in 2013 when the lender “officially recognised” the Somali government after a 22-year hiatus.
The nation still has among the poorest living standards in the world and remains reliant on international assistance, which accounts for more than 40 per cent of its budget. The US is working with the World Bank and IMF to help Somalia clear its debts and open up new lending.
Somali banknotes are not widely used and the economy is largely dollarised, but the IMF has warned against currency reform until the country has its act together.
IMF outlook: “Economic activity is estimated to have expanded by 3.7 per cent in 2014, driven by growth in agriculture, construction, and telecommunications. Nevertheless, growth will remain inadequate to redress poverty and gender disparities.”
SUDAN
Sudan was dealt a further economic blow when the southern oil-rich part of their country succeeded in 2011, making any outstanding payments to the IMF even more difficult. Still, Sudanese President Omar al-Bashir is surrounded by supporters on his return from South Africa in June. He returned to Khartoum after a court in South Africa had ordered his arrest based on an international warrant for war crimes charges. Source: AP
Period in arrears: 1984-present
Amount outstanding: $A1,778,590,203
Oil-rich Sudan has struggled with an enormous debt burden since the 1980s, and the secession of South Sudan in July 2011 took away three quarters of its critical oil revenue. The loss of oil revenues caused rapid inflation due to imported price rises.
With the urging of the IMF, Sudan has been scaling back government spending and raising taxes, sparking anti-government protests. The US still maintains its 1997 sanctions over the North African nation for its role in hosting Islamist militants.
This week, the IMF described Sudan’s progress as “remarkable”, with tight monetary policy and fiscal consolidation bringing inflation below 20 per cent in May and driving growth of 3.7 per cent in 2014.
IMF outlook: “The outlook remains challenging. Sudan’s large external debt and arrears hinder its access to external financing and weigh heavily on its development. This is compounded by the impact of economic and financial sanctions.”
Source: newgreektv.com
Greek-Australian comedian Nick Kesidis is set to perform during the Melbourne Magic Festival.
The award-winning comic will offer his “Still One Lonely Guy” act from June 30th to July 4th, from 8:30 to 9:15 p.m. at Northcote Town Hall. The venue is located at 189 High Street, Northcote, VIC.
Kesidis has been described as a combination of street performer and entertainer, by Greek-Australian news portal Neos Kosmos. The Greek-Australian funny man’s show is appropriate for all ages over 9 and up.
Additional information and ticketing for this year’s Melbourne Magic Festival can be accessed by telephone at: (03) 9481 9500 or the web at: sa2.seatadvisor.com/sabo/servlets/.
GREEK WORLD MEDIA 