Rehn said “To beat the crisis, we have taken action to deal with short, medium and long-term challenges. For the short-term, we had to stabilise financial markets so as to avoid the free fall of our economy. For the medium term, we need economic reforms for sustainable growth and job creation. And for the long-term, we needed to redesign the architecture of European Monetary Union”.

Mersch, as a central banker had to concentrate on the capital market. He stressed that “Governments have recognised that certain powers need to be at the European level for a Single Market to function. But what we have seen in the crisis is that we do not yet have the right powers at the European level to support a Single Market in capital…We see Banking Union, therefore, not only as a necessary complement of monetary union but also as a way of putting in place the necessary institutions, rules and instruments to sustain a genuinely single financial market”.

Who is responsible?

Let’s see if they are telling the truth. No doubt they are absolutely right that the EU is still fighting the repercussions of the crisis and tries to fill the institutional holes in the EU’s edifice. Speaking about the crisis the two top EU officials should have said a few words about its causes. None of them however mentioned that the German and the French banks kept lending money to Greece until the spring of 2009 that is almost two years after the first sings of the crisis were quite visible and the ECB had already sounded the alarm, even from September of 2007.

The Greek borrower

The Greek minister of Finance at the time Yiannis Papathanassiou had boast in March of 2009 for his high performance as a borrower. He stated that the Greek exchequer ‘under his guidance’ had borrowed in the first two months of that year €50 billion. This kind of money was of the order that could make or break Greece and as everybody learned some months later the poor country ended up totally broke.

Of course the Greek government wasted the €50bn as they had done with previous loans. Their ‘policy’ was to use the loans to appoint thousands of their political clientele in the public sector. The money was also misappropriated by corrupt politicians. Akis Tsohatzopoulos, the No2 in all Costas Simites governments from 1996 to 2004, is on trial today for money laundering and for taking bribes. From 2004 until 2009 the two Costas Karamanlis governments hired 850,000 more people in the public sector, as Leonidas Grigorakos, the deputy minister of Interior revealed yesterday in Athens.

The bank connection

However the Greek and the other mindless EU governments didn’t do it alone during the party years of the first decade of the new Millennium. All the major EU banks kept lending them hundreds of billions of euro without a second thought. Greece was borrowing at the same interest rate as Germany. No worries if those loans were ever to be repaid. It was enough to write the loans as ‘assets’ in the bank’s balance sheet, thus fattening the bonus of the banker at the end of the year. The bonuses to bankers for approving that kind of lending were so huge, in the area of millions annually, that one year’s take home pay was enough to support a family for a lifetime. Consequently the lenders are equally responsible as the fraudulent and mindless Greek politicians now in the hands of the penal justice. Unfortunately no banker has been put behind bars.

It’s deplorable that a Commission Vice President and a Member of the Executive Board of the ECB didn’t make the slightest reference to such actions of bankers and politicians which caused the worst economic crisis of Europe after the WW II. Not even a word about how dearly the average European pays for the ‘party’ held for years by a handful of people. Both speakers enjoyed the trip and the stay in the Alpine landscape of Alpbach and recited once more the recipe for Eurozone to come out from the crisis, at a dear cost paid by the many.

In short Rehn and Mersch didn’t say a word on their experience from the crisis nor on what caused it neither how much the average European pays for it.

Republished by permission from Europeansting.com.

According to protothema.gr, the Premier set thered lines clarifying that the government will not implement new measures, as the Greek economy and society cannot bear them.

Leaving the Maximos mansion, Finance Minister Yannis Stournaras said to reporters that a substantial progress in the negotiations was achieved but he also underlined that many issues remain still open.

“I believe that we will reach an agreement in the next few days,” the FinMin said. “I can’t say how soon this will be because negotiations are ongoing.”

However, on Friday evening, The Guardian writes, Athens’ normally mild-mannered finance minister, Yannis Stournaras, reportedly lashed out at mission chiefs from the EU, ECB and IMF during a heated exchange in his office, telling them they could “take the keys” to the economy ministry if they continued to demand more austerity from a nation experiencing a sixth straight year of recession.

Emerging from the building, the economics professor uncharacteristically labeled the talks as “very difficult” and gave a taste of his own frustration. “The negotiations for the next loan tranches are still very difficult. I can assure you that things are not simple at all,” he said.

After troika representatives abruptly cancelled a meeting with Stournaras late on Saturday, Prime Minister Antonis Samaras tried to smooth over the cracks.

One of the main topics of the government-troika meetings was the transfer plan in the public sector. The government agrees to proceed with the dismissal of perjury public employees by June and those removed to be replaced with an equal number to be recruited through ASEP. While there is political agreement on this issue, the problem is the time schedule does not pan out due to the slow pace of the public sector, protothema.gr reports.

The second major issue has been the National Bank-Eurobank merger and their recapitalization, with the Greek government insisting that it should continue uninterrupted and unchanged despite the delay in collection of amounts required from the private shareholders.

The two sides also discussed the adjustment doses for amounts owed to pension funds and tax offices and how to bridge the financial gap of EUR 2.7 billion for 2013-14. New measures to cover the gap are currently being rejected since they would not pass from a parliamentary voting.

As stressed in the report, the Eurogroup decision will have a series of exceptionally negative developments in the financial sector in Cyprus, leading to the practical isolation and shrinkage of the financial services sector and (ultimately) the island’s economy.

The report states that “the Eurogroup and IMF’s selective use of deposits above EUR 100,000 for the recapitalization of the banks, simply because they are uninsured, weakens (instead of strengthening) the Eurozone as a whole and subverts the European system of bank supervision and resolution of banking crises, which was decided in the midst of the Eurozone crisis. This is a dangerous practice that can even lead to the weakening of the European Union itself, that the enlightened European Leaders of other times spent their lives  creating and regulating”.

Meanwhile, Cypriots queued calmly at banks as they reopened yesterday under tight controls imposed on transactions toprevent a run on deposits after the government was forced to accept a stringent EU rescue package to avert bankruptcy.

According to Reuters, bank staff turned up for work early as cash was delivered by armored trucks, and queues were formed at branches in the capital, with uniformed security guards on duty. Doors opened at noon (6:00 a.m. EDT) but initially at least there was no sign of any major run on the banks, as had been feared.

Authorities say the emergency rules imposed to limit withdrawals and prevent a bank run will be temporary, initially for seven days, but economists say they will be difficult to lift as long as the economy is in crisis.

Current government coalition has been a possibility even before the votes were counted on the night of June 17. And as most analysts admit, elections were won due to fear tactics explored by old politics. Samaras, Venizelos and Kouvelis, after failing to agree in May, they got a second chance in June to form a government that should be willing to sacrifice itself to save the country.

In troika’s mind, there was only one path: to follow the Papademos’ government way. However, this was something Greek voters pledged the new government to avoid. When they heard the right-wing rhetoric built around the ‘MoU re-negotiation’ concept, they thought they did it. When Antonis Samaras promised to renegotiate the infamous Memorandum, voters saw an opportunity to combine austerity relief with the conservative, safer approach of ND. So they ditched the radical vote, doing Alexis Tsipras a favor, who, in reality, hoped to spend sometime in the opposition before getting serious with the country’s core politics.

By voting for old politics, Greeks decided to stay in familiar waters and refrain from exploring the uncertainty of the new. Besides, a 3-year austerity made people weaker, placing them closer to the indifference threshold.

Unfortunately or not, voters were spared with the technicalities. Pre-election rhetoric was based on the magic word of ‘re-negotiation’; a handful of columnists and politicians who really explained the fallacy were swamped by partisan juxtaposition. On election night, the new Prime Minister already abandoned the strong campaign word and started talking about ‘amendments’ that would be put into effect sometime during the 4-year period of governance and, most importantly, they would be received as a ‘bonus’ for playing the predetermined austerity cards right.

This is how a government can screw up political communication strategy (if any) overnight. Hardcore Samaras’ associates will probably say that communication is not that important, since what matters is real structural changes. Wrong. In times of crisis, people are disoriented. If you do not package your politics right, you are finished, especially in Greece, and particularly when you are a conservative leader running a coalition scheme supported by the socialists and the left.

From the moment the coalition is once again messing around with pensions, salaries and social benefits (namely horizontal measures) the pistol is cocked and the trigger is about to be pressed. Is people’s new disappointment enough to break a government? Probably not, but if the opposition manages to give meaningful words to social discontent, then breaking a link would be enough to unlock the administration and take it down; not noisily on the streets of Athens, but in the chambers of strategic politics.

The survival of the government depends on a really weak link held by PASOK leadership and this weak link is about to crack for a variety of reasons.

First of all, despite all the laws and measures passed in the past, most people consider the attack on household income a fresh piece of government policy. Being under the bankruptcy threat is no longer a strong argument; it was burned out during the Papandreou years.

The government’s vagueness about the new austerity measures continues the fear tactics, making things even worse. This alienates voters even further from the old political system, whose leftovers were used to form today’s government coalition. In simple terms, those who initiated fear and presented themselves as citizens’ protectors quickly failed on their promises and once more engaged fear as a tool to bail themselves out of the pressure.

When you need cash fast, is there any other alternative than cut spending from the source? Probably not, but why lie to the people? Was it the result of amateur political spinning or a failure of leadership to assess reality?

And this brings us to coalition’s inner politics. Old PASOK and Venizelos are in a down slope (sources say that a new formation is under way by key PASOK people) and Kouvelis is already experiencing an identity crisis and is in no position to play a role without the intermediary socialist link. This could crack the government in no time.

But still, a triggering event is required to make things roll that should be about the people (and not about partisan relations) and would put the coalition in a real unity test. In my view, this grassroots event is already scheduled in the political agenda for late August or early September and has nothing to do with troika’s wises.

It will be genuinely about the people and for the people.

This is the new draft bill for the relief of over-indebted households from loan obligations, tabled by SYRIZA to be discussed when the Parliament returns from the summer break.

Tsipras’ political argument is simple and involves hundreds of thousands of households that saw their budgets flattened by the crisis, due to unemployment or massive reduction of income. This policy was included in Antonis Samaras’ speeches during the pre-election period, but nothing is heard ever since.

The technical argument is that the banks are making up the losses from bad loans through their recapitalization from the Credit Stability Fund. At the same time, the banks continue to demand the repayment of the delayed installments, regardless of the fact that those loans have been classified as bad debts and are taken into account by the recapitalization.

In plain talk, those who will disagree with the bill would sound like asking Greek people to pay the banks twice for financial management failures of the past: first, via national borrowing for recapitalization, and second, from their own pockets for bad personal loans.

So, who is going to disagree with Tsipras’ proposal and on what grounds? In terms of political communication, this move is an absolute winner. It could rule the agenda and meddle beautifully with the new austerity measures the coalition government is about to announce; furthermore, it corners the coalition government politically, and challenges MPs (through a catalogue name vote) on an individual as well as collective level.

Conspiracy advocates could say that this is planned between the Premier and the main opposition. If this is not the case, New Democracy will have to react, PASOK and Democratic Left will have to take sides; MPs individually will have to do the same. This could prove to be a unique moment in Greek politics, gathering an across the board agreement, or the trigger in question, ending up being a win-win for the centre left.

It could also make Antonis Samaras the Prime Minister serving the shortest term in modern Greek history and turn Alexis Tsipras into the youngest one, ever.

Dr. Demetris Kamaras is the Editor of Alyunaniya.com

Analytically: “The Eurogroup has been informed that the Spanish authorities will present a formal request shortly and is willing to respond favourably to such a request. The financial assistance would be provided by the EFSF/ESM for recapitalisation of financial institutions. The loan will be scaled to provide an effective backstop covering for all possible capital requirements estimated by the diagnostic exercise which the Spanish authorities have commissioned to the external evaluators and the international auditors. The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to EUR 100 billion in total.

Following the formal request, an assessment should be provided by the Commission, in liaison with the ECB, EBA and the IMF, as well as a proposal for the necessary policy conditionality for the financial sector that shall accompany the assistance.

The Eurogroup considers that the Fund for Orderly Bank Restructuring (F.R.O.B.), acting as agent of the Spanish government, could receive the funds and channel them to the financial institutions concerned. The Spanish government will retain the full responsibility of the financial assistance and will sign the MoU.

The Eurogroup notes that Spain has already implemented significant fiscal and labour market reforms and measures to strengthen the capital base of the Spanish banks. The Eurogroup is confident that Spain will honour its commitments under the excessive deficit procedure and with regard to structural reforms, with a view to correcting macroeconomic imbalances in the framework of the European semester. Progress in these areas will be closely and regularly reviewed also in parallel with the financial assistance.

Beyond the determined implementation of these commitments, the Eurogroup considers that the policy conditionality of the financial assistance should be focused on specific reforms targeting the financial sector, including restructuring plans in line with EU state-aid rules and horizontal structural reforms of the domestic financial sector.

We invite the IMF to support the implementation and monitoring of the financial assistance with regular reporting.”

In a press release to the Athens stock exchange (ATHEX), the lender said that following the bond-swap and its effects on the banking sector it would be calling a meeting of its shareholders to cancel the merger decision, passed by its shareholders in November. An Alpha Bank official said the board meeting would take place on March 27, according to Reuters.

Shareholders of the two banks had approved the merger at twin meetings in November last year. The merger would have created Greece΄s largest bank and was widely seen as a initial step in an expected consolidation of the Greek banking sector.

But the debt swap deal between Greece and its private sector creditors, which was completed last week, agreed to write off more than half the face value of their Greek bond holdings caused much bigger losses to banks than expected when the merger was originally agreed. The deal will see about EUR 105 billion written off Greece’s total debt and was vital for the country to receive funds from a second bailout.