No government soon

As the tradition wants it the next German government will not be formed in a few days. It usually takes weeks and this will not change now. As things stand presently it is more plausible than not that Merkel will seek a government partnership with the SPD’s socialists to form a grand coalition administration as they did during Merkel’s first term in the Chancellery. The last single party government in Germany was in 1957 under Conrad Adenauer, the first post war Chancellor governing the country from 1949 until 1963 and it is most unlikely this to be repeated now.

In any case Germany’s stance will not change regarding the two most important Eurozone issues that stand unresolved for months, the Greek enigma and the bank resolutions. Both of them triggered intense electoral confrontations more so over the Greek affair. The other thorny discussion, namely the structure of the Single Resolution Mechanism (SRM) for failing banks, didn’t acquire the dimensions of a prime electoral theme. It was debated in more closed circles where Berlin reaffirmed its position for a decentralised SRM, which will not disseminate all over the Eurozone part of the liabilities to be left behind, after a major bank resolution is accomplished.

As for the Greek case, Germany has already accepted that this country will need a third aid package towards the mid of 2014, but this time it won’t be tens of billions. Incidentally also yesterday the auditors representing the troika of Greece’s lenders EU-ECB-IMF were in Athens meeting the Financial Minister Yiannis Stournaras. Reportedly they all agreed that Greece is bound to show this year a positive prime surplus albeit small in its fiscal accounts. They also accepted that the 2013 recession reading will be smaller than predicted.

At this point it must be reminded that on the condition Greece attains this year a fiscal surplus, its Eurozone partners and lenders have undertaken the obligation to cut down the country’s sovereign debt to sustainable levels. This issue was extensively debated during the pre-election period in Germany and it reached even the eight o’clock news bulletins. During this debate both Chancellor Merkel and her Finance Minister Schaeuble repelled the proposal of a straight haircut of the loans Greece owes to its Eurozone partners/lenders. To note here that the largest credits having been accorded to Athens came from Berlin. However both the two leading German politicians didn’t exclude the possibility of cutting down interest rates and extending pay off time, a proposal that amounts to a lesser overall burden for Greece but avoids a reduction of the principal.

All in all the triumphant Angela Merkel in her first comments on the electoral results yesterday night appeared very restricted, about the new government she is expected to present to Bundestag. She was careful not to exclude a possible grand coalition with the socialists of SPD. This prospect however doesn’t seem enough to change Germany’s positions on the two hot Eurozone issues, the Greek problem and the SRM. On the contrary Berlin would rather appear more unbending on its opinions.

Republished by permission from europeansting.com.

How did this happen?

During the past three or four years, over-indebtedness and the draconian programs applied to cut down government deficits, were quickly translated into less and less economic activity and consequently into quickly increasing unemployment in the weak Eurozone countries. Only in Spain unemployment was endemic even before the crisis years. Ireland is also an exception, but a positive one, steadily overcoming now all its problems. However in all those high unemployment countries over-indebtedness and the real economy woes which followed, came seven years after the advent of the euro.

Until the first signs of the still ongoing crisis in the weak Eurozone economies appeared in the spring of 2009, all of them could borrow at the same interest rates as Germany. During the first two months of that year Greece had borrowed the unbelievable amount of around €50 billion. The financial environment though changed drastically in the summer of 2009 and towards the end of that year Greece became insolvent followed by Portugal and Ireland. Spain and Italy haven’t really joined this club but live under the Damocles Sword of their debts.

In short the introduction of the common European currency and the imprudence of the major German and French banks, in evaluating the creditworthiness of all Eurozone members with the same rate, drove many of them to the unsustainable region of debt. But it was not only the governments that borrowed heavily. All the peripheral banks were also offered practically unlimited credit from the major Eurozone banks in Germany and France. As a matter of fact at that time “the road to hell was paved with good intentions” and everybody thought the party will never end.

The difficult questions

The existential questions for Eurozone then come freely. Was the advent of the euro the basic reason for the over-indebtedness of the weak countries? Can the weak Eurozone countries follow the example of Ireland and effectively confront their problems? Given that the first question has a rather historic character it seems that the second is the crucial one.

A free translation of the question is the following: Is it possible for Italy, Greece, Spain and Portugal and probably France to return to a sustainable growth path and start reducing unemployment? Of course all that, under the spell of a strong currency and the high cost or even unavailability of credit. Unfortunately the Eurozone has only made standard for everybody a disadvantage, the expensive euro. At the same time euro area financial markets are tragically fragmented. The cost and the availability of credit are drastically diverging between member states. Germany can borrow at almost zero interest rates, while at the same time Greece, Portugal, Cyprus and partially Ireland can’t borrow at all in the market, while Spain and Italy have to pay dearly for the refinancing of their debts.

This unsustainable arrangement has led to an also unsustainable situation in the labour market, with half of Eurozone being condemned to unseen before unemployment levels. And the next question comes naturally. Is the Eurozone itself sustainable, from an economic and political point of view given the situation in Greece, Italy, Spain, Portugal and now Cyprus? Can those economies start growing again in the foreseeable future, under the prevailing conditions?

This question is practically answered continuously but not yet conclusively in the streets of Athens, Rome, Madrid, Lisbon and Nicosia. The endurance of the political system in all those countries is tested every day. The stress on many occasions is so intense that an accident may happen. The reliance on the police forces is increasing all over the South. For how long can this continue? The option to leave the single currency zone is no more a taboo in the South. Hopefully the North has being informed about this.

As things stand now the disintegration of the Eurozone may come as an accident. Berlin has miscalculated many times in the last hundred years the reaction of the others. Is Germany once more being short-sighted? Unemployment is slowly but steadily feeding the political explosion and unfortunately the extinguishers are gradually been withdrawn. Bail-ins prevail.

From the europeansting.com. By permission.

“From Piraeus, the most important port in the Mediterranean, I want to send a message of optimism that we will succeed,” Samaras said, according to AMNA.

“The Greek people’s strength, the entrepreneurship of the Greek and, above all, the optimism and unity that exists today, have, I believe, always been the tools that gave us progress and prosperity and will give them to us once again,” he said, the state agency reports.

“Today, on the feast of the Epiphany, the wish that was given to us and the hope that we received from the Blessing of the Waters ritual instills in us once again optimism and strength that we will succeed,” the prime minister added.

The Prime Minister travels to Germany today to participate as a keynote speaker at the conference of German newspaper Die Welt. European Central Bank president Mario Draghi is to address the conference as well.

Tomorrow at noon, Samaras will meet with German Chancellor Angela Merkel, whilst earlier the Greek Prime Minister will have a private meeting with former Vice Chancellor of Germany, Hans-Dietrich Genscher.

Merkel’s spokesman Steffen Seibert said there would be an informal exchange of opinions during the meeting, according to Kathimerini newspaper.

“It is natural that we should take the opportunity to underline once again the progress that has been made in Greece in terms of structural reforms,” Seibert added.

Meanwhile, Finance Minister Yiannis Stournaras said Greece must maintain the trust of its partners, which it earned with great difficulty, on Sunday, warning that otherwise all the sacrifices made so far would be put into question.

Stournaras, speaking on MEGA television station, left no room for fiscal relaxation, and opined that if the government remains devoted to the adjustment programme of the Greek economy, the first signs of recovery will begin to appear in the second half of the current year.

“2013 will be a rough year, as we have EUR 9.2 billion in measures to implement. But we are on the right track.

He noted that the first positive messages from the execution of the budget appeared in the last months of 2012, which enables the government’s economic staff to harbor the optimistic forecast that the country’s primary deficit will end the year below the targeted 1.5 percent deficit to GDP ratio target, at 1.2-1.3 percent of GDP.

Stournaras was also optimistic on the execution of this year’s budget, noting that provided all the targets are surpassed, there will be a possibility for reasonable benefits in 2014. “If we do better on the 2013 targets – which is very likely – we will be able, in 2014, to channel 70% of the excess to social benefits, but targeted benefits to those who have genuine need”.

Attica police have banned all demonstrations in specific areas in downtown Athens today. Syntagma Square and Omonoia Square are not included in the ban. The police issued a statement that any public gatherings or marches would be banned between 9 a.m. and 10 p.m. today. It said the decision was being taken in the interests of public safety and the city’s ‘socioeconomic life,’ Kathimerini informs. More than 7,000 police officers are to be placed on duty, including riot police, snipers, navy seals, port officers, various speedboats and a helicopter.

Labour unions in the public and private sector GSEE and ADEDY have called a three-hour work stoppage and a rally in Athens to protest against the Merkel visit. SYRIZA has encouraged its supporters to take part in the protest and vent their dissatisfaction with the austerity measures being implemented in Greece.

At 1 pm a rally will take place in Syntagma Square by GSEE-ADEDY against “the ongoing anti-worker, anti-social and recessionary government policies and the troika.” Also, there will be a pan-Attica work stoppage from 12 pm to 3 pm in all public services. PAME will hold a protest rally against “the new barbaric measures and the blackmail by the EU, the government and the capital” in Omonoia Square at 1 pm. Municipal workers (POE-OTA) announced its participation in the pan-Attica work stoppage from 12 pm until the end of shift, and in the rally in Syntagma Square. Independent Greeks party has announced a protest rally outside the German embassy at 6 pm.

According to protothema.gr, Prime Minister Antonis Samaras has a difficult ten days ahead of him where he will have try and catch up to the deadlines for the release of the tranche of EUR 31.5 billion in November.

Further to the symbolism that the German leadership supports the Greek effort, the government expects one statement that will act as stabilizer within the country but mainly abroad and in the international markets.

The government believes that a successful visit from Merkel will prepare the climate for Samaras to put the issue of the loan installment disbursement and the question of extension at the summit on October 18 in order to finalize it in an urgent meeting of the Eurogroup and implement it within November.

Merkel said the aid payment was ”urgently needed”. She added: “The troika report will come when it is ready. Being thorough is more important than being quick… We are working hard on this, but we must resolve all the problems,” she added.

Samaras began the joint press statement, saying “Europe is a common house for all of us…We will enact the measures which we should have enacted long ago. I told Chancellor Merkel that the Greek people are bleeding this moment, but that I am sticking to the plan. We don’t ask for favors. Merkel showed respect for the sacrifices we have made, and says that they must not go to waste. Greece has turned a page, and that her image in the international press has improved significantly.”

In comments made before the press, President Karolos Papoulias said to Chancellor Merkel: “We have almost exhausted our endurance. We must think of measures that will bring hope, particularly growth measures. We must fight youth unemployment, and underemployment of women. I don’t have anything else to say, we will discuss it in the future, Ms Prime Minister (as he called her). I am quite pleased that you visited.”

Regarding the issue of extending the fiscal adjustment, sources said Angela Merkel said: “we can talk about it, but everything depends on the troika report.”

As regards the disbursement of the next tranche, government sources said the German Chancellor “ruled out the possibility to be given before the EU Summit”, and added that she hoped that the Summit will instruct an extraordinary Eurogroup to release the money.

At the same time, Greek police fired tear gas and stun grenades when protesters tried to break through a barrier to reach the cordoned-off area where Merkel and Samaras were meeting. Some demonstrators pelted police with rocks, bottles and sticks, Kathimerini writes.

Four people dressed in World War Two-era German military uniforms and riding on a small jeep, waved black-white-and-red swastika flags and stuck their hands out in the Hitler salute.

Banners read ”Merkel out, Greece is not your colony” and ”This is not a European Union, this is slavery.”

Some 6,000 police officers were deployed, including anti-terrorist units and rooftop snipers, to provide security during the six-hour visit. German sites in the Greek capital, including the embassy and Goethe Institute, were under special protection.

German Chancellor Angela Merkel will arrive in Athens Tuesday at 12.00. She will meet with President Karolos Papoulias for about half an hour and then visit Maximos Mansion (2 p.m.) for a meeting with Prime Minister Antonis Samaras. A joint news conference will follow.

According to Kathimerini, some 7,000 police officers are going to be placed on duty for the visit. Police officers will be brought in from outside Athens as the government steps up security measures for the chancellor’s first trip to Greece since 2007. Greek media reported that the German embassy and the Goethe Institute will receive additional protection.

At the same time, Greece’s two largest unions, GSEE and ADEDY, have called for a demonstration in front of the Finance Ministry in central Athens at 6 p.m. on Monday. The unions said they want to express their opposition to the austerity measures being negotiated by the government and the troika. The unions have also called a three-hour work stoppage from noon on Tuesday to coincide with the visit of Chancellor Angela Merkel.

Meanwhile, SYRIZA has encouraged its supporters to take part in the protest and vent their dissatisfaction with the austerity measures being implemented in Greece. Independent Greeks party has also called for a separate rally outside the German embassy in Athens (a human chain to be formed around the building as a symbolic protest). Members of the Communist Party-affiliated union, PAME, will hold a separate demonstration at 1 p.m., at Omonia Square.

Relations between Greece and Europe’s Germany have been strained, with Merkel blamed in Athens for imposing austerity at all costs and the Greeks criticised in Berlin for not fulfilling their obligations.

On Sunday, government and opposition parties described the chancellor’s visit to Greece as a chance to show solidarity and recognition of its efforts.

Merkel’s trip to Athens is “an act of recognition for the Greek government which is under great pressure with its reform policy,” Foreign Minister Guido Westerwelle said.

However, German Finance Minister Wolfgang Schaeuble insisted on Sunday that Merkel’s visit to Athens did not mean that the disbursement of Greece’s next bailout tranche was a given.

“Greece must fulfill its obligations for the next tranche to be paid,” said Schaeuble.

“The Secretary-General hopes that, in advance of the forthcoming technical and political meetings, the parties strengthen their resolve to quickly achieve a negotiated solution that restores international confidence in an Iranian nuclear programme that could be deemed exclusively peaceful,” stated a note issued by Mr. Ban’s spokesperson.

“In this connection, the Secretary-General appeals to the parties to resume their diplomatic engagement with renewed intensity and with the utmost flexibility,” the spokesperson added.

According to media reports, the talks in the Russian capital on Monday and Tuesday failed to make any progress. A technical discussion is scheduled for 3 July in Istanbul, Turkey.

Iran has repeatedly stated that its nuclear programme is for the peaceful purpose of providing energy, but many countries contend it is seeking to develop nuclear weapons.

The issue has been of international concern since the discovery in 2003 that Iran had concealed its nuclear activities for 18 years in breach of its obligations under the Nuclear Non-Proliferation Treaty.

In 2011, the Security Council imposed a fourth round of sanctions against Iran, citing the proliferation risks of its nuclear programme and its continued failure to cooperate with the UN International Atomic Energy Agency (IAEA).

Google revealed an alarming situation, in its Transparency report. According to the report, it received more than 1,000 requests from governments to take down content from its search results and YouTube during the last six months of 2011.

These requests were intended at having some 12,000 items overall removed, about a quarter more than during the first half of last year.

“It’s alarming not only because free expression is at risk, but because some of these requests come from countries you might not suspect – Western democracies not typically associated with censorship,” Dorothy Chou, senior policy analyst said.

Google received 461 court orders for the removal of 6,989 items, and it went on to remove 68% of those items. The company also received 546 informal requests and went on to pull content related to 46% of those requests.

According to the Guardian, Google also receives a lot of requests to remove content based on copyright infringement, which it complies with about 97% of the time.

According to the report The United States government leads the world in content removal requests to Google, as measured by specific items, according to the company’s latest transparency data report for the second half of 2011.

The data, which was released Monday, shows that American authorities have requested more than twice as many as the next country, Germany. Google says it complied with 40 percent of the American requests. The number of content removal requests received by the US has increased by 103% compared to the previous reporting period.

Google says it has got no choice but to submit to these requests because certain types of political speech are against law and deemed derogatory.

According the European Union’s Executive Commission announcements in January, clear guidelines will given on handling such requests, outlining under which circumstances it would be legal to have content removed from the Web and when it would curb free speech and fundamental rights, Arabian Gazette reported.

According to, Dimitris Tsiodras, during a telephone conversation between Papoulias and Merkel, the latter “conveyed some thoughts” about a possible referendum in which she emphasized Europe’s determination to help Greece emerge from the crisis.

Tsiodras said a referendum was “obviously” out of the question, as it falls outside the jurisdiction of Greece’s newly appointed caretaker government, Kathimerini reported.

The rise of parties opposing austerity commitments, has raised fears that if anti-bailout parties prevail the country could be forced to leave the euro.ND leader Antonis Samaras commented, “Greece doesn’t need a referendum to prove its choice in favour of the euro, a choice that it’s defending with bloody sacrifices,” he said. Radical Left Coalition leader Alexis Tsipras accused main parties PASOK  and ND “for giving Merkel the right” to treat Greece ”as a protectorate”. PASOK leader Evangelos Venizelos said, “referendums fall exclusively within the competencies of the government and the Greek Parliament and not the EU or other member states.”

Fitch ratings agency on Thursday downgraded Greece to CCC, the lowest possible grade for a country that is not in default, warning of Greek exit from the eurozone, according to Reuters.

On Friday, Fitch also downgraded the credit ratings of five Greek banks:  the National Bank of Greece, Piraeus,Agricultural Bank of Greece, Eurobank, and Alpha.