Update: Greece after the referendum

Reading Time:

EU parliament

  • Guy Verhofstadt plenary speech on Greece with Alexis Tsipras 8-7-2015, link
  • Alexis Tsipras reply to Guy Verhofstadt plenary speech on Greece, link

Tusk on the shared responsibility

Plans for the week

  • European leaders have given Greece until Sunday to reach an agreement to save its economy from a meltdown.
  • Greece’s finance minister said that the country would submit a proposal by Thursday that lays out “a comprehensive and specific reform agenda.”

Source: NYT

Greece’s creditors have prepared a blueprint to remove the indebted nation from the the 19-nation euro, an unprecedented move after failing for five months to agree on an aid bailout.
“The commission is prepared for everything,” European Commission President Jean-Claude Juncker said after a meeting of euro-area leaders in Brussels. “We have a Grexit scenario, prepared in detail.”

Source: Rebecca Christie / Bloomberg

Greek Prime Minister Alexis Tsipras said today he was confident of meeting an end-of-the-week deadline set by eurozone leaders to reach a bailout deal or risk leaving the euro."I am confident that in the next two or three days we will be able to meet the obligations in the best interests of Greece and also the eurozone," Tsipras said in a speech to the European Parliament in Strasbourg. Greeted by a mixture of boos and cheers from European MPs, the Greek premier added: "Our proposals for financing our obligations and restructuring our debt will not burden European taxpayers."

Source: AFP

Humanitarian aid now on the table

European leaders said they’re now considering humanitarian aid for Greece as a financial bailout moves further out of reach.

All 28 European Union leaders have been summoned to Brussels for a Sunday summit that will consider whether to use the bloc’s budget to help Greeks hardest hit by the crisis in the economy. Euro-area leaders also will meet in case a last- minute rescue comes together.

“We need to have humanitarian aid whatever happens,” EU Economic Affairs Commissioner Pierre Moscovici said in an interview in Paris on Wednesday. “The Greeks didn’t turn their back to the euro zone. We must not turn our back to the Greeks.”

Source: Rebecca Christie / Bloomberg

Waiting is damaging the economy

There is a lot of political merit in buying some additional time. But this good politics is bad economics.

Every day that goes by intensifies the Greek economy’s economic and financial implosion. With the banks shut for more than a week now, economic activity is grinding to a halt. Tax revenues are collapsing. Tourist trips are being cancelled. Unpaid government, corporate and household bills are mounting. ATMs are running out of cash. Pensions and salaries are paid only partly, if at all. Whatever capital is still mobile is looking to flee the country. And already alarming unemployment and poverty are on the rise.

The deeper the economy sinks, the larger the reform and financing requirements to restore its viability. Moreover, with European leaders having failed to provide bridge financing, there are legitimate questions as to whether, by Sunday, the economy will simply be too damaged to allow for its rehabilitation within the eurozone (and this is regardless of the willingness of the Greek government and its European creditors to keep the country in the single currency).

Source: Mohamed El-Erian

Narratives of the Greek crisis

Before the vote Official International Monetary Fund FAQs German Ministry of Finance FAQs A Preliminary Draft Debt Sustainability Analysis, IMF, June 26, 2015 Prime Minister Tsipras’...

Following the price correction of the Chinese stock market

The Politics of China's Stock Market collapse (Washington Post) "China bans stock sales by major shareholders for 6 months" (Bloomberg) The Problem With China’...