Greece updates for September 23 , 2013 - More Merkel , more strikes , more foreclosures , more pain , more Troika........

Greece needing to meet bailout plans foreclosures By Marcus Bensasson Panagiota Kalapotharakou says she’s never seen such distress in her 25 years as a lawyer at the consumer-advocacy organization she helped to set up in Athens. “If you look outside, the people are in despair,” Kalapotharakou said of the line of visitors outside her office in the rundown neighborhood of Exarchia, where most of her time is spent helping people with debts they can’t pay from Greece’s boom years. “They can’t survive. What they can pay is much smaller than what the banks are asking for.” While the country’s lenders are on firmer footing after getting capital from euro-area and International Monetary Fund bailout funds, they still need to reduce the non-performing loans that have tripled to 29 percent of the total in three years and threaten their new-found solvency. One obstacle is a five-year ban on foreclosures that prevented thousands of Greeks from losing their homes after the economy went into free-fall. The government is now considering a plan to ease the restrictions by the end of this year to satisfy its creditors’ demands. Finance Minister Yannis Stournaras said last month that banks face serious problems if they’re not allowed to repossess and auction homes of people who don’t pay their mortgages. “At the moment, even people who can afford to pay the mortgages do not,” National Bank of Greece SA (ETE) Deputy Chief Executive Petros Christodoulou said in a Bloomberg Television interview on Sept. 6. “When the new law is passed and officially foreclosures are allowed over a certain benchmark, we will see that the credit ethos will return.” Lifting the restriction threatens to intensify the strain on Greek society, which is buckling under a sixth year of recession and unemployment of almost 28 percent, the highest in the 28-member European Union and more than four times the rate in Germany. A regular feature of Greece’s economic crisis has been knife-edge austerity votes in parliament, with protests turning violent outside. In Spain, which has the second-highest jobless rate after its own property crash, foreclosures have been linked to protests and even suicides. In both countries, governments have tried to balance concerns over their neediest citizens with satisfying the terms of bailouts from international creditors. Mission heads of Greece’s troika of creditors -- the European Commission, European Central Bank and IMF -- are back in Athens today to review the country’s progress in satisfying conditions for the release of the latest installment of its bailout loans. Previous reviews have often delayed payments because the inspectors have found the government’s efforts to overhaul the economy were lagging behind targets. One item on the agenda is a review of lenders’ non-performing loans and fresh stress tests by the end of the year of banks’ capital adequacy to see if they can withstand adverse macro-economic scenarios. The troika has criticized the moratorium for hampering the banks’ ability to deal with troubled assets. “All the banks are making operating losses, so anything that helps them return to profitability is good,” said Maria Kanellopoulou, an analyst at Euroxx Securities in Athens. “The stress tests will focus on the methodology the banks use to define and manage NPLs.” This, she said, is one of the biggest issues affecting banking earnings. Investors have shown more confidence in Greek banks. The Athex Exchange Banks Index of the five publicly traded lenders has climbed about 32 percent since July 4, outpacing the 20 percent gain by the benchmark Athens Stock Exchange Index and the 12 advance for European finance stocks. Greece initially introduced a blanket ban on foreclosing all residences with mortgage debt of up to 200,000 euros in 2008, widening the ban two years later for some primary residences worth more. The rate of delinquencies on mortgages was 19.1 percent in 2012, an increase from 4.9 percent six years earlier, according to the IMF. Prime Minister Antonis Samaras said on Aug. 22 that the government will completely protect the main residences of poor Greeks affected by the crisis as it tries to put in place a system that prevents abuses. His assurances came five days after Stournaras’s comments, published in Greek weekly paper Real News, prompted opposition from lawmakers in parties within his coalition, which has a majority of just five in Greece’s 300-seat parliament. “Anxiety has been created over this issue for no reason,” Deputy Development Minister Thanasis Skordas said in an interview. “No one sets out to create new problems, nor are we too insensitive to understand the difficulties people face today. On the contrary, our concern is how to not allow such problems to undermine social cohesion.” Kalapotharakou, 55, is concerned that it may not be possible to introduce safeguards that will protect Greeks who are unable to repay their debts. Ekpizo, her organization, is pushing for the ban to be extended for three years and for improved mechanisms to help over-indebted Greeks restructure their debts out of court. Ekpizo’s offices are on the second floor of an apartment building on a graffiti-filled street next to Athens Polytechnic, the scene of an uprising against Greece’s military dictatorship 40 years ago. In 2008, the city erupted into rioting following the shooting nearby of 15-year-old Alexis Grigoropoulos by a police officer. The area has since been the scene of frequent clashes between police and anti-austerity protestors. The organization, created in 1988, once organized seminars on issues such as environmental awareness. The crisis means Kalapotharakou now spends about 90 percent of her time discussing household debt. Home loans in Greece expanded to 81.1 billion euros at the mortgage market’s peak in August 2010, more than seven times the amount at the start of 2001, when Greece joined the single European currency, as first-time buyers took advantage of easier financing and interest-rate reductions. Now that credit has tightened, Kalapotharakou says the banks would gain little from seizing homes from borrowers, which would fetch a fraction of the outstanding debt in an auction. Meanwhile, those losing their properties will still owe the money that’s not covered by the sale proceeds, she says. “Not all circumstances are right for liberalizing markets,” she said. “If you free up houses, you will see a collapse in the housing market. Who’s going to buy?” Greek home prices dropped 11.6 percent in the second quarter from a year earlier, according to Bank of Greece (TELL) data. Values have dropped 31 percent since peaking in 2008, with Greece’s two biggest cities, Athens and Thessoloniki, both faring worse than the national average. Fitch Ratings increased its forecast for the peak-to-trough decline in average house prices to 42 percent from 33 percent in July. Easing the ban on foreclosures would help increase recoveries for mortgages packaged into bonds, according to an Aug. 30 report. Recovery rates have dropped to as low as 1 percent from 13 percent in 2010 and arrears have increased significantly since the ban, suggesting “moral hazard concerns are legitimate.” Greece’s economic output has shrunk by more than a fifth since the start of its recession, which has been amplified by successive rounds of spending cuts and tax increases. They were instituted to tackle a fiscal deficit that had spiraled to 15.6 percent of GDP in 2009, triggering Europe’s debt crisis. Against this economic backdrop and facing political opposition, the government might yet extend the ban if the troika doesn’t push too hard on the issue, according to Lefteris Farmakis, an analyst at Nomura International in London. “You have a political problem here, and if they insist on this it’s not going to be easy,” he said. “Maybe there are some benefits for the housing market and the economy overall, but clearly this comes at a consequence in the real world.” [Bloomberg]

ekathimerini.com , Monday September 23, 2013 (12:15)  Merkel vows to keep up reform pressure on Greece after historic election win Angela Merkel has said she will keep up the pressure on Greece to carry out reforms after scoring a historic victory in the German federal elections on Sunday. “We should not stop exercising pressure for the agreed reforms to be carried out,” said Merkel after a major election win for her CDU party and its Bavarian partner, the CSU. Merkel also insisted that she told the truth about Greece’s predicament and the possible need for a third bailout, which was brought up during the election campaign by Finance Minister Wolfgang Schaeuble. “This is not a new issue and we raised it repeatedly during the election campaign,” said Merkel, adding that Schaeuble had first raised the matter before a parliamentary committee in November 2012. Merkel won an overwhelming endorsement from German voters, putting the country’s first female chancellor on course for the biggest election tally since Helmut Kohl’s post-reunification victory of 1990. Merkel’s Christian Democratic bloc took 41.5 percent to 25.7 percent for the Social Democrats of Peer Steinbrueck in yesterday’s election, according to results from all 299 districts. That leaves her short of a majority and needing a coalition partner to govern Europe’s biggest economy. “This is a super result,” Merkel, who is now set to become the fourth chancellor since the war to win a third term, told supporters at her party’s headquarters in Berlin. “To the voters, I promise that we will handle it responsibly and with care. We will do everything we can in the next four years to ensure that they’re once again successful years for Germany.” After sweeping the election on the back of an unemployment rate near the lowest in two decades and her handling of the euro-area crisis, Merkel, 59, must now look for a governing ally after the Free Democrats, crashed out of the lower house of parliament. Party leaders are due to meet today to discuss coalition talks. During the campaign, Merkel said that insisting on reforms in euro countries that received aid was the only way to raise Europe’s competitiveness, citing the fall in German joblessness from a post-World War II high of 12.1 percent in 2005 following a labor-market overhaul. The German unemployment rate is now 6.8 percent compared to 12.1 in the 17-nation euro region. German 10-year bond yields are 1.94 percent, while comparable U.K. gilts yield 2.92 percent and U.S. debt 2.73 percent. Merkel’s victory gives her another four years at the helm. If she serves the whole term as she said she intends, she will have spent 12 years as German leader, more than the 11 1/2 years managed by British Prime Minister Margaret Thatcher. To get there, she must first find a governing partner. Merkel’s choice is limited to a re-run of her first-term “grand coalition” with her traditional SPD rivals or the first-ever national alliance with the Greens. Neither party rushed to endorse a coalition. Steinbrueck, her former finance minister, reiterated that he won’t serve under the chancellor, saying “the ball is in Mrs. Merkel’s court.” The FDP took 4.8 percent, below the 5 percent hurdle needed to win seats in the Bundestag for the first time since the first elections of the postwar period in 1949. The Greens, with which the SPD governed from 1998 to 2005, took 8.4 percent, and the anti-capitalist Left Party got 8.6 percent. The anti-euro Alternative for Germany had 4.7 percent. Merkel’s score compared to Kohl’s 43.8 percent in December 1990, two months after reunification of East and West Germany. She’s now set to follow Adenauer, Kohl and Helmut Schmidt as a three-term leader. While Merkel said that “it’s too early to say precisely how we proceed” with coalition building, she will probably be forced into a coalition with her Social Democratic or Green party rivals to ensure a stable government. Coalitions are the rule in the German political system and negotiations usually last from four to six weeks. “It’s up to her to work for a majority,” said Steinbrueck. Not many in the SPD are pushing for a repeat of the grand coalition, said Frank-Walter Steinmeier, the former foreign minister who now leads his party’s caucus in the Bundestag. He said he’d rather stay in his current role. As a junior partner, the party would effectively be putting its fate in her hands. Their partnerhip with Merkel ended with the SPD’s worst postwar result, 23 percent, a tally many in the party blame on the grand coalition and an inability to win credit for policies in a Merkel government. Merkel was first elected in 2005, yet it was the euro-area debt crisis spreading from Greece from 2009 that dominated her second term and may dictate her political legacy. As Germany became the biggest contributor to 496 billion euros of rescue aid, with the German chancellor insisting in return on reforms to make Europe more competitive, the continent was divided into a rich north and weaker south. That made Merkel resented in countries such as Greece and Portugal; in Germany it created an opening for the AfD, which was founded earlier this year, to vie for its first parliamentary seats. Market reaction was muted as investors were reluctant to put on big positions before preliminary euro zone manufacturing data due at 0758 GMT. Investors were keen to see the shape of the new government in euro zone paymaster Germany. Merkel won a landslide personal victory on Sunday although her conservatives appeared just short of the votes needed to rule on their own. Merkel's party may have to convince leftist rivals to join a coalition after their current allies, the Free Democrats (FDP) suffered a humiliating exit from parliament. "It's somewhat positive for peripheral markets which have done quite well in recent days but we don't expect big moves as this was expected,» said KBC strategist Piet Lammens. "It might start to get things moving again in Europe... Maybe we can get some breakthroughs on the banking union or another aid package for Greece." [Kathimerini English Edition & agencies] ekathimerini.com , Monday September 23, 2013 (11:34)  Greece, other bailed out countries get Merkel for another four years James G. Neuger Southern Europeans are facing four more years of Angela Merkel whether they like it or not. Majorities of 82 percent in Spain, 65 percent in Portugal and 58 percent in Italy repudiate the German leader’s handling of the euro area’s debt crisis, blaming her for drastic cuts in social services, recession and record unemployment, according to a German Marshall Fund poll released last week. The majority that matters, in Germany, decided otherwise yesterday, putting Merkel back in charge and saluting policies that have kept the currency union intact while at times veering close to letting it unravel. Any concessions now are likely to come on the margins: a little more money for Greece here, a little less austerity there, without altering her determination at most to drip-feed aid to countries that embrace tight budgets, wage restraint and export-oriented industry. “Crisis management is very much a continuation of the status quo,” said Mujtaba Rahman, a former European Commission official who is now director of European analysis at the Eurasia Group in New York. “The core German principles of legal certainty and conditionality will remain in place. Decision- making will still be incremental.” Merkel, 59, will start her third term with Europe perched between crisis and recovery. The 17-nation euro zone is emerging from a record 18-month recession and Ireland is poised to become the first of five aid-dependent countries to be weaned off outside help. While Ireland’s 10-year bonds now yield about 2 percentage points more than German debt, making it the first aid recipient to fall in line with euro interest-rate targets, progress has been spottier elsewhere. Greece, with a yield premium of about 8 percentage points, needs further relief; Portugal, with a 5.1 percentage-point premium, might also need a top-up. Germany’s 28 percent weight in the $12.7 trillion euro-area economy, top credit rating and pre-eminent role in the creation of the euro enabled it to dominate the crisis response. German views may gain more clout, now that two crisis-management allies -- the Netherlands and Finland -- face fiscal and economic problems of their own. “We cannot prematurely drop the pressure to reform,” Merkel said on German television last night. Defending her habit of feeling her way into problem-solving instead of laying out grand visions, she said that “once I know that something will cost something, I’ll say so.” Merkel wouldn’t speculate on the shape of her next government, most likely a rerun of her 2005-2009 coalition with the Social Democrats, her party’s traditional rivals. The Christian Democratic bloc won 311 seats in the Bundestag, five short of an absolute majority, forcing Merkel to share power with the Social Democrats or Greens. “The German SPD is much more in sync with other countries, also in the south,” said Laurens Jan Brinkhorst, a former Dutch deputy prime minister who now teaches at the University of Leiden. Defections from her own ranks have already compelled her to enlist the Social Democrats as de facto crisis-management partners. On at least four occasions, including this year’s aid package for Cyprus, Merkel relied on opposition votes to pass save-the-euro measures in the Bundestag. “She has been able very successfully to occupy the middle ground,” said Kemal Dervis, a former Turkish economics minister who is now a vice president of the Brookings Institution in Washington. Merkel the consensus-seeker ruled out trying to form a minority government. Merkel and her chief lieutenants meet this morning to consider which party to engage in coalition talks, which will run in parallel with euro-level negotiations over bailout fixes, next year’s national budgets and backstops for troubled banks. Merkel-SPD talks lasting as long as the 65 days of 2005 would give time for markets to be unsettled by risks including political tumult in Italy or German high-court objections to the European Central Bank’s bond-buying program, the key element in over a year of market calm. One school of thought holds that Merkel, in her third term, will turn to legacy-building by dispensing aid more liberally and shouldering more of the costs of forging a closer euro union. Merkel is animated by “a sense of destiny in terms of what her third term can leave behind in the legacy of the EU,” said Jackson Janes, head of the American Institute for Contemporary German Studies at Johns Hopkins University in Washington. “That’s where she’s going to put her marbles.” So far, destiny’s verdict is mixed. Merkel, who grew up on the wrong side of the Cold War east-west divide, is grappling with a north-south one that was at least temporarily deepened by her austerity-first prescriptions. The 5.3 percent unemployment rate in Germany that smoothed her re-election contrasts with a euro-zone average of 12.1 percent. Joblessness is 16.5 percent in Portugal, 26.3 percent in Spain and 27.6 percent in Greece, where the debt crisis broke out just as Merkel started her second term in late 2009. As Germans were counting votes yesterday, top officials from the troika of European Commission, ECB and International Monetary Fund were heading to Greece to map out the next steps in the rescue package for the country that drove the euro zone to the brink of breakup. Greece is drawing on 240 billion euros ($324 billion) of pledged aid and needs more, either in the form of fresh loans, a writedown of existing ones, or both. Prime Minister Antonis Samaras said he will hold creditors to a commitment to “consider further measures and assistance” once Greece posts a surplus on its operating budget. As that date draws closer, the Greek and German sides are replaying familiar arguments over conditionality. In Brussels last week, Samaras said Greece doesn’t need to make further budget cuts. Merkel’s acolytes accused Greece of a something- for-nothing mentality. “There would definitely be no new program without conditions,” Michael Meister, deputy parliamentary chairman of Merkel’s party in the outgoing government, said in a pre- election interview. Merkel has ruled out a shift to joint debt liability, saying that would take Europe backward by providing artificially cheap financing to countries that don’t deserve it. She favors keeping governments in charge of euro policies and limiting the powers of the Brussels-based commission, especially on bank oversight. One country appealing for a more lenient German stance is Cyprus, which was forced by creditors to raze its debt-laden banking system in exchange for a 10 billion-euro bailout in March. The Cypriot economy will shrink 8.7 percent this year, the commission forecasts. “Germans too realize through the policy of more Europe, more unification, that there is a need for measures not just of austerity, or harsh austerity, but measures to boost growth,” Cypriot President Nicos Anastasiades said in a Sept. 17 interview in Nicosia. [Bloomberg] ekathimerini.com , Monday September 23, 2013 (11:47)  New wave of strikes in Greece coincides with troika arrival for latest review The arrival of the troika in Greece for the latest review of the country’s adjustment program is being met a new wave of strikes against the civil service mobility scheme, which is one of the milestones Athens has to reach to qualify for October’s bailout tranche of 1 billion euros. High school teachers began a new 48-hour strike on Monday after having walked off the job the previous week. Administrative staff at universities, some 1,700 of whom are due to be moved to other positions, also went on strike. The civil servants’ union, ADEDY, has called for a 48-hour strike on Tuesday and Wednesday. ADEDY said it was in talks with private sector union GSEE about making Tuesday’s protest a general strike. Regardless of whether GSEE agrees, a protest has been planned for Tuesday. It is due to begin at Klafthmonos Square in central Athens at 10.30 a.m. ekathimerini.com , Monday September 23, 2013 (14:47)   Troika to ask for spending cuts to offset property tax lightening By Prokopis Hatzinikolaou The representatives of Greece’s international creditors – known as the troika – are asking for measures on the expenditure front in order to accept the revised plan by the Finance Ministry for the taxation of properties. The ministry is proposing the reduction of taxes to be imposed on property from 2014 from 4.15 billion to 3.5 billion euros, with the troika said to be ready to discuss that if the government can provide details of a 650-million-euro reduction in spending. The latest plan includes interventions in the rates of the new Single Property Tax for plots within town planning, and a reduction in the rates for farm buildings and for supplementary spaces in homes such as storage rooms or garages, so that they are not taxed at the same rate as actual living areas. The original plan was for 20 tax brackets for plots inside town-planning zones ranging from 0.40 euros per square meter to 4 euros/sq.m., but these rates are about to be reduced according to the revised plan. Furthermore, the ministry is proposing a 20 percent tax discount (using a 0.8 percent rate instead of 1 percent) for buildings aged 50 years or over, so as to reduce the burden on the owners of old houses. Everything will depend on the talks with the heads of the troika, which started on Sunday. The negotiations on the new tax will focus on the final rates for the tax that will replace the special tax paid via electricity bills for the last time this year as well as the FAP property tax. The Finance Ministry will attempt to convince the country’s creditors that 81.5 percent of taxes owed will be collected, against the 67 percent that the troika has anticipated in its reports. Should the troika accept this figure, the total amount in tax to be imposed will go down to 3.5 billion euros, with the intention of collecting at least 2.8 billion euros. However the troika will still ask for ready proposals concerning measures that will reduce public spending by 650 million euros in case the ministry’s plan does not prove successful. ekathimerini.com , Sunday September 22, 2013 (20:58)  Cash-starved firms to follow Viohalco’s exit By Anestis Dokas Time is running out for many Greek industries as they have exhausted their cash reserves, with many likely to follow Viohalco’s example and leave Greece in a bid to gain access to credit abroad. Most firms in sectors such as food, textiles, steel, aluminum and construction are at breaking point, with their cash flow virtually at zero while banks appear unable to provide credit. Corporate officials are even speaking of stopping payments to suppliers, social security funds and employees if the same situation persists. Under the circumstances, few were surprised by Viohalco’s decision to depart, with the business world saying it won’t be the last. Certain companies are said to have prepared contingency plans that even include the transfer of their production units abroad, too. One entrepreneur who is trying to retain a minimum level of liquidity for his company told Kathimerini that “even all four systemic banks combined cannot afford a major refinancing of loans starting from 300 million euros upward.” ekathimerini.com , Sunday September 22, 2013 (20:50)