Friday, May 16, 2014

Greece updates May 16 , 2014 --Poul Thomsen from International Monetary Fund, Jorg Asmussen from the European Central Bank, Marco Buti and Thomas Wieser: all four were working “clandestinely” for months preparing for a collapse of Greece’s banks. Their secret blueprint, known as “Plan Z”, was a detailed script of how to reconstruct Greece’s economic and financial infrastructure if it were to leave the euro. From the Financial Times series and the excellent work of Peter Spiegel...............Court rules “mobility scheme” unconstitutional; FinMin has to hire anew 397 fired cleaners ....... Greek court rules: Teachers’ and Transport workers’ strikes put public health at risk ....... Thursday and Friday see PIIGS deep steepen losses - Greek retroactive tax on foreign holders of greek debt between 2012 and 2013 concerns and political issues .....

Keep Talking Greece ....

Court rules “mobility scheme” unconstitutional; FinMin has to hire anew 397 fired cleaners

Posted by  in Society
First Instance Court in Athens ruled that the Finance Ministry has to hire anew the 397 cleaners it had laid-off several months ago. According to the court, the finance ministry decision to sent home 397 cleaners in the context of ‘mobility scheme’ was illegal and unconstitutional as it occurred without previous evaluation of their work.
The “mobility scheme” sends home civil workers with 75% of their salary for a period of eight months. Then the personnel is fired.
Cleaners have been protesting outside the Finance Ministry for weeks, whereas clashes with riot police could not have been avoided.
cleaning ladies police
397 cleaners at the Finance Ministry had appealed against the decision that had affected a total of 465 people.
While the court ordered the new hiring of the personnel working for 500-600 euro per month, it is not clear yet whether the court order is provisionally enforceable.
The cleaners’ lawyer Yiannis Karouzos described the court ruling as a “landmark decision” as it puts in question the “mobility scheme” that proves to be absolutely unconstitutional.
Under Troika-pressure to lay-off more than 20,000 civil workers in two years, the Greek government had decided the easy solution: the mobility scheme that made people jobless over night.
Ι suppose other sectors of civil workers like the “school guards” have gone to courts for being on “mobility scheme” over night.

FT: the secret “Plan Z” for Greece’s euro exit

Posted by  in Economy
Poul Thomsen from International Monetary Fund, Jorg Asmussen from the European Central Bank, Marco Buti and Thomas Wieser: all four were working “clandestinely” for months preparing for a collapse of Greece’s banks. Their secret blueprint, known as “Plan Z”, was a detailed script of how to reconstruct Greece’s economic and financial infrastructure if it were to leave the euro. From the Financial Times series and the excellent work of Peter Spiegel.
The Eurozone crisis, Part 2: Grexit
Inside Europe’s Plan Z:  How the euro was saved
In the second instalment of a series on the year that changed Europe, Peter Spiegel reveals how a secret strategy was developed to contain the firestorm from a Greek exit.
Every working day since the crisis struck, George Provo­poulos, the silver-haired governor of Greece’s central bank, summoned a small “emergency team” of aides to his offices at 6pm to review the health of the nation’s banks. What he was told on June 15 2012 was enough to make the courtly central banker blanch.
It was the Friday before a parliamentary election – the second national vote in as many months – and the country appeared to be edging towards panic. On that day, Greeks withdrew more than €3bn from their bank accounts, or about 1.5 per cent of the country’s entire economic output. The Bank of Greece had watched people moving money from their banks to their mattresses for nearly three years, but never on such a scale.

“In a matter of a few days, a full-blown banking crisis could have erupted,” Mr Provopoulos said in an interview. At that rate, Greece would run out of bank notes in a day or two.

Unbeknown to almost the entire Greek political establishment, however, a small group of EU and International Monetary Fund officials had been working clandestinely for months preparing for a collapse of Greece’s banks. Their secret blueprint, known as “Plan Z”, was a detailed script of how to reconstruct Greece’s economic and financial infrastructure if it were to leave the euro.

The plan was drawn up by about two dozen officials in small teams at the European Commission in Brussels, the European Central Bank in Frankfurt and the IMF in Washington. Officials who worked on the previously undisclosed plan insisted it was not a road map to force Greece out of the euro – quite the opposite. “Grexit”, they feared, would wreak havoc in European financial markets, causing bank runs in other teetering eurozone economies and raising questions of which country would be forced out next.

But by early 2012, many of those same officials believed it was irresponsible not to prepare for a Greek exit. “We always said: it’s our aim to keep them inside,” said one participant. “Is the probability zero that they leave? No. If you are on the board of a company and you only have a 10 per cent probability for such an event, you prepare yourself.”
Leaving the Greeks out
Work on Plan Z began in earnest in January 2012, largely overseen by four men. Jörg Asmussen, a German who had joined the ECB executive board that month, was assigned by Mr Draghi to head a Grexit task force within the central bank. Thomas Wieser, a long-time Austrian finance ministry official, was appointed permanent head of the “euro working group” of finance ministry deputies and helped co-ordinate work in Brussels with Mr Buti. And Poul Thomsen, a Dane who had headed the IMF’s Greek bailout team since the onset of the crisis, provided input from the fund in Washington.

Efforts to keep information from leaking from the small teams around the four men were extreme for the same reason Mr Trichet had banned such planning: public discovery could be enough to cause the kind of panic that would force them to put their plan into action.

According to one participant, no single Plan Z document was ever compiled and no emails were exchanged between participants about their work. “It was totally fire-walled even within [the institutions],” said the official. “Even between the teams there was fire-walling.” A decision was made not to involve Greek officials out of fear of leaks.

Their firewalls worked. During a dinner between José Manuel Barroso, the commission president, and Ms Merkel at the chancellery in Berlin less than two weeks before the Greek vote, Ms Merkel asked for reassurance from Mr Barroso that a plan was in place in case Greece rejected bailout conditions and Grexit ensued.

Mr Barroso acknowledged the plan’s existence and offered to show it to Ms Merkel but she said his word was enough, according to officials in the room. Under the German system, such documents can be requested by the Bundestag, and senior German officials were concerned they would be obliged to disclose such planning if they had it in writing.

An argument and a plan

Although the FT was not given access to Plan Z documents, officials who saw them said they amounted to a detailed script of how to create a new financial system from scratch.
In Washington, IMF officials prepared a 20-page matrix of actions. Drawing on their experience on bank runs and currency crises, officials said the detailed IMF blueprint included such drastic action as turning off all ATMs and reinstating border controls to prevent massive capital flight.

At the ECB, officials studied Argentina’s experience of issuing IOUs during their 2001 currency crisis, since the euro notes and coins circulating in Greece would no longer be legal tender. Among the options was issuing Greek IOUs worth about half the value of those euros, since getting new bank notes to Greece would be a logistical nightmare.
ECB officials examined the US military’s introduction of new dinars into Iraq in 2003 but were humbled by the logistical challenge; the US effort took only three months but relied on the air and land assets of the world’s largest armed forces. Greece’s capacity to print notes on its own was limited; since the euro was introduced, Athens had mostly printed €10 notes.

Equally complicated was the basic “plumbing” of the Greek economy. Greece, like all other eurozone countries, is connected by a network called Target 2, a giant proprietary computer system run by the ECB and national central banks that make most commercial transactions possible. Once Greece was disconnected from Target 2, it would have no way to clear transactions, grinding the economy to a halt. The entire system would have to be rebuilt.

Similar work was occurring in Brussels. Some of it was thick in EU law: how can a ringfenced economy still be a fully integrated member of the EU’s internal market, which requires a free flow of goods? What were the legal authorities to set up capital controls? Other preparations were much more practical, such as which officials would appear in public to announce Greece’s new status.

“The people who would have been responsible for pulling a switch, they would have received in good time a paper saying: you’ve got to do this and this and this,” said a participant.
To many who worked on the project, Plan Z was as much an argument as an action plan. They wanted to demonstrate to those advocating for Grexit that the job was Herculean, something they could not conceivably back once they realised how difficult it would become. But in the summer of 2012, Greek voters almost forced their hand.

A hard default

With most of Europe’s attention focused on France, where Mr Sarkozy was fighting an unsuccessful effort to win re-election on the same day as Greece’s first parliamentary election, few outside Greece anticipated the storm that was approaching. Even within Greece many political leaders were stunned when results started rolling in on the evening of Sunday May 6.

For most of the four decades since its return to democracy in 1974, Greece’s electoral politics had been dominated by two parties, Pasok on the left and New Democracy on the right. But as the crisis deepened, amid accusations by bailout monitors of mismanagement under governments led by both parties, that status quo began to splinter.

Anti-government activists on the far left and right, once dismissed as radical fringe groups tossing Molotov cocktails in Athens’ central Syntagma Square, began to gain support from a disaffected electorate. The neo-Nazi Golden Dawn party found a receptive audience among the alienated urban poor; the charismatic Mr Tsipras found his own fertile ground among supporters of Pasok, which had negotiated the hated bailout agreements.

As expected, New Democracy finished first in the vote but it polled less than 19 per cent – a stunning 14.6 percentage points less than it had received in national elections three years earlier. Even more remarkable was the complete collapse of Pasok. It finished third behind Syriza, with just 13 per cent of the vote – 31 points less than in 2009.

“We were not reading properly what was happening in Greek society,” said a veteran Pasok politician. “We knew there was a lot of anger but when you’re caught up in the [bailout] programme and wanting to make it a success and believing that the country needs to change, we did not pick up – nobody did, really – the rise of Golden Dawn, nor the spectacular rise of Syriza, nor our collapse.”

One person who was not surprised was Lucas Papademos, Greece’s technocratic prime minister who had managed to hold the country together during a truncated six months in office. In an interview, the former central banker said opinion polling on the eve of the vote had made him so concerned the election would prove inconclusive that he remained in his office on the Sunday night of the election to prepare for the market shock.

According to Mr Papademos, Greek authorities were concerned in the vote’s immediate aftermath that things could spin out of control if the antagonistic parties were unable to form a government for weeks. But they also feared that a new government, led by Syriza or even New Democracy, would reject the bailout deal, leading EU authorities to pull the plug. “The risk was that the constellation of election results would not allow the formation of a government supportive of the new economic programme,” Mr Papademos said.

In a teleconference, the seven European leaders heading to the Los Cabos G20 summit agreed to stick to a common line: they would promise to support Greece – but only if it abided by the existing bailout’s conditions. There would be no renegotiation.

Without bailout funding, Athens would no longer be able to pay its bills, and there was a €3.1bn bond due on August 20, a portion of which was held by the ECB.

A “hard default” – failing to pay an outstanding bond – was long seen as the most likely route to Grexit since, if there was no one left to lend to Athens, it would not be just the government that ran out of money.
At the time, Greek banks were relying on emergency central bank loans to stay afloat because private investors had stopped lending. To get those central bank loans, Greek banks had to provide some kind of collateral, which, for banks in most countries embroiled in the crisis, meant government bonds. But those government bonds would become worthless in a hard default, so central bank loans would be cut off. Without emergency liquidity assistance, Greece’s banks would collapse. With no banks there was no economy.

This would not happen in a traditional monetary system. But Greece did not have a central bank in the traditional sense. Its central bank was in Frankfurt, run by officials who were mainly not Greek, and there was no way to compel the ECB to lend to Greek banks. The only way to restart the banking system would be for Athens to set up its own central bank and begin printing its own currency.
‘Kill the country in hours’
But Mr Papademos and EU officials began to worry about a second “accidental” route to Grexit after the May election results: a bank run.
If panicked withdrawals began, it could lead to the same place as a “hard default”. Greek banks would literally run out of cash, and the ECB would be unable to fund them because they would be insolvent. “Rules would clearly prohibit providing liquidity without adequate collateral, so that means you kill the country within hours,” said an ECB official involved in the deliberations. To restart the banks, a new currency would be needed.
As Greece’s political parties fought over whether they could form a government, Mr Papademos was receiving daily updates from the central bank on totals being withdrawn by depositors; the amounts were becoming so large that he wrote a warning letter to the Greek president. If no government was possible, elections had to be called quickly.
Bank Jogs…
Since the start of 2009, Greek authorities had successfully managed a slow-motion “bank jog” that had seen deposits fall from €245bn to less than €174bn on the eve of the 2012 elections. According to Greek officials, about a third of that money was pulled out of the country entirely; another third was spent to maintain rapidly falling living standards; and a final third was squirrelled away in mattresses and pillowcases for fear the euros could be turned into drachma if they were kept in banks.
Under Mr Provopoulos, the central bank went so far as to fly in extra euros from other parts of the EU to ensure even large withdrawals could be accommodated. A pattern was established: if a Greek depositor asked for a big withdrawal, they were told to come back the next day. For Greek central bankers, it was essential the account holder got the cash when they returned.
“What if a depositor had walked into a bank and asked for his or her money? What if the answer was: ‘I’m sorry, we are short of cash’?” said Mr Provoploulos. “Under the then prevailing conditions, it would have led to widespread concerns and very likely panic among depositors.” An astounding €28.5bn in new banknotes was pumped into Greece in the run-up to the 2012 elections.
But the feverish withdrawals between the May and June votes – the central bank was making shipments 24 hours a day – spooked officials, none more so than those watching from the ECB. A bank run raised questions of democratic legitimacy – should an unelected group of central bankers in Frankfurt, by deciding on their own that Greek banks were no longer solvent, really be the ones to force Greece out of the euro?
Inside the ECB, there was broad consensus that the call that would lead to Grexit should not be made by central bankers. Instead, they would pass the decision to eurozone politicians.
During a June 25 meeting in Brussels with Mr Barroso and Herman Van Rompuy, the European Council president, with Mr Juncker joining by phone, Mr Draghi informed the leaders that eurozone politicians would be asked to guarantee emergency loans to commercial banks before the ECB pulled the plug.
Mr Draghi’s warning was not an academic exercise. One official said Mr Draghi had told the leaders a “period of uncertainty” would begin 30 days before the August bond was due, on July 20. Although Antonis Samaras had cobbled together a coalition the week before, the new government was still demanding renegotiated bailout conditions. And Ms Merkel had not yet decided whether Greece should remain a member of the eurozone.
Full article here

Greek court rules: Teachers’ and Transport workers’ strikes put public health at risk

Posted by  in Society
Did you know that teachers’ strikes put the students’ health at risk? Have you ever thought that a court is concerned about the public health when it comes to strikes but it doesn’t seem to care when thousands of patients are deprived of basic medical care because they cannot afford their medication or a fee to a private doctor due to incredible long waiting list for public health care appointments?
The Plenary of the Council of State ruled that the teachers’ and public transport workers’ strikes strike in May and January 2013 were putting at risk the public health. Therefore it ruled that the “mobilization” of teachers and metro and urban train workers was constitutional and according to the book of law.
The Council of State rejected the appeals submitted by the Federation of Secondary Education ( OLME) ) and the Unions of Workers at Tram, Metro & Urban Train (fixed rail-track). Teachers and workers had appealed the government decision to ‘mobilize’ the strikers.
OLME had declared a 24-hour and a 5-day strike on the first day of exams for the entrance to universities and colleges.
Reasoning for teachers’ strike
The judges felt that postponing the exams due to the teachers’ strike “can have serious impact on the mental health of the students participating in the exam, and thus to such extent and intensity that put the public health at risk therefore the decision to ‘mobilize’ the strikers was according to Constitution and the law.”
Reasoning for fixed rail-track workers
The judges indicate that the recruitment of strikers was done to protect the health of the residents of Attica as during the strikes there was no security personnel to cover basic transportation needs of the society.
This has resulted into traffic congestion for any other private and public transport means. According to the Council of State, “this situation creates an objective danger to the health of citizens who wish to move around in Attica [prefecture] and particularly those in need of timely access to health services .”

Peripheral bonds deepen losses amid Greek tax and political fears

By John Geddie

Lower-rated euro zone bond prices slipped on Friday, deepening sharp falls on Thursday triggered by nervousness about the stability of the Greek government, a tax on foreign holders of Greek bonds, and weak growth.

The rally in peripheral government bonds had been fairly steady since the start of the year, but some analysts suggested the reversal might be more than a blip.

"There will be some investors that are concerned, and should take into consideration that is not just a one-day movement but something more prolonged," said Daniel Lenz, strategist at DZ Bank.

The yield on Greek 10-year government bonds was up 4 basis points at 6.87 percent, following a jump of over half a percentage point on Thursday.

Italian, Portuguese and Irish 10-year bonds also rose 4 bps, to 2.73, 3.75 and 3.12 percent respectively, while Spain's were 1 bp higher at 3.02 percent.

Thursday's price falls were largely attributed by traders to a Greek government circular detailing capital gains tax that would apply to non-resident holders of Greek debt between 2012 and 2013.

Greece's government said the document had only sought to clarify that the previous tax regime of 33 percent on foreign legal entities and 20 percent on individuals had been abolished in 2014, although it later withdrew the document.

Strategists said the Greek tax regime could have implications for how governments, desperate to balance their widening budget deficits, may look for future private sector contributions. Italy was quick to deny that it had any plans for a retroactive tax.

"The price action was very just showed how fast such a stampede can be generated to avoid any such confiscatory actions," said KCG strategist Ioan Smith.

Others pointed out that double taxation agreements in Europe would exempt many investors from such a tax, adding that the shift in market sentiment was more likely a response to Greece's fragile political situation ahead of European elections.

Expected gains for Greek euroskeptic parties in next week's election might erode domestic support for the ruling coalition and potentially trigger a general election.

In addition, EU economic growth came in much lower than expected on Thursday, weighed down by shrinking output in Italy and Portugal.

The slowdown is increasing pressure on the European Central Bank to ease monetary policy further, with markets now broadly expecting its June meeting to introduce a package of policies, including cuts in all its interest rates and targeted measures aimed at boosting lending to small- and mid-sized firms.
Until that materializes, strategists say peripheral yields may continue to edge higher. Ireland, however, could get a boost later on Friday, with Moody's scheduled to review its rating.
[Reuters] , Friday May 16, 2014 (13:20)

PM accuses SYRIZA of undermining Greece, as Venizelos eyes wider coalition

 Prime Minister Antonis Samaras addresses a pre-election event held by New Democracy's candidate for Attica governor, Giorgos Koumoutsakos, in central Athens on Wednesday night.
In his most outspoken attack yet during this election campaign, Prime Minister Antonis Samaras accused SYRIZA leader Alexis Tsipras of trying to destabilize Greece as it attempts to exit the crisis. This tirade came as PASOK leader Evangelos Venizelos suggested he would seek the formation of a wider governing coalition after the May 25 European Parliament vote.

“I want to publicly accuse Mr Tsipras, in front of the Greek people, of undermining the national effort,” Samaras told an audience in Thessaloniki. “While all Europeans are preparing to elect representatives for the European Parliament, Mr Tsipras is calling on Greeks to bring down their government.”
Samaras argued that Tsipras is putting the possibility of an economic recovery this year at risk.

“He sees the elections as a vehicle for destabilization... at a time when more than ever we need to follow a steady path to capitalize on what we have achieved through so many sacrifices,” added the premier, as he expressed his support for New Democracy’s candidate for Central Macedonia governor, Yiannis Ioannidis.
In two television interviews on Thursday, one broadcast on Star channel and the other on ANT1, Venizelos indicated that he would approach President Karolos Papoulias after the elections to discuss the prospects for forming a broad “unity government” irrespective of how the PASOK-backed Elia alliance and other parties fare. Venizelos suggested that – beyond New Democracy and PASOK – such a unity government should include Democratic Left, which quit the coalition last June over the closure of former state broadcaster ERT – as well as SYRIZA.

“The government must make an effort to rally all political forces,” Venizelos said, indicating that the common goal should be to project an impression of unity beyond any pro- or anti-memorandum dilemmas.
Venizelos appealed to those “flirting with” the idea of voting for SYRIZA to avoid doing so, describing such a choice as “a dangerous game.” “If someone thinks SYRIZA will bring back all that was lost between 2010 and 2014, they are mistaken,” he said.

The PASOK leader also commented on the ongoing revelations by the Financial Times about behind-the-scenes developments at a G20 summit in Cannes in 2012, telling ANT1 that eurozone finance ministers were asked to work on a euro exit plan for Greece but that he refused. , Thursday May 15, 2014 (20:40)

Greece denies plan for retroactive tax on foreign bondholders

Greece's government on Thursday denied it had instituted a retroactive tax on foreign holders of Greek bonds, saying capital gains booked from early 2012 to the end of last year were subject to the tax regime covering that period.

Greek 10-year bond yields rose to near two-month highs on Thursday, with traders citing a document detailing a retroactive tax on non-resident holders of Greek bonds.

Greek officials, however, said that document had only sought to clarify that the previous tax regime of 33 percent on foreign legal entities and 20 percent on individuals had been abolished starting this year.

"There is no taxation on capital gains from transfers of Greek government bonds by foreign investors that took place from January 1, 2014 onwards," a statement from the finance ministry said. "Consequently, the reports referring to retroactive taxation or intention for retroactive taxation are completely untrue."
[Reuters] , Thursday May 15, 2014 (18:07)

Greece’s bonds lead euro-periphery debt lower on political risk

Greek bonds declined, pushing 10-year yields to the highest in seven weeks, as opinion polls before next weekend’s European Parliament elections suggest Greece’s governing coalition is losing support.

Italian bonds fell, with yields rising the most in two months having earlier dropped to a record. Irish and Spanish securities also reversed gains that had pushed yields to the least since Bloomberg began collecting the data.

“Risks in Greece are still largely underestimated” so the selloff in bonds could continue, said Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in London. If the outcome of the European Parliament elections “has an impact on the next steps for debt sustainability then it could also spill over to other markets in the periphery.”

Greek 10-year yields rose 47 basis points, or 0.47 percentage point, to 6.77 percent at 1:55 p.m. London time after climbing to 6.85 percent, the highest level since March 28. The 2 percent bond maturing in February 2024 dropped 2.835, or 28.35 euros per 1,000-euro ($1,367) face amount, to 75.56. [Bloomberg] , Thursday May 15, 2014 (16:07)