Obama, Merkel say it is ‘critically important’ for Greece to remain in the euro (GREK)


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President Obama and German chancellor Angela Merkel agreed that it is “critically important” for Greece to remain in the euro. 

The two spoke on the phone on Sunday as the situation in Greece has grown increasingly chaotic over the last 48 hours. 

In a statement, the White House said, “The leaders affirmed that their respective economic teams are carefully monitoring the situation and will remain in close touch.”

“The two leaders agreed that it was critically important to make every effort to return to a path that will allow Greece to resume reforms and growth within the euro zone.”

On Sunday, news broke that Greek banks would be closed on Monday and remain closed until at least July 5, when Greece is scheduled to hold a referendum on the latest bailout proposal from its European creditors. 

Greek prime minister announced the referendum in a surprise announcement on Friday night. 

It now looks like Greece will miss a €1.6 billion payment to the IMF due on Tuesday and appears as close to a “Grexit” as it did during the eurozone crisis of a few years ago. 

Additional reporting by Reuters.

SEE ALSO: Greek banks will be closed on Monday

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Is Putin Trying to Pry Greece Out of the European Union?


iStockphoto/The Fiscal Times

By Rob Garver,The Fiscal Times

February 12, 2015

As finance ministers from across Europe held emergency meetings in Brussels in an effort to keep a newly assertive Greece in the currency union, Russia’s Foreign Minister Sergey Lavrov repeated an offer from Moscow to provide Greece with the funding it needs to ease punishing austerity programs and rebuild its economy. 

Greece was forced to accept several rounds of sharp cuts in public spending as a condition of receiving a massive bailout package from other EU member nations beginning in 2010. The austerity measures were deeply unpopular with the Greek public, and resulted last month in the election of a new, leftist government that came to power on a promise to push back against European powers, primarily Germany, demanding that the country stick to the terms of its deal despite the fact that it has not resulted in any meaningful economic recovery. 

Related: The Greece-EU Standoff Is Getting ‘Berserk’ 

Now, the new government is trying to make good on its campaign promise by demanding that its European Union creditors ease their requirements by allowing Greece to spend more on public services, and change the terms of repayment to make the country’s debt service less onerous. 

For their part, Greece’s creditors are somewhere between dubious and dismissive. The current bailout package expires at the end of the month, and the next tranche of loans to Greece is dependent on a deal being struck. 

The fight could pose an existential threat to the European currency union, because one of the potential endgames for Greece is abandoning the Euro – a move that would allow the country to take on debt in a currency it controls. The concern is not that the loss of Greece would be economically devastating to the Eurozone, but that if the markets began to see Eurozone nations’ commitment to the Euro as contingent on domestic politics the whole enterprise could collapse. 

Senior officials in Greece have repeatedly claimed that the country has other options for finding financing. German Finance Minister Wolfgang Schaeuble said that if Greece demands changes to the financing deal, “It’s over.” He said the other EU nations “can’t negotiate about something new.” 

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Such talk has angered Greek leaders, who see Germany, in particular, as being unnecessarily tied to continued austerity programs. Several have held out the prospect of turning to other sources for funding. 

After bailing out Greece twice, Germany and other European countries like Finland and Holland are also angry. Instead of showing good faith in asking for debt forgiveness, Tsipras has promised to rehire 12,000 public-sector workers, raise wages and essentially thumb his nose at all the reforms that might get him another free pass. 

“We want a deal. But if there is no deal, and if we see that Germany remains rigid and wants to blow Europe apart, then we will have to go to Plan B,” said Defense Minister Panos Kammenos, who also heads Independent Greeks, a political party that is part of the governing coalition assembled by Prime Minister Alexis Tsipras. “We have other ways of finding money. It could be the United States at best, it could be Russia, it could be China or other countries.” 

Nikos Chountis, Greece’s deputy foreign minister, has said that both Russia and China have made offers of financial assistance. Russia has also moved to strengthen political and economic ties with Athens. Russian President Vladimir Putin’s government has, on multiple occasions, held out the offer of financing to Greece. In late January, Russian Finance Minister Anton Siluanov said the Kremlin was open to considering a financial aid package for Greece. 

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Last week, Tspiras discussed bolstering ties with Russia in a phone call with Putin, according to a statement released by his office. “The Russian president and the prime minister emphasized the need for substantial improvement of the cooperation between Greece and Russia — countries with deep and historic ties — especially in the sectors of economy, energy, tourism, culture and transport,” said a statement from Tspiras’s office, also noting that Putin had invited Tspiras to visit Moscow in May. 

Then Wednesday, as the EU finance ministers were trying to hammer out a deal with Greece, Lavrov, Russian’s foreign minister, again raised the issue of Russia riding to the rescue of the Greek people in a joint press conference with Greek Foreign Minister Nikos Kotzias. 

He said they also discussed further cooperation on the issue of energy. “We discussed energy cooperation, considering Athens’ interest in the plans of building a gas pipeline from Russia to Turkey and to the Greek border,” Lavrov said. “We believe this project has good prospects.” 

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Lavrov also threw in some praise for the Greek government’s initial resistance to an EU plan to extend economic sanctions against Russia over its continued aggression in eastern Ukraine. “We appreciate the stance of the Greek government, which understands the complete counter-productivity of attempts to speak this language with Russia,” he said. 

Adding to the tension of the moment was the fact that on Wednesday, Putin, as well as Ukrainian President Petro Poroshenko, German Chancellor Angela Merkel, and French President Francois Hollande were meeting in Minsk, Belarus, in an effort to come to a deal to stop the fighting in eastern Ukraine, where Russia-backed separatists are fighting to create an autonomous region aligned with Moscow. 

Late Wednesday, the finance minsters discussing the future of Greece’s financial relationship with the EU had not announced a deal. One of the most likely outcomes appeared to be a statement of principles that would allow the talks to continue next week. 

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Don’t Expect a ‘Grexit’: Greece Can’t Escape Europe


Wayne Merry

Economics, Europe

While Russia and China may be courting Greece, Athens’ fate still lies in Europe’s hands.

Global financial markets currently obsess about the fate of a small Balkan country’s sovereign debt and its impact on the Eurozone. However, if the burden of Greek debt were to disappear overnight, the miracle would just reveal the underlying weakness of the Greek economy and its dependency on Europe for the foreseeable future.

Since the Hellenic Republic entered the European project (then the EC) in 1981, the brutal truth is that only massive European transfer payments have separated Greece from the status of de facto third-world economy. The Greek economy is both narrow and shallow, and has been for many generations. The country’s most valuable export has been people, whose talents and achievements do not merit the recent jibes of the German tabloids. Even today, Greece produces relatively little and can export even less. The domestic economy does not remotely earn enough to pay for the country’s vital imports, especially energy. Greece lives on—lives on, mind you, not just maintains its lifestyle with—externalities: tourism, shipping, remittances and EU subsidies. The modern face of contemporary Greece—its highways, airports and the Athens Metro—were largely paid for by EU counterpart funds. The most vital aspect of EU membership for Greece is the freedom of its people to work elsewhere in Europe at will and then send money home. Thus, even without the debt crisis, Greece is no more fully sovereign in economics than it is in military security.

Greek households are not the problem. Indeed, the average Greek is a model of financial probity (except as a taxpayer). Greek households maintain little debt, value education for their children (no small task, given the atrocious state of public higher education) and use increasing prosperity to acquire real property—mostly real estate—rather than to finance short-term consumption. Greeks are not inherently indolent, but nor do they justify their self image revealed in a recent Pew Trust study as the hardest workers in Europe. Context determines their efforts. When properly motivated, Greeks are diligent, but many Greek institutions—above all, the massive state sector—motivate in the wrong direction. It is instructive to look at Greeks in other contexts, such as America and Canada, Australia and New Zealand, South Africa and Kenya, and even Germany. Greek effort and enterprise abroad are a tribute to what people coming from an inherently hardscrabble heritage can achieve.

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