The resolution that refuses to be resolved rolls on.
Under the premise of Jean-Claude Juncker’s “no disbursement without implementation” the Greeks were set three tasks to complete before Wednesday when the Euro-group ministers were supposed to hold another meeting to review Greece’s progress.
Firstly, the parliament had to approve the €3.3 billion in cuts in wages, pension and jobs, which they did even though Athens was set on fire in the meantime. Secondly they had to find yet another €325 million worth of “structural expenditure reductions” to replace parts of the pension reform that the political leaders couldn’t agree on. And finally, the nation’s political leaders needed to provide some form of “assurance” that all that has been agreed to will actually be implemented after the April elections when Mr Papademos is no longer running the country.
As I type Antonis Samaras, head of Greece’s New Democracy party, has still has not signed anything that the rest of Europe would consider a “guarantee of assurance”. On the weekend it was reported that he told his party members to vote in favour of the austerity bill in order to receive the next bailout, but only so that he could then
“negotiate and to change the current policy, which has been forced upon us”
Given that he is most likely to lead the country after the April elections this is a massive stumbling block. Speaking of stumbling blocks, Finland has once again raised the issue of collateral , which you may remember caused all sort of political problems back in August.
So basically, at this stage there is still no deal with the Troika and that means that it is not possible to finalise any deal with private sector creditors, if in fact there is one.
As I have warned numerous times in the past, the problem with all this dithering over a deal is that the underlying problems that effect Europe continue to exist. This means that while bureaucrats squabble over every step the economies of the European periphery get worse by the day. As we saw once gain with Greece overnight:
The country’s economic slump is headed towards a record annual plunge close to 7 percent in 2011, the fourth consecutive year of a deepening recession. After an official confirmation by the Hellenic Statistical Authority (Elstat) on Tuesday that GDP dropped 7 percent year-on-year in the fourth quarter of 2011, the economy has shrunk by an average of 6.8 percent.
The latest quarterly contraction followed a slight slowdown of the depression in the preceding quarter, with GDP shrinking 5 percent due to the customary seasonal surge of tourist revenues in the summer.
The decline in the last quarter explains the surge in the jobless rate above 20 percent or 1.036 million unemployed in November.But the omens for the first half of 2011 were even worse, Elstat said, with economic contractions of 7.3 percent in the second quarter and 8 percent in the first quarter.
Greece’s GDP over the last 12 months has been Q1 2011: -8.0% year-on-year, Q2 2011: -7.3% y/y, Q3 2011: -5.0% y/y, Q4 2011: -7.0% y/y. Yet according to the latest ‘Troika’ report Greece will return to growth in 2013. A this stage that will only be possible if delivered by the Easter Bunny, Santa Claus or, if all else fails, the Tooth Fairy.
The FT has just reported that today’s meeting has been cancelled with Jean-Claude Juncker, chairmain of the eurogroup, citing “the need to continue technical work as well as a lack of assurances from Greece’s leaders”. Have they just realised they now need €150 billion?
According to the schedule, Greece should be submitting an official offer for bond exchanges to private sector holders on the 17th, leading up to a final agreement of the entire deal at the March 1st EU summit. It doesn’t look like that schedule is going to be met which is a concern as all deals need to be in place in order for Greece to meet a €14.5 bn payment on March 20th.
In other news, as I mentioned last week , the European commission has released its first ever alert mechanism report documenting what it considers to be the macro-economic threats faced by each of the EU member nations. The report appears to have done a good job of identifying and categorising the issues facing each of the countries. I am, however, a little concerned that the whole report reads like just another recipe for further implementation of one-sided policy and there is absolutely no mention of the fact that the existing programs aimed at addressing these exact problems are failing miserably. For example:
Some Member States need to correct accumulated imbalances on both the internal and external side. They will have to reduce high levels of overall indebtedness and regain competitiveness so as to improve their growth prospects and export performance. In-depth analysis will help to assess the drivers of productivity, competitiveness and trade developments as well as the implications of the accumulated level of indebtedness and the degree of related imbalances in several Member States.
Adjusting internal and external imbalances while attempting to pay down previously accumulated debts. Where have I heard that before?
The outcome of this report is that Belgium, Bulgaria, Denmark,Spain, France, Italy, Cyprus, Hungary, Slovenia, Finland, Sweden and the United Kingdom are all on notice and require “additional assessment”.
The full report is below:
Alert Mechanism Report 2012 En