Daily Archives: February 8, 2015

TONY ABBOTT has inflamed his critics by bringing forward a party vote on his future to early Monday morning, prompting a warning from Liberal figure Arthur Sinodinos hours after the Prime Minister tried to take his enemies by surprise.

Mr Abbott’s decision sparked warnings from his colleagues as some of his critics said it showed he was “desperate” while some said he was not showing full respect for the Liberal party room.

“It’s disappointing that the party room meeting has been brought forward to the earlier time,” said Senator Sinodinos, an experienced former adviser to John Howard.

“Tuesday is the appropriate time to consider this issue with calm reflection rather than have the pressure of the clock on Monday,” Senator Sinodinos told The Australian.

“This would show real respect for the party room and its views.”

Senator Sinodinos confirmed to The Australian that he would vote in favour of the spill motion. Others who said they would back it included Victorian MP Sharman Stone and Western Australian MP Dennis Jensen.

Other Liberal backbenchers reiterated their objections to the spill, including Angus Taylor, Linda Reynolds and Ian Macdonald.

Joe Hockey said all frontbenchers should vote against the spill and he rejected suggestions that Mr Abbott had made a “captain’s call” by bringing forward the vote.

“There was discussion with a number of members of the Liberal Party leadership group and as Julie Bishop has confirmed, she was consulted on the final decision this morning,” Mr Hockey told Sky News.

The Treasurer said that if ministers wanted to support the spill motion they were obliged to resign from the frontbench, but he added that he believed all on the frontbench would show loyalty to the leader.

Others said Mr Abbott’s move would backfire because it showed he was failing to consult his colleagues even after he had pledged to be more “collegial” than before.

“It shows he’s all over the place, he’s confused and he’s desperate,” said one MP.

Another MP said the move would encourage Liberals to support the spill motion.

“A lot of people who were going to vote against the spill motion will now vote for it because of this decision,” he said.

“It’s about his pattern of behaviour. It’s about how he treats the party room.”

The Australian was told that other senior Liberals were not consulted on Mr Abbott’s decision although it was canvassed by some of the Prime Minister’s allies on Friday.

The deputy leader, Julie Bishop, whose position is also subject to the spill motion, was only told on Sunday morning after the new time was decided.

Mr Turnbull held back from directly criticising Mr Abbott’s decision but described it as a “captain’s call” by the Prime Minister.

The remark lent weight to fears on the backbench that Mr Abbott was showing disrespect to the partyroom after strong criticism of other unilateral decisions such as the knighthood for Prince Philip on Australia Day.

“The Prime Minister’s decision, as he’d said, was to hold the meeting on Tuesday and you’re right, I did praise him for that this morning,” Mr Turnbull told reporters in Sydney at about 11am on Sunday.

“Subsequently, he’s the Prime Minister, he’s made a captain’s call and he’s changed the date of the meeting.”

Mr Turnbull did not say he was challenging Mr Abbott or would stand as a candidate if the leadership was declared vacant.

However, he made it made it clear that if the leadership was declared vacant by the Liberal partyroom then any minister was free to stand for the leadership without being disloyal.

“If, for whatever reason, the leadership of a political party is vacant then any member of the party can stand, whether they be a minister or a backbencher, without any disloyalty to the person who’s leadership has been declared vacant,” Mr Turnbull said.

“The leadership of the Liberal Party is uniquely in the gift of the partyroom, just as John Howard has always said.

“I’m talking to my colleagues and I know that other senior members of the party are doing that.”

Greece’s proposal to swap debt held by its euro zone creditors for bonds with payments linked to economic growth got a cool reception in European capitals this week, with one official calling it a «new trick» to a haircut.

It would be the first time official creditors signed up to an idea that is unpopular with private bondholders and only has a couple of private sector precedents. While some see the bonds as a reform incentive, others see a way to dodge paying up.

But a growing number of economists say that it could be the right method to give Greece’s new leftist government the breathing space on its hefty debt payments that it says it needs to get the economy back on track after its financial crisis.

They say the official sector, which holds the purse strings of Greece’s international aid package, would have more leverage than the private sector in recouping its dues – the top concern about such bonds.

“The official sector would have more power than a private investor if it felt that a country was cooking the books,» said Marcus Miller, a professor of economics at Britain’s Warwick University.

“It may also have some ways of getting the money as well because the European Union can levy taxes on countries.”

Miller and nobel prize-winner Joseph Stiglitz were among 18 eminent economists who recently wrote in a letter to the Financial Times that growth-linked debt relief should be part of a plan to help Greece recover.

The governments proposals are vague although comments made by new finance minister Yanis Varoufakis to investors in London on Monday suggest they are targeting loans from other member states and the bloc’s bailout fund EFSF. Greece’s debt to the euro zone totals 196 billion euros.

There are few recent cases in the private sector. Argentina and Greece itself issued growth-linked warrants to reluctant bondholders as an extra sweetener after a restructuring.

“All of the problems that we have identified with these growth-linked bonds in the private sector do not relate to the official sector,» said Starla Griffin of Slaney Advisors, who in 2013 published a survey on investor attitudes towards growth-linked bonds.

Griffin, a member of the UN’s committee on sovereign debt restructuring, identified three main areas of investor concern: difficulties of verifying growth data, trading and regulatory complications, and uncertainty of income.

Trust

Probably the biggest hurdle is one of trust. Argentina, for example, spent years dodging payouts on their inflation-linked debt after reporting consumer prices that differed wildly from private estimates.

But official creditors check economic data as part of the conditions of the international bailout, so they could keep tabs on it themselves.

“They have more information than anybody,» said Griffin.

“If it was structured properly, you would have some sort of certifier of the data.”

A second concern for investors is how to measure such an asset’s worth because it fluctuates in value during economic booms and busts. The value is needed for trading but an official creditor would hold the bond until it expires.

Private investors also have to constantly report the value of their portfolios to regulators but Greece’s euro zone partners, are not subject to the same regulatory oversight.

The final problem raised in Griffin’s survey was that fund managers may struggle to match the returns on these bonds to their clients’ demands. Most bonds pay a fixed-rate of interest.

RBS strategist Michael Michaelides believes any loss taken on interest payments may be something politicians would accept if they could tell European taxpayers they were getting back the initial sum loaned.

“A GDP linkage of the debt may be useful politically for all sides, hence defusing what could become a tense game of ‘chicken’,» he said.

Nevertheless, if any loss of interest was seen as a writedown by the back door it could be a breach of European Union law, producing a hurdle that could be hard to clear.

The Greeks – many of whom blame Germany for the strict austerity that they say crippled their economy and left a quarter of them out of work – may have another card to play.

In a bid to revive the German economy after World War Two, creditors tied repayments to its trade surplus. The UK also had similar relief on a U.S. loan.

source:ekathimerini.com

As Berlin and Athens lock horns over debt relief, Greece’s claim that Germany has never compensated it for all the damage wrought by the Nazis during World War II is again straining ties.

Greece’s new Prime Minister Alexis Tsipras, whose radical left party swept to power last month promising to reverse spending cuts imposed under the indebted country’s rescue package, has vowed to tackle the long-simmering dispute.

But he is likely to run up against a firm “no” from Europe’s biggest economy, which argues that Berlin does not owe it a cent and that the historic issue has long been closed.

“Nearly 70 years after the end of World War II, the question of reparations has lost legitimacy”, a German finance ministry spokesman said recently.

The issue of wartime reparation claims over Germany’s four-year occupation of Greece, which ruined the country financially and left thousands dead, has complicated relations between Athens and Berlin for decades.

Now, with Greece struggling under more than 300 billion euros ($340 billion) of debt, calculations that Athens is still owed just over half that amount, or 162 billion euros left over from the war, is sure to touch a nerve.

Tsipras’s SYRIZA party and its unlikely coalition partner, the nationalist Independent Greeks party led by Panos Kammenos, plan to re-open the claim, whose impact is highly symbolic in Germany for harking back to its darkest chapter.

Haunted by its Nazi past, Germany prides itself on its efforts to come to terms with its history.

Tspiras, a former Communist, lost no time after his election victory in laying flowers at a memorial near Athens where dozens of Greek leftists were executed by German occupation troops in 1944.

His finance minister, Yanis Varoufakis, during a bruising first visit last week to Germany, stressed that it had not been “a sign towards Germany” but rather was targeted against Greece’s neo-Nazi Golden Dawn party, now the country’s third-biggest political force.

During his election campaign, Tsipras said he would press the “unfulfilled right” to reparations for a “people who bled and payed heavily for the brutality of Nazism”.

Greece’s occupation by the Nazis from 1941 was one of the most bloody in Europe, with Hitler’s forces rampaging, pillaging and shooting, and encountering a nation that fiercely resisted.

The Nazi regime ended up bleeding Greece dry. The Third Reich forced the Greek central bank to loan it 476 million Reichsmarks which has never been reimbursed.

A German Bundestag lower house of parliament report in 2012 put the value of the loan at $8.25 billion.

In Greece, its estimated value is higher, at 11 billion euros, according to a confidential report to the finance ministry and reported by the To Vima newspaper in January.

After Germany’s capitulation and the end of the war, the United States’ main concern was to halt any advance by the communists in Greeces civil war.

It asked the Greek government, keen for economic support under the Marshall Plan — the US aid package to rebuild Europe after World War II — to drop its reparation claims until the signing of a peace treaty.

Germany rebuilt itself and paid practically nothing to its former enemies “which obviously helped the German economic miracle hugely” in the post-war period, according to an analysis by Rabobank.

Albrecht Ritschl, a professor of economic history, said in an interview with Germany’s Spiegel news weekly in 2011 that “Germany has been the 20th century’s worst payer of debts”.

Just before German reunification in 1990, the two former Germany’s signed a treaty with the Allies, considered as the formal end of World War II.

Although the document, which was approved by Greece among others, was not officially termed a peace treaty, for Berlin it effectively drew a line under possible future claims for war reparations.

Not so, though, for former resistance icon Manolis Glezos, who has been pressing for Germany to settle up for decades.

The issue has a “political and moral dimension”, says the nonagenarian who, at the age of 18, took down the Nazi flag from atop the Acropolis.

And last year, Greek President Karolos Papoulias, another veteran of the Greek resistance, took the opportunity during a visit by his German counterpart Joachim Gauck to call for negotiations on the issue to be opened quickly.

“You know that I can’t give you any other response than to say that the legal path is closed,” Gauck said, before solemnly asking Greece to forgive Germany for a heinous Nazi crime committed at the height of the war.

source: ekathimerini.com

Greece said on Saturday it had no short-term cash problem and that it will hand its European Union partners a comprehensive plan next week for managing the transition to a new debt deal.

The EU has warned time is running out to avoid a financing crisis in Greece.

The new left-wing government in Athens has rejected the austerity that was forced upon the country by an EU/International Monetary Fund bailout and instead says it wants a “bridge agreement” until it has negotiated a new deal.

“We will present a comprehensive proposal on Wednesday,” Finance Minister Yanis Varoufakis said, referring to a meeting of euro zone finance ministers in Brussels on that day.

Varoufakis was attending a cabinet meeting called to prepare the government’s overall policy programme, which Prime Minister Alexis Tsipras will present to parliament on Sunday.

On Friday, Jeroen Dijsselbloem, who chairs the Eurogroup of euro zone finance ministers, told Reuters that Greece had to apply for an extension of its reform-for-loans plan by Feb. 16 to ensure the euro zone keeps backing it financially.

This is essentially an extension of the current bailout, something Greece has said it does not want and will not accept.

It is due a 7.2 billion euro trance from the EU/IMF bailout, which it says it does not want because of the austerity strings attached.

Instead, Athens wants authority from the euro zone to issue more short-term debt to tide it over until a new deal is agreed, and to receive already-agreed profits that the European Central Bank and other central banks have gained from holding Greek bonds.

Greece faces interest rate payments of around 2 billion euros over February and should repay a 1.5 billion euro loan to the IMF in March.

That has raised concerns the country may suffer a cash crunch, but this was dismissed on Saturday by the Greek official in charge of the government’s accounts.

“During the time span of the negotiations there is no problem (of liquidity). This does not mean that there will be a problem afterwards,” Deputy Finance Minister Dimitris Mardas said on Mega TV.

Asked whether the state may suffer a cash crunch if talks drag on until May, the minister said he did not expect the negotiations over a new deal to last that long. “Even if they did, we can find money,” he said.

source:ekathimerini.com