Joe Biden Claims He Was "Personally Involved" In 'Saving' Greece From Grexit

The Obama administration played an important role to make sure Greece remains in the eurozone, former Vice President Joe Biden said. As KeepTalkingGreece.com reports, in an interview to newspaper Kathimerini, Biden said that he was personally involved in the issue and described the efforts and difficulties he faced to avoid the financial collapse of Greece.

The Obama administration and you personally also played an important role in making sure that Greece remained a part of the eurozone. Could you describe for us these efforts and the difficulties you faced? Was there a close call when you got very concerned about a Grexit and a destabilized Greece? Do you believe that the risk of a Grexit is gone?

President Obama and I were engaged with all parties in the Greek financial crisis, because we wanted to prevent Greece from experiencing financial collapse. Grexit would have had very serious long-term consequences for Greece and Europe – and could potentially have triggered a wider crisis of confidence in the global economy.

We were concerned that in the high-stakes negotiation between Greece and its creditors, failure to reach a sensible agreement would have made all parties much worse off in the end. But because of each side’s desire to secure the best possible terms, this worst-case scenario was a real possibility.

While the ultimate decision was up to the leaders of Greece, the IMF, and the eurozone countries, I think we helped steer the conversation in a more pragmatic direction because of the credibility we had in Athens, Brussels and Berlin.

We argued with the creditor countries that Greece had been saddled with an unsustainably high debt burden and that reform would only go so far with such a large debt overhang. At the same time, we encouraged the Greek leadership to think about how to demonstrate to its creditors that it had a credible roadmap for systemic economic reform, which was necessary.

While a deal was reached and the worst of the crisis is behind us, we are not yet completely out of the woods. I believe the United States continues to have a role to play in supporting the parties as they move forward with discussions on Greece’s economic future.

So that"s who the Greeks have to blame thank for record unemployment, record suicide rates, record poverty, and record taxes.

Biden spoke also of the importance of “energy diplomacy” after the discovery of natural gas in Cyprus, Israel and Egypt – and the potential for discoveries in Greece and Lebanon.

"This is an exciting development that could bring about not only economic prosperity, but also enhance regional security through cooperation, collaboration and integration,” Biden stressing the necessity for a solution of the Cyprus issue.

Full interview here.

We look forward to Jucker"s response to Biden"s claims of saving the world...

Grexit 4.0? Varoufakis Urges Tsipras: Ditch Negotiations, Adopt "Parallel System"

Former finance minister Yanis Varoufakis strikes back and, as KeepTalkingGreece reports, urges Prime Minister Alexis Tsipras to turn his back on Greece’s lenders, adopt a parallel payment system  and to unilateral restructure the loans held by the European Central Bank.

In an op-ed in Efimerida ton Syntakton, Varoufakis, Varoufakis calls on Tispras to prepare for break with creditors in order to avoid rupture.

“This two-pronged preparation is the only way to prevent another excruciating retreat by the prime minister in the short term and [German Finance Minister Wolfgang] Schaeuble’s plan in the long term,” Varoufakis wrote.

In his article, Varoufakis suggested that Schaeuble’s strategy is to lead Greeks to the point of exhaustion so they ask to leave the euro themselves.

Noting that the “parallel payment system was already designed in 2014”, Varoufakis stresses that Tsipras had “two delusions” that led the government to the current impasse:

a. that on the night of the referendum, the dilemma was between Schaeuble’s Grexit Plan and the 3rd bailout

b. that the obedience to the 3rd bailout could be political manageable through a parallel, society-friendly program.

Both of these “working assumptions” were based only on autosuggestion, the ex finance minister stresses adding that he tried to explain this to the Prime Minister on the night of the referendum

“In reality there was never a basis for hope that the toxic third bailout would be gradually rationalized, in terms that the  European Commission would support Athens so that the austerity and anti-social IMF measures would relax, the IMF would force Berlin to accept debt restructuring and lower primary surpluses, the ECB would include Greece in the bond purchase program (QE),” Varoufakis wrote

He accused leading European negotiators of lying.

“That Moscovici [EU Monetary Affairs Commissioner], Coerer [ECB] and Sapen [French finance minister] might have given such promises was not an excuse.

Since May 2015 we were fully aware that these gentlemen know how to lie and fail to deliver on their promises when they do not lie.”

More on parallel payment system and IOUs here, here, here

Varoufakis full article in Greek EfimeridaTonsyntakton

PS as Tsipras and Varoufakis went apart on the Referendum night in July 2015, I do not think that the Greek Prime Minister will accept the proposals of his former finance minister.

GREECE: IMF, Go Home!

The next few weeks will be interesting to see whether or not the European Union and the European Central Bank really care about the wellbeing of Greece and the Greek economy.

The original reason for the bailout of Greece was to ‘protect the country’ and to ensure the EU-member would have a fair chance to sort all of its issues out. Contrary to what most people (including us) expected, the country was indeed able to put itself back on track, and the budget results of fiscal 2016 are emphasizing Greece is indeed doing much better.

The primary surplus, which is the budget result excluding the cost of servicing the debt position, reached 2% of the Gross Domestic Product in 2016. That’s 300% higher (!) than the surplus that was required by its lenders. This also offers some sort of reassurance to see Greece meet the surplus requirement of 1.75% this year, but reaching a primary surplus of 3.5% in 2018 would be quite a stretch. Quite a stretch, but not impossible as for instance the USA, Belgium and Greece enjoyed a 3% primary surplus in the nineties.

Source: OECD

This opinion is being shared with the International Monetary Fund, which is still considering its options whether or not it wants to participate in a third bailout package, after refusing to be part of the second bailout in 2015. The IMF openly doubts the possibility to reach the 3.5% number without additional austerity measures and more debt relief. The additional austerity measures are directly opposed to the more lenient approach requested by Greece. On top of that, we’re uncertain how more debt relief will increase the primary surplus, as the primary surplus discusses the budget before taking the debt-related expenses into account.

It is pretty obvious more actions are needed, and the IMF would like to see Greece transform its personal tax system as the supranational organization claims it’s actually ‘inviting’ Greeks to avoid taxes, but it’s always a thin line between reducing the tax rate, hoping the size of the taxable (and declared) income would increase, offsetting the impact from a lower marginal tax rate. We wouldn’t count too much on the IMF stepping back into the next phase of the bailout program as it wasn’t particularly pleased when the Greek prime minister decided to give the pensioners a one-time bonus of almost 400 EUR each. Tsipras argued the payment was made after a self-proclaimed ‘extra surplus’ was created in 2016.

It does look like we will see a heads-on collision between Greece, its European lenders and the IMF this year, and we would expect the IMF to continue to refuse to participate in the next bailout-round. It’s in the EU’s best interest to continue to work with Greece, as the country seems to be trying to do its best and refusing a new bailout package my push the country over the cliff. And that’s really something the ruling Syriza party – which is already losing votes in polls – can’t use, whilst the European Union would obviously like to avoid another political impasse in one of its countries.

Source: greeknewsagenda.gr

In fact, helping Greece out in the next bailout round could help to keep the current government in the saddle. After all, it would be possible for Greece to qualify for the ECB-initiated purchases of government bonds, which could significantly lower the cost of debt of the country, and improve the situation beyond just the primary surplus.

Greece still has a few more months as the first large repayment is due in the third quarter. But if the negotiations don’t start soon, the country might very well end up in a new death spiral.

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