Eurozone looks for dialogue after stunning Greece elections

[webfact]

Eurozone looks for dialogue after stunning Greece elections
By RAF CASERT and PAN PYLAS

BRUSSELS (AP) — For a man long seen as the eurozone's worst nightmare, Alexis Tsipras has had a smooth first day as prime minister of Greece.

The firebrand left-winger wants fellow eurozone nations to forgive some of his country's bailout loans, something many European leaders have vehemently ruled out. But concerns of a disastrous confrontation — in which, say, Greece might stop repaying its loans or the eurozone stop funding Athens — eased on Monday after both sides said they were open to negotiation.

The election of Tsipras and his radical Syriza party had been accompanied by much hand-wringing in European capitals. Besides calling for the cancellation of some of Greece's rescue loans, Tsipras has pledged to undo some of the spending cuts and tax hikes eurozone countries had required in exchange for the loans.

Politicians and investors worried that a tough stance on either side could even lead the country to drop out of the euro, a move that would devastate Greece's economy and destabilize the currency union.

But while discussions on Greece's debt have yet to start — and could yet turn sour — the rhetoric on Monday from both sides was one of compromise rather than ultimatums. Financial markets retained their poise.

"It won't give quite the fireworks that some people were expecting," said Professor Hendrik Vos of the University of Ghent. Jean-Claude Juncker, the president of the European Union's executive commission, agreed: "I am not excessively nervous about this."

That may be an attempt to calm down the political rhetoric before Greece's new government enters negotiations with its eurozone counterparts.

But at the very least, Tsipras' election is likely to give new momentum to policymakers in Europe who want the region to focus less on debt reduction, as Germany has insisted for years, and more on spending to get growth going.

The recognition that the region needs more action to encourage growth was highlighted by the European Central Bank's announcement last week it would start buying 1.1 trillion euros in bonds to stimulate the economy. The European Commission earlier launched a 315 billion euro investment plan.

Greece has since 2010 needed 240 billion euros ($270 billion) in loans from fellow eurozone countries and the International Monetary Fund to avoid bankruptcy.

Those loans came only on strict conditions that Greece cut its debts sharply. It cut spending and raised taxes — measures that had the side-effect of hurting growth. Greece suffered an economic depression and a surge in unemployment to above 25 percent.

Riding popular discontent over this austerity imposed by the eurozone creditor nations, Tsipras rode to power on a promise to undo some of the painful policies and demand a cut on the rescue loans it owes.

Despite the tough rhetoric, both Syriza officials and eurozone leaders said they were willing to be flexible.

"France will be at Greece's side," said French President Francois Hollande.

Jeroen Dijsselbloem, the Dutchman who chairs eurozone finance ministers' meetings, said that even though "there is very little support for debt write-offs," there is room to consider ways to make Greece's debt more sustainable, if necessary.

His views were echoed by the leaders of Belgium and Finland, a country that has long been among the most unmovable on austerity issues.

Regional heavyweight Germany, however, was non-committal beyond stressing that Greece needs to honor its commitments. "Greece is still in the process of building a new government," said German Finance Minister Wolfgang Schaeuble.

Yanis Varoufakis, a Syriza member who is tipped by some to become the next finance minister, sought to downplay concerns that the new government would take an aggressive stance in negotiations.

He said the government would seek to convince its euro partners that reducing Greece's debt burden by linking repayments to growth, say, would be positive for all sides. At present, Greece has to repay its loans whatever the state of its economy, further worsening the country's debt. At over 170 percent of GDP, Greece's debt is way beyond levels most economists consider manageable.

He has also dismissed suggestions that Syriza would threaten to pull Greece out of the euro, so-called Grexit.

"We, who happen to be in the eurozone, must be very careful not to toy with loose and fast talk about Grexit or fragmentation," he told BBC radio. "Grexit is not on the cards; we are not going to Brussels and to Frankfurt and to Berlin in confrontational style. There is plenty of room for mutual gains and benefits."

Amid the calmer rhetoric, the main stock market in Athens recovered much of its sharp losses of the day to close down 3.2 percent. European stocks also largely closed higher while the euro clambered up from 11-year lows.

At the height of Europe's debt crisis a few years ago, the main concerns was that a possible Grexit would spell the end of the euro project as investors looked for other countries to fall out as well. However, many European politicians have said that contagion fear is not applicable now as Europe has built up institutions and financial firewalls to prevent it.

Not everyone in the markets is convinced with that argument.

"Once one country exits, who is to say that more would not follow," said Neil MacKinnon, global macro strategist at VTB Capital.

Whatever transpires, Syriza's victory sends a message to European policymakers that voters are rejecting austerity and could bolster other anti-bailout parties, such as Podemos in Spain. It is an election-heavy year in Europe.
___

Pylas wrote from London. Lorne Cook also contributed to this report.


-- (c) Associated Press 2015-01-27

[PepperMe]

Spain, Portugal and Italy next.

[Suffinator]

It won't be much of a dialogue ... read ... http://meebal.com/anti-austerity-activists-call-following-greek-stance/

[cup-O-coffee]

This is all BS. I like this read as a solution to countries going under:

How could Greece and Argentina – the new 'debt colonies' – be set free?

"Many people argue that, regrettable as they may be, such situations are unavoidable. However, when it comes to debt problems within our borders, we actually don't let the same situation develop. All national bankruptcy laws allow companies with too big a debt problem to declare themselves bankrupt. Once bankruptcy is declared, the debtor company and its creditors are forced to work together to reorganise the company's affairs, under clear rules.

First, a standstill is imposed on debt repayments – for as long as six months in the case of the debtor-friendly American bankruptcy law. Second, subject to the majority (or in some countries a super-majority of two thirds) of them agreeing, creditors are required to accept a debt reduction programme in return for a new company management strategy. This programme could involve outright reduction (or even cancellation) of debts, lowering of interest rates, and extension of the repayment period. Third, lawsuits by individual creditors are banned until there is an agreement, so that individual creditors cannot disrupt the restructuring process. Fourth, the claims of other stakeholders on the company are also taken into account, with wages being typically given "seniority" over debts.

Unfortunately, no mechanism like this exists for countries, which is what has made sovereign debt crises so difficult to manage. Because they don't have any legal protection from creditors in times of trouble, countries typically postpone the necessary restructuring of their economies by piling on more debts in the (usually unfulfilled) hope that the situation will somehow resolve itself. This makes the debt problem bigger than necessary."

God forbid that the fat cats have to watch their numbers decrease whilst people lose jobs and starve and die because they have no health care. (Sarcasm)

It's just numbers... currently the people suffer and the fat cats watch their number digits grow on their computer screen... numbers that mean nothing to no one except greedy scum. There needs to be a solution so that the people can wake up with hope and food on their plates and a job to go to, and I give a damn if it means the fat cats have to watch their disgusting numbers decrease on their computer screens whilst STILL being able to enjoy caviar and champagne from the back seat of their Bentley.

It's high time to have bankruptcy laws for countries so that greedy scum have to think twice before luring countries into deals that are impossible to pay back.

It's truly idiotic that NATO will protect a member country if someone shoots a bullet at them, but there is no institution to protect a country if a scumbag rich person sucks the life out of a country's downward spiraling economy by offering even more debt on top of the debt... like a drug dealer giving a discount to an addict string out and nearly dead.

And they say the banks don't own the world. I say they are trying to and doing a damn good job of it. It's a form of usury that deserves a bullet to the brain... especially when billions of common people suffer due to greedy scum.

Countries need protection from debt because impoverished countries hurt everyone around them, including other countries.

Just my ranting view...

[cup-O-coffee]

Spain, Portugal and Italy next.

Don't forget China...

[watso63]

It's a high stakes game and it seems the new Greek government is calling the EU's bluff.

I think they'll win to a large extent because the EU federalists are scared to death that their pet projects wheels will come off.

Makes good watching from here.

http://m.bbc.com/news/world-europe-30995480

Edited January 27, 2015 by watso63

[Cletus]

Germany's the problem, not Greece (Nobel winner Stiglitz on CNBC):

http://www.cnbc.com/id/102367704

[cigar7]

If Greece gets free money, or forgiven loans, others will line-up to get free money.

Others like Italy, will be lining-up for free money.

[JockPieandBeans]

The stench of sh**e over Berlin and Brussels must be suffocating.

[Johpa]

If Greece gets free money, or forgiven loans, others will line-up to get free money.

Others like Italy, will be lining-up for free money.

There are two sides to a loan and nobody is lining up for free money and nobody is lining up to hand out free money. Those who loaned money to Greece will lose their bets regarding risk. Greece should just default and move apart from the Euro, a currency that has become little more than the Deutch Mark. Other countries have defaulted and later prospered: e.g. Argentina and Brazil. The Euro is nothing but a failed political-economic ploy by the financial community to extend its power and influence (profits) and should be deposited into the dustbin of history, just as the economic austerity placed upon the Greek people was an erroneous economic recovery plan imposed by fools who would ignore Keynes in order to protect their own personal profits. You could see these fools gathered at Davos last week.

[Cletus]

If Greece gets free money, or forgiven loans, others will line-up to get free money.

Others like Italy, will be lining-up for free money.

Italy has actually loaned money to EU, never got free money or loans, not even one euro!

Didn't you know that?

[Cletus]

If Greece gets free money, or forgiven loans, others will line-up to get free money.

Others like Italy, will be lining-up for free money.

There are two sides to a loan and nobody is lining up for free money and nobody is lining up to hand out free money. Those who loaned money to Greece will lose their bets regarding risk. Greece should just default and move apart from the Euro, a currency that has become little more than the Deutch Mark. Other countries have defaulted and later prospered: e.g. Argentina and Brazil. The Euro is nothing but a failed political-economic ploy by the financial community to extend its power and influence (profits) and should be deposited into the dustbin of history, just as the economic austerity placed upon the Greek people was an erroneous economic recovery plan imposed by fools who would ignore Keynes in order to protect their own personal profits. You could see these fools gathered at Davos last week.

I couldn't agree more, Johpa, well said.