Another final countdown for Greece

AFTER months of wrangling, recriminations and negotiations Greece has being given its final deadline by Eurozone ministers to pay up or get out.
Following Sunday's referendum, which saw millions of Greeks flock to the polls to vote Oxi, or No, to austerity measures demanded by the Eurozone countries it was clear that the long awaited end was nigh. Tuesday's meeting of Eurozone ministers merely confirmed what the markets had already suspected.
Final deadlines for the Greek government have become something akin to a Rolling Stones farewell tour, we have seen them before and stopped believing the flyers. This time, however, it seems almost certain that the Greeks will have to make some drastic decisions or genuinely risk Grexit.
Following the failure in Tuesday of either side of this ongoing saga to reach a conclusion European Union President, and Prime Minister of Poland, Donald Tusk warned that unless Greek officials presented a genuine and workable proposal to stay in the euro by Friday morning it would face bancruptcy.
The deadline comes ahead of am emergency meeting of all EU leaders On Sunday to discuss the possibility of Greece's exit  from the Eurozone. While this exit may not necessarily mean leaving the EU Sunday's meeting shows how seriously its possible exit from the Eurozone is being seen by member states both in and out of the single currency and its potential for Europe as a whole.
A bankrupt country within the EU would pose a risk for the bloc as a whole,  not just the Eurozone. Greek history shows a country where financial insecurity rapidly turns to domestic insecurity. Riots against austerity measures precipitated the rise of Syriza, yet by the standards of Greece's own reasonably recent history these were mild issues compared to Military Juntas and dictatorships. For European Ministers on Sunday the question of a destabilising financial crisis on one of its members and what it will mean for the security of the bloc as a whole will be a real issue.
German Chancellor Angela Merkel has already made it clear that Greek debt will not be forgiven. As the holder of by far the largest single portion of Greek debt, both as a contributor to European bailouts and domestic loans, Germany may hold the balance of Greece's future. France, which holds the second largest portion, wants a solution, however President Hollande is unlikely to push against the formidable Mrs Merkel too hard on this issue if he feels that the stakes become too much.
A possibility may be for a restructuring of Greek debt alowing for a longer period of repayments at lower levels. The International Monetary Fund has pushed for this form of a solution, having already had its debts defaulted on however this seems to be more focused on the IMF desperately wanting any chance of recouping its losses than supporting Greece.
For now the sword of Damacles hangs perilously over Greece. The thread which holds it is the new Greek Finance Minister Euclid Tsakalotos. Already seen as more willing to negotiate than his predecessor and a safer hand on the economy Mr Tsakalotos' first week will be a trying one.

Time for the final Grexit

Grexit, Grisis, Great news for eurozone; whatever your want to call it the time for a decision on Greece's future is rapidly approaching.
At time of writing there are still some hopes that a deal can be struck, however, even these are slim. The concessions proposed by the Greek government may buy them some time with their creditors but it will only be  a stop gap measure and likely to anger their own electorate.
Having campaigned on a platform of standing up to the European Union, preserving pension rights and combating austerity Greek Prime Minister Alex Tsipras and his ruling Syriza party will find it uncomfortable to explain why they are now making such a dramatic U-turn. On Tuesday it looked questionable whether he would be able to get the support in parliament to follow through on any agreement which included a concession on pensions making the plans even more unrealistic.
While the  proposal to combat Greece's mounting  debt has been greeted with cautious approval by some, including EU President Jean-Claude Juncker, others, including head of the International Monetary Fund Christine Lagarde and European Central Bank President Mario Draghi, are not even this optimistic of a solution.
Greece is hedging its bets on the idea that other eurozone countries will see Grexit as too much of a risk and therefore so long as they put on a good show of trying to compromise they will they will get what they want. Even if a bailout is agreed upon this time though it will only be a temporary measure. Unless Greece dramatically cuts its spending, raises the retirement age and curbs its more excessive tendencies then this will be just one round of a never ending fiscal game between the eurozone nations.
The issue for Germany et al though is  that having shown that they will bend over backwards to keep Greece in the zone they will have lost a key bargaining chip and created an inevitability for any future negotiations.
At this stage it could prove to be a greater risk to actually keep Greece in the eurozone. What critics of this opinion are quick to point out is that the zone was created with the specific concept that once joined it could not be left. To allow for Grexit would therefore create a dilemma for the bloc as member nations face an uncertain future, with any member potentially leaving and avoiding its responsibilities should the going get tough, examples of Spain and Portugal are thrown around considerably with this argument.
Such future exits would undoubtedly be painful and costly for the zone in the short term. If the eurozone is to survive in any format however this will be its only chance. By reducing the number of nations the remaining members will be able to create a more secure sustainable regime likely to increase productivity.
It would also not necessarily mean to collapse of the financial systems of leaving countries and the subsequent decent into anarchy and autocracy which has been predicted. The outflow from a prosperous regenerated eurozone is likely to bleed into these countries through trade and treaties, which with their new found ability to manage their own capital and current accounts more effectively is likely to help boost economies over the long term.
On a practical level the argument that should countries be allowed to leave the eurozone it would create some form of mass exodus must surely if true, which is unlikely, prove a decisive reason why it should be allowed. An economic regime which everyone wants to leave by definition has been proven to have failed and should be discarded in favour of a more effective one.
Without a real threat of exit there is no genuine means by which eurozone members can force others to acquiescence. Any negotiations will therefore prove pointless with a predetermined policy of paying an inevitability. An exit will without any question be painful, the rebuilding costly and many would sufferin the short term  Failing to allow it though would be catastrophic in the long run with the long term effects precipating a global financial crash to make the last decade seem a minor inconvenience.

Leaving Europe is a bad breakup we don't need

The future of Europe is one of those great discussions where it doesn't appear to actually matter if someone knows what is going on for them to make a contribution.
This is a good thing otherwise I would obviously be unable to wrIte about it.
In recent weeks the call from Conservative MP's to leave the EU, or at least calling for such unacceptable changes to the treaty agreement that they leave little other choice, has grown to more than 100. The Conservatives' For Britain group has appeared in a ghastly parliamentary parody of a bad boyfriend deliberately making unreasonable demand in the hopes that his girlfriend will break up with him and leave him looking like the injured party.
At the time of writing British MP's are debating the European Union Referendum Bill, the legislation required for the much heralded in out referendum to take place in 2017. As forgone conclusions go this was a safe bet. Everyone knows that it will pass. There is just too much pressure for a referendum to take place for it not to. It isn't whether we have a referendum now which matters, it is how we vote in that referendum.
The EU is far from perfect and in many ways could do with significant reform. This won't happen just because Britain stamps it's feet and cries though. It won't happen quickly and it most certainly won't happen in one go. The eurosceptics pushing for a renegotiation of the UK membership, supported by a number of disgruntled failed cabinet ministers looking to put the boot in,  know this. If they don't then they have either deluded  themselves or they really should not be allowed close to the debate. They know that the EU cannot change just because Britain says so. Likewise it won't even consider changing when there is a chance that the UK could leave anyway. International politics is a game and relies on states playing it in order to maximise their own preferences and gains.
The question which should be being debated in parliament is what is in it for everyone else. If we were serious about requesting reforms which would ensure that we stayed in the EU then we should be looking at how other states perceive their positions and what the relative gains will be. At the moment Britain had offered nothing in return for getting everything it wants.
An additional issue, and one which seems to be lost on many eurosceptics, is that leaving the EU will diminish Britain's absolute gains on the international stage. At present the United States sees the UK as a gateway into dealing with the rest of Europe. With its exit Britain's special relationship will sour quickly. This is of course something which will please the more nationalistic elements of the debate and what they are hoping for. The problem is that as the UK loses a great deal of support from America's declining hegemony it will lose its importance on the international stage.
This split will lead to a loss of trade which on its own could have been absorbed. Combined with the loss of trade and resources from Europe however it will prove crippling. Trade with China, based in no small measure with an understanding of Britain's ties to the US and its access to the EU economy, will not take long to dry up.
Britain is no longer an empire and it seems that too many people have forgotten this. We live and work in a globalised networked society. An EU exit has only one possible outcome for the UK, economic isolation and collapse. Better the long crawl to reform than the short sprint to crisis.

Eurosceptic votes may harm economy

AFTER months of campaigning the results are in for the European Union and the electorate has sent a clear message, that they can’t decide what they want. The much hyped success of the Eurosceptic parties in the European elections may have wider implications on the economy as investors start to lose faith.

European Central Bank President Mario Draghi warned on Monday that they need to be “particularly watchful for at the moment [there] is the potential for a negative spiral to take hold between low inflation, falling inflation expectations and credit, in particular in stressed countries.”

While Mr Draghi was expressing his views the rest of Europe was watching the results of the elections come in. An overall increase in the number of Eurosceptic parties, on both the right and the left, has led to a lack of confidence in the Euro from external investors as the stability of the bloc is called into question.

Mr Drahgi faces an uphill struggle in his aim to achieve his “goal, which is to return inflation towards 2% in the medium-term, in line with our mandate.” With investors watching an increasing number of parties in the EU wanting to see the bloc have less power over the internal affairs of the individual countries than it makes the future of the eurozone look tenuous.

As ‘animal spirits’ diminishes then no amount of monetary policy initiatives will help to increase investment to the levels necessary to raise aggregate demand, and therefore the level of output needed to increase prices.

Mr Drahgi summed up the issues facing the ECB in its struggle: Essentially, we are confronting three issues that might warrant a response. “First, the common effect of exogenous factors, including the exchange rate, on euro area inflation. Second, the asymmetric effect of endogenous developments, such as tight access to credit for parts and sectors of the euro area. And third, the risk that those effects combine to generate a more persistent regime of excessively low inflation.”

The outgoing European Parliament President Martin Schulz gave a voice to the concerns of investors when he said: “"It is a bad day for the European Union when a party with such a racist, xenophobic and anti-Semite program gets 24-25 percent of the vote in France. "But these voters aren't extremists, they have lost trust, they have lost hope." If the rise in euro-scepticism demonstrates the loss of faith from voters then a drop in investment will surely prove the same for foreign investors. 
It is perhaps an irony that it has been the state of the economy which many commentators have blamed for the rise of Euro-scepticism as national parties use unemployment levels and free movement between some EU countries as a rallying point for a fearful electorate.

Pro-Europe parties still hold a majority, however, while the mechanism of the EU Parliament will help to keep dissenting voices from causing too much disruption.

In finance though it is not always about the reality of the situation as much as it is about the perception. With candidates across Europe echoing the words of United Kingdom Independence Party Leader Nigel Farage: "The whole European project has been a lie. I don't just want Britain to leave the European Union, I want Europe to leave the European Union," the future of a strong trading alliance looks risky. With stronger markets emerging elsewhere investors may just decide to hedge their bets on a more stable opportunity. If this happens then Mr Draghi’s concerns about the potential for deflation may become a dangerous reality.

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