Dissension in the ranks: Greek government in fresh turmoil over €86bn bailout deal

BY Fraser Tennant

Following the intense negotiations required to secure the €86bn conditional bailout deal with eurozone leaders, Greek prime minister Alexis Tsipiras now needs to do more tough talking – this time with his own coalition partners.

The first to highlight dissension within the ranks of the Greek government was Panos Kammenos, defence minister and leader of the Independent Greeks party, who likened the deal to that of a coup by foreign leaders. The junior coalition partner has made it clear that he will not support the measures included in the bailout deal.

Mr Kammenos said: “The agreement speaks of 50bn euros worth of guarantees concerning public property, of changes to the law including the confiscation of homes. We cannot agree to that."

The new bailout agreement has also to be approved by parliaments in a number of eurozone states.

Further examples of the strength of opposition in Greece to the terms of the deal include demonstrations at the Greek parliament and the announcement of a 24-hour strike by civil service workers.

“The Greek government made a 360 degree shift after six months of tenuous negotiations and accepted another devastating deal for Greece," says Dimitris Rapidis, a political analyst and director of the think-tank, Bridging Europe. “The government and its prime minister, Alexis Tsipras, grew public expectations immensely and irrelevantly, motivating 61 percent of the electorate to vote ‘no’ in the recent referendum.”

The financing deal agreed for Greece over the next three years (the third such bailout) is on condition that Greece passes all agreed reforms – which include tax revenue, liberalising the labour market, and pension and VAT reforms – by Wednesday 15 July.

Should the four pieces of legislation required not be passed by the Greek government, the deal will fail – leaving Greece’s banks facing a possible collapse and opening the door to the country's expulsion from the eurozone.

Adding to Greece’s short-term crisis is the International Monetary Fund’s (IMF) announcement that the beleaguered country had this week missed a debt repayment (€456m) for the second consecutive month.

“The social and electoral consequences for the Syriza party, and especially for Mr Tsipras himself, will be assessed mid-term,” asserts Dimitris Rapidis. “It’s important to point out that this bailout has no chance to succeed and improve the current economic conditions in Greece as there is no concrete growth plan, there is no commitment to address unsustainable debt and, above all, there is no plan to protect the most vulnerable parts of the society.

“On the contrary, by accepting such a program, Greece moves closer to a Grexit or, worse, to a continuous political instability and social unrest. This government had every chance to shift course, demonstrating a solid social appeal so far, even with bigger geopolitical risks for the country, but it finally chose to apply the same catastrophic recipe.”

Potential Grexit or otherwise, finance ministers from all 28 EU countries are convening on Tuesday 14 July to hold a scheduled meeting in Brussels to discuss the mounting debt crisis in Greece.

News: Eurozone Leaders Reach Rescue Deal for Greece, With Tough Conditions

Global alt assets to reach $15.3 trillion

BY Richard Summerfield

Global alternative assets are set to increase to $15.3 trillion by 2020, according to a new report from PwC.

This growth in alternative assets will likely be driven by a period of transformation in the global alternative asset management industry as parties active in the space recalibrate their business and operations and make technology a top investment priority.

The report, 'Alternative Asset Management in 2020: Fast Forward to Centre Stage', notes that though the predicted level of growth in the alternative assets space is expected to be achieved over the next five years, that growth is dependent on a number of factors. Primarily, it relies on the continued growth of global monetary policy and the stable development of global GDPs. However, the report notes that growth could drop to $13.6 trillion if interest rates in Europe and the US rise and capital markets undergo corrections.

Much of the expected growth in alternative assets is expected to come away from the traditional developed global markets. Indeed, South America, Africa and the Middle East are expected to be hotbeds over the next five years. "The shift in global economic power from developed to developing regions will drive continued focus on sovereign investors, fast-growing institutions and the emerging middle classes in new markets," said Mike Greenstein, global alternative asset management leader at PwC. "These groups of investors will increasingly seek branded multi-capability alternative investment firms. Currently, a number of alternative firms exist in this category and others will aspire to join them."

Growth in emerging markets is likely to be driven by key trends. The first is a government-incentivised shift to individual retirement plans. Generally speaking, the global population is rapidly ageing. With global pension fund assets expected to reached $56.6 trillion by 2020, alternative assets should play a larger role in allocations. Other growth trends include a marked increase in the number of high-net-worth-individuals from emerging populations and the growth of sovereign investors.

Report: Global alternative assets predicted to reach $15.3 trillion in 2020

A Greek tragedy?

BY Richard Summerfield

It would appear that after much debate – and many billions of euros – the Greek debt crisis may finally be entering the end game.

On Tuesday 30 June, the International Monetary Fund (IMF) confirmed that Greece had failed to make its latest €1.5bn debt repayment, officially placing the country ‘in arrears’. Greece’s missed payment is the largest in the IMF's history and the country becomes the first ever ‘advanced economy’ to be placed in arrears. The ‘default’ by Greece also brings about the end of the country’s second bailout programme.

In a last gasp attempt to prevent default, the Greek government proposed a new two year bailout programme which would be supplied under the European Stability Mechanism, which provides Europe’s bailout fund. The proposal was made shortly before the IMF’s payment deadline.

In a letter sent to the European Commission, IMF and European Central Bank, incumbent Greek prime minister Alex Tspiras asked for a new loan of €29.1bn to cover debt maturing in 2017.

In order to secure the fund, Mr Tspiras claimed that he would accept all of the conditions put forward by the country’s creditors provided there were a few minor amendments. The Greek government is seeking, in terms of the country's value-added tax system, a special 30 percent discount for Greek islands, many of which are in remote and difficult-to-supply regions, be maintained. With regard to pension reforms, Mr Tsipras asked that changes to move the retirement age to 67 by 2022 begin in October, rather than immediately. He has also requested a special ‘solidarity grant’ be awarded to the country’s poorer pensioners. This grant, Mr Tspiras notes, would be phased out by December 2019. “Our amendments are concrete and they fully respect the robustness and the credibility of the design of the overall programme,” said Mr Tsipras.

At the time of writing the approval of this third bailout seems highly unlikely. Many senior European figures, particularly those in Germany, appear unwilling to deal with Mr Tspiras and his finance minister Yanis Varoufakis. Mr Tspiras’ decision to call a referendum for Sunday 5 July, in which the country will decide whether it wants to accept creditors' bailout conditions, has proven to be a contentious one. German chancellor Angela Merkel noted that “the door to talks with the Greek government has always been, and remains, open", adding, however, that talks could not take place before Sunday’s poll.

With fierce criticism of the referendum ringing around Europe, a no vote appearing most likely, and a €3.5bn payment to the ECB due on 20 July, Greece’s time in the euro may be drawing to a close.

News: Greece debt crisis: IMF payment missed as bailout expires

Greece defiant following collapse of eurozone debt deal talks

BY Fraser Tennant

Greek prime minister Alexis Tspiras has called for “realism” from international creditors following the collapse of the latest round of debt deal talks in Brussels on Sunday.

The talks between the Greek government and EU officials saw Greece reject demands to make €2bn (£1.44bn) worth of spending cuts in able to secure a deal to unlock bailout funds. Also at issue was the looming deadline for Greece to repay more than €1.5bn of loans to the International Monetary Fund (IMF) by the end of June.

Mr Tspiras also rejected an EU request to make substantial cuts to pensions by saying his country's dignity would not allow for such an eventuality.

“One can only suspect political motives behind the institutions insistence that new cuts be made to pensions despite five years of pillaging by the memoranda," said Mr Tspiras in an interview with the Greek newspaper Efimerida Ton Syntakton. “The Greek government is negotiating with a plan, and has presented nuanced counterproposals. We will patiently wait for the institutions adhere to realism.”

Mr Tspiras also commented that his stance was not “a matter of ideological stubbornness” but was “about democracy”. In response, a muted European Commission (EC) said that although some progress had been made during the talks, “significant gaps” remained and time was running out for Greece to unlock bailout funds from the EU and IMF.

The impasse between Mr Tspiras and EU officials has intensified concerns as to the prospect of a Greek default in two weeks’ time. Furthermore, many believe that this could ultimately lead to Greece withdrawing from the eurozone altogether – a ‘Grexit’, as it has become known.

On the prospect of a Grexit, French president Francois Hollande said there was “little time” to prevent Greece from leaving the eurozone and that “the ball was now firmly in Greece's court”.

Mr Hollande said: “It's not France's position to impose on Greece further cuts to smaller pensions, but rather to ask that they propose alternatives. We have to get to work... everything must be done in order that Greece remains in the eurozone."

Next up for Mr Tspiras and the Greek government is a European Central bank (ECB) reassessment of continuing support for Greek banks in case of default (17 June); a meeting of Eurozone ministers to hammer out a deal that Greece can ratify by the end of the month (18 June); and the end of the Eurozone bailout with Greece and the deadline for a Greek €1.5bn debt repayment to the IMF (30 June).

News: Morning Agenda: Greek Debt Talks Break Down Again

France pushes through economic reform bill

BY Richard Summerfield     

Facing continued stagnation in the national economy, French prime minister Manuel Valls was forced to take decisive action last week. Utilising emergency constitutional powers, he pushed through an omnibus bill which will implement a number of labour market reforms. Though the prime minister felt that his bill would likely pass a parliamentary vote, he was unwilling to leave it to chance.

The reform bill is made up various measures which appear quite inconsequential in isolation, but their sum, the government hopes, will reinvigorate the national economy. The bill proposes to extend shopping hours on a Sunday, sell between €5bn and €10bn of state shareholdings, liberalise the country’s inter-city coach industry, and deregulate a number of professions. Should the reforms have their intended purpose, they could prove vital for the economy, which is entering its third year of stagnation and near zero growth.

However, implementation of the so-called ‘Loi Macron’ bill (named for French economy minister Emmanuel Macron) by emergency decree required the government to pass a vote of no confidence. The government succeeded by just 55 votes. The Macron bill has encountered opposition from both the left and right wings of the French political spectrum. A number of government ministers, suggesting the reforms were too pro-business, had announced they would move to block the bill if it went to a vote. Despite some political reluctance, recent polls point to strong public support for the reforms.

The decision to bypass regular parliamentary procedure has served to further emphasise the commitment of the Valls/Hollande government to modernisation. "There was probably a majority for this bill but it was not sure so I decided to take no chances - I couldn't risk seeing a plan so crucial to our economy be rejected," said Mr Valls. "Nothing will make us give up, nothing will make us retreat - the national interest of the French people requires it."

News: French govt to pass controversial economic reform bill by decree