sexta-feira, 6 de fevereiro de 2015

Greece should bail-in the eurozone

Excelente artigo: de longe, a melhor analise do cenario econômico grego.

For the past week, the world has been roiled by the new Greek administration. Elected on the basis of promises to end austerity and write down part of Greece’s enormous debt burden, Finance MinisterYanis Varoufakis has embarked on a whirlwind tour of Europe to explain his policies, with a view to gaining broad support for a new approach to ending the Greek depression and restoring its finances.
The “new deal” that Mr Varoufakis offers both to Greece’s citizens and to its eurozone partners is, broadly, this:
Many people have commented that Greece’s debt burden, though enormous relative to its shrinking GDP, is not unaffordable, and question why a further restructuring is necessary. But this misses the point. The debt deal offered by Mr Varoufakis would not materially affect Greece’s payments. But it would fundamentally change the power balance between Greece and its creditors.
For the ECB, Mr Varoufakis suggests converting existing holdings of Greek debt to perpetual bonds. These would be similar to the “consols” issued by the British government at various times, usually to finance wars, which are fixed-coupon bonds with no maturity date that can be repaid at any time. Perpetual debt with fixed-rate coupons can become expensive for the issuer when interest rates are falling, but this is mitigated by the call option: indeed, the British government is just about to call most of its remaining War Loans in order to refinance them at today’s low interest rates.
As Andrew Lainton explains, the ECB should accept Mr Varoufakis’s offer. It has nothing to lose and a great deal to gain by removing the risk of default from its holdings of Greek debt.
Mr Varoufakis suggests converting other debt, notably the European Financial Stability Facility (EFSF) rescue loans, to GDP-linked bonds, where debt service costs and/or repayments would rise and fall with GDP. The proposal was well received by representatives of the finance sector, but so far eurozone governments have been distinctly lukewarm. For them, this proposal is politically controversial. It stems from Mr Varoufakis’s argument that Greece is insolvent, not illiquid.
The proposed debt restructuring would convert EFSF loans to something akin to preference shares — a debt-for-equity swap. In effect, Mr Varoufakis wishes to bail in creditors, rather as senior unsecured bondholders and uninsured deposit holders would be in a bank failure (once the EU Bank Recovery & Resolution Directive is fully implemented). This is, of course, risk sharing — not by issuing common debt, but by taking equity stakes in a distressed country with a view to turning it around. I suspect this might be anathema in creditor countries. But as Mario Draghi pointed out in a speech in Helsinki in November 2014, some form of risk sharing is essential if the eurozone is to survive. Mr Varoufakis’s scheme thus deepens European integration without breaking the taboo on common debt. It deserves serious consideration.
But Greece has already had debt restructuring in return for the structural reforms imposed by the Troika: it has failed to enact all the reforms agreed, and even those it has managed to make have largely failed to deliver the expected benefits. Why should Greece’s creditors take seriously new promises to reform, let alone replace the existing reform programme with something different?
Mr Varoufakis argues that privatisations at fire-sale prices are counterproductive. So, too, are tax and benefit reforms that wreck the living standards of ordinary Greeks while leaving the privileges of the rich untouched. After meeting Tsipras this week, Martin Schulz, the President of the European Parliament, commented: “We agree ordinary Greeks have paid too much. Now is the time for those who took money out of the country to pay.”
But the challenge of making the sort of structural reforms that would ensure that rich and powerful Greeks pay their share should not be underestimated. Previous administrations have not dared to tackle Greece’s oligarchs.
Mr Varoufakis’s pledge to “destroy the Greek oligarchy” is thus not simply a side issue. It is the heart of his mission to restore Greece to prosperity and enable it to remain in the eurozone. And he will need all the help he can get from his eurozone partners to achieve this objective.
The mistake that the EU has made in Greece is to fail to provide adequate support — or even recognise the need — for radical reform of institutions and governance. Telling a government to end corruption, reform taxation and pursue sound fiscal policies is all very well, but governments in hock to oligarchs have enormous difficulties doing this. When institutions are weak, officials and politicians are captive and corruption is rife, a strong legal framework and sensible governance rules will not by themselves ensure fundamental change. The EU could be doing far more to help Greece enact the deep structural reforms of institutions and governance that is really needed to turn it round.
The EU must also learn the lessons of history. Europe has suffered terribly in the past because of antagonistic relationships between indebted nations and their creditors. And the world is littered with the political corpses of those who inflicted pain on their people and damage to their economies in the name of “balancing the books” and “restoring credibility”. Severe austerity begets populism — and populism, though well-intentioned, has a dark side. Germany should remember its own history: it was Chancellor Brüning’s austerity policies at the height of the Depression that led to Hitler’s landslide victory in 1932. Latin American countries, too, have repeated the cycle of severe austerity — populist profligacy — disastrous collapse again and again. And Greece, of course, is a serial offender. It is essential that this cycle is broken. And for that, co-operation, mutual support and a sense of shared destiny is needed. This is the hope that the Greek people cling to. And this is the hope that the EU, at its best, can offer.
Syriza is a populist government, and some of the policies it has already implemented are disturbingly similar to those of other populist governments that eventually failed disastrously. It must resist the siren voices that want to wipe out the pain of the past and restore lost prosperity through a highly expansive fiscal programme. This is a road that must not be travelled. There can be no magic wand: recovery requires hard work and enterprise, and there will still be pain to come.
But the EU, too, must not allow its fear of populism and scepticism about Syriza’s motives to dominate its decisions. It now has an opportunity both to restore hope to Greece and to secure its own future as a union. It should take it.

Frances Coppola

Fonte: FT