Geopolitics

The Future Of Greece? Five Key Clues For The Oracle

Waiting outside a bank in Athens, on July 6, 2015.
Waiting outside a bank in Athens, on July 6, 2015.
Giacomo Tognini

Amid all the talk of debt, defaults and deadlines, it is not easy to understand just what is actually going on in Greece. After yesterday's momentous referendum, we shine the spotlight on five key points to offer a way out not only for Greece and the Eurozone, but for the rest of us on information overload:

ALL EYES ON MARIO

Perhaps the single most crucial player right now is Mario Draghi, president of the European Central Bank (ECB), who was already on the phone early Monday with Greek Prime Minister Alexis Tsipras. Last week, following rampant withdrawals from Greek citizens seeking to protect their funds, the ECB limited emergency liquidity assistance (ELA) to Greek banks to 89 billion euros. The decision forced the Greek government to impose capital controls, and banks imposed a cap of one withdrawal of 60 euros per day for holders of Greek bank accounts.

Now that voters firmly rejected the austerity terms of the bailout agreement, Draghi must decide whether to continue providing funds to the Greek banking system â€" which is rapidly running out of money, with only around 1 billion euros left â€" or turn off the tap, causing a collapse of the Greek banking system. The failed banks would then appeal to the central government for help, but since Athens is already bankrupt as of last Tuesday, it would have to emit “IOUs” in lieu of actual euros, effectively creating a parallel currency. This would be a prelude to the formation of a “new drachma,” as Greece has no ability to print euros unilaterally and the ECB’s suspension of assistance would render the country devoid of cash.

Italian financial newspaper Il Sole 24 Ore reports that the ECB may offer a temporary loan while negotiations continue or use unspecified “new measures” to avert the impending economic catastrophe. So if the fate of Greece rests squarely in the hands of Draghi, are there clues to what he might do? He once famously declared he would do “whatever it takes” to save the euro. He also has been dubbed "Super Mario." To the rescue?

“VAROUFEXIT”

Greek Finance Minister Yanis Varoufakis announced his resignation early Monday morning despite being vindicated by the “No” victory in the referendum. In an effort to improve Athens’ prospects for a quick deal with its European creditors, the quixotic former economics professor decided that the widespread aversion to him shared by many European leaders would be an obstacle in the coming days of negotiations. French newspaper Libération reports that Euclid Tsakalotos has been sworn in as his successor.

Tsakalotos is an Oxford-trained economist and was previously the deputy minister of foreign affairs. He is close to Varoufakis both personally and in economic thinking, but has a reputation as a calmer negotiator. The outgoing minister endorsed Tsakalotos for the post.

DEFAULTS AND DEPRESSIONS

Last Tuesday Athens missed a payment of $1.7 billion to the International Monetary Fund (IMF), and has since been technically in default. Greece’s GDP has contracted by 25% since 2008, which according to Il Sole 24 Ore is the worst recession for any advanced economy since World War II.

The next key date is July 20, the deadline for Greece to pay back 3.5 billion euros owed to the ECB. With the government already effectively bankrupt and its banks perilously close to the same, some economists are urging a rapid “Grexit,” which Nobel laureate and New York Times columnist Paul Krugman writes would allow Greece to establish a new currency â€" the drachma â€" and let it strongly devalue, a move that helped both Argentina and Iceland recover from economic collapse in 2002 and 2009, respectively.

An alternative proposed by the Greek government is to stay in the Eurozone but obtain the cancelation of a large portion of Greek debt, though this has been widely rejected by European leaders after the 2012 bailout by the so-called "Troika" of the IMF, European Commission and European Central Bank moved virtually all of the country’s debt from private to public hands. Given this reluctance, French daily Le Monde reports German Economy Minister Sigmar Gabriel saying that a new bailout is "difficult to imagine."



THE CONTAGION FACTOR

Fears are rising that a Greek exit from the Eurozone could spark contagion to other weak European economies. The Guardian reports that soon after news of the referendum results broke, yields on government bonds in Spain, Italy and Portugal rose by over 2%. Yields move inversely to prices, meaning that those countries’ debt is now less attractive to investors after Greeks voted no. But leaders have consistently asserted that the risk of contagion is far lower than it was in 2011 at the peak of the previous euro crisis.

Speaking to La Stampa, Italian Prime Minister Matteo Renzi emphasized how Italy’s recent record of reforms could provide a “third way” between austerity and bailouts. In Spain, another country hit by recession but not saved by bailout, Finance Minister Luis de Guindos said Greece “must stay in the euro,” according to Madrid-based daily El Mundo. He expressed willingness to find a solution to the crisis, but noted that Spain underwent painful reforms and Athens must accept some of the same rules.

SAVED BY THE BRICS?

A last resort for Greece in case it is forsaken by the ECB is to look eastward to Russia and China for help. Tsipras spoke with Vladimir Putin on Monday, and the two have established close relations since the Greek leader was elected in January. But it is difficult to see how Moscow or Beijing could come to Athens’ aid. Russia’s economy is still reeling from a fall in oil prices, which fell further today, and international sanctions as a result of Putin’s actions in Ukraine. China’s stock market has been in freefall for the past three weeks, causing serious concern about the stability of the world’s second-biggest economy.

According to Reuters the Chinese central bank flooded the market with new cash, lending liquidity to investors and borrowers to reverse a trend that eliminated $3 trillion in stocks. As Moscow and Beijing look inwards to prop up their own economies, the BRICS â€" composed of Brazil, Russia, India, China and South Africa â€" will hold a summit Thursday in Ufa, Russia. Kathimerini writes that a decision hasn’t been made yet as to whether Tsipras will be invited to the meeting, and speculation has been mounting since March that Greece could potentially be invited to join the club of emerging economies. BRICS manages its own financial institution modeled on the World Bank called the New Development Bank (NDB), which could in theory bail Athens out if it joined the organization.

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Queen Elizabeth II with UK PM Boris Johnson at a reception at Windsor Castle yesterday

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 Hej!*

Welcome to Wednesday, where chaos hits Syria, Brazilian president Jair Bolsonaro is accused of crimes against humanity and a social media giant plans to rebrand itself. For Spanish daily La Razon, reporter Paco Rodríguez takes us to the devastated town of Belchite, where visitors are reporting paranormal phenomenons.

[*Danish]

🌎  7 THINGS TO KNOW RIGHT NOW

• Syrian violence erupts: Army shelling on residential areas of the rebel-held region of northwestern Syria killed 13 people, with school children among the victims. The attack occurred shortly after a bombing killed at least 14 military personnel in Damascus. In central Syria, a blast inside an ammunition depot kills five soldiers.

• Renewed Ethiopia air raids on capital of embattled Tigray region: Ethiopian federal government forces have launched its second air strike this week on the capital of the northern Tigray. The air raids mark a sharp escalation in the near-year-old conflict between the government forces and the Tigrayan People's Liberation Front (TPLF) that killed thousands and displaced over 2 million people.

• Bolsonaro accused of crimes against humanity: A leaked draft government report concludes that Brazilian President Jair Bolsonaro should be charged with crimes against humanity, forging documents and incitement to crime, following his handling of the country's COVID-19 pandemic. The report blames Bolsonaro's administration for more than half of Brazil's 600,000 coronavirus deaths.

• Kidnappers in Haiti demand $17 million to free a missionary group: A Haitian gang that kidnapped 17 members of a Christian aid group, including five children, demanded $1million ransom per person. Most of those being held are Americans; one is Canadian.

• Putin bows out of COP26 in Glasgow: Russian President Vladimir Putin will not fly to Glasgow to attend the COP26 climate summit. A setback for host Britain's hopes of getting support from major powers for a more radical plan to tackle climate change.

• Queen Elizabeth II cancels trip over health concerns: The 95-year-old British monarch has cancelled a visit to Northern Ireland after she was advised by her doctors to rest for the next few days. Buckingham Palace assured the queen, who attended public events yesterday, was "in good spirits."

• A new name for Facebook? According to a report by The Verge website, Mark Zuckerberg's social media giant is planning on changing the company's name next week, to reflect its focus on building the "metaverse," a virtual reality version of the internet.

🗞️  FRONT PAGE

"Oil price rise causes earthquake," titles Portuguese daily Jornal I as surging demand coupled with supply shortage have driven oil prices to seven-year highs at more than $80 per barrel.

#️⃣  BY THE NUMBERS

98

For the first time women judges have been appointed to Egypt's State Council, one of the country's main judicial bodies. The council's chief judge, Mohammed Hossam el-Din, welcomed the 98 new judges in a celebratory event in Cairo. Since its inception in 1946, the State Council has been exclusively male and until now actively rejected female applicants.

📰  STORY OF THE DAY

Spanish civil war town now a paranormal attraction

Ghosts from Spain's murderous 1930s civil war are said to roam the ruins of Belchite outside Zaragoza. Tourists are intrigued and can book a special visit to the town, reports Paco Rodríguez in Madrid-based daily La Razon.

🏚️ Between August 24 and September 6, 1937, during the Spanish Civil War, more than 5,000 people died in 14 days of intense fighting in Belchite in north-eastern Spain, and the town was flattened. The fighting began on the outskirts and ended in house-to-house fighting. Almost half the town's 3,100 residents died in the struggle. The war annihilated centuries of village history. The town was never rebuilt, though a Pueblo Nuevo (or new town) was built by the old one.

😱 Belchite became an open-air museum of the horror of the civil war of 1936-39, which left 300,000 dead and wounds that have yet to heal or, for some today, mustn't. For many locals, the battle of Belchite has yet to end, judging by reports of paranormal incidents. Some insist they have heard the screams of falling soldiers, while others say the Count of Belchite wanders the streets, unable to find a resting place after his corpse was exhumed.

🎟️ Ordinary visitors have encountered unusual situations. Currently, you can only visit Belchite at set times every day, with prior booking. More daring visitors can also visit at 10 p.m. on weekends. Your ticket does not include a guaranteed paranormal experience, but many visitors insist strange things have happened to them. These include sudden changes of temperature or the strange feeling of being observed from a street corner or a window. Furthermore, such phenomena increase as evening falls, as if night brought the devastated town to life.

➡️ Read more on Worldcrunch.com

📣 VERBATIM

We still cling to the past because back then we had security, which is the main thing that's missing in Libya today.

— Fethi al-Ahmar, an engineer living in the Libyan desert town Bani Walid, told AFP, as the country today marks the 10-year anniversary of the death of dictator Muammar Gaddafi. The leader who had reigned for 42 years over Libya was toppled in a revolt inspired by the Arab Spring uprisings and later killed by rebels. Some hope the presidential elections set in December can help the country turn the page on a decade of chaos and instability.

🇮🇷🎓  IN OTHER NEWS

Iran to offer Master's and PhD in morality enforcement

Iran will create new "master's and doctorate" programs to train state morality agents checking on people's public conduct and attire, according to several Persian-language news sources.

Mehran Samadi, a senior official of the Headquarters to Enjoin Virtues and Proscribe Vices (Amr-e be ma'ruf va nahy az monkar) said "anyone who wants to enjoin virtues must have the knowledge," the London-based broadcaster Iran International reported, citing reports from Iran.

The morality patrols, in force since the 1979 revolution, tend to focus mostly on young people and women, particularly the public appearance for the latter. Loose headscarves will send women straight to a police station, often in humiliating conditions. Five years ago, the regime announced a new force of some 7,000 additional agents checking on women's hijabs and other standards of dress and behavior.

Last week, for example, Tehran police revealed that they had "disciplined" agents who had been filmed forcefully shoving a girl into a van. Such incidents may increase under the new, conservative president, Ibrahim Raisi.

Speaking about the new academic discipline, Samadi said morals go "much further than headscarves and modesty," and those earning graduate degrees would teach agents "what the priorities are."

Iran's Islamic regime, under the guidance of Shia jurists, continuously fine tunes notions of "proper" conduct — and calibrates its own, interventionist authority. More recently the traffic police chief said women were not allowed to ride motorbikes, and "would be stopped," Prague-based Radio Farda reported.

Days before, a cleric in the holy city of Qom in central Iran insisted that people must be vaccinated by a medic of the same sex "as often as possible," and if not, there should be no pictures of mixed-sex vaccinations.

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

Thoughts on Facebook's new name? Zuckerverse? Tell us how the news look in your corner of the world: Drop us a note at info@worldcrunch.com!

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