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January 2020

17
Jan

Greece Rages Against Turkey’s Heft in Libya Peace Talks

Athens opposes Libya’s maritime accord with arch-rival Turkey
Greek premier, Germany’s Merkel discussed Libya on FridayBy Eleni Chrepa and Paul Tugwell

(Bloomberg) — Greece warned it may try to block any Libyan peace deal that doesn’t resolve a dispute over regional maritime borders, as Prime Minister Kyriakos Mitsotakis met with military commander Khalifa Haftar ahead of a Berlin conference on the country’s future.

The Greek government, which won’t take part in the Berlin summit, will not accept any political deal for Libya that doesn’t annul an agreement the country struck with Greece’s rival Turkey on maritime borders, Prime Minister Kyriakos Mitsotakis said in an interview on Thursday.

“Greece will veto, even at foreign-minister level before it makes it to head-of-state level,” any Libya agreement that doesn’t annul the pact with Turkey, Mitsotakis said.

Greece may not get that chance.

Mitsotakis was left off the invitation list for the peace talks in Berlin this weekend, where German Chancellor Angela Merkel, Italian Prime Minister Giuseppe Conte and U.S. Secretary of State Michael Pompeo will join Russia’s Vladimir Putin and Turkey’s Recep Tayyip Erdogan, the two leaders who’ve been calling the shots on Libya.

The politicians in Berlin are seeking a deal on foreign intervention after Russia and Turkey failed to persuade Haftar on a visit to Moscow to agree to a ceasefire.

Migrant Trafficking

The battle to secure control over the government has reduced oil-producing Libya to near-failed state status, with the country becoming a center for migrant trafficking across the Mediterranean.

President Recep Tayyip Erdogan said Thursday that Turkey plans to issue new exploration licenses in the eastern Mediterranean following the maritime deal with Libya, a step likely to add to tensions with Greece and the European Union. Erdogan, who backs Fayez al-Serraj’s government in Libya, said Friday that Haftar is not reliable.

“We encouraged Commander Haftar to participate in the Berlin process with a positive spirit,” Greek Foreign Minister Nikos Dendias told reporters after a meeting in Athens. “We expect Germany to safeguard the European position for Libya matters.”

Greece “will do whatever it takes” to protect its sovereignty if Turkey begins hydrocarbon drilling in waters Greece claims as its own, Mitsotakis said, adding that he doesn’t believe the situation in the Aegean will escalate.

Mitsotakis also held a call with German Chancellor Angela Merkel on Friday to discuss the issue.
Greece should have been invited to the Berlin summit, Mitsotakis said. “We should be in Berlin to discuss the future of a country whose stability is of interest to Europe, and of particular interest to Greece,” the premier said.

Greece’s participation in the conference had never been considered, German Government Spokesman Steffen Seibert said at a news conference in Berlin on Friday.

Berlin shared Greece’s concerns about the maritime dispute, which was already being dealt with in separate European forums, he added.“This conference doesn’t deal with that issue.”(Updates with foreign minister comment in 10th paragraph, Merkel call in 12th)–With assistance from Sotiris Nikas and Raymond Colitt.

16
Jan

Erdogan Says Turkish Energy Exploration to Follow Libya Deal

Erdogan Says Turkish Energy Exploration to Follow Libya Deal

Thursday, January 16, 2020 02:09 PM

Turkey will issue new exploration licenses in the eastern Mediterranean now that it’s set a maritime border with Libya, President Recep Tayyip Erdogan said Thursday, a step liable to exacerbate strains with Greece and the European Union.

Erdogan’s remarks underlined Turkey’s determination to press its claims in contested waters of the energy-rich eastern Mediterranean, where European nations, Egypt and Israel have built a forum to promote their interests. Turkey insists it has rights to energy finds there due to its claims to Cyprus’s north, which it seized in 1974. Greece, Cyprus and the EU oppose Ankara’s drilling operations within the island’s exclusive economic zone.

Tensions over the conflicting claims have escalated since Turkey and Libya signed a contentious agreement in November that delineates maritime borders and affirms claims of sovereignty over areas of the Mediterranean. Turkey’s demands could make it more difficult and costly to build a planned natural-gas pipeline that could link the eastern Mediterranean basin with European markets through Cyprus, Greece and Italy.

Leaders From Israel, Cyprus, Greece Sign EastMed Gas Pipe Deal

“From now on, it is not legally possible to carry out any exploration activity or construction of a pipeline in areas between Turkey and Libya without the permission of both countries,” Erdogan told a televised conference in Ankara. “We will issue licenses for these areas and start exploration work in 2020.”

Greece, Cyprus and Egypt see the deal with Libya as a brazen Turkish bid for dominance in the contested waters. Libya is also in conflict with Greece over off-shore exploration licenses Athens issued for waters south of Crete, which is located between Turkey and Libya.

Turkey extracted the maritime agreement from Libya’s internationally recognized government in exchange for military assistance in the North African nation’s civil war. Ankara and Moscow are now trying to bring the warring sides to a truce, which would also protect the accord.

The eastern Mediterranean has been one of the world’s most prolific spots for major gas discoveries during the past decade. Noble Energy Inc. found the Leviathan gas field in Israeli waters in 2010 and Italy’s Eni SpA discovered the giant Zohr deposit off the Egyptian coast in 2015. Exxon made a discovery off the southwest coast of Cyprus last year.

Turkey Starts Naval Drills in Disputed Mediterranean Waters

Turkish drilling ships are currently operating off Cyprus in waters declared by Turkey as its own economic exclusive zone, under agreements with the northern Turkish Cypriot state, which is recognized only by Turkey. The EU is weighing sanctions against Turkey over its oil and natural-gas exploration off Cyprus, and Cyprus wants the International Court of Justice to resolve its dispute with Turkey.

8
Jan

The IMF Leaves, But Greece’s Rescue Isn’t Over

Wednesday, January 8, 2020 04:28 PM

The announced closure of the International Monetary Fund’s office in Athens feels like a landmark, even though Greece, unlike many other crisis-hit nations in recent decades, was emphatically not bailed out by the IMF. It’s a moment to reflect on whether Greece really has been bailed out by anyone.

Technically, Greece is no longer a country in crisis. It’s more indebted relative to its economic output than any other European Union member state: Its debt-to-GDP ratio stood at 180.2% at the end of the second quarter last year, compared with an EU total of 80.5%, and there is no significant downward trend. But the European Commission sees the debt burden as sustainable and projects that it will drop to 100% of GDP by 2041. A 2018 deal, which smoothed out Greece’s repayments, helped greatly with that.

Other indicators look bad but not catastrophic. Unemployment is down to 16.4% from a 2014 peak of 27.8%. The economic growth rate is finally in positive territory, projected by economists tracked by Bloomberg to reach 1.7% for 2019 and 2% this year.

From the IMF’s point of view especially, there’s little left to do in Greece. Last year, the country made an early repayment of 2.7 billion euros ($3 billion) on its relatively expensive debt to the IMF. Now, it only owes the fund, which made its last disbursement to Greece as long ago as 2014, a mere $6.3 billion out of a total of $340 billion in external debt.

But in effect, the crisis and the rescue efforts have cast Greece, an EU member since 1981, down to the economic level of some of the newest member states. Its per-capita GDP, adjusted for purchasing power parity, has stabilized at a little more than two-thirds of the average EU level, about the same as in Latvia or Romania. The high taxes forced on Greece by creditors have created an informal economy about as big, relative to GDP, as in these and other Eastern European countries.

According to Elstat, Greece’s national statistical agency, net migration has been positive in the last few years, but that’s more of a problem than a happy development. Greeks have been leaving the country of about 11 million at a rate of more than 100,000 a year since the crisis started. The outflow only has been offset by the arrival of migrants from the Middle East and Africa during the recent refugee wave — a burden Greece struggles to process.

Unlike Eastern European countries, however, Greece has never received much of a remittance inflow from its emigres. In fact, such transfers of funds have even dropped since the crisis-driven mass emigration started.

Greece also has less flexibility to foster economic expansion than the Eastern European nations: Agreements with creditors forced it to run primary budget surpluses, and even despite low interest rates, its financing needs are much higher than the Eastern Europeans’ because of the sheer size of its debt pile. Romania, for example, has a government debt-to-GDP ratio of just 34%.

What’s more, unlike their Eastern European counterparts, Greek banks are saddled with enormous amounts of non-performing loans, which aren’t declining fast enough to allow banks to expand credit. The Greek banking system’s bad-loan ratio stood at 42.1% in September, the latest month for which data are available. In Romania, that ratio is below 5%.

Greece, in other words, isn’t just starting from a low base like the Eastern Europeans — it’s doing so while dragging around a ball and chain. The center-right government of Kyriakos Mitsotakis is trying to offload the bad debt from banks’ books and lower taxes, but Greek governments’ flexibility in fixing the economy will be limited long beyond Mitsotakis’s tenure.

In a way, the restrictions are fitting payback for what went wrong in Greece. In a September 2019 speech, Poul Thomsen, director of the IMF’s European Department, said Greece’s crisis was different from the contemporaneous ones in Spain, Ireland and Portugal. In those countries, adoption of the euro drove a private credit expansion that led to an “unsustainable demand boom.” In Greece, by contrast, it was the government that feasted, raising pensions and social transfers by 7% of GDP between the single currency’s adoption and the onset of the crisis. That, in Thomsen’s view, explains Greece’s bad fortune in facing a greater fiscal tightening than Europe’s other crisis victims.

By extension, Greece’s political elite must learn to live with the long-term restrictions. An obsessive spender needs to be separated from his credit cards. Contrary to what’s often assumed, Greece’s private creditors were punished, too, for supporting the government’s appetites — they took a major haircut in 2012.

In other words, a lot has been done to minimize moral hazard on the part of Greek politicians and private investors. But it still exists for the IMF and the EU, which have collectively worked out the punishment that came as part of Greece’s financial rescue. They won’t be responsible for any of the mistakes they made during the bailouts — underestimating the depth of the crisis, demanding the draconian tax increases, insisting on budgetary tightness even as it translated into continuing economic decline.

The IMF is getting paid back ahead of time. Yields on the bonds issued by the European Stability Mechanism to support Greece, are negative, so Europe can well afford to be lenient on Greece’s repayment terms. The Greek crisis has delivered tough lessons to Greece’s elite and to bankers. But the IMF and the European Union are free to handle the next crisis in the same bungling ways, battering the victim but taking on little of the cost.

Of course, the world doesn’t have to be fair, but Greece’s institutional creditors should consider shouldering more of Greece’s burden. If the Mitsotakis government, and perhaps its successor, make substantial progress in getting Greece’s economy to grow again and Greek emigres to come home, nominal debt cuts shouldn’t be ruled out. It’s not wrong to make Greece wear its ball and chain, but making it do so indefinitely is excessive.

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