Tuesday, 30 January 2018

The Great Greek property selloff

A confluence of economic depression, taxes and debt has created conditions for a massive selloff of Greek real estate. 

A NEW study confirms suspicions that taxation and debt are prompting Greeks to sell off property they spent previous generations amassing. Property ownership has fallen for the first time in decades, and half of all Greeks don't think it's worth buying property any more. The likely result: A massive selloff to overseas buyers. 

The latest study by the Hellenic Property Federation has found that:
Ownership has fallen by 7.7pc during Greece’s ten-year economic crisis, to 74pc
42pc of Greeks would rather buy, versus 49pc who'd rather rent 
Three quarters of landlords have lowered rents during the crisis, yet half of all renters remain in arrears with payments 
One third of all owners plan to sell in the next two years, three times the pre-crisis figure 
Three quarters of owners find crisis-era austerity taxes on property unfair. 

The real estate market has suffered a series of blows since the Greek debt crisis began in 2008. 

1. ENFIA, a property ownership tax, was introduced in 2011 to offset falling income tax revenues. It is meant to raise €2.65bn a year, but often raises more. Property-rich but cash-poor Greeks have been forced to sell properties at bargain rates in order to raise money to pay the tax. 
2. As unemployment rose to a high of 28pc in 2013, rented residential and business properties were left vacant. The combination of the economic depression and property tax meant that ownership became a liability rather than an asset. Many properties went up for sale, flooding the market and further depressing prices. 
3. The depression also created a rise in non-performing loans, many of them mortgages. These now stand at just €105.2bn, or 60pc of GDP, according to Bank of Greece figures. The banking system plans to reduce these by €40.2bn by the end of 2019. Much of this - €11.5bn – will come from liquidations, meaning a dumping of loan collateral on the real estate market this year and next. A further €7.4bn will come from sales to debt collectors, likely leading to further foreclosures. The government has, at the behest of the Eurozone and International Monetary Fund, taken property auctions out of physical courts and put them online in its January 15 omnibus bill, where no amount of protests can delay or stop them. 
4. The short-term rental platform Airbnb gave Greek owners temporary relief. These rentals have until now been essentially tax-free, offering a lifeline to owners who have been able to reschedule mortgages and keep up with payments for the first time in years. But the Independent Public Revenue Authority (AADE) is now launching a platform for such rentals to be registered and taxed by as much as 45 percent. The expected tax income is €57mn. Airbnb income averaged $2,787 per registered Greek property last year, the company says. 

The combined pressures – property tax, inability to find paying renters, the commencement of foreclosures in earnest and the closure of tax loopholes – mean that a slate of Greek property will come on the market this year an next. According to Bank of Greece data, residential property prices fell by 40pc between 2007 and 2016. Whether this round of selling further depresses them remains to be seen. 

Thursday, 25 January 2018

Greece, former Yugoslav Macedonia, begin to mend fences

The prime ministers of Greece and former Yugoslav Macedonia announced their first concrete steps towards rapprochement in more than 20 years at Davos on Wednesday. 

Speaking on the sidelines of the World Economic Forum in the Swiss resort, the leader of the government in Skopje, Zoran Zaev, said he would strike the name Alexander the Great from the national airport and main national motorway. The latter will be renamed Friendship Highway, the Greek side said. 

In return, Greek premier Alexis Tsipras said, he will move to ratify in parliament a partnership agreement between the former Yugoslav republic and the European Union, as well as membership in a regional body.  

Confidence-building measures will also resume, Tsipras said, “in areas such as energy, transport and cross-border contact, with the most important being the opening of the border crossing near the Prespa [Lakes].” Greece shares the idyllic Greater Prespa Lake with former Yugoslav Macedonia and Albania, and has agreed on opening a three-way customs and border infrastructure. 

“We don’t just want to solve the problem of the name, but to put the relationship between our two countries on a stable foundation,” Tsipras said. “That means we must first confront irredentism in all its forms, with guarantees that we will leave no window open for similar provocations to arise in future.” 

“We want to be partners in the European Union and allies in NATO, to face all the hardships in the difficult era in which we live,” Zaev said. “We, as prime ministers, have the political vision, the sense of responsibility and the courage to find a solution to this problem which has existed for 25 years. The time has come… because it is of vital importance for our prospects of entering NATO and the EU.” 

As a NATO and EU member, Greece holds a power of veto against new members, and effectively exercised it in 2008, when former Yugoslav Macedonia applied to enter NATO. Both bodies have told the government in Skopje to resolve its differences with Greece as a pre-requisite to entry. 

A brief but painful history 

Shortly after communism in Eastern Europe collapsed in 1990, Serbia attacked other constituent republics of Yugoslavia, initiating the federation’s breakup. The European Union’s recognition of Slovenia and Croatia as sovereign states in December 1991, at the behest of Germany, precipitated that breakup. 

Yugoslavia’s southernmost state had been called Macedonia throughout the communist era, in what many historians consider an attempt by Yugoslav leader Marshal Tito to launch a territorial claim on the Greek region of Macedonia to the south. In 1991, the regional government in Skopje declared independence as the Republic of Macedonia, and circulated communist-era maps showing the republic’s claim to Greek territory as far as the Aegean, including the city of Thessaloniki. 

Greece objected to the new nation’s registration with the United Nations under that name, and it was temporarily registered as The Former Yugoslav Republic of Macedonia, or FYROM. The European Union suggested a composite name that included the term Macedonia, such as “Nova Macedonia”, but the proposal split the Greek government and caused massive demonstrations in Thessaloniki. A Greek trade embargo aimed at forcing its neighbour to relent backfired in 1993, triggering an international wave of sympathy for the nation of two million, and a series of bilateral diplomatic recognitions as ‘Republic of Macedonia’. The last major diplomatic initiative between the two was the Interim Accord of October 1995, whereby they recognised each other’s sovereignty, disavowed any mutual territorial threat, resumed trade and pledged to find a solution to the name issue.  

With its strategy and public opinion in disarray, Greece quietly signalled it was willing to open talks on the basis of a composite name including the M-word, but after the 2006 election it was the nationalist VMRO-DPMNE (Internal Macedonian Revolutionary Organisation – Democratic Party of Macedonia) government in Skopje that refused to compromise. 

The SDSM (Social Democratic Union of Macedonia) came to power on May 31 last year, following a December 2016 election, ousting the VMRO-DPMNE from power for the first time in a decade. Zoran Zaev immediately signalled he was willing to re-open talks with Greece. His foreign minister, Nikola Dimitrov, visited Athens on June 14. He and Greek Foreign Minister Nikos Kotzias, officially re-opened direct talks to resolve the name issue that day. 

Those talks are taking place on the basis of a composite name including the M-word, which the republic would use for all internal and international purposes. 

Monday, 22 January 2018

Greece almost clears penultimate hurdle

Greece has almost cleared its latest hurdle on the road to graduating from economic oversight by its creditors, but not quite. Monday's meeting of euro area finance ministers, or Eurogroup, declared a political agreement, but in order to disburse a €6.7bn loan instalment Greece needs to stay abreast of interest payments, it wants to see evidence that certain measures are being implemented, not simply approved in parliament. 

First, it wants to see that a new law enabling banks and tax authorities to foreclose on homes and sell them online will produce "a continuous and unimpeded flow of electronic auctions". Until a January 15 bill went through parliament, auctions were carried out in physical courts. Protests by homeowners and sympathisers often disrupted proceedings, and by intimidating notaries-public, put a stop to them for all of last year (see video below).

The tranche of €6.7bn breaks down as follows: 
- €3.3bn cover Greece's debt servicing needs to the end of June.
- €1.9bn are to go towards a rainy day fund, which Greece needs to have in place in order to graduate from its fiscal adjustment programme in August. 
- €0.5bn will go towards payment of half the government's debts to its suppliers, a cash injection to the Greek economy. 
- €1bn will be paid out at the end of April, once the government has paid off its outstanding debts to suppliers. 

The Eurogroup also wants to see progress on privatisation. The highest profile selloff in 2018 is that of the Public Power Corporation, plagued by controversy for years.

Greece is meant to graduate from its fiscal oversight by the Eurozone and the International Monetary Fund, its two main creditors, in August, following which it hopes that its massive outstanding debt of €332bn will be rescheduled. The IMF says that without further rescheduling, Greece won't be able to repay its debts after 2020. 

The Eurogroup's incoming chairman, Portugal's former finance minister Mario Centeno, offered promises to this effect: "We will look into a mechanism that will link debt relief to growth developments," he said, but warned that, "a sizeable primary surplus and reform momentum must stay on and outlive the programme in order to unlock growth potential and regain investors' confidence." 

Greek finance minister Euclid Tsakalotos said he was satisfied with the outcome. "It was a point of great encouragement for us that the final paragraph of the communique mentions a working group, which will specify the debt measures in terms of what we call the French Mechanism." 

By "French Mechanism", Tsakalotos was referring to a mechanism demanded by Syriza since it took power in January 2015, whereby Greece would repay its debt in proportion to its GDP growth. "There will be a certain amount of debt relief," he explained, "and following that, if growth is disappointing, there could be some further relief." 

Tsakalotos ruled out a line of credit for Greece after it graduates from fiscal oversight, saying this will probably be replaced by its new rainy day fund. 

He also said that in order to graduate, Greece will have to come up with its own plan for growth and development of the economy. This, he said, has already begun in the omnibus bill passed on January 15. That bill re-establishes the national land register, begun to little effect in the previous decade, delineating forest and coastal land from land that may be commercially developed. This delineation has been a long-standing demand of the business community, since many domestic and foreign investments - especially in tourism - have stalled on the inability to secure planning permission. 

Wednesday, 10 January 2018

Europe stumbles forward in search for migration policy

This article was published by Al Jazeera International
Athens, Greece - Greek Migration Minister Yannis Mouzalas has lashed out at six European Union countries for "sabotaging" the bloc's refugee relocation scheme and undermining efforts to craft a common asylum policy.
An original European Commission proposal seeking to redistribute 160,000 asylum seekers throughout the EU from overcrowded camps in Greece and Italy fell significantly short after completing just 31,000 relocations by its end last September.
"We were slow to implement the proposals," Mouzalas said on Tuesday.
"There were member states … which sabotaged these proposals; and it took a great struggle on the part of the Commission and the ministries to prevent this sabotage from leading to a failure of the programme."  
Mouzalas was referring to Hungary, Poland and Denmark, which refused to participate in the programme. Austria, the Czech Republic and Slovakia all together took in just 45 people.
Relocation in Europe
Over the last three years, Greece and Italy have become the main gateways for 1.5 million refugees arriving on Europe's shores. Under current EU rules, known as the Dublin II regulation, refugees must apply for asylum in the first EU country they arrive in - an impossible burden for the Greek and Italian authorities dealing with asylum requests.  
The spat over the bloc's Relocation Programme has now opened up a gulf between EU members over how to reshape a future asylum policy.
"The idea of institutionalising relocation has become part of the Dublin reform discussion, and it has become deeply contentious within that," Elizabeth Collett, director of the Migration Policy Institute, Europe told Al Jazeera. 
"[It] is one of the reasons why the Dublin reform discussion has largely stalled."
Mouzalas said that the dispute has weakened, rather than strengthened, the prospect of a common EU migration policy.
"The EU, through its institutions, tried to create a common treatment," he told Al Jazeera.
"I think that in the first phase … this failed … Xenophobic parties are playing en ever-larger role in the formation of the political agenda. There is a turning. One cannot say whether this will win in the end," he said.
Collett agreed that EU members had "moved further apart", arguing that the problem lay in mistaken assumptions as Europe expanded eastwards.
"The events of the last three years raised a question that had conveniently been sidestepped," she said.
"When Europe went through its major enlargement in 2004 [with the accession of 10 new countries], the question was never put, 'Are you willing to host large numbers of refugees?' I think it was assumed by existing member states that acceding member states understood this, and by acceding member states that it would never be required of them.
"What happened in 2015 or 2016 [at the height of the refugee crisis] was that the question was asked and the answer came back, 'No, we're not ready to do that.' That placed a fundamental political question on the table: on what basis is Europe collectively prepared to do protection? That question has yet to be resolved and we seem to be moving further apart with each passing month."
The allure of club membership
The person in charge of creating Greece's Asylum Service in 2013 took a more optimistic view.
"If we look back over the last three years in the EU, it's an unprecedented period," said Maria Stavropoulou, referring to the period that saw Europe grappling with the what has been described as the worst refugee and migrant crisis since World War II.  
"Many things happened very quickly … People usually go forward not running but stumbling. The Relocation Programme was a process of trial and error."
Stavropoulou, who steps down as the service's director next month, argued that the EU proved that relocation "works if we give it a chance, and it works very well".
She also said she believed that the naysayers would ultimately change position.
"Sooner or later, member states tend to act like persons," she said. "There's a lot of human psychology in the way countries and governments act, and they like to be eventually members of a club ... because it is in their self-interest."
Rosa Balfour, a European foreign policy expert at the German Marshall Fund, a think tank, also held out hope.
She said she saw the relocation debate as part of a broader tug-of-war between Brussels and member states over national sovereignty versus supranational decision making.
"It wasn't just about the numbers, [holdouts] also wanted to affirm the principle that the Commission could not tell them what to do… at the moment everyone is pushing boundaries to see how far they can go," said Balfour.
According to Balfour, the Commission has scope to leverage its power ahead of the EU's next financial perspective for the 2020-2027 period, which sets a ceiling on the amount the bloc can spend in any of these years.
Poland and Hungary claim 105bn euro ($125bn) in EU funds during the current period, a significant contribution to their Gross Domestic Programme, and the Commission is considering tying funds to compliance on rule of law, freedom of speech and other issues.
"If [holdouts] were to be negatively affected by stricter conditionality on, say, rule of law issues … they could decide to renegotiate their position on certain policies, they could do some horse-trading and decide what the priorities are," said Balfour.
A plan for the future
The Greek government now wants the EU to focus on expanding its Resettlement Programme, which allows refugees to apply for asylum directly from third countries deemed safe such as Jordan, Lebanon and Turkey.
That, officials in Athens believe, would undermine human traffickers and take pressure off the Aegean route, one of the main ways for refugees to reach Europe via sea.  
"It really needs to become the main legal avenue for refugees towards the EU," said Stavropoulou. "To make a dent, if it is going to undercut the business model of the smugglers, it has to be significant numbers."
Stavropoulou said she believed that means in the hundreds of thousands of refugees a year, but the Commission's current plan seeks to resettle only 50,000 in the next two years. 
The stakes for Europe are much higher than the well-being of refugees and the upholding of humanitarian law, said Collett.
The outcome of the European migration debate has the power to either advance or unravel the European project, she argued. 
"Can we maintain an area of internal free movement where there are no border controls? The Schengen area, upon which all this immigration and asylum discussion is based … is more in question now than it ever has been," she said.
"If these big questions are not resolved, some countries will start asking, 'Should we all be working together in Schengen? Should we change the shape of Schengen? Should we have more than one of these things?' I think there are those very, very quiet conversations taking place." 
Daniel Esdras, head of the International Organisation for Migration (IOM) in Greece, said he would "never forget the first group [of relocation subjects], which was bound for Luxembourg".
It was IOM's job to prepare relocation subjects and make logistical preparations for their move - and he remembers well how unlikely those new beginnings seemed to amount to anything.
"We had to convince the airline to accept this group, we had to help the [Luxembourg] embassy prepare the paperwork … there was nothing. But we had to make a start," he says.

"If we had not begun by taking risks and [displaying] courage and using all our strength, this programme would not have run as it did."