Thursday, 6 December 2012

A Bad Numbers Week for Greece

Greece slipped further down the greasy statistical pole this week, an indication of losses both material and moral. Unemployment, poverty and perceptions of corruption all rose in estimates compiled by the Greek and European statistical services, and Transparency International.

Unemployment and poverty rise

Greek unemployment rose to 26 percent for the month of September, according to figures released on Thursday by the Hellenic Statistical Service (Elstat). The figure stood at 25.3 percent in August, and at 18.9 percent in September 2011.

In nominal figures, Elstat reports that 1.3 million people are unemployed, 3.4 million people are inactive and  3.7 million people are in work. This means that 3.7 million people are supporting 4.7 million people, but the ratio is in reality even less favourable, because approximately 800,000 of the 3.7 million work in the public sector and are paid through taxes. The original wealth generated through private sector wealth therefore sits on the shoulders of a mere 2.9 million people.

Employment peaked in 2008 at 4.65 million people, when only 371,000 were out of work.

Poverty also rose in figures released on Monday by Eurostat, the European Statistical Agency. Thirty one percent of Greeks, or 3.4 million people, were at the end of 2011 considered to be at risk of poverty or social exclusion. The blanket term covers three categories of deprivation as follows:

Greeks at risk of poverty or social exclusion* (all figures are % of population)

Persons at-riskof-poverty after social transfers 
Persons falling under at least one of the three
criteria (at risk of poverty or social exclusion) 
EU27 average

*Source: Eurostat

The highest proportions of people at risk of poverty or social exclusion were recorded in Bulgaria (49 percent) and the lowest in the Czech Republic (15 percent).

Greece has been in recession since the last quarter of 2008, and has lost over 18 percent of its economy according to a report by its creditors. Its economy is set to shrink by seven percent this year, at least 4.5 percent next year, and stabilise in 2014.

Corruption Rises in Greek Eyes 

The perception of Greeks that their country is corrupt rose this year according to Transparency International’s latest figures, released on Wednesday. Its 2012 Corruption Perceptions Index places Greece 94th out of 173 countries surveyed, alongside Benin, Colombia, Djibouti, Moldova, Mongolia, India and Senegal. Greece is behind every one of its European Union partners including Eastern bloc nations (except Bulgaria) which have been EU members, market economies and democracies for far less time.

The CPI measures the extent to which people believe that corruption exists, not corruption itself. Greece placed 80th last year and has been falling in the index since 2005 (see table below).

“There are solutions,” said Kostas Bakouris, head of TI in Greece. He called for the post of a “national co-ordinator of bodies combating corruption” to be created, directly answerable to the prime minister.

Greece’s Corruption Perceptions Index Rankings (2001-2011)*

2011 Greece is 80th with a score of 3.4
2010 Greece is 78th, with a score of 3.5
2009 Greece is 71st, with a score of 3.8
2008 Greece is 57th with a score of 4.7
2007 Greece is 56th with a score of 4.6
2006 Greece 54th with a score of 4.4
2005 Greece is 47th with a score of 4.3
2004 Greece is 49th with a score of 4.3
2003 Greece is 50th with a score of 4.3
2002 Greece is 44th with a score of 4.2
2001 Greece is 42nd with a score of 4.2

*Source: Transparency International

For more on this topic see Greek Shame campaign Seeks to Banish Corruption.

Wednesday, 5 December 2012

UN Official Deplores Migrant Detention in Greece

This article was published by Al Jazeera

Eleni, 9, is a Bulgarian Roma who has been in Greece for eight years. She roams the streets with her sister Zoi, 12 and brother Mario, 14. Their mother works as a nanny in Spain and their father works late hours as a DJ in Athens, so they are practically left to their own devices. Asked if they attend school, the quick-witted Eleni quips, "We go on Saturdays and Sundays."   (Photo by Anna Psaroudaki) 

Greece’s growing chain of detention camps for undocumented migrants came under strong criticism from the United Nations on Monday. Francois Crepeau, Special Rapporteur for the Human Rights of Migrants, said conditions in some of the camps were “shocking” and the detention of children and families “utterly unacceptable”.

“It’s difficult to see families, it’s difficult to see children, three or five years old behind bars,” Crepeau said.

The Rapporteur said migrants were often detained without proper heat, hygiene or legal representation. “They are not informed properly about their rights, about what is going to happen to them, about recourses. They don’t see lawyers, or the lawyers take the money and run.”

Recently Greece's police spokesman told Al Jazeera that the detention policy was partly undertaken for migrants’ own good. “In the camps a migrant has a certain level of comfort, regular meals, a lawyer and medical attention,” Christos Manouras said. Journalists are not allowed into camps to verify these claims.

The worst camp he saw was in the town of Vena, Crepeau said, where “28 people are crowded into a room [of about 35 square metres] with beds which are concrete slabs, filthy toilets and nothing to do and no light… No television, nothing to read, no information – these are not places where I would care to spend more than an hour.”

The Special Rapporteur delivered the remarks in Athens, at the end of a nine-day inspection that included meetings with government authorities. The inspection is part of a year-long study of external EU borders that has also taken him to Brussels, Italy, Tunisia and Turkey.

Greece adopted a detain-and-deport policy for undocumented migrants in March, three months before the conservative-led government came to power. Under the conservatives the policy has been intensified. Police stop migrants on the street to check their residence papers every day, and regular police sweep operations have rounded up migrants en masse.

“The Greek-Turkish border is the main entry point of irregular migration in the European Union. Estimations say that 85-90 percent of irregular migrations go through that point,” Crepeau said. Prime Minister Antonis Samaras has called the influx “an unarmed invasion”. Greece has made over 100,000 arrests of undocumented migrants a year between 2006 and 2011. Despite a negative birth rate, its population has grown by over a million people over the past two decades.

Until this year authorities gave undocumented migrants three months to leave the country of their own accord. But after five years of recession and a 25 percent unemployment rate, political pressure built up in favour of a more aggressive policy. At the beginning of the year over eighty percent of Greeks were polled as favouring detention or deportation for undocumented migrants. This year for the first time the far-right Golden Dawn party was elected to parliament, claiming seven percent of the vote largely on the basis of its anti-immigrant policy. Polls show it could claim twice that vote if elections happened today.

Despite the political pressure, Crepeau believes the Greek policy is ultimately untenable. “The policy is not viable either legally or practically,” he told Al Jazeera. “Legally you can only detain if the person is dangerous to herself or others, or if the person is at risk of not coming back for proceedings. These are the only two reasons for administrative detention. If you only have a policy of detaining everyone at all times it’s against international law and it’s against international human rights. It’s not legally viable.”

If anything, however, Greek policy seems to be moving in a more xenophobic direction. Legal amendments ratified this year criminalise illegal entry onto Greek soil, and make it possible for the government to detain undocumented migrants for up to 18 months. Last month, Samaras said it was one of his government’s top priorities to abolish a two year-old citizenship law that offers Greek nationality to the children of migrants who have been legally resident in Greece for at least five years. His interior minister recently said that he would introduce tougher requirements, such as compulsory attendance of the Greek national curriculum in school.

Greece’s radical left wing Syriza, the main opposition party in parliament, has called for full migrant access to health and education, and for turning detention camps into open reception centres.

Although he called for an end to “a policy of systematic detention of  all migrants,” Crepeau did not lay the blame on Greece’s door alone. He said the European Union had to collectively resolve the problem of undocumented migration, because EU member states have unrecognised labour market needs which attract migrants.”  

Tuesday, 4 December 2012

Socialist Schism Could Weaken Government

Greece's beleaguered socialists suffered a new setback yesterday when one of their most high profile MPs declared himself an independent.

Andreas Loverdos on Monday proclaimed a new political movement, the Radical Movement for Social Democratic Alliance (Rikksy), but said he would continue to support the conservative-led coalition the socialist Pasok party is a member of. In a statement he indirectly criticised socialist party leader Evangelos Venizelos for allowing himself to be strong-armed by the conservatives. "The entrapment of [political] forces in one-party procedures... without correspondence to the people and to society must be avoided," he said. In aiming to unite the "European, reformist centre-left", his movement  puts itself in direct competition with the socialists.

Venizelos reacted with a statement that Pasok "will march ahead with the willing and able." Loverdos' move was all the more painful for Venizelos, because last spring the two had announced a pact to forge a common political path.

Pasok suffered the loss of six MPs on November 7, who were expelled for voting against a package of painful austerity measures amounting to 13.5bn euros. One more departed later. It is now down to 25 MPs from 33 after the June election.

The conservative-led government wields a total of 167 seats in the 300 seat legislature, but has shown signs of advanced ageing after just five months in power. Apart from the eight socialist defections it has also shed one conservative, while its smallest partner, the Democratic Left with 16 seats, did not stand with the government on its most controversial austerity bill. Loverdos could be a threat to Pasok if he were to lure away more MPs. That danger already exists in the form of the radical left opposition Syriza, which opposes Greece's austerity policy and is believed to be in secret negotiations with lawmakers from various factions.

The socialists' fortunes have gone from bad to worse since they ceded power to a technocrat interim prime minister last November. In back-to-back elections last May and June they took 13 percent and 12 percent of the popular vote, respectively, in a steep tumble from 44 percent in 2009. Many observers believe the party faces possible extinction. 

Bond Buyback To Wipe Out 90% of Greek Banks' Bond Value

Greece's Public Debt Management Agency yesterday announced that ten billion euros will be spent buying back Greek bonds at discount, amounting to the second haircut for Greek banks this year. The money will go towards 40 billion euros' worth of bonds, meaning a discount of 75 percent on average. If achieved, the size of the buyout is more than enough to cover Greek banks' entire bond holdings.

The bonds in Greek bank vaults have already been discounted by a similar rate in March, during a restructuring that shaved 107 billion euros off the value of bank holdings of Greek bonds globally. This means that Greek banks' bond holdings will undergo a cumulative discount of more than 90 percent.

The buyback money comes from the European Financial Stability Fund (EFSF), the temporary facility set up in 2010 to bail out overindebted eurozone governments. After the buyback, the EFSF will spend 23.8 billion euro recapitalising the Greek banking system. The buyback will also pave the way for the eurozone to spend 10.6bn euros financing the Greek budget this year and another 9.3bn euros in the first quarter of 2013.

Greek banks have suffered a quadruple disaster since the beginning of the crisis: their cash reserves have dwindled from about 240bn euros to 165bn as Greeks sent their money abroad or lived off savings; their non-performing loans have soared; the value of their main asset, Greek government bonds, has plummeted; and their share value has collapsed to about a quarter of its pre-crisis levels. They have been staying afloat by borrowing from their sole source of credit, the European Central Bank, but much of this cash has been sucked up by the government during periods when its rescue programme was frozen.

The banks' plight has been shared by the rest of Greek society as liquidity to households and enterprises has dried up. The refinancing, and a consolidation currently underway, is supposed to put an end to this financial desert. In an interim report on monetary policy yesterday, the Bank of Greece said these two factors will "strengthen the trust [towards Greek banks] of domestic depositors and international money markets" and "positively influence the flow of deposits and Greek banks' access to international money and capital markets." 

Monday, 3 December 2012

Further Tax Hikes Expected

A new type of theft: Copper water pipes have been ripped off the outside of a new apartment building on Iosif ton Rogon Str., in central Athens. A few streets away, on Zefxidos, planks had been taken from scaffolding erected outside a public school. Among the victims of the ever more desperate thieving are apparently unattended olive groves, whose trees can occasionally go missing. 

A new tax code to be unveiled this month contains tax increases for large portions of Greek society, according to information leaked to various Greek media.

One apparent idea is to introduce Greece's top tax rate of 45 percent to incomes of 26,000 euro a year, whereas it currently applies to incomes of 100,000 euro. Another is to tax self-employed professionals on all their income, abolishing the free pass on the first 5,000 euro of their income. Most controversial of all has been an apparent attempt to abolish tax rebates for children.

Pensioners and salaried employees, who have borne the brunt of tax increases and pay cuts over the four years of the crisis, would be offered a significant tax cut.

The New Athenian last week asked Finance Minister Yannis Stournaras whether the new code would contain incentives for taxpayers to buy debt. The answer was no. 

Friday, 30 November 2012

Greek Bond Buyback in Trouble

Greece's attempts to buy back bonds may be in trouble. A meeting between finance ministry officials and bankers yesterday ended without a deal, Greek media report.

The bond buyback exercise allows Greece to take advantage of its bonds' low retail value by repurchasing them at reduced rates. It is an essential part of Greece's continued funding by the 'troika' of the European Commission, European Central Bank and International Monetary Fund. On Wednesday Greek Finance Minister Yannis Stournaras called it a "significant part of the debt reduction goal" of 20 points of GDP by 2020, adding that "the buyback has to work." 

Gerry Rice, External Relations Director at the International Monetary Fund yesterday explainedwhy: "we will be looking for implementation of the buyback operation, and contingent on that implementation and the success of the buyback program we will be in a position to put forward the recommendation to our board." 

Should the IMF freeze its portion of the Greek programme, the whole Greek rescue package would come to a halt. The IMF cannot, legally, continue to fund rescue packages not deemed sustainable. 

The debt reduction goal of 20 percent of GDP was deemed necessary by Greece’s creditors on Monday, if the debt is to be brought to 124 percent of GDP by 2020 and “significantly below 110 percent of GDP” two years later. Other measures contributing to that goal include a 15 year extension of bond maturities, a ten year moratorium on interest payments and a return of profits the European Central Bank would make on Greek bonds it bought at a discount.

Bonds for shares?

At Wednesday's press conference, Greek officials failed to clarify how much they intended to spend on the programme, what the minimum buyback contribution to the debt reduction should be, and where the money would come from. They did rule out any funding from the bailout loan or from sales of short-term bonds to Greek banks, which have been the government’s two cash lifelines for the past three years.

Since the state is cash-strapped, one likely buyback method would be to ask Greek banks to sell bonds back to the government at a significant discount in return for some of their shares, rather than cash. Greek banks have lost their independence in terms of equity, because they have received billions in recapitalisation money from the Greek government and the European Financial Stability Facility over the past three years.

But a bonds-for-shares proposal might run into problems. Banks have already used most or all of their bonds as collateral to borrow cash from the European Central Bank and the Bank of Greece. This cash has been keeping the banks, and the Greek government, afloat. Selling these bonds at bargain basement prices, and without a cash prize, might leave them badly exposed.

Thursday, 29 November 2012

Greeks Pay 14bn for Bureaucracy

The cost of Greece's central administration comes to 14 billion euro a year, or 6.8 percent of GDP, a study revealed yesterday. That figure includes above-table costs and an estimate of the cost of corruption.

The study was presented by Prof. Panayotis Karkatsoulis, who teaches at the School of Public Administration. He blames over-regulation, which allows state functionaries to thrive off legal loopholes. Since 1975, says Karkatsoulis, Greece has passed 171,500 laws, presidential decrees, ministerial decisions and local government decisions. He also blames the size of central administration, which he estimates employs over 53,000 people.

"Excessive legal formalism, obsession with detail and [administrative] diaspora ...[lead us] to a system of administration where the functional state and correct organisation are distorted so as to serve the deeply-rooted client relationship between the citizen and the state," Karkatsoulis says.

Karkatsoulis conducted a poll revealing that most public employees would like to be better organised (90 percent) and support reform (90 percent) and deregulation (65 percent). He said all laws and surveys contributing towards these ends have been routinely ignored.

The venue was a conference held by the Greek branch of Transparency International, which has posted Karkatsoulis' presentation

New Poll Confirms Rise of Extremes in Greece

An opinion poll published today shows the Greek radical left opposition party, Syriza, leading the ruling conservative coalition by five points, confirming a trend seen in the polls for the past month.

The poll, which appears in the weekly magazine Epikaira, gives conservative New Democracy 26.5 percent of the popular vote, and Syriza 31.5 percent. It also confirms the oft-predicted rise of the far-right Golden Dawn party to third place with 12.5 percent.

Beyond these three, the field is flat, with a clutch of four small parties claiming between five and 6.5 percent. This is important for three reasons. First, it sinks New Democracy's main coalition partner, the socialist Pasok, to the order of five percent, even lower than its lowest ever election showing of 12 percent last June, and indistinguishable from the likes of other small fry. Pasok had already been cast down from the ranks of potential ruling parties; now it is also on death row. This now should mean that both Pasok and the third coalition partner, the Democratic Left, ought to be more deeply invested in the ruling coalition, for the wilderness awaits them after a Syriza victory (see Pasok leader Evangelos Venizelos' article in today's Efimerida ton Syntakton, asking for the full four-year term).

Second, the poll implies that, unless something radical happens, the next parliament will also have seven parties, making it almost impossible for one of the two big players to secure single-party rule. New Democracy has picked its friends. Syriza has taken a step towards doing so. In a press conference two weeks ago its leader, Alexis Tsipras, opened the door a crack to a possible collaboration with the anti-austerity Independent Greeks. The party's main obsessions since it entered parliament in May have been charging the Germans reparations for illegal wartime loans, drilling for mineral resources and hauling off socialist and conservative politicians to the gallows for bringing the country to this pass. The two parties may come from opposite sides of the ideological divide, but they are both reactionary and possibly vindictive.

Third, if, as polls suggest, the Greek electorate is planning to cultivate more small parties without killing off any of the old ones, this will not only make it harder for larger players to form lasting governments; it will also make it harder for them to form mobile ones. Small parties have a narrow scope for action because they cling to life by preening and feeding a flock of client voters. They are, in effect, limited interest groups (witness the Democratic Left's trench-digging before the hallowed issue of dismissing state workers, its client base). The foreseeable future of Greek politics, therefore, does not seem to hold the promise of bold policy moves. Ultimately, though, this may be a good thing as well as a bad thing. It makes reform harder, but it may also hamper a Counter-Reformation. 

Wednesday, 28 November 2012

Greek Bailout Remains a Ticking Time Bomb

Prime Minister Antonis Samaras sounded a triumphant note after Greece was awarded 43.7bn euro in delayed loan instalments during the small hours yesterday.

In an emailed statement he said, “Greece managed to win back its credibility… it put the foundations in place for the Greek debt… to become sustainable again.”

Some people dispute these claims. The leader of the radical left opposition Syriza, Alexis Tsipras, yesterday reiterated his argument that all forecasts are slippery in the volatile global economic climate. “Two years ago they were telling us that the goal for a viable debt was 120 percent of GDP, now they are telling us it could be 124 percent, tomorrow they may say 130 percent.”

Documents seen by the Financial Times seem to confirm this view. An article run by the newspaper today reveals that the debt would be closer to 115 percent of GDP in 2022, rather than the “significantly lower than 110 percent” foreseen by the Eurogroup. Finance Minister Yannis Stournaras said in an afternoon press conference that the FT estimate was based on an outdated chart, and that adjustments equivalent to 2.7 points of GDP had later been made. 

The money released yesterday represents instalments of Greece’s second bailout loan due since May, when the country went into back-to-back elections. Its loan was frozen along with its austerity and reform programme.

Of the 43.7bn euro,9.3bn will be released next year, following a tax reform. The bulk, 34.4bn, is to be released immediately, in a fortnight. 23.8bn of this will recapitalise banks. The rest will go to state salaries, pensions and suppliers, many of whom haven’t been paid in as much as two years.

The eurozone spent two weeks deliberating on how to deem Greece’s debt as viable, in order to be able to release the money. The International Monetary Fund, which is bailing Greece out along with the European Union, had deemed the debt unsustainable after the economy shrank more than expected this year (recent figures by the Greek Statistical Service revised the recession from a forecast figure of about four percent to seven percent of GDP by the end of the year). This means that Greece’s economy is not thought to be strong enough to reduce the debt over time, only to roll it over indefinitely. It would condemn Greece to a perennial Sisyphian task of rolling the debt uphill, only to see it roll back to the bottom. Sustainability consists of the firm prediction that the boulder will roll down the other side of the hill. As economist George Pagoulatos put it to The New Athenian, the debt would overtax an “anaemic” Greek recovery after 2014, and it therefore “traps the economy in an equilibrium of very low growth.”

The ultimate challenge to the eurozone, which is now Greece’s main creditor, is to forgive a chunk of the capital they have lent Greece. But that would have to come from the pockets of European taxpayers. They are not in a forgiving mood and fear that greater concessions to bigger eurozone debtors like Italy might follow.

For the moment, the Eurogroup has managed to make Greek debt look sustainable on paper by tinkering with interest charged on that capital. The eurozone has lowered it from 1.5 percent to half a point, and offered a ten year moratorium on interest premiums. It also extended the maturity period on Greece’s bailout loans by fifteen years.

Two further things were offered. The European Central Bank will forego profit margins on Greek bonds it bought at a discount. It will now not charge Greece the original face value of those bonds when they mature, but something closer to the discount price it paid, which is about two thirds of face value. Greece will be also be allowed to use some of its bailout money to buy back some of its own bonds on open markets, at the discounted rates at which they are now trading. This means that if Greece sold a bond for 100 euro, it could now buy it back for less than half that amount.

All of these measures theoretically cut Greece's debt by 20 points of GDP and bring it to 124 percent of GDP in 2020, which, if true, is already a concession of four points by the IMF. But this will only hold true if Greece sticks to the programme, which it has a poor track record at doing, and if the international environment doesn't adversely affect it. These are two big ifs. Greece already has 25 percent nominal unemployment, and is looking at deeper recession and joblessness for another year, possibly two. Its latest austerity measures, voted into law this month, take effect on January 1. Growth initiatives, on the other hand, need time to mature. Given that things will get worse before they get better, it is quite possibly that Syriza, which has led the five month-old government in the polls for at least a month, will accede to power before long. The party says it will ultimately uphold the bailout loans, but will tear up the austerity memoranda. Figuring out what that means in practice may take months. The smooth running of the Greek programme should not be taken for granted, or set by creditors as a precondition. Doing so sets a political time bomb ticking.

The Eurogroup said in its statement yesterday that it is “committed to providing adequate support to Greece during the life of the programme and beyond until it has regained market access, provided that Greece fully complies with the requirements and objectives of the adjustment programme.” That seemingly unequivocal statement still contains countless uncertainties and trap doors. 

Monday, 19 November 2012

Greece Awaits Payout Decision

Greece awaits an important decision from tomorrow’s Eurogroup meeting in Brussels: the nod on 43 billion euro in delayed loan instalments, which Greece is now eligible for after passing 13.5 billion euros’ worth of spending cuts earlier this month. 

“We are completely ready for Tuesday. There is no further action pending on our side,” said Finance Minister Yannis Stournaras on Sunday evening.

He said the government had moved to put into law a mechanism that will oversee budget execution in each ministry to ensure that there are no cost overruns. At a Eurogroup meeting last Monday the Eurogroup said it expected that this week “the necessary elements will be in place for Member States to launch the relevant national procedures required for the approval of the next EFSF disbursement.”

The fragile, three-party coalition in Athens needs the loan payouts to recapitalise banks and to pay off state suppliers, pumping money back into the economy.

The decision to release the money was meant to have been taken at last Monday’s Eurogroup meeting. But that meeting was dominated by a dispute with the International Monetary Fund, which believes that Greece’s debt is not sustainable unless a large chunk of it is forgiven. Since banks and private sector lenders already forgave 107 billion euros last march, representing more than half of their Greek bond holdings, it is now incumbent on European governments to offer a discount, something the eurozone has been resisting.

Greece has taken a surprisingly soft stance on the restructuring of its debt. The IMF's insistence on official sector involvement was not grasped by the Greek side. Asked about it on Friday, Finance Minister Yannis Stournaras said "I don't have anything to say about that, thank you."

Reuters quotes ECB board member Joerg Asmussen as saying that the Eurogroup will not address the sustainability issue on Tuesday, leaving it to later meetings.

Europe is also consumed by larger concerns, namely a dispute between net contributors and net beneficiaries over the size of the next seven-year European budget. Fiscal hawks like Germany and the Netherlands want the roughly one trillion euro budget cut significantly. An emergency EU summit has been called for Thursday to resolve the dispute.

Friday, 16 November 2012

Greece: Good Marks. Must Try Harder.

This article was published by PBS NewsHour.

A report on Greece’s progress leaked this week by the Financial Times suggests that the country’s bruising struggle to balance its budget is being appreciated, but the road ahead remains strewn with boulders.

The performance review by representatives of the so-called troika of Greece’s creditors - the International Monetary Fund, European Central Bank and European Commission - awards Greece high marks for a “very substantial” fiscal adjustment. Greece has closed a 36 billion euro deficit by 23 billion euro in just three years, leaving just a third of the way to go.

This sentiment was passionately seconded on Wednesday by Charles Dallara, Managing Director of the Institute of International Finance, which represents some 400 banks and private lenders. In a speech delivered in Athens, he called Greece’s course of cost cutting “nothing short of brutal”.

“That reform still marches on, and that Greece clings to the mantle of the euro with tenacity is testimony to the resilience, fortitude and courage of the Greek people,” Dallara said.

According to the original memorandum Greece signed with its lenders in April 2010, it should now be coming to the end of the process. Instead, it has asked for an extension to the end of 2016. A previous two-year extension to 2014 has already doubled the cost of its original bailout loan to 200 billion euro. This extension, the troika believes, will cost another 32 billion euro.

The reason for these setbacks is a slippery recession, which has claimed a fifth of the country’s economy and a quarter of its workforce in just three years. Greece has so far been forced to cut 49 billion euro in spending – more than twice the size of the deficit hole it has managed to plug. New cost cuts voted in last week will over the next two years raise that number to a staggering 62 billion euro, a third of the economy as it now stands. Greece is caught in a vicious cycle. As the economy shrinks its tax revenue falls, meaning that spending has to be reduced even further to achieve targets. That is why austerity policies keep being extended.

The report acknowledges this, calling the recession “deeper” and “longer-than-expected”. It also recognises that the spending cuts have deepened and lengthened it.

So can Greece be saved through fiscal retrenchment? The political opposition in Athens thinks not. At its heart sits the radical left Syriza party, which sees the memoranda of austerity measures as a political dead end that “devour their governments.” Syriza has in the past supported unilaterally defaulting within the eurozone. Recent polls show that it enjoys a slight lead of two to three points above the ruling conservative New Democracy. Embracing austerity as the responsible choice, on the other hand, has punished New Democracy and its main coalition partner, the socialist Pasok. They have fallen from a combined 77 percent of the popular vote in 2009 elections to 42 percent last June.

The four month-old coalition also bears the scars of last week’s legislative battles, where 13.5 billion euro in new cuts were approved. Eight of its members of parliament defected and were permanently expelled, permanently reducing its majority. Its smallest member, the Democratic Left, stepped aside in a crucial vote on the austerity package, showing that it has only one foot in the government. Unsurprisingly, the troika report says that “the political coalition supporting the government appears fragile and some components of the programme face political resistance.”

Prime Minister Antonis Samaras put a brave face on matters after approval of the budget on Sunday night, declaring the week a victory and promising a new focus on growth. But such bravado may not be enough to pull Greece through. Its creditors have stalled 43 billion euro in loan disbursements because they disagree on whether its debt is ultimately sustainable. A seven percent recession this year and 4.5 percent next year will mean that debt is worth 189 percent of GDP.

The troika report believes an additional four or five billion euros’ worth of spending cuts will be needed down the road, something that presently seems politically unlikely to happen. The most recent round of austerity was sold on the basis that it is final. Even what has been legislated won’t work unless “the structural reform agenda is fully and swiftly implemented,” an exercise involving further political bloodspilling. “This will require breaking the resistance of vested interests and the prevailing rent-seeking mentality of powerful pressure groups,” the report says. That is probably an understatement.

Even Charles Dallara, who presided over a 107 billion euro write-down of Greek debt for his members last March, felt that Greece needs more time. “It is time to recognise that austerity alone condemns not just Greece but the whole of Europe to the probability of a painful and protracted era of little or no economic growth.” He suggested more moderate targets, a lowering of interest rates on Greece’s bailout loans and a greater emphasis on pump-priming public projects.  

Greek workers would agree. As Dallara spoke, they took part in a strike along with workers across southern Europe, all hard hit by recession in the eurozone. State workers have long been affected by salary cuts. Now they are worried about layoffs, previously impossible because of union pressure, but now a fact. Two thousand government workers will go this year, starting with those in disciplinary proceedings for not doing their jobs properly. And that is just the start of a net loss of 110,000 public sector jobs over four years. In the private sector it’s the other way around. Workers are used to unemployment, now at 25 percent; but after last week’s austerity measures, their minimum take home pay will be as low as 430 euro a month. These are the ranks from which Syriza is constantly swelling its approval ratings. The markets used to be the main motive for ending the recession. Now it’s the desperate shortness of political time. 

Thursday, 15 November 2012

Greek Workers Besiege German Minister

About a thousand local government workers in Greece’s northern city of Thessaloniki on Thursday besieged a building that contained Germany’s deputy labour minister. The siege was sparked by remarks he made the previous day, suggesting that many workers should be laid off. 

German deputy labour minister Hans Fuchtel is reported to have said that a thousand Germans could do the work of the 3,700 employees of Thessaloniki municipality. He was in the city to inaugurate a third annual Greek-German local government conference. But the timing was unfortunate. On Monday, Greek mayors received orders to start laying off staff, following the passage of an austerity bill last week. Thessaloniki must shed about 100 workers, local union members say. Raw television footage showed them storming the conference grounds with placards and loudspeakers, and weaving their way through buildings. Union leader Sotiris Vaios told The New Athenian that they plan to stay there until they meet with Fuchtel, but they dispersed around noon, eye witnesses reported.

Fuchtel has been travelling up and down Greece for over a year, advising local governments on how to better organise themselves to cope with increased duties and slashed subsidies.