Thursday, 27 September 2012

Coalition to Present Mammoth Austerity Package

Greece’s coalition government has reached basic consensus on a new, 13.5 billion euro austerity package demanded by its creditors. But it is still a long way from releasing a 31.5 billion euro instalment of its bailout loan it desperately needs to stay afloat.

Finance Minister Yannis Stournaras emerged from a four-hour meeting with coalition leaders saying, "we have agreed on the basic planks" of the package.

This means that after two months of wrangling behind closed doors, the Greek government will present its European Union partners with a massive austerity package, billed as Greece’s last, at a meeting of the eurogroup finance ministers on Monday. On the same day, it will present a draft version of the measures to parliament. 

The new measures were meant to cut about 11.5 billion euro in spending and raise about two billion dollars in new taxes, but Greek media reported that a billion euros could be shifted from the burden of cuts to the tax burden.

The money represents a 1,227 euro burden for every man, woman and child. It amounts to cutting 15 percent of this year's budget. The junior coalition partners, the Panhellenic Socialist Movement and the Democratic Left, are making it clear that they want the cuts to happen over four years rather than two. Greece has informally asked the eurozone to agree on extending Greece's balanced-budget deadline by two years to 2016.  

"It is of monumental importance that the measures be implemented not by 2014 but by 2016," socialist party leader Evangelos Venizelos said, "because spreading them out over four years will soften them and make them friendlier."

This Greek demand runs in tandem with another, the ability to replace spending cuts with unexpected income over four years. "It is very important... for some difficult cuts not to take place, because the economy will have taken off, we will have growth and much better tax revenues," Venizelos said.

Winning these two concessions from its eurozone creditors before presenting the package to parliament is a priority for the government. Stournaras said EU approval would have to come before the parliamentary vote. That might put the Greek vote well past the October 18-19 EU summit. He said the coalition leaders' broad agreement gives him a "basis for a vigorous negotiation."

Even with mitigating clauses, though, the three-party coalition will stand on precarious ground. Greece has lost a fifth of its economy during the crisis, and one in four workers is unemployed. That has led to an explosive political climate in which the fortunes of bailout supporters have suffered, to the benefit of the radical left Syriza, which has hitherto denounced the bailout and its austerity plan as a dead end.

Wednesday, 26 September 2012

Protest March Ends in Tears

Municipal workers from the neighbourhood of Nea Philadelpheia in Athens join the marchers on Syntagma Square.

Younger, angrier protesters replaced the morning’s peaceful march in Athens, after police teargas thousands off Syntagma square in front of parliament. The message was also different. “We’re not afraid of teargas and arrests,” they chanted.

Teenagers stretched their T-shirts over their noses to help keep out the acrid smoke as a pavilion burned in the centre of the square, and teargas continued to waft over the crowd. Broken glass,  sticks separated from their placards and empty plastic water bottles were strewn in front of the square’s luxury hotels.

Greece is bracing for 15 billion dollars in new spending cuts, billed as the last round of austerity to balance the budget. If the measures fail to pass through parliament, Greece would lose bailout instalments that allow it to pay state salaries and pensions. 
This was the three month-old, conservative-led government’s first general strike. Conservative New Democracy was once the party that opposed the bailout programme, but has over the last year become its champion, describing it as Greece’s only hope of staying in the eurozone.

Central and local government ground to a halt. So did schools, universities and banks. Hospitals operated on skeleton staff. Passenger ships were tied up in port, and shops rolled down their blinds.

“We won’t pay,” peaceful protesters earlier chanted outside parliament, echoing a popular sentiment towards tax inspectors and Greece’s overseas creditors. “The junta did not end in 1973,” they said in reference to Greece’s seven-year dictatorship. “We will end it on this square.” 

The government says the 11.9 billion euro austerity package it is about to unveil will be the country’s last. But few on the street believe this talk of finality; fewer still believe the cuts will help turn around this stricken economy. After four straight years of recession, and with unemployment among the young at over 50 percent, the climate is paranoid and insecure. Many Greeks believe the bailout was designed to protect banks by ensuring that Greece would not default. It is not, perhaps, surprising that most people expect many more years of hardship. 

Tuesday, 25 September 2012

Money Laundering and Blasphemy Rock Greece

Greece's parliament speaker has suspended himself today, after being implicated in a Supreme Court investigation into the finances of politicians.

Evangelos Meimarakis asked his deputies to assume his duties, following a closed door meeting with the Supreme Court prosecutor yesterday. His investigation is one of more than thirty the financial crimes squad has launched into politicians’ affairs.

The prime minister ordered the files to court for prosecution last Saturday, in the most dramatic pro-transparency policy swerve in years. The finance ministry announced that Prime Minister Antonis Samaras "asked Finance Minister Yannis Stournaras to transfer the financial crimes dossier with details pertaining to politicians under investigation to the prosecutor, along with a full description of the situation. He also asked the squad to provide the prosecutor with every possible assistance on this matter."

Conservative backbencher Nikos Nikolopoulos said he was "astounded to hear [Meimarakis] was embroiled in a mammoth money laundering case" and called for the speaker’s resignation. "The speaker of parliament cannot serve from a position of hibernation or dormancy," he wrote in an open letter to Meimarakis. "And in this way the national demand for clean solutions and straight talk from politicians cannot be satisfied...Protect yourself, the parliament and democracy! Resign as speaker."

Thursday, 20 September 2012

Two Billion in Cuts Remain Undecided in Countdown to Austerity

Greece's coalition leaders ended a three-hour meeting today without final agreement with the country's lenders on an 11.5 billion euro package of new austerity measures.

As the country entered the final stretch of talks, though, socialist coalition member Evangelos Venizelos revealed that a two billion euro gap remains to be settled.

"The general picture is that about 6.5 billion euro are coming from salaries, pensions and benefits, while five billion are coming from state operating costs," Venizelos said outside the prime minister's office. "This balance must be maintained."

But he also referred to two billion euro that must be separately raised in new taxes. "The two billion cannot come from pensioners and salaried employees, and those who cannot hide their income," Venizelos said. "They must come from areas where there is tax evasion and tax avoidance."

Greece's lenders have insisted that the state shed 150,000 salaried positions, and cut public health spending.

"Keeping the measures discriminatory [rather than across-the-board] is the least line of defence that must be held," Venizelos said, referring to horizontal pension and salary cuts, which have sparked protests, strikes and riots over the last two years. German Chancellor Angela Merkel struck a similar note two weeks ago, when she advised the government not to belabour the middle class and the poor with a greater burden than they were already shouldering.

The measures in dispute concerned "the modernisation of the state," Finance Minister Yannis Stournaras said earlier in the day. "That is the sticking point."

Fotis Kouvelis, leader of the Democratic Left, a coalition member, was more combative. "The troika [of lenders] has to stop attacking Greek society,"he said. "They have to understand that this society can only take so much, and the way it works has its limits."

Tuesday, 18 September 2012

Is Greece Headed For A Crash?

This post has been published on Al Jazeera.

The Greeks are being told to eliminate $16bn of public spending in a new wave of austerity. That is three times the size of the cuts that caused last February’s violent riots in Athens. Can the government convince parliament that the cuts are fair, or will it unleash a new storm of unrest?
ELPIDA IS EXCITED about starting first grade this week. Oblivious to the budget crisis that envelops her country, she spends evenings running around the park of her central Athens neighbourhood. Two swings are missing and the slides and climbing frames are patched with repairs, testimony to penury at every level of government after years of recession and falling tax revenues. And if Greece doesn’t cut another $16 billion of government spending soon, amounting to almost a fifth of its budget, it would forfeit a bailout loan that keeps it from going entirely bankrupt. 

The cuts have had a deep impact on everyday life. Elpida’s family stands with the majority of Greeks in a culture that revolves around personal rather than institutional authority. It lacks access to power, and has fallen unaided on particularly hard times. Before the crisis they were middle class, running a jewellery shop in the centre of Athens, but couldn’t stand up to the competition. A few years ago they spent their last 30,000 euro setting up a coffee shop. It, too, failed. Elpida’s mother and two aunts moved into a small apartment with their parents and, armed with little more than high school diplomas, went out in search of work.

Two of the three sisters, including Elpida’s mother, have since been laid off. One of them can claim unemployment benefits for a few more months. The third is clinging to a job selling dried fruit and nuts, but hasn’t been paid in six months. The family lives off the father’s pension and the precarious dole. “I keep looking for work,” Elpida’s mother says forlornly. “I knock on several doors a day. But there is nothing. When I did get a job waitressing, the employer reneged on his promise to pay my social security and I left after two months.”

Wednesday, 12 September 2012

Crete Quakes, Thera Rises

Two powerful earthquakes jolted the island of Crete in southern Greece today. There were no casualties.

The tremors came 90 minutes and some 200km apart, first a magnitude 5.6, then a 4.3. Both originated relatively deep - about 20km under the sea bed - yet they were strongly felt in the coastal cities of the island of Crete. 

It was precisely there that the ancient Minoan civilisation was ended 3600 years ago by a massive volcanic eruption on the island of Thera or Santorini, 110km north of Crete. That volcano is acting up again. A British-led seismological survey published in Nature Geoscience says that as much as 20 million cubic metres of molten magma have flowed upwards in recent months, lifting the island about 14cm. That’s the biggest magma flow since 1955, when the island last erupted.

Sunday, 9 September 2012

New Athenian Archive Updates

Dear Reader,

This blog is being retroactively updated with editorials, interviews and stories on Greece and the neighbourhood published in the period 2001-2009. This week, over 60,000 words of 2006-2007 material have been added. Each year of posts is topped by a review, summarizing the year's most important stories.

Also, each post in The New Athenian is indexed by searchable keywords, making it a freely available archive of Greek politics, society and the economy.

Thanks for visiting. 

John Psaropoulos

Thursday, 6 September 2012

Greek Health Costs Spiral due to 'Polypharmacy' and Unemployment

Greek Health Minister Andreas Lykourentzos says public health expenditure will overshoot a target set by Greece's creditors, casting doubt on the efficacy of a highly unpopular austerity policy and sending a derailed budget further off-course.

The National Healthcare Services Provider (EOPYY) will spend  about 6.5bn euro this year, 1.4bn-1.5bn euro more than it will raise, Lykourentzos told a session of the parliamentary social affairs committee yesterday.

He said EOPYY's main liabilities were the construction and farming industries. Greece formed EOPYY last February under the terms of its bailout loans, in order to consolidate 13 health and pension funds. One of these, the Social Insurance Foundation (IKA), has seen a 40% collapse in contributions as a result of low demand in new real estate, Lykourentzos said. Another, the farmers' pension fund, has been chronically insolvent.

Lykourentzos also warned that non-hospital, prescription-based pharmaceutical expenditure would exceed a limit of 2.8bn euro set for this year.

Greece has managed to reduce its total pharmaceutical expenditure from 6.3bn euro in 2009 to 4.5bn euro last year thanks to an austerity programme mandated by its so-called troika of creditors, consisting of the European Commission, the European Central Bank and the International Monetary Fund. But it now appears that it will not stay on track to reach a target of 3.65bn euro this year (see table below).

Greek Pharmaceutical Expenditure 2009-2012 (in millions of euro)

Social Sec. Fnds
 *Forecast in April 2012
Sources: Health Ministry, Labour Ministry

Lykourentzos stressed that a new online platform through which doctors must now file prescriptions is helping to reduce waste and fraud. And plans are underway to consolidate 133 hospitals under EOPYY's purview to 85 in administrative terms. 

But he did not hide his frustration at the sheer weight of demand for medicine. "Let me tell you that last July we had 4,717,000 prescriptions," he told the committee. "Last Friday alone, because pharmacists had declared a strike, we had 600,000 prescriptions. We need to understand that we cannot have polypharmacy, we cannot have over-prescription," he said.

Social welfare costs have risen and contributions have collapsed in recent years due to unemployment. Nine hundred jobs are lost every day, the National Centre for Social Research (EKKE) revealed to Kathimerini newspaper today. Statistical unemployment stands at 23 percent, and is forecast to reach over 24 percent by the end of the year, but underemployment and payroll arrears are not expressed in that figure.

In a survey of the Greek economy released today, the Labour Institute of Greece's largest labour union, the General Confederation of Greek Labour (INE-GSEE), predicts that unemployment will reach between 26-29 percent by the end of next year. It estimates that Greeks have already lost 16.2 billion euro in salary and pension cuts during the crisis, amounting to eight percent of GDP.

Greece is currently in its fourth year of recession, and has lost an estimated one-fifth of its economy since 2008.

Tuesday, 4 September 2012

Former Minister Blames Recession on Corrupt Parties

Socialist former minister Tasos Yannitsis has delivered a scathing criticism of the Greek political system, blaming corruption for the country's current recession and the failure to turn the economy around.

"Contrary to what [Jean-Claude] Juncker said in October 2009, "the game is not up"," Yannitsis writes on the website "The game continues under different circumstances, and that is why reality is becoming more and more difficult." 

In October 2009, Eurogroup president Jean-Claude Juncker exploded with the phrase, "the game is up," in a meeting of finance ministers in which Greece revealed that its deficit that year would be three times what was originally forecast. Juncker was referring to the practice of statistical fiddling rather than political corruption.

Yannitsis phrased his polemic as a second-person response to Theodoros Pangalos, who as deputy prime minister in the last socialist government (September 2009 - November 2011) caused a media uproar when he suggested in parliament that Greece's voters and politicians had colluded to "devour" the public wealth and create a mountain of national debt over the years. 

"Many people publicly or privately 'devoured' [the public wealth]," Yannitsis writes. "Scandals were a part of that scene. But so was so much superficially legal behaviour... When, for instance, the state administration needs no new hires yet thousands of positions are advertised, or when a public project is redundant yet it proceeds at a cost of millions so that bribes may be paid, or when institutional decisions are made that confer scandalously rich benefits upon groups of citizens, these things are usually done in a legal manner. But in fact what we're talking about is an egregious theft and waste of public resources," says Yannitsis. 

"All this was not innocently done. It was the result of... a political mentality which saw that it could practice politics in a way that consciously led to nominal social and economic benefits, but real party political benefits, distorting reality and unconscionably sending the bill to future generations."

Yannitsis says Greece's economic collapse was the inevitable result of over-borrowing to bestow political favours, regardless of the 2008 financial crisis. "By constantly borrowing - and in the last decade being especially lenient towards private borrowing as well - an ever-greater proportion of all this - income, public projects, growth - was transformed into a giant with feet of clay that couldn't possibly fail to collapse, either as a result of the crisis or on its own."

Yannitsis, an economist, has been frustrated in past efforts at reform. He found himself at the centre of a storm of disapproval as labour minister in 2001, when he suggested transforming the state-sponsored pension system from a defined-benefits to a defined-contributions system in a effort to guarantee its viability. The Greek social security system has duly unravelled during the crisis. Pensioners have seen their benefits cut by as much as 50 percent. Greece's largest insurer, the Social Insurance Foundation, which extends health and pension coverage to  about half of Greece's population, is currently bankrupt. And pharmacists are  refusing to honour prescriptions to over 90 percent of insured Greeks unless they are paid in cash.

As interior minister earlier this year, with Greece in its fourth year of recession, Yannitsis suggested reducing party financing from state coffers by 20 percent to roughly 40 million euro, and tying it to voter turnout rather than tax revenues. Instead, parties rushed through parliament a bill that approved 20 million euro in  campaign spending for the May 6 election.