Tuesday, 24 September 2013

An Early Sunset for Golden Dawn?

In the five days that have elapsed since the politically-motivated killing of musician Pavlos Fyssas in Athens, the conservative-led government has pursued the far-right Golden Dawn party legally and politically.

Golden Dawn member Yiorgos Roupakias has confessed to the killing and has been charged with murder and illegal weapons possession. Eye witnesses say police were present at the time of the killing and may have witnessed it, but questions remain as to why they failed to stop it.

Yesterday the public order ministry announced that it was suspending seven top police commanders in Athens pending a full investigation into press allegations of Golden Dawn sympathies and collaboration in the force.

At the same time, five police commanders have been either withdrawn or have resigned in central and southern Greece following reports that they failed to investigate a Golden Dawn weapons cache a few hundred yards from the police station in the town of Halkida, on the island of Evoia, 100km northeast of Athens.

The suspicion of strong Golden Dawn sympathy among security forces is not new. National weekly newspaper To Vima has repeatedly published an analysis of 11 ballot boxes in voting centres around Athens police headquarters, where hundreds of police are registered to vote. The newspaper found that the vote for Golden Dawn in those boxes was between 17.2 and 23 percent, compared to a range of five-to-seven percent in neighbouring voting centres.

Political Pursuit 

The government has announced that it is looking into a legal amendment that would stop state financing to parties running paramilitary organisations or with criminal indictments hanging over them. Only Golden Dawn answers this description. The party has already received three quarters of its 1.6mn euro allocation for this year.

There are 32 pending indictments against Golden Dawn members, which supreme court deputy prosecutor Haralambos Vourliotis is now examining. He is also reportedly looking into prosecuting Golden Dawn as a criminal organisation. To do so he would have to prove that attacks like that on Fyssas were not spontaneous initiatives but centrally directed.

Greek media are now reporting that the government will table a discussion in parliament on how to deal with the resurgence of fascism. The government evidently sees an opportunity to emasculate a party that took 6.9 percent of the right wing vote last June, and until recently enjoyed approval ratings of up to 13 percent. 

An opinion poll published yesterday by Eleftheros Typos, the conservative party's unofficial mouthpiece, found that three quarters three quarters of Greeks believe Golden Dawn to be a threat to democracy, to organise violence and to have been connected to the killing of Fyssas - something Roupakias reportedly denies. 

If the government succeeds in cutting off state funds to Golden Dawn, putting a number of its operatives in prison and crippling it by indicting a broad swath of its commanders, it will have dealt a blow many Greeks and immigrants feel was long overdue. Golden Dawn gangs are suspected of being behind hundreds of late night attacks on migrants in the past two years. Their outbursts and rants in parliament have set a new low watermark for the standard of debate in the chamber.  

The government may also consider bringing to the floor of parliament an anti-racism bill former justice minister Antonis Roupakiotis drafted last May. The bill was never presented to parliament because the government feared that most conservative MPs would vote against it. 

See also Yiorgos Lambropoulos' article on how Golden Dawn is structured.

Saturday, 21 September 2013

Can Greece’s Rescue Plan Succeed?

This article and an accompanying television report were published by Al Jazeera

Germany’s election means something to almost everyone in Europe. To the Greek street, it signals the point when the government ought to pluck up the courage and ask the Eurozone to forgive a big chunk of its onerous debt, which now stands at 174 percent of its GDP.  

Four years of austerity have succeeded in eliminating a $49 billion budget deficit even while the economy shrank – a painful process akin to playing the piano while someone breaks your fingers. Having done this, Greece finds that its economy has shrunk so much, it is barely able to service its debt. Interest last year cost $16bn, placing the country in what one economist calls a “debt bondage”.

The debt also acts as a barrier to growth, creating a vicious cycle. “No-one wants to invest in a country which is uncertain, which has lost confidence, which is shrinking,” says former finance minister Nikos Christodoulakis. Apart from the risk, there is the reality of high taxes.

Angela Merkel’s government has lent the Greeks money on the principle that German taxpayers will never have to pay for the European periphery’s debts, so it seems that the Greeks will be disappointed in their quest. The problem is that most Greek economists no longer see the country’s rescue package as viable without serious intervention.  

“It is highly doubtful whether this rate of tax extraction from a moribund economy can be maintained,” says Athens University economist Yanis Varoufakis. He is admittedly one of the Greek rescue plan’s most severe critics, and has predicted that the euro will ultimately meet its Waterloo in Greece.

Varoufakis is not alone, however. “You need fresh money in this country,” says Gikas Hardouvelis, a proponent of the Greek rescue. As chief economic advisor to Prime Minister Loukas Papademos, he played a leading role in negotiating Greece’s second facilitation loan last year.  “Otherwise we’re going to lose our youth, the country is going to shrink and we’re going to be taken over by foreigners.”

Merkel’s opponent, Social Democrat leader Peer Steinbrueck, espouses the idea of a massive investment package for the European periphery – a second Marshall Plan; but his party is trailing the ruling CDU in the polls by about 10 points.

Greece was essentially bankrupt when it lost the ability to borrow affordably from markets in early 2010. It accepted some $300 billion in facilitation loans from the European Commission, the European Central Bank and the International Monetary Fund – the notorious ‘troika’ – who feared a collapse of the euro as a currency should Greece be allowed to fail like a massive Lehman Brothers. In return, Greece had to commit to painful spending cuts.

The result of austerity is that the economy has lost 26 percent of its size and is still shrinking. Unemployment is the highest in Europe at 27.9 percent, and twice that for the young. Wages have fallen sharply for those who do still work – by about 23 percent in the private sector and as much as twice that in the public sector.

Prime Minister Antonis Samaras put a brave face on things in an annual economy speech earlier this month. “Greece is turning a new leaf. Its economy, after six years of recession, is turning a new leaf,” he said, predicting recovery in 2014. The government is claiming to have finally reached a budget surplus before debt servicing is factored in. It also sees a lower-than-predicted recession in the second quarter (-3.8 percent instead of -4.6 percent) as heralding the beginning of an upturn to growth.

The government has been quick to grasp at straws before. In late spring Samaras foresaw unemployment stabilising. In January his finance minister, Yannis Stournaras, foresaw a return to growth by the end of the year. Both predictions were confounded. Could this time be different?

Greek economists think not. They are deeply skeptical about the primary surplus, attributing it to the government’s withholding payments to private sector suppliers and Value Added Tax returns to businesses, and allowing the social security deficit to widen. 

They converge on the view that the recession is slowly lifting, but that this merely leaves the economy moribund. “A starving person sheds a large portion of his weight in the first few weeks. As death approaches, the rate of weight diminution declines to zero,” says Varoufakis dryly.

When $140bn of Greek debt was written off in March 2012, there was an optimistic camp, which felt that Greece’s finances were going to be sustainable. That camp is now deserted because financial markets still won’t touch Greece.

At the very least, analysts expect Greece to be given another reduction in interest (it has already fallen from five percent to 3.1 percent) and an extension on the maturity of its loans. But this is merely to prevent a collapse in instalments.

Growth is a more elusive goal. The Greek banking system cannot finance it because it is itself bankrupted by the level of nonperforming loans. Two years ago the government brought in the financial consultants Blackrock to audit the banking system. “Blackrock found that about 30 percent of loans were nonperforming in 2011. Now it might well find twice that proportion,” says Christoforos Sardelis, who created Greece’s Public Debt Management Agency in 2000, and now works at the National Bank of Greece.

Five ways out

Austerity has led to such a massive sapping of public and private wealth that the recovery has to come from outside, most Greek economists say. Their ideas fall into two categories – those that reduce debt and those that would bypass it to nurture growth.

I think the eventual solution for the Greek debt problem will be some form of debt-equity swap,” suggests Hardouvelis. “We owe at this stage over $288bn to our European partners, and everybody is asking how to get rid of that wolf that scares investors. The best way to do it is to say, ‘let’s swap debt for equity, and come in and invest’. Land is the easiest thing to do… take a rocky island for 100 years... I don’t see any other solution.”

The idea of mortgaging sovereign territory to Germans might be politically controversial, but it kills two birds with one stone, generating revenue and reducing debt at the same time.

Christodoulakis suggests a different kind of swap between Greeks and Germans. Germany coerced two loans out of the Bank of Greece in 1943, during the Nazi occupation. These were never repaid, and Christodoulakis estimates their current value with interest at over $21bn – roughly, he says, Germany’s contribution to Greece’s first facilitation loan in 2010. 

I think that a very fair compensation and settlement of the issue would be to count one for the other… It would reduce the amount of Greek debt by 8-10% of GDP.” This idea enjoys overwhelming popular support in Greece, but has been ruled out by Germany.

Sardelis focuses on growth. He believes that a “risk transfer” to an internationally recognised body would unlock liquidity to the south.

“The European Investment Bank or the European Central Bank or some other institution needs to take on the role of loan guarantor. That would enable [banks] to issue loans to the peripheral economies on looser terms,” he says. “When trust breaks down someone intervenes and restores it. This isn’t happening,”

Left-of-centre economists focus on how Greece might regenerate itself without a wealth transfer from the outside. Savvas Robolis, who heads the Labour Institute, believes that Greece could generate half a point of GDP and seven thousand jobs just by restoring minimum wage to 751 euros a month. A controversial law in February 2012 lowered it to 586 euros despite the protestations of the Greek business community that taxes and state bureaucracy were a far more pressing concern. Unemployment has continued to rise, suggesting that the measure was far from successful.

Also in the self-sufficient camp, Varoufakis doesn’t think Greece can recover if it attempts to service its debt while it remains in recession. “Greek debt will remain sky high while Greece’s GDP will continue to shrink,” he says.  He believes a new contract between Greece and the troika should make Greece’s repayment schedule “dependent only on Greece’s GDP growth rate.” Greece’s left wing opposition has embraced this suspension of interest payments; but Hardouvelis believes it would “strain relations with Greece’s Eurozone partners” to the point of getting it kicked out of the EU.  

Greece is not alone in its financial asphyxiation. The single currency showed up weaknesses in the competitiveness of southern European economies and helped channel investments to the north.

Panayotis Petrakis, an economist at Athens University, describes this unequal structure as “the new normal”. He divides the Eurozone into “a productive centre, which concentrates capital from the periphery, which will have 27-30 percent unemployment.”

But Greece is singled out by the length and stubbornness of its illness. Portugal, Spain and Ireland have begun to see a pickup in their exports, bring in fresh money to pay off debts. Greece’s pickup has been much slower – an indication of the investor-unfriendliness it has to fix at home, and this is the nub of the problem.

“Suppose for twenty years we have no problem with the debt,” says Hardouvelis. “Are we going to fix a country that generates the income that, when the time comes, enables the future rich Greeks to pay back the debt? … The question always comes back to us.”

Wednesday, 18 September 2013

Greece Struggles to Slim the State

This article was published by Al Jazeera.

Central and local government, law courts and schools remain closed throughout Greece on Wendesday and Thursday, as the country grapples with a public sector  strike against austerity

Wednesday’s march through Athens by roughly 10,000 public employees marked the height of a week of troubles for Greece’s austerity government. It was the banner event of a 48-hour strike in the entire public sector, to protest against ongoing attempts to slim the state. Greece has already been experiencing the effects of an indefinite strike in public high schools, which began in earnest on Monday.  

Secondary school teachers, in particular, are fed up with the indignities of austerity. They say they have lost almost half their income during the crisis, and 16,000 - about one in five - have been allowed to fall off the payroll as their contracts would up or they retired. The result is that this year the government is asking those who remain to spread themselves across various subjects - yet it has cut their overall teaching hours.

“You cannot have growth without health, education, electricity and water,” says Thanasis Konteles, a teacher and union leader in Athens’ southern suburbs, outlining sacred areas in which he believes the government should not attempt severe savings. “We’re not against reform, but we want to have a voice in the process,” he said.

Health and social security are big budget items, however, and the cuts there have been deep. Since 2009, the government has slashed pharmaceutical spending alone by some $3 billion. It is now consolidating public hospitals and cutting spending on medicine even further. Its plan is to save another $800 million to bring total health expenditure to about $4.8bn in next year’s budget.

We're trying to do the reforms in the healthcare system that other European countries have done many years ago - spending less money for better healthcare,” health minister Adonis Georgiadis tells Al Jazeera. He believes that his plan to create fewer, larger hospitals with satellites of primary care centres will ultimately give Greeks better health services. The radical left opposition party, Syriza, he believes, orchestrates street demonstrations like Wednesday’s.

People on the left are good people, they're romantic people, they're utopic (sic) people,” he says. “But they don't live in this world. They live in another planet… Greece was the last soviet state in the European Union. This has to be ended and we will end it now.”

Not all Greeks see austerity as a process of ultimate improvement. Instead, many see a two-tier society taking shape in the widening gap between private services for those who can afford them, and dwindling state services. “I came here for a biopsy and they said ‘wait six weeks’,” said Katerina Ioannidou, a former state employee who was fired from public television this year. Al Jazeera met her outside Konstantinopouleion hospital, which has just absorbed the remnants of a smaller the government closed this month. “Imagine having cancer for six weeks and not knowing it.”

Austerity has managed to close an annual deficit of some $50bn over four years. That has produced 27.9 percent unemployment, the highest in Europe, but mostly at the expense of the private sector. Even though at least 180 thousand people have left the public payroll during the crisis, some 700 thousand remain, and the government has promised its creditors to shed almost a quarter of them over four years.

The conservative-led government has made the strongest efforts of any administration during the last four years to reform the state. It passed legislation this year paving the way for mass dismissals.

Yet for all its efforts, it hasn’t managed to fire a single employee. Two thousand were meant to go in June, and as many again by August. Efforts to fire the first batch by shutting down public television, ERT, ended in a debacle. The government lost a coalition ally, the Democratic Left, over the closure, and saw its parliamentary majority drop from 19 seats to a mere five. That leaves it vulnerable to defections and inherently insecure. It has since lost any practical benefit to the public payroll that might have transpired, promising to hire back two thousand of the roughly 2,700 people employed by ERT. The road to an efficient state that costs less and attracts investors is apparently going to be a long one.