Wednesday, 28 January 2015

Greece’s leftist cabinet prepares to break some eggs

This article was published by Al Jazeera International

Greece’s first fully left-wing government went to work on Wednesday to make good on its core election promise: to restore Greek sovereignty and growth.

To do this, prime minister Alexis Tsipras wants to redirect the country’s sliver of surplus wealth from overseas creditors to the poor and battered middle class.

His government’s first major task will be to restructure Greece’s debt, which now stands at $365 billion - 175 percent of GDP, because meeting debt instalments is eating up more wealth than Greece can currently produce.

Tsipras and his newly appointed finance minister, Athens University economist Yanis Varoufakis, are to begin what promises to be a lengthy negotiation with creditors on Friday. That is when Dutch finance minister and current president of the single currency bloc, Jeroen Djisselbloem, is expected in Athens.

We will support them in their quest for economic recovery of Greece. We are glad that their ambition is to realise this within the Eurozone and that is exactly our ambition too,” Djisselbloem said on Monday, after the Radical Left Coalition, or Syriza, emerged victorious with 36.3 percent of the popular vote.

But this is not a resumption of business as usual. Syriza has promised to overturn the austerity policies previous Greek governments accepted. The new cabinet consists of an unprecedented lineup of leftist academics, most of whom were once members or supporters of the Greek communist party.

Varoufakis has been one of the most outspoken critics of Greece’s austerity policies. Asked by Al Jazeera in late 2013 whether Greece could continue to service its debt, he replied, “under no circumstances”, predicting that Greece would “remain in the dark cloud of permanent insolvency and perennial debt bondage.”

Greece restructured its debt once already, shaving off an estimated $117bn [103bn euros] in 2012. This restructuring will be harder, because the debt has been purchased by other EU sovereigns; any debt forgiveness will have to go through national parliaments.

Though Syriza now demands a writeoff of up to half its debt, even Varoufakis did not then think that Greece’s creditors would ever agree to this.

The troika of Greece’s official lenders has two alternatives,” he said. “One is to write down Greece’s debt substantially, e.g. by 100 to 120 billion euros, and then let Athens return to the markets in order to re-finance its remaining debt. Alas, this would mean that Mrs Merkel would have to announce to her Parliament, against all her earlier pronouncements, that the German taxpayer will take a large hit. This she will simply not do.”

The more realistic concession, Varoufakis, felt, would be telling European taxpayers  “that Greece’s debt will not be written down but that the repayments will be stretched into the future and the interest rate will be pushed close to zero. This seems to be the scenario that the powers-that-be are opting for. Once more, they are tending toward a suboptimal (non)-solution that will simply prolong Greece’s debt bondage at a cost for Europe’s taxpayers that is unnecessarily high.”

Yet the powers that be – the so-called troika of the European Central Bank, the European Commission and the International Monetary Fund - simply did not make this offer to the previous government, perhaps in anticipation of a Syriza victory. A senior party source tells Al Jazeera that Syriza has been in unofficial talks with the German government “for months”.

Even if creditors do offer an extension of debt repayment now, there is no guarantee that the Syriza would accept it. Varoufakis indicated in 2013 that this would only work “if Europe signs a binding agreement with the Greek government which casts in stone an automated and unconditional repayment schedule for the next thirty years, making each repayment dependent only on Greece’s GDP growth rate and not subject to troika visits.”

In other words, Greece would only meet agreed debt payments if it were experiencing significant rates of economic growth. This, felt Varoufakis, would be the only formula that “would allow Greece a chance to escape debt bondage while Mrs Merkel will also have the opportunity of pretending to the German electorate that Greece was not allowed to write down its debts.”

Varoufakis will not be the only negotiator with creditors. Tsipras has said that he will form a national negotiating team. This will reportedly include Haris Theoharis, who achieved notoriety as Greece’s first general secretary for public revenue for the efficiency with which he prosecuted tax collection. His dismissal ahead of a June reshuffle caused the ire of creditors. Theoharis is now an MP with Potami, a centrist, reformist party.

But the driving force behind policy will be unmistakeably leftist. One key role will go to deputy prime minister Yannis Dragasakis, one of the hawks on the left who want a parliamentary committee of inquiry into the financial conduct of past administrations. “We consider how we got here to be an open issue – how we got to the deficits and debt before 2009,” Dragasakis recently told a panel of fellow economists.

Also key to the economy will be Yiorgos Stathakis, a University of Crete economist, who assumes the burgeoning development portfolio. Four ministries have been telescoped into one, giving him oversight over much of the productive economy - trade, exports, infrastructure, merchant shipping and tourism. Stathakis will, over the next two years, disburse  over $12bn in EU-funded infrastructure projects, and billions more in tourism spending. That spending will account for much of the 2.9 percent growth Greece is forecast to achieve this year.

Interviewed shortly before Sunday’s election, Stathakis felt that the government would not shy from executing at least $2bn in social spending, as part of a promise to ultimately redistribute $12bn.

We will definitely do it because the welfare programme we have announced has a fiscal cost of 1.8bn euros,” he said. “It is within the range of the budget and we will succeed in fulfilling our promises.” That 1.8bn swallows all of Greece’s primary surplus in 2014, and has raised concerns in official circles about the prudence of Syriza’s fiscal relaxation.

On election night, Syriza set up a pavilion near parliament where supporters gathered to hear Tsipras’ acceptance speech. While the votes were being counted, the pavilion speakers blared the start of a Leonard Cohen song:

“They sentenced me to 20 years of boredom,
For trying to change the system from within,
I’m coming now, I’m coming to reward them,
First we take Manhattan, then we take Berlin.”

Inexplicably, the song was stopped in mid-verse – perhaps to avoid giving offence. Yet Syriza has openly campaigned as the vanguard of an anti-austerity revolution that will displace German austerity policies in the Eurozone. It remains to be seen whether Tsipras, the DJ of that policy, will be forced to change track.

Tuesday, 27 January 2015

Syriza appoints government dominated by leftists

Greece's new prime minister, Alexis Tsipras, on Tuesday announced a cabinet made up predominantly of leftists, with a series of academics in key posts. 

Athens University economist Yanis Varoufakis will assume the sensitive finance portfolio. Until now the finance minister has also led Greece's negotiations with creditors, though it was widely expected that a significant role will also be played by Yannis Dragasakis, the economist who will serve as Tsipras' economics advisor and deputy prime minister. 

University of Crete economist Yiorgos Stathakis will assume the development ministry, which is now to include the ministries of the merchant marine, tourism and infrastructure, concentrating many of the portfolios governing productive sectors of the economy.

The University of Peiraieus political scientist Nikos Kotzias is to assume the foreign affairs portfolio. With the exception of Varoufakis, the other three are dyed-in-the-wool leftists whose affiliations go back to the Greek Communist Party.

Tsipras heads the first left wing government in Greece's history, dominated by his Radical Left Coalition party, Syriza. The party won 36.3 percent of the popular vote in Sunday's election, unseating a socialist-conservative coalition. It commands a 162-seat majority in the 300-seat parliament in coalition with the right-wing Independent Greeks party.

Other traditional leftists assuming portfolios are Panos Skourletis (labour), Nikos Voutsis (interior), environment and energy (Panayotis Lafazanis), Aristeidis Baltas (education and culture) and Panayotis Kouroumplis (health and social security). Tsipras' chief of staff Nikos Pappas is to assume a ministry without portfolio. The defence ministry is to go to Tsipras' coalition partner, Panos Kammenos, leader of the right-wing Independent Greeks.

Tsipras telescoped 18 ministries into ten, boosting the portfolios of development, education, under larger administrative clusters. 

1. Finance Ministry (as is). 
2. Development ministry (to include the ministries of the Merchant Marine, Tourism and Infrastructure).
3. Interior Ministry (to include the ministries of Administrative Reform, Public Order and Macedonia & Thrace). 
4. Environment and Energy Ministry (to include also the Agriculture Ministry and general secretariat of Industry).
5. Education and Culture ministries to be combined into one.
6. Health Ministry to absorb social security.
7. Labour Ministry.
8. Defence.
9. Foreign Affairs.
10. Justice, Transparency and Human Rights.

The Greek ten-year bond was trading at higher interest rates on Tuesday at 9.36 percent, compared to 9.09 percent on Monday and 8.41 percent two days before Sunday's election. 

Tsipras was sworn in on Monday afternoon. 

Monday, 26 January 2015

Syriza to name government soon

Syriza, or the Coalition of the Radical Left, received more than 36 percent of the vote, beating the incumbent conservatives by seven points. This enables it to field 149 deputies in the 300-seat parliament - two shy of an outright majority. Independent Greeks is a right-wing party that campaigned as a potential coalition partner to Syriza. Syriza and Independent Greeks would command a comfortable majority of 162 seats. 

"As of his moment there is a government," Indepependent Greeks leader Panos Kammenos told reporters on Monday morning, as he emerged from the offices of Syriza, the main victor in Sunday's election, where he had held talks with Tsipras.

"We are giving a confidence vote to premier Alexis Tsipras. The prime minister will today go to the president to be sworn in and announce the makeup of the government," he said.

Talks had also been expected with The River, a centrist, reformist party, though no further mention of this was made on Monday.

Tsipras has until Thursday to announce the makeup of his government. 

Syriza has campaigned on a platform of ridding Greece of austerity policies dictated by its Eurozone partners and the International Monetary Fund. Those policies have helped Greece balance its budget but have also raised unemployment to 25 percent. Syriza has also vowed to renegotiate the terms of debt repayment to the Eurozone and IMF, which lent it 240bn euros. 

That debt is deemed unsustainable to the Greek economy and rescheduling it has been a political issue since 2012 - in other words for the duration of the outgoing socialist-conservative coalition's term in office; but talks on achieving this were never started. Syriza has said it wants up to half the debt forgiven and repayment of the rest extended by decades. 

Syriza has softened its message over the past three years - no longer threatening unilateral default. Instead it says it heralds a new, anti-austerity majority not just in Greece but across Europe. And it is basing much of its power to sway creditors, on the perception that the political time is right for them to forgive some Greek debt.

"I assure you that the new Greek government will be ready to co-operate and negotiate with our partners a fair, mutually beneficial and sustainable solution," Tsipras told a crowd of cheering supporters on Sunday night. "Greece will come to this dialogue with its own proposals, its own national reform plan, and its own four-year development plan.. There will no fatal disagreement (with partners) but also no continuation of austerity." Tsipras also promised not to repeat the tax-and-spend policies, which led Greece into debt, but to maintain a balanced budget. 

Yet Greeks' anger is mixed with fear that they could still be forced out of the euro if they cannot meet debt payments. Even Tsipras admits that the negotiation must be over by July, when government bonds worth some ten billion dollars come due. Until then, Greece has to survive on home-grown tax revenues. Those revenues fell sharply in the last few months. Greece missed its target of a 5bn euro primary surplus, bringing in just under 2bn euros in tax revenue above spending for 2014, the finance ministry announced on Monday. 

Outgoing conservative prime minister Antonis Samaras declared himself satisfied. "My conscience is clear. I took over a country on the brink of disaster. I was asked to hold burning coals in by hands. Most people gave us few chances of survival; but survive we did. We avoided the worst case scenario. We rid the country of deficits and the recession. We restored national credibility and prestige." His New Democracy party slipped only two points relative to its 2012 performance; but their junior coalition partners fared far worse. 

"The [election] result does not satisfy us at all given our efforts and our candour," declared socialist leader Evangelos Venizelos, whose Pasok party got 4.68 percent of the vote, less than half its 2012 performance. He added, "I am sure that Syriza is aware of the enormous responsibilities it is shouldering." The socialist camp was split by the emergence of former socialist leader Yiorgos Papandreou under a rival banner. Venizelos announced that Pasok would hold a congress to reconstitute itself. 

Wednesday, 21 January 2015

The new Greek government could face a financial siege

This article was published by Al jazeera International. 

At election rallies across Greece, the main opposition party, the Coalition of the Radical Left, or Syriza, promises to lead a European revolution against austerity.

Millions of pairs of eyes have turned to Greece, to see whether after five years of patience, of painful and unwavering efforts, Greece can lift its head. We will prove that when people are determined they can defeat even the greatest enemy,” declared Alexis Tsipras, Syriza’s leader, at a recent rally in the northern city of Komotini.

Tsipras’ supporters are a mix of traditional leftists and the newly dispossessed. The former see the prospect of Greece’s first ever left wing government as a historic moment. The Greek communist party, KKE, lost a civil war 65 years ago in pursuit of this goal. Syriza, which was formed in 1989 as an attempt to unite Greece’s fragmented communist groups, now represents the left’s best hope of achieving it. 

The majority of Syriza’s supporters, however, are not dyed-in-the-wool ideologues. They are people like Uzinel, a city bus driver who quit his job after his 1,200 euro monthly salary fell by half. “It used to cost me 300 euros a month just to drive in to work, so I was working for 280 euros,” he said as he braved the January cold, waiting for Tsipras to arrive at the rally. “Tsipras says he will restore minimum wage to 750 euros. That is decent.” Uzinel now supports his family by farming sugarcane and tomatoes.

Many Greeks are willing to admit that the country’s $42bn [36bn euros] deficit needed to be tamed; but five years of government spending cuts that finally balanced the budget last year also helped deprive Greece of a quarter of its economy, and produced unemployment of over 25 percent. In a controversial report published in May 2013, the International Monetary Fund admitted that it had greatly underestimated the recessionary effect of the public spending cuts it ordered the Greeks to make.  

Now that the government is finally raising more in taxes than it is spending, its new challenge is to meet scheduled debt repayments. That task is absorbing more than its hard-won surplus, forcing it to keep borrowing and keeping it in what Syriza’s chief economist, Yiannis Milios, calls an “austerity trap”.

Syriza’s main election promise is to renegotiate the terms under which Greece would repay $280bn [240bn euros] lent to it by fellow Eurozone members and the International Monetary Fund to ease the period of adjustment. It wants its creditors to write off up to half of that debt and allow Greece to delay repayment of the rest until it enjoys healthy growth rates.

“We have always said that a debt servicing cannot deprive the country of the valuable resources which are needed for social cohesion and growth,” Milios tells Al Jazeera. “And there are now many voices in Europe who agree with us… Deflation, recession, high unemployment are not only Greek problems. They are problems of all the European south and they have started also being problems in the northern countries.”

Leftists, who formed the backbone of the Greek resistance during Nazi occupation, are fond of reminding Germany that it was effectively relieved of the damages claims of the countries it had fought and occupied, amounting to hundreds of billions of dollars. “I think the so-called German economic wonder wouldn’t have taken place if this decision wasn’t made in the London conference of 1953,” says Milios.

Rebellion against the debt trap resounds with Greek voters, who now owe an unprecedented $200bn (173bn euros) to banks, social security and the taxman – a sum equal to the country’s output.

Not everyone is convinced that Syriza can pull off a successful negotiation with creditors. Anger at the recession is mixed with fear that the country’s fragile recovery may become derailed.

“I don’t trust them. Are we just going to wake up the day after the election and find that all our problems have been solved? I don’t think so,” says Popi Giouzelidou, a clothes shop owner on Komotini’s main square. “Where are they going to find the money? And why didn’t they work with the conservatives as a national unity government? I think they just want power.”

Strictly speaking, Syriza is not winning this election as much as the incumbent coalition of conservatives and socialists is losing it. Its current approval rating of around 30 percent is only marginally greater than what voters gave it in the last general election, two and a half years ago. The ruling New Democracy and Pasok parties, however, have together lost roughly 10 percent of the vote. Under Greece’s election law, that will deprive them of a 50-seat bonus in parliament awarded to the top party.

Syriza has already gone against the majority in triggering this election. By refusing to back the government’s candidate for president, which requires bipartisan support, it invoked a constitutional dissolution of parliament last December. Public opinion, as expressed in recent polls, favoured continuity and political consensus.

Before the 2012 elections Syriza had again gone against majority opinion by openly threatening to unilaterally stop debt repayments, forcing it to leave the Eurozone with potentially ruinous results for the currency. More than two thirds of Greeks have consistently polled as favouring the euro over a return to the drachma.

While Syriza is now careful to back a negotiated rescheduling of debt, its strategy still hinges on leveraging Greece’s nuisance value. Its argument now is that denying the Greeks satisfaction would be politically incorrect. “You’re worried that if a Syriza government comes along… the almighty Germans or whoever else will chop off our head, stick it on a pike and carry it around saying, ‘here’s what happens to people who vote for Syriza’,” Yiannis Dragasakis, a senior Syriza policymaker, recently told a panel of fellow-economists. “Does anyone believe that such a Europe has any kind of future?”

Syriza faces a difficult negotiation. Creditors have frozen $8.8bn (7.6bn euros) in loan disbursements until Greece completes its negotiation, and the current government has exhausted a $17.4bn (15bn euro) ceiling of bond sales under its oversight programme. A Syriza government’s only source of revenue, therefore, will be taxes; but public tax revenues collapsed in the last three months of 2014, cutting a projected $7bn (6.1bn euro) primary surplus by two thirds.

Eurozone finance ministers are preparing to extend the negotiation deadline by six months, to September. Such a prolonged negotiation would amount to a siege. Senior banking sources tell Al Jazeera that Greece only has cash reserves to service the debt, pay public servants and shore up the pension system through February.

“The cash reserves are definitely until the end of March and in addition there are many options that the Greek state can use to have another 2-3 months without any real problem,” insists Syriza MP Yiorgos Stathakis, an economics professor widely thought to be in line for the crucial finance portfolio. “At any rate as soon as we form the government I think political stability will improve the performance of tax receipts.”

Even if a Syriza government manages to draw out talks to the deadline, it is highly unlikely to be able to make good on $12bn (11bn euros) in social spending it has promised. Stathakis, who is the most moderate of Syriza’s economic policymakers, says the party would implement at least a $2bn (1.8bn euro) portion of the programme that would provide food, electricity and healthcare for the poorest Greeks.

“The Greek programme has failed completely,” he says. “We have to go back to the table, find a new solution with our partners. That’s the only way.”