Tuesday, 3 February 2015

Syriza's first week

Within hours of taking office on January 28, Syriza's ministers had made it clear that this government will not resume business as usual. 

It announced that two major state utilities, the Public Power Corp. and the Peiraieus Port Authority, would not be privatised as mandated by the so-called troika of Greece's creditors – the International Monetary Fund, the European Commission and the European Central Bank. It later added the Public Gas Company to the no-sale list. The country’s 10 major ports and some 37 regional airports are to remain in state hands. 

Approximately 11bn euros' worth of privatisations of state land, infrastructure and utilities are now in doubt, as the radical leftwing government has promised to scrap the agency overseeing the process. 

Other austerity-era measures are also to be rolled back. A five-euro consultancy fee in public hospitals is to go, as is a hiring freeze in the national health system.

Incoming finance minister Yanis Varoufakis announced that his ministry would hire back all 595 cleaning ladies his department had dismissed 18 months earlier, when it outsourced cleaning services and shut down two thirds of tax offices. Approximately 3,000 school guards, university employees and municipal police dismissed under austerity policies may also return.

Assuming office, Varoufakis said “The biggest loan in human history was given on the basis of shrinking incomes, from which debts both old and new would have to be repaid. It didn’t take an economist to see that … we’d repeatedly fail to graduate from this process.”

This barrage of declarations reinforced fears that Syriza was going to unravel five years' worth of difficult spending cuts and might lead Greece to a disorderly exit from its oversight programme overnight. The Athens Exchange lost nine percent of its value in a day

Deputy Prime Minister Yiannis Dragasakis emerged from the prime minister's office that evening to mitigate the capital flight and political panic. "Our government is interested in attracting investments, especially in areas that broaden the country's productive potential and create jobs. We're preparing a long list of works and investment opportunities in Greece," said Dragasakis. 

The climate further stabilised the following day during a visit from the European Parliament speaker Marten Schultz. 

Varoufakis dropped an anvil on the foot of visiting Dutch finance minister and Eurogroup chairman Jeroen Dijsselbloem on Friday, when he announced that Greece would no longer meet with inspectors from the troika. 

"Our government will proceed on the criterion of the best possible communication with the Eurozone and EU institutions and the IMF. But with a three-member committee which is charged with the implementation of a plan which we consider to be anti-European, and which the European parliament has said is rottenly constructed, we do not intend to co-operate," Varoufakis said. 

Dijsselbloem had earlier warned the government against unilateralism, "Taking unilateral steps or ignoring previous arrangements is not the way forward.  The problems of the Greek economy have not disappeared or changed overnight with the elections. There are still major challenges in order to realise sustainable growth, new jobs, confidence in the economy and to create new perspective for young generations. I realise that the Greeks have been through a lot and have gone through many tough measures. But a lot of progress has been made to put Greece back on track and it is important not to lose this progress." 

But the coffin seemed to have been laid out for the troika as an institution. By February 3 the German newspaper Handelsblatt reported that the troika's component institutions were seeking alternative ways of maintaining contact with Athens. 

There was more good news for Greece in the bond yield. Its benchmark 10-year bond, which had risen from an 8.41 percent interest rate to 11.17 percent over election weekend and the week that followed, finally began to drop on January 30. 

On February 1, Varoufakis embarked on a tour of European capitals. In Paris, French finance minister Michel Sapin agreed that the time had come for "a new testament between Greece and the Eurozone". Earlier that day Sapin had told Canal+ that France would consider an extension of Greek debt maturity, but not a write-down. 

In London, where Varoufakis met with investors on February 2, he told the Financial Times that Greece will propose a debt swap - replacing its existing bonds with two new types of bond - one linked to growth and another "perpetual bond" to replace the loans from the ECB.  

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