Thursday, 28 May 2015

Study finds Greeks lost four tenths of income in crisis

A new study estimates that the average Greek household lost almost four tenths of its income in the first five years of the crisis.

Most of that loss - 23.1 percent - was in direct income, the study says. A further 8.8 percent was lost to increased taxation and another seven percent to inflation not matched by increases in income over the period 2008-2012.

The study is based on the declared income of 5.2 million taxpayers.

The study (Greece: Forms of adaptation, solidarity and inequalities in the crisis period) was unveiled on Thursday by its authors, Tasos Yiannitsis and Stavros Zografakis, economists at Athens University and Athens Agricultural University, respectively.

It found that income from salaries, which affected mainly the middle class and blue collar workers, fell by 27 percent, but income from corporate profits and dividends, which affected the rich, fell by 54 percent, suggesting that all social strata suffered.

However, its authors point out that the losses to the poor, though nominally smaller, were devastating because incomes among the lowest earning households were already low.

The proportion of Greeks living below the poverty line rose from 27.9 percent to 31.1 percent; but economist Panos Tsakloglou said that conceals the true extent of the spread of poverty, because the definition of poverty fell over the same period by a thousand euros to 7,756 euros. In 2008 terms, approximately 40 percent of Greeks are below the poverty line, Tsakloglou said.

In an indication of how badly the Greek state has failed to provide for the neediest during the crisis, the study found that in the poorest 10 percent of households, less than a tenth of income came from social welfare. Most - 62 percent - came from charity and donations from friends and neighbours. 

Saturday, 23 May 2015

Tsipras blasts creditors; talks at impasse

Greek premier Alexis Tsipras accused the country’s creditors of trampling on the agreed rubric of talks, and using financial pressure to push the country towards measures his government believes will cause further recession. 

“Some of our creditors are attempting to overturn the February 20 agreement,” Tsipras said to the central committee of his Syriza party, or Coalition of the Radical Left, on Saturday.

The agreement between Greece, on the one hand, and the European Commission, European Central Bank and International Monetary Fund, on the other, foresaw an interim agreement at the end of April, which would release 7.2bn euros’ worth of loan instalments to Greece. This would allow it to meet its commitments until a comprehensive agreement was reached at the end of June.

That deadline has come and gone without an agreement. Tsipras is saying that Greece’s creditors are driving his government towards a comprehensive agreement without releasing interim funds, in an effort to maximise their leverage.

“The non-payment of loan instalments to Greece is unacceptable and should not be happening,” Tsipras said. “If the cash starvation of Greece is our creditors’ tactic, it is totally ineffective.”

After missing an April 23 deadline, Tsipras’ government announced on May 3 that it was optimistic about an agreement being reached in May, without specifying when or what kind – interim or final. Since then there has been a Eurogroup meeting (May 11) and a summit of EU leaders (May 21-22) without any sign of an agreement; this despite the fact that Tsipras expressed optimism on May 22 after meeting with German chancellor Angela Merkel and French president Francois Hollande.

The consensus among financial experts is that Greece cannot pay its way through June without assistance. Apart form 2.5bn euros in salary and pension payments, it must meet several debt payments to the International Monetary Fund:

6 June: $300mn
12 June: $350mn
16 June: $580mn
19 June: $350mn

Key Issues

Tsipras said he would not go back on his word to refuse further cuts to pensions. “We do need to look at the viability of pension funds,” he said, “but not with further cuts. Instead we need to look at redistribution of wealth from the rich.”

Tsipras said pension funds lost 25bn euros in cash reserves when they were forced to accept a restructuring of Greek bonds in 2012. He called the move “criminal”, and said Greek officials would be called to account, indicating former finance minister and current socialist leader Evangelos Venizelos.

Tsipras also refused to give creditors satisfaction on labour deregulation. “Not only will we not further deregulate labour, we will bring back arbitration, a cornerstone of Europe,” he said. He also reiterated a promise to restore minimum wage to 731 euros a month.

An unelected prime minister, former central banker Loukas Papademos, deregulated labour in a highly contentious law in February 2012. The law dropped minimum wage to 586 euros a month, and abolished collective bargaining for each sector of industry. Syriza has vowed to revoke it.

A New Deal

Syriza has vowed to negotiate lower primary budget surpluses, which would be spent repaying debt. “The surpluses of 3 percent this year, 4.5 percent in 2016-17 and 4.2 percent in 2018, were based on austerity and are not implementable,” Tsipras said.

He reiterated his party’s commitment to a growth programme for Greece based on “low surpluses, redistribution of wealth and debt restructuring, plus a massive programme of investment in infrastructure and new technologies,” Tsipras said.

“We will rid the taxpayer of 10bn euros’ worth of austerity in the coming years with a lower primary surplus,” he said.

Saturday, 16 May 2015

How Syriza came to power

This retrospective was published in the April edition of The Aspen Review Central Europe

By John Psaropoulos

Syriza, the Radical Left Coalition, came to power on January 25 with 36.3 percent of the vote. It rules in coalition with the right-wing Independent Greeks, with which it shares a populist, anti-austerity agenda. It is Greece’s first predominantly leftwing government, and claims to be the vanguard of a Europe-wide revolution against austerity. 

Prime Minister Alexis Tsipras’ central election promise is simple: to restore Greek sovereignty and growth. To do this, he wants to redirect the country’s sliver of surplus wealth from overseas creditors to the poor and battered middle class. And to achieve that, he has to negotiate a new treaty with Greece’s creditors – the European Central Bank, the European Commission and the International Monetary Fund.

Five years of government spending cuts mandated by Greece’s creditors balanced the budget in 2013 for the first time in decades. The fact that the Greek state now lives within tax revenues weakens the argument for further borrowing, whose sole purpose is to pay off older debt.

Syriza argues that austerity has done its job and cannot be a prescription for the growth Greece now needs in order to pay off its 321bn euro debt (175 percent of GDP). On the contrary, it has deepened a recession that claimed a quarter of the Greek economy and produced unemployment of 25 percent – something the IMF revealed in a controversial paper in 2013

“The biggest loan in human history was given on condition that incomes would shrink, and from these shrinking incomes debts both old and new would have to be repaid,” said incoming finance minister Yianis Varoufakis on his first day on the job. “It didn’t take an economist to see that … we’d repeatedly fail to graduate from this process.”

Tsipras wants to provide food and electricity to dispossessed households; extend healthcare to those who have lost their coverage – an estimated quarter of the population; and restore pensions that have been reduced. He insists that he does not aim to recreate deficits to fund this.

But Greece remains precariously perched. Tax revenues fell sharply in late 2014, producing a smaller than forecast primary surplus of 1.8bn euros.

“I think that the government faces a very difficult task because Greece has funding needs of more than 20bn euros this year,” says Miranda Xafa, Greece’s former representative to the IMF. “Syriza has chosen the path of confrontation that could lead to an accident that would take the form of a default on the payment of the external debt. And the next step would be social unrest, capital flight and eventually Grexit,” she says using an abbreviated term for “Greek exit” from the Eurozone.

Humble beginnigs

Syriza was founded as an electoral alliance between the Moscow-oriented Greek Communist Party (KKE) and the Eurocentric communists of the Greek Left. As the Coalition of the Left and of Progress (Synaspismos), they took an impressive 13 percent of the vote in June 1989.

The fall of communism the following year split them between Stalinists and reformists. The former retreated to the KKE. The reformists turned Synaspismos into a political party. Throughout the 1990s, both groups fought for political survival in low, single-digit figures.

It was not until 2006, when party leader Alekos Alavanos campaigned against higher education reform, that Synaspismos, now renamed Syriza, really saw a chance of appealing to an audience outside the traditional left. It soared to 17 percent approval ratings in some opinion polls, yet still scored only five percent of the vote in the 2007 election.

“The party’s gains in 2007 may not have been great but Syriza was already beginning to exert an influence on the more radical wing of Pasok, which saw their party’s stagnation and dead end,” says former Syriza leader Alekos Alavanos.

In 2008, he passed on the leadership to the 30 year-old Alexis Tsipras, a civil engineering graduate who had already shown a vocation for politics. As a member of the communist youth and president of his school’s student body in 1991, he had led school sit-ins in protest against the conservative government’s education reforms, helping to defeat them.

“[Tsipras] understood that people wanted a change of political personnel, a new generation. He had been [party] secretary for youth which means he was more charismatic than the other candidates,” says Alavanos.

Meteoric rise, ideological drift

Under Tsipras, Syriza dared to read the crisis as an opportunity to beat the two-party system.

Socialist Prime Minister George Papandreou signed onto Greece’s first, 100bn euro facilitation loan in May 2010. By November 2011 he had resigned, after reaching an impasse with creditors over a slew of austerity measures. An interim technocratic government was installed under former central banker Loukas Papademos. Its job was to force austerity measures through parliament, negotiate a 100bn euro discount of Greek debt in private hands, sign onto a second 140bn euro loan and declare elections.

Under pressure from European leaders, conservative New Democracy leader Antonis Samaras – a bailout denouncer - joined the socialists in supporting the Papademos government.

The May 2012 elections were a political earthquake. New Democracy had suffered by abandoning its anti-bailout stance; but the socialists had fallen from 44 percent of the popular vote in 2009 to just 13.18 percent. They had been replaced as the leading centre-left force by Syriza, which rebounded from the brink of political extinction to claim 16.78 percent, quadrupling its 2009 vote.

Not only was Greece’s two-party system over. With some 45 percent of the vote going to anti-bailout parties, Greece had produced a hung parliament and could not govern itself. In vain, Samaras and new socialist leader Evangelos Venizelos tried to convince Tsipras to join them in a pro-bailout coalition. The week-long wooing of Tsipras only cemented his status as the new political force to be reckoned with.

In a rematch the following month, Greeks voted their fear of default only marginally above their loathing of austerity. New Democracy came out ahead with 29.66 percent of the vote, but Syriza leapt forward by ten points to become the main opposition party.

The tectonic shift was now complete. New Democracy had replaced the socialists as the principal Europeanist party, and Syriza had replaced New Democracy as the principal bailout denouncers.

Why Syriza?

“Syriza, did a very clever thing in 2012,” says Alavanos. “It was the only party that talked about an alternative government. The Greeks were looking for an alternative.” Alavanos says the Greek Communist Party (KKE) could have stepped into the breach “but the KKE doesn’t do politics; it just wants to protect its ideological base.”

Less explicable to Alavanos is why the right-wing Popular Orthodox Congress (LAOS) didn’t occupy that space. “It had more votes than Syriza in 2009. It could have a populist, right-wing, anti-capitalist rhetoric, and it could combine this with an anti-immigration policy, which the left cannot do. It could be a [Marine] Le Pen phenomenon.” LAOS instead joined the coalition backing the austerity government of Papademos, and Greek voters voted it out of parliament.  

Syriza had come a long way not merely by becoming the people’s voice against austerity; what gave it its edge is that it distinguished between pro-euro and pro-austerity politics. An overwhelming majority of Greeks supported Greece’s remaining within the Eurozone but not the austerity imposed by creditors.

In May 2012, Syriza vowed never to jeopardise Greece’s euro membership. Between the May and June elections it took another step towards the political centre: the party did not oppose the bailout loans that keep Greece afloat, it said; merely the austerity memoranda that accompany them. In dropping the threat of a unilateral default, Syriza crossed the line from pure bailout denunciator to bailout re-negotiator, seizing New Democracy’s more nuanced electoral platform.

This shift was emphasised in this year’s election. “We belong to the European family and we are going to find a solution together,” said Syriza’s chief economist, Yiannis Milios. “No one wants to destroy the other. We will not default. We will cooperate.”

Syriza has replaced the threat of unilateral default with political correctness. 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’,” Deputy Prime Minister Yiannis Dragasakis recently told a panel of fellow-economists. “Does anyone believe that such a Europe has any kind of future?”

Nuance and omission

Syriza’s rise to a potential ruling party had other, far-reaching effects on its message after 2012. A civil disobedience movement called “den plirono” (“I won’t pay”) had burgeoned during the crisis, as many Greeks started driving through motorway toll posts without paying. The campaign opposed extraordinary taxes levied during the crisis and even utility bills.

Syriza actively encouraged it. When financial fraud inspectors arrested a restauranteur on the island of Hydra for failing to issue receipts in August 2012, Syriza MPs applauded the local population for besieging them in the local police precinct. Theodoros Dritsas, now minister of the merchant marine, deplored the police “display of authoritarianism”. 

In early November, however, Syriza held a party congress to consolidate its positions and muffle many of its more extreme voices. It quickly dropped its exhortations for civil disobedience, espousing by November 22 “fair and proportional” toll charges “with discounts for frequent users”. This change in stance helped the conservative government to create a 2.9bn euro primary surplus in 2013, but displeased many on the party’s left fringe.

“The point of the 2012 congress was to turn a collection of components into a party and [Tsipras] succeeded in that,” says Vasilis Karasmanis, a philosophy professor and political observer at the Athens Polytechnic. “The components are an anachronism.”

The party’s rise to power also led it to quietly drop its opposition to a 50-seat bonus the current electoral law awards to the first party in the 300-seat legislature. (The remaining 250 seats are awarded on a proportional basis to the parties that clear a three percent threshold). The measure is designed to strengthen the chances of a government being formed, but while Syriza was a fringe party it demanded proportional representation across the board – a traditional leftwing mantra.

Syriza’s argument was that the bonus has helped propagate the two-party system, enabling the socialists and conservatives to rule Greece alternately for the last 40 years. Syriza Euro-MP Manolis Glezos, embarrassed the party last October, when he repeated the traditional party position: “We will try to persuade the Greek people to elect us without the bonus. But if we win with the bonus, as we’ve said before, we will immediately abolish this electoral law and declare repeat elections, which will be a simple battle without deceit.” Karasmanis calls Syriza’s silent acceptance of the 50 seat bonus now “an ideological about-turn of the first order”. 

Although it kept its 2012 manifesto for this election, Syriza de-emphasised major commitments. It stopped talking about nationalising the banking system and handing it over to co-operatives, where it would be re-purposed to deliver liquidity to small and medium-sized enterprises. (Interviewed shortly before the election, Milios said “the banks are nowadays stable. They have passed the stress tests of Black Rock and the European Central Bank. They belong to the Eurosystem of banks and they are being overlooked by the ECB.”)

Syriza also stopped talking about taxing the rich at 75 percent, up from the current 45 percent, fearing capital flight. It moved towards the middle class and stopped talking about raising taxes on businesses: more than 90 percent of employment in Greece comes from some 400,000 small and medium-sized enterprises. Gone, too, is talk of renationalising any privatised state companies.

Syriza, in short, has transitioned to a more centre-left position and taken over the socialist party’s voter base. It is ideologically palatable to the Greek mainstream. But voters are waiting to see whether it wins its three big gambles; to reach a new testament with creditors within the European family; to achieve growth and create jobs; and to spend up to 11bn euros a year on a social safety net. 

February 2015  

Tuesday, 12 May 2015

Hard-won surplus slips

The latest Greek budget figures suggest that the government is rapidly losing the budget surplus built up in 2013 and 2014.

First quarter figures published on Monday show the treasury's surplus at 1.186bn euros, down from 2.454bn in the first quarter last year. Most of the loss comes from central government and social security.

The figures show a six percent drop in tax revenue to 8.8bn euros, from 9.4bn euros during the first quarter of 2014.

There is also a 15 percent drop in social security contributions, to 4bn euros, from 4.7bn in the first quarter last year.

The surpluses Greece posted in the last two years were the first in decades.

Underlining the decreased confidence in the economy is the fact that the government doubled its loan guarantees to 121bn euros this year, to from 60bn euros at the end of 2014. This is almost exclusively due to 68bn euros' worth of guarantees to Greek banks, enabling them to draw on Emergency Liquidity Assistance from the European Central Bank. Banks needed ELA to make up for a bank run before and after the January 25 election. Bank of Greece figures leaked to the media last week estimated withdrawals this year alone at 30-35bn euros.

The government revealed on Tuesday that 600mn euros poured into state coffers as a result of a decree forcing local government, pension funds and public bodies to lend it their bank deposits. A mere 64mn of this came from local government, since most mayors are refusing to comply. The government was hoping to raise 2.5bn from the measure.

Syriza hoped to raise 2.5bn euros by forcing municipalities, pension funds and public trusts to lend it their deposits. But it has only raised a quarter of that sum so far, it revealed on Tuesday, 600mn euros, because many mayors refuse to comply.

The protracted talks have also made households uneasy. Depositors have pulled as much as 35bn euros from their bank accounts since the January election, a Bank of Greece email revealed last week.

All this suggests that people’s faith - and authority - are slipping away from the government.

Greece is embroiled in a protracted negotiation with its main creditors, the Eurozone and the International Monetary Fund, over an austerity programme that has been in force since 2010. The leftwing Syriza government maintains that austerity has caused a loss of a quarter of the economy since then. Creditors insist that Greece has to implement the reforms in full. 

Monday, 11 May 2015

Syriza’s mysterious deal

Greece’s leftwing Syriza government appears to be working towards a more comprehensive deal than was originally envisaged with its main creditors, the Eurozone and the International Monetary Fund.

A Eurogroup statement on Monday night “welcomed the progress that has been achieved so far,” but offered no clues as to when the deal would be finalised. “The reorganisation and streamlining of working procedures has made an acceleration possible,” it said. 

Eurogroup chairman Jeroen Dijsselbloem said talks were "more efficient, more positive, more constructive". 

Greek government spokesman Gavriil Sakellaridis refused to be drawn out on the details of the agreement ahead of Monday’s Eurogroup meeting, except to say that Greece would pay its IMF instalment of $750mn on time the next day. A payment order was duly issued on Monday. “We are not trying to blackmail, but want an agreement that respects commitments to Europe and to voters,” he said.

The rubric agreed on February 20 with creditors was that Greece would sign a partial agreement by the end of April, which would build confidence towards a final deal in June.

But talks have dragged on past deadline. An omnibus bill of agreed measures the government was to have made public on April 30 has remained under wraps.  The government in Athens now says it is confident of a deal in May, without specifying whether it will be interim or final.

Sakellaridis did not seem to believe that Monday’s Eurogroup would be definitive. “We want this Eurogroup to acknowledge the important progress marked so far in the Brussels Group,” he said, referring to the technical teams of negotiators on the two sides. 

The lack of such acknowledgment had hounded Finance Minister Yanis Varoufakis at the last Eurogroup meeting in Riga, Latvia on April 24. Finance ministers were so critical of Greece’s apparent lack of progress in talks that Varoufakis left without attending a post-conference dinner. “We see that this process… is leading nowhere,” he said afterwards. Varoufakis maintains that Greece had given technical teams a “hot text” full of proposals, but until there was agreement at the technical level, Dijsselbloem refused to distribute the proposals to ministers.

Bad press

The government is also smarting after a official at the Bank of Greece sent an email to journalists blaming Syriza for the loss of tens of billions of euros from the Greek financial system since it came to power on January 25. The bank has said it does not come from the governor's office or the communications office. 

Syriza does not dispute the figures, but suspects that its creditors are using Greek institutions to attack it. 

Speaking in parliament on Friday, Prime Minister Alexis Tsipras said his government would not judge independent officials "on the basis of whether we have the same ideas or not... but we demand that these people remain loyal to their mission and hold the national line." 

In a veiled threat to central banker Yannis Stournaras, he said a committee of inquiry into past policies will not hesitate to refer those responsible for policy errors to a plenary session of parliament. Stournaras served as finance minister from June 2012 to June 2014. 

The Bank of Greece email, published in part on Saturday and in full on Monday, lists a number of capital outflows:

“Capital flight towards foreign bonds or into mattresses comes to 30-35bn euros,” it says. “Twenty to 30 [billion euros] in loss of stock market equity; 10 [billion euros] for repos [short-term loan instruments]; three [billion euros] in credits from the Community Support Framework. We should have received 4 bn and we got just 1; 20 bn is missing from paper money in circulation; it is impossible to calculate the loss in debt held by foreigners. They own about 70bn euros’ worth; loss of value to real estate; 3 billion less in the economy from non-payment of government suppliers; one must add losses to banks from individuals’ freezing of payments, which has increased non-performing loans. Banks now have a problem and may need another round of recapitalisation.”

“We don’t dwell on the numbers, but on the question of whether it was right and ethical for them to be published in this way,” Sakellaridis said on Monday.