The nonpaper of the Greek government regarding the state of negotiations

Non paper of the Greek government on the current state of the negotiations.

May 5, 2015

  1. The serious disagreements and contradictions between the IMF and the EU are creating obstacles in the negotiations, as well as high risks. While until recently the main argument of the institutions was that the Greek side did not submit complete proposals, now it is clear that proposals have indeed been submitted and that there have been substantial concessions towards the direction of an “honorable compromise.”
  1. The difference of strategy, however, between the institutions is creating obstacles.
    • The IMF puts its red lines on the reforms, especially on pension and labour reforms, while it has loose lines on the topic of the primary surplus. On the back of the mind of the IMF lies the thought of debt write off, so that this can be rendered sustainable.
    • On the contrary, the European Commission has red lines on the topic of the primary surplus, and consequently, on the issue of not cutting the debt, and loose lines on tough reforms, such as those regarding pensions and labour relations.
  1. As a result, the totality of the institutions has red lines everywhere: pension reforms, labour reforms (IMF), and primary surplus (EC). Under these circumstances there can be no compromise. The responsibility belongs exclusively to the institutions and their weakness of communicating with each other.
  1. The Greek government, having realized the glaring contradiction, decided to take the initiative:
    • not to bring [for a vote] in the Parliament the multi-bill before there is potential for an agreement.
    • to put on the table of discussion the ‘next day,’ that is, the exit plan [of the country] towards the markets and the financing of growth in the post-June era.
  1. Today’s FT [Financial Times] fully reveal the contradictory strategies utilized between the Eurozone and the IMF (see the article of Peter Spiegel). The FT reveal that the head of the European department of the IMF, Paul Thomsen, has warned the Finance Ministers of the Eurozone that “perhaps the IMF will not provide its share of the tranche of 7.2bn euros” if “they do not write-off a significant part of Greece’s debt.” At the same time, P. Spiegel notes that “the Eurozone, which owns the biggest part of the Greek debt, is firmly opposed to the [idea of] debt relief.”
  1. At the same time, the European Commissioner for Economic & Financial Affairs, Taxation & Customs, Pierre Moscovisi, confirmed the contradiction between the EC and the IMF, saying that the issue of the debt “can be discussed only after an agreement on a reform program.” A strategic disagreement, which has Greece at its epicenter, between the EC and the IMF, and works to the detriment of the country.

Addendum: You can find a version of the nonpaper in Greek, here.

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GR Political Economy Digest #17

NEIN

While Friday’s Eurogroup storm seems to have passed, today is an equally (if not more) important date for the fate of Greece. Yanis Varoufakis, the Greek Minister of Finance, is expected to send a list of proposed reforms to TIFKAT (The ‘Institutions’ Formerly Known As Troika) for approval. Analysts, markets, and entire governments might have sighed in relief on Friday, but it is today actually that will illuminate whether a substantial compromise has been reached in the last Eurogroup meeting.

There is not much to say at this point, other than to wait and see what Varoufakis has planned. The list of reforms is expected to be quite short (no longer than 3-5 pages) and concise. Hopefully, it will also include meaningful proposals that speak more of a “compromise,” rather than the hardcore Left platform of Syriza or ANEL. “Wait, what?,” you may ask. “Who cares about those hardcore Lefties and the few ultra-nationalist crazies of ANEL? They are a fringe part anyways, right? And they wouldn’t jeopardize their ascent to power so soon, would they? As long as the moderate part of Syriza is willing to compromise, then there is no problem!” Well… I would love to share your optimism, but I am quite wary of the influence of the anti-austerity and anti-reform hardliners. I am also quite confident that we will witness some important schisms in the next couple of weeks – iff (if and only if) Varoufakis and Tsipras are true to Friday’s deal. Some senior Syriza officials and important figures of the Left have already begun speaking up (Manolis Glezos, John Milios, Sofia Sakorafa, and even Mikis Theodorakis). I suspect that more voices will soon follow in tune. Will that be enough to bring the government down? This is extremely early to say. But don’t be surprised if the inter-governmental dynamics change drastically in the upcoming weeks.

In any case, happy Lent Monday everybody! Here is the list of the top articles to read on the political economy of Greece today: 

  1. Greece: Four more months of hope and risks, by Frederik Ducrozet | Credit Agricole CIB, Feb 23 2015
  2. Greek bailout: Athens submits economic reform plan today (Live updates), by Graeme Wearden | The Guardian, Feb 23 2015
  3. Tsipras tamed as economists declare Greece loses austerity fight, by Simon Kennedy & Jennifer Ryan | Bloomberg, Feb 23 2015
  4. Greece scrambles to send draft reforms to EU institutions, by Peter Spiegel & Kerin Hope | The Financial Times, Feb 23 2015
  5. In defence of can-kicking, by Duncan Weldon | Medium, Feb 23 2015
  6. A hard week ahead for Greece after a last-minute deal, by Max Ehrenfreund | The Washington Post, Feb 23 2015
  7. Greece’s future is its past, by Rebecca Harding | Pieria, Feb 23 2015
  8. Greece: A debt colony with a bit of “home rule”, by Paul Mason | Channel4 News, Feb 23 2015
  9. Varoufakis ‘absolutely certain’ Greek reforms will meet approval | Deutsche Welle, Feb 22 2015
  10. Spain said to lead EU push to force terms on Greece, by Nikolaos Chrysoloras & Karl Stagno Navarra | Bloomberg, Feb 22 2015
  11. Ten days that shook the euro; how Greece came to the brink, by Alastair MacDonald & Jan Strupczewski | Reuters, Feb 22 2015
  12. Greece readies reform promises, by George Georgiopoulos | Reuters, Feb 22 2015

Photo Credits: Ilias Makris (Kathimerini, 22.02.2015)

GR Political Economy Digest #16

pavlopouleto

Habemus Pavlopoulos! As of today evening, Greece has a new President of the Democracy (PtD). Prokopis Pavlopoulos, former Minister for the Interior, Public Administration and Decentralization (2004-2007) and Minister for the Interior and Public Order (2007-2009) with New Democracy, has just been voted as the new PtD. A lawyer and influential legal scholar in Greece, Pavlopoulos was nominated by Prime Minister Alexis Tsipras himself on Tuesday noon.

But Pavlopoulos was both an unexpected and an unwelcome choice for the vast majority of the Greek people. He was unexpected because, up until the last moment, Greek media were almost certain that New Democracy’s Dimitris Avramopoulos (the current European Commissioner for Migration, Home Affairs and Citizenship) would be Tsipras’s pick. Moreover, the two other names thrown in the rumor frenzy by the press, former PM Kostas Karamanlis and former MEP Marietta Giannakou, did not point towards Provopoulos’s direction at all.  In a surprising move, and after not announcing his nomination as planned on Sunday night, Alexis Tsipras nominated Provopoulos instead yesterday.

But Pavlopoulos is also viewed as a highly unwelcome choice. He was Minister for the Interior and Public Order during the 2008 December riots that caused enormous damages in Athens and other major cities, but failed to handle the situation accordingly. He was heavily attacked back then, both by regular citizens who viewed their property being damaged or looted right in front of their eyes, and by the party of Syriza, who accused him, together with the police, for plotting various schemes and acts of brutality. Pavlopoulos is also infamous for authorizing more than 800,000 hirings in the public sector as a Minister for the New Democracy government, between 2004 and 2009. If the notion of ‘clientelism’ could be personified, he would definitely be one of the highest contenders for the title.

Despite all that, Pavlopoulos was eventually named the new PtD of Greece, voted by 233 MPs (out of a total of 300), including the majority of New Democracy MPs and former PM Antonis Samaras himself.

Leaving aside the election for the PtD, the Greek government has a lot of ground to cover in the days to come in order to secure the continuing financing of the country. But so does Germany and the rest of the Eurozone partners, if they aim to arrive at a substantive and meaningful deal with Greece. Accordingly, the ECB – which has emerged as a sort-of power broker in the past few weeks – has also a big role to play in all of this. Let us hope that both sides can pour some water in their wines, and meet somewhere halfway through, with the ECB acting as a constructive addition rather than impediment to an upcoming agreement. Otherwise, there is no way for this story to have a good ending. Time is running, and money running out. The sooner there is a deal, the better for Greece.

Addendum: It has come to my attention that few blogs and websites have linked to this post, with some people contesting the total number of hirings authorized by Pavlopoulos. Since this is an important issue, let me point you to a few more links on the subject matter. The accusations against Pavlopoulos have been leveled by the newspaper Ta Nea a while back. Indeed, not many other newspapers have delved into the matter, and Pavlopoulos has himself refuted the claims on a radio-show once. Nevertheless, there has been no official statement from neither Pavlopoulos, nor New Democracy to refute the total number of the hirings (that I know of). And even if there is, and the (yet to be disputed) number is wrong, one thing is for sure: Pavlopoulos did authorize the hiring of a hell lot of people during his tenure. He did nurture the clientelistic Greek state even further. And that is a sad reality.

The top articles on the Greek political economy to read before you go to bed tonight are:

  1. What deal could be struck to keep Greece in the Eurozone?, by Raoul Ruparel | Open Europe, Feb 18 2015
  2. Greece to submit loan request to euro zone, Germany resists, by Renee Maltezou and John O’Donnell | Reuters, Feb 18 2015
  3. Greece gets lifeline as ECB agrees €3.3bn extra emergency funds, by Jennifer Rankin, Graeme Wearden and Helena Smith | The Guardian, Feb 18 2015
  4. Greece’s game of chicken is starting to get dangerous, by Matt O’ Brien | The Washington Post, Feb 18 2015
  5. Power broker in Greek debt crisis could be the E.C.B., by Jack Ewing | The New York Times, Feb 18 2015
  6. Greece’s key pledges and requests at the Eurogroup meetings | Macropolis.gr, Feb 18 2015
  7. Calling Greece’s loan-agreement bluff: A giant red herring, by Gabriele Steinhauser and Viktoria Dendrinou | The Wall Street Journal, Feb 18 2015
  8. The world-historic depths of Greece’s economic misery, charted, by Jordan Weissman | Slate (Moneybox), Feb 18 2015
  9. Kammenos makes media threat, compares euro talks to resistance against Ottomans | Kathimerini, Feb 18 2015
  10. Even as progressives take lead in Greece, women remain out of power, by Joanna Kakissis | NPR, Feb 18 2015
  11. Why Angela Merkel is holding firm on Greece, by Mark Gilbert | The Chicago Tribune, Feb 17 2015
  12. Give Greece Room to Maneuver, by the Editorial Board | The New York Times, Feb 17 2015
  13. PM Tsipras declares war at home on Greece’s ‘oligarchs’, by Stephen Grey | Reuters, Feb 17 2015

Photo: Ilias Makris (Kathimerini)

GR Political Economy Digest #12

eikonaki Once SYRIZA was elected in power (with the help of ultra-nationalist Independent Greeks), the international media were on an ecstatic frenzy. A historic win for the Left, coupled with the fact that it was achieved by a past underdog under the direction of a very young new leader, Alexis Tsipras, seemed like the perfect story for the media. Today, five days after the Greek parliamentary elections, the tone has turned from almost delirious to extremely worrying. It seems that everyone – including SYRIZA’s supporters – were betting on a softening of the party’s stance, once it came into office. But SYRIZA has shown no intention to tone down its rhetoric and move away from its worrisome programmatic pledges. In fact, SYRIZA has remained adamant in its pre-electoral promises. Although this is a fresh feeling for the Greek society, which is very much used to the U-turns of politicians once they get elected, it is also an evident cause for alarm – due to the nature of Syriza’s promises and intentions.

Greece has to fulfill its running obligations with its international lenders within the next few months, it needs to receive the last chunk of bailout money in order to pay salaries and pensions starting this month, and more than anything, it needs to implement the necessary structural reforms in order to open up the state and market within the country, changing the existing clientelistic political system, combatting the oligarchic structure, and tackling the problems arising from the extensive shadow economy and crony capitalism in place. Yet, what we have seen in the first few days of SYRIZA’s rule is not exactly close to ‘promising’ in bringing substantial change to the country. SYRIZA has pledged to re-hire about 10,000 former workers in the public sector (who have been fired due to its downsizing); it has announced that it would block all further privatizations pertaining to the biggest port in Greece, the Peireus Port, and has assumed a similar stance in regards to the country’s multiple regional airports; it has jeopardized the (unusual!) consentual agreement of all member states of the EU in regards to the sanctions against Russia after further aggressions in Ukraine; and it has stated (via the current Minister of Economics, Yanis Varoufakis) that Greece ‘does not need the last 7 billion euros’ coming from the final loan disbursement.

SYRIZA is playing an extreme form of hardball with the TROIKA and the totality of our European family. As things look now, it either has some extraordinary cards under its sleeves (an agreement with our European counterparts about debt-relief of some sort is quite possible. Straightforward debt-reduction seems highly unlikely.), which it will present in a sugarcoated manner to the Greek people in the upcoming weeks; or it is actually more honest than all of us expect, is prepared to collide with Europe, and ready to gamble the fate of the country within the EU/EZ, even if it does not have enough firepower to fuel a ‘heroic exodus.’

My prediction is that SYRIZA will perform a magnificent ‘kolotoumba’ soon (if it has not already, unofficially, under the table with the other Europeans). It is not a matter of where the party stands normatively in their economics or ideologically in their politics. It is a matter of hardcore realism. And when Varoufakis and Tsipras are faced with the fatal question of “how are we going to pay up for the salaries and pensions of millions of people,” the dilemma of playing hardball or joining the chorus of former Greek leaders who performed eloquent ‘kolotoumbes’ in order to save the country’s economy will (hopefully) disappear.

In any case, here is what you need to read about the Greek political economy today:

  1. Greece and its discontents, by the Charlemagne | The Economist, Jan 31 2015
  2. Greece and the euro’s future: Go ahead, Angela, make my day | The Economist, Jan 31 2015
  3. Europe’s Greek Test, by Paul Krugman | The New York Times, Jan 30 2015
  4. Portugal Won’t Join Greece in Debt Renegotiation |  Capital.gr, Jan 30 2015
  5. Greece awaits EU finance meeting; eurozone deflation deepens (With live updates), by Angela Monaghan | The Guardian, Jan 30 2015
  6. Greece really might leave the euro, by Matt O’ Brien | The Washington Post, Jan 30 2015
  7. Greece’s Political Chimera, by Nikos Konstandaras | The New York Times, Jan 30 2015
  8. Fitch: Greece-Troika Deal Still Possible but Risks Are High | Reuters, Jan 30 2015
  9. Greece looking for common ground with European partners, by Stelios Bouras and Alkman Granitsas | The Wall Street Journal, Jan 29 2015
  10. Greece Steps Back Into Line With European Union Policy on Russia Sanctions, by Andrew Higgins | The New York Times, Jan 29 2015
  11. Global Economy: Greece, EMU and democracy, by Antonio Fatas | Fatasmihov.blogspot.com, Jan 28 2015

Judgement time for Syriza

Yesterday, after a very brief yet polarized pre-election period, the Greek people went to the polls and voted for their new government. Regardless of personal preferences or ideological inclinations, the result was an astounding victory for the Left in Greece. SYRIZA, the Coalition of the Radical Left, officially won the parliamentary elections falling one seat short of outright majority. As many supporters of the party chanted until the early hours of Monday morning: “It’s SYRIZA’s time.”

Many things can been said about the party, its Leader, its programmatic pledges, and the views expressed by a number of its (former and new) MPs. Since 2010, SYRIZA has adopted a highly inflammatory populist rhetoric, and has surged at the top of the “anti-austerity” camp in Greece. It’s elected representatives have criticized excessively – often, using highly derogatory language – both the previously elected Greek governments, and the Troika of lenders responsible for overlooking the bailout packages received by Greece. They have attacked the former parties of the establishment (New Democracy and PASOK), they have pledged to overthrow the existing oligarchic power-structure in place, they have vouched to overturn all of the policies decided by the previous (democratically elected!) governments, and they have insisted over and over again that they would not honor the agreements made between Greece and its international lenders.

In crisis-ridden Greece, it is no wonder that they turned themselves from a fringe party in the margins of Greek politics to the official opposition party in the parliamentary elections of 2012, to coming first in the European Elections of 2014, and eventually forming a government after yesterday’s elections. By strategically capitalizing on the anger and desperation of the Greek people, they have managed to propel themselves at the forefront of the political scene. In order to do so, they have followed a smart tactic of excessive promise-making and pledges that are not only unfeasible (given the current financial situation of Greece), but also deeply destructive of any prospect of recovery from the country’s current state. Playing favorites with the unions, embracing a statist approach in decision-making, and proposing a host of anti-liberal and anti-reformist economic and social measures, SYRIZA does not seem to grasp the fundamental issues at the crux of the Greek downfall, and does not offer a viable progressive-reformist plan to move forward.

SYRIZA has promised many things. Most of all, however, it has promised new ‘hope’ to the people of Greece. Even its main pre-election slogan was “Hope is coming.” It has elevated tremendously the expectations of the domestic population, but it has also managed to put itself in the center of international debates about austerity and economic growth – especially within Europe.

All eyes are on Tsipras and his party now. There is no scapegoating this time around, nobody else to blame. It is them, now, that will have to take the difficult decisions about the country. It is them that will have to meet face-to-face with the Troika of lenders, with foreign Ministers of Finance, and with the person they have demonized the most in the past 3 years: Angela Merkel, the German Chancellor. They will now become the new government – albeit with the help of the ultra-nationalist, anti-liberal, far-right party ANEL (Independent Greeks). In a sense, maybe this is the most appropriate of all setups: both SYRIZA and ANEL have championed an anti-austerity, anti-memorandum, and even anti-European rhetoric. They have both starkly opposed any and every attempt to reform Greece in the past few years, and have made no concessions whatsoever. Now, they are both in power, together.

I am not very optimistic about what tomorrow brings for Greece. Especially after SYRIZA reaching out to ANEL for a coalition government, rather than any of the other two center-left parties (PASOK, the old party of the establishment; and To Potami, a new party created early 2014 by a former journalist). One could say that this was to be expected, and I fully agree. But I was also hoping for a better ‘kolotoumba’ (i.e. somersault, in Greek) than this.

We will witness, of course, many ‘kolotoumbes’ in the upcoming months, especially as they pertain to the programmatic promises of SYRIZA about the economy and our existing agreements with Troika. Let’s hope that they happen soon. And once they do, let’s hope that they are enough to keep this country afloat.