2016 Memorandum 3 Implementation

11/09/2016
Political developments are ramping up after the Summer break and the Thessaloniki conference set the scene for Alexis Tsipras to lay out the government's plans for the next 5 years. It's the usual 'we have turned the corner' stuff and an appeal for foreign and local entrepreneurs to invest "without hesitation" in the economy. He also promised a stable tax environment for 12 years to any company investing more than €20m. Does this mean any company investing less than this amount will be subject to instability and uncertainty in relation to taxation? 

Once again, it must be stated that unless the whole of Greek society is radically reformed, it will discourage investment, especially investment that creates jobs. An environment where you can spend up to two hours waiting to carry out a bank transaction or spend half a day in a public service department (often having to return more than once with more 'paperwork'), is not conducive to the  efficient use of people's productive time, i.e. time at work. It is not evident that this government, or indeed any previous Greek government, understands that there is more to a business-friendly environment than a stable tax regime. 

As pointed out in the article below, the unions are to continue the good fight, which thus far, in seven years of ongoing strikes, has achieved absolutely nothing. It remains to be seen what the next act in the Greek drama will bring but it is very difficult to visualise any recovery in Greece without radical reform or exit from the Eurozone.

http://www.ekathimerini.com/211933/article/ekathimerini/news/greek-premier-pledges-growth-amid-protests-austerity-plans


06/05/2016.
The public sector and private sector unions have called a 48-hour strike, to take place on Friday May 6th and Saturday May 7th. A protest strike and demonstration had already been called for Sunday May 8th in order to protest against the new tax and pension measures proposed by the government, with a vote to take place at midnight on Sunday. The result is a three-day national strike.

There will be no public transport until at least Monday, including no metro or bus service from the airport to Athens. Seamen are striking from Friday until Tuesday, so there will be no ferry services to the islands. Hospitals are also operating with emergency cover only as doctors and nurses are participating in the strike. Garbage collection is also affected.

There are a number of issues with this strike which defy logic. Firstly, this is probably about the 45th or 46th general strike since the crisis began and virtually none of the demands of the trade unions have been met. The measures being legislated for have been agreed as part of Memorandum 3, which all the main political parties accepted in Parliament in July 2015. Secondly, the unions are able to call lightening strikes without any strike notice and without a vote of the members. In this case it seems that the General Secretaries of ADEDY and GSEE, (the public  and private sector umbrella union organisations respectively) have called a strike and whether it was with or without the consent of their constituent unions is unknown.

In addition, the unions never comment on the fact that these measures are being proposed in order to receive continuing loans from the EU. Without these loans it is difficult to see how the public sector and pensions in general can continue to be paid. Perhaps, defaulting on the debt and returning to the Drachma might be a solution but this option is never mentioned, in public anyway, by the unions or their umbrella organisations, ADEDY and GSEE.

Finally, as mentioned above, these strikes have achieved nothing in the past. The unions have held 'protest' strikes about changes in their pay and conditions continuously, but returned to work once the legislation is passed in Parliament. These strikes cause massive disruption in people's daily lives and are undoubtedly a contributory factor in job losses, apart from a reduction in revenue for business and the government. Permanent damage is also being done to the tourist industry, which should be exploiting the difficulties in Turkey, Egypt and other countries competing with Greece for tourists. For example, A person or family arriving in Athens airport Friday - Sunday for a holiday on a Greek island will have to take a taxi to Piraeus, costing €40-€45. They will be unable to travel by ferry to their required destination until the ferries resume on Tuesday. Anyone arriving on Friday in Athens will be stranded there, without public transport until at least Monday or Tuesday, unless they take a flight to the island they intend to visit. But if (when) the legislation is passed everyone goes back to work without a thought for the damage that has been done.

 It could be argued that this is part of the industrial relations environment and culture of Greece but this will have to change for any progress to be made in relation to attracting investment, more tourists and economic recovery. Moreover, if the trade unions have a legitimate grievance, which they often have, then they should go on strike until a settlement is agreed. For instance, if pay or conditions are eroded, the union should call a strike until they are restored or a compromise is reached. There is no evidence of this actually happening since the crisis began in 2010. 

The view expressed on this blog since the crisis began is that no Greek government will have the political will to overcome the opposition of vested interests to the measures to modernise the Greek economy. The vested interests include trade unions, which should try to be part of the solution, instead of exacerbating the already deep-rooted problems facing Greece.

http://www.amna.gr/english/article/13708/Trade-unions-announce-general-strikes-from-Friday-against-planned-pension-and-tax-reforms



05/03/2016
The article below outlines the tax changes for 2016 and the effect these changes will have private sector workers earning over €30,000 per annum. This is proof, if more proof were needed, that SYRIZA  have no vision or plan to sort out the huge problems facing Greece. Imposing excessive taxation on workers in the private sector has very negative outcomes, such as a reduction in disposable income, leading to reduced consumer spending, resulting in a drop in VAT returns. Moreover, this measure will act as a disincentive to workers and also encourage emigration. Therefore, it's clear that very little thought is being applied when it comes to devising an equitable tax policy. It appears as if SYRIZA just reacts on an issue by issue basis to each problem that arises and seems to have very few ideas about how to devise national policies or govern Greece. 


http://www.ekathimerini.com/206665/article/ekathimerini/business/more-taxes-looming-for-salaried-workers-in-the-private-sector

On a different subject, the main political parties have agreed a statement between them on the handling of the refugee crisis. They agreed to honour the promises made to the EU in relation to the crisis and to request the EU border control agency, Frontex,  and NATO, to assist Greece in controlling the flow of refugees from Turkey. There were a number of disagreements but at least there is some measure of co-operation between the main parties.

http://www.ekathimerini.com/206663/article/ekathimerini/news/pm-opposition-chiefs-set-out-common-points-on-refugees



02/02/2016
There will be more turmoil in Greece, and particularly Athens, this week due to a transport walkout today and a general strike on Thursday. These 'protest' strikes are against the proposed pension and tax reforms required under the terms of Memorandum 3. The refugee crisis is having a very negative impact on Greece but is also exposing the lack of organisation and accountability in Greek society generally. It appears no government department is responsible for dealing with the refugee crisis and there is no co-ordinated effort between the various government departments and agencies to tackle this issue. It is as if the magnitude of the problem is so great that no one does anything. The same explanation can be applied to the economic crisis of the past 6 years. There are changes that could have been implemented, which would not have solved the crisis in themselves, but would have made life a little easier or efficient. Changes like these would also mean one less issue to deal with. Consider what has been done in relation to the sale of baby food, or milk. These are measures that should have happened many years ago, yet the Greek government was forced to implement changes like these as part of the bailout agreement. The conclusion has to be that Greek society is not very well-ordered and hence the spectre of Grexit continues to haunt Greece and its people. (see article below).

http://www.politico.eu/article/why-were-not-safe-from-grexit-yet-syriza-greece/


20/01/2016
For some years now it has been argued here that it is highly unlikely that any political party, or combination of political parties that form a government in Greece, will be able to implement the measures and reforms contained in the various memoranda. PASOK and New Democracy both failed to implement Memorandum 1 and 2 respectively and there is no reason to believe that the same fate will not befall SYRIZA. 

Pension reform and the tax proposals related to farmers are the latest stumbling blocks faced by the government. It seems every union and professional organisation in Greece is opposed to the contentious proposals related to pension reform contained in Memorandum 3. There have been strikes and walkouts  by seamen, transport workers and lawyers recently. Moreover, doctors are walking off the job on Thursday in protest against the pension proposals and another general strike has been called for February 4th. In addition, farmers are blocking some main highways to add their weight to the protests. 

While there are huge numbers of people opposed to pension reform, no suggestions are being made as to how the various pension funds can be made viable. It seems logical to assume that if the current level of pension payments are to be retained, the government should be able to afford to pay for it.  However, Greece is currently living on borrowed money, which will dry up if the reforms are not implemented. As if that was not bad enough, the forecast in relation to the economy is not very encouraging. The report below sees a 2.9% contraction in GDP for 2016, on top of the estimated 25% reduction in Greek GDP since the crisis began. In order for the pension funds to be viable, people need to be contributing into them, which means jobs, but unemployment is at around 26%. Investment is needed to create jobs but taking the disruption caused by strikes, walkouts and protests into consideration, the chances of anyone investing in Greece are slim. This along with the continuous government changes to the tax system and capital controls on the banks, makes the business environment extremely uncertain and acts to discourage investment. It is also having the opposite effect, where companies are now divesting out of Greece, particularly the Athens Stock Exchange. 

It seems that if pension reform, and the other measures in Memorandum 3 are not implemented by the government, then they will be implemented by default, literally and metaphorically. 

http://www.ekathimerini.com/205267/article/ekathimerini/business/ernst--young-forecasts-gdp-contraction-of-29-pct-this-year

The link below, published today Feb. 21st, also discusses some of the above.

http://www.ekathimerini.com/205262/opinion/ekathimerini/comment/two-sides-of-the-same-coin

Memorandum 3

18/01/2016
Before the general strike on February 4th, the train unions have called 'rolling 3-hour stoppages', which will disrupt transport on the national railway system. It should also be noted that Proastiakos, the National Railway Network, controls the line from the last metro station to the airport. The question is: did the unions ballot the members on the decision to take this action? It is highly unlikely that they did and this is a key reform that's needed in Greece, especially if external investment is to be attracted into the Country. The other aspect is the disruption to people travelling to work in the private sector, where many small businesses and companies are struggling. Of course, the Greek transport unions are never interested in their customers, only their own sectional interests. They should remember that if more and more jobs are lost, they will have less customers and may face staff reductions themselves.

http://www.ekathimerini.com/205180/article/ekathimerini/news/delays-cancellations-in-train-services-due-to-work-stoppages


16/01/2015
Another working-day general strike to protest against pension reform has been called for Thursday, February 4th. The objective is obviously to force the government not to implement these measures. One wonders does anyone read the Memoranda and documents agreed with the EU or is it only the negotiators that are aware what is contained in these agreements. It will be recalled that one of the ministers in the Papandreou government admitted he hadn't got time to read the first memorandum agreed by the cabinet, of which he was a member. The pension reforms and creation of a single, unified social welfare fund are in Memorandum 3, agreed by a large majority in Parliament last Summer. Currently, all the opposition parties now oppose the changes proposed by the government, having already agreed to them in the Parliamentary vote. The unions have had about 42 general strikes since the crisis began and have succeeded in changing nothing. In fact, the situation has deteriorated in the intervening years and many argue that Greece's economic problems have been exacerbated by union opposition to change and government reluctance to implement the various memoranda.

It should be acknowledged that many of the measures various Greek governments have been forced to implement are counter-productive to achieving growth and economic recovery. However, there are internal changes that could be made to improve the business environment, make public services more efficient and introduce more competition. These would undoubtedly involve a large dose of pain but the existing environment is certainly not conducive to economic recovery.   Moreover, if the social welfare and pension funds are unsustainable, and almost everyone agrees that they are, then something has to be done to prevent them from collapsing altogether. Finally, it would seem that when anything unpalatable is proposed in Greece, everyone outside the government is against it for one reason or another. Nevertheless, alternative proposals are never presented, leading to the conclusion that everyone wants to be in opposition and nobody has the courage to lead.

http://www.ekathimerini.com/205113/article/ekathimerini/news/unions-gear-up-for-general-strike-on-february-4


13/01/2016
It was noted in this blog (29/11/2015 below) that it would be better for the main opposition parties to support the government in implementing the Memorandum, particularly in relation to pension reform. The article below comes to the same conclusion. The only alternative for opposition parties who do not support the government's bill on pension reform is on the basis of leaving the Eurozone. Any party or  parties that vote against the measures should do so in the knowledge that if a general election results and they are elected to government, they will have to implement the same measures or leave the Euro. That's the reality of the current political situation in Greece. It is also worth remembering that the three main opposition parties voted for the Memorandum, which contains all or most of the proposed pension reforms, so it is illogical to oppose these measures at this stage.

http://www.ekathimerini.com/205012/opinion/ekathimerini/comment/the-decisive-and-the-furious


07/01/2016
Yanis Varoufakis is reported to be launching a pan-European movement to bring back democracy to Europe. In the illustrated article below he makes the point that "financialised capitalism" tries to squeeze out any opposition to the current global market doctrine. For example, wages and working conditions are constantly under threat and governments are under continuous pressure to keep wages low. Thus, the asymmetric relationship between capital and labour that has always existed is tilting more in favour of capital, with increasing bargaining power given to capital. The logic is that if this phenomenon continues, the system will collapse because there will not be enough consumers (with enough money) to keep the system going. Unless the wealth is shared, there is no way the current imbalance can last.

https://www.jacobinmag.com/2016/01/yanis-varoufakis-interview-jeremy-corbyn-greece-eurozone-tsipras/


02/12/2015
There is another general strike (protest) against austerity tomorrow, Thursday December 3rd. It is probable that most of the participants will be public servants and people working in the public sector.
There are seldom any reports about the percentage of people who take part in these strikes, although if there is a demonstration in the centre, the estimated number of participants is usually given. Once again, the general public will suffer more inconvenience. One effect of the strike is that the Metro from the airport to and from the first suburban metro station, Doukissis Plakentias, will not be working. And politicians expect investors to risk their money in this type of business uncertainty? As usual, this strike will achieve nothing, apart from messing up many people's lives for a day - a waste of another day by the unions!!!

http://www.ekathimerini.com/203966/article/ekathimerini/news/strike-to-halt-transport-services-in-greece-on-thursday


01/12/2015
The article below discusses the feasibility of left-wing policies in the Eurozone. The conclusion is that, in the context of the single market, monetary union and (Greece) being restricted by the terms of the bailout programme, this is not possible. The writer suggests solutions to address the difficulties facing Greece and these solutions could also be applied at a European level.

The reality is that governments should be pro-business and create the conditions to allow business to flourish. This would lead to economic growth and higher employment. Many assumed that SYRIZA would have such a plan but sadly, this was not the case. The policies outlined in the article would definitely work but a national consensus between the political parties, employers and trade unions would be necessary to achieve it. It would be similar to creating an Incomes Policy, where wages are kept in line with inflation and employer costs are reduced to encourage employment. If correctly applied, this could lead eventually to full employment. This must be accompanied by a policy to encourage investment to increase growth and create jobs. Obviously, Labour Market Reform would be required because business needs a certain level of certainty. This would mean, for example, legislation related to the conditions under which a strike could take place in order to prevent  trade union leaders for calling a strike with no or very short notice. General strikes in protest about issues should also be banned. If employees feel strongly enough about an issue, they should be committed enough to protest at the weekend.

This article gives a blueprint for a social-democratic left in Europe and it makes a lot of very good arguments in favour of this approach. The solution to achieving European-wide social-democratic governance is for ordinary citizens to elect political parties with the type of policies suggested in the article.

http://tinyurl.com/jnmmtqo


29/11/2015
The main opposition parties, ND, PASOK and To Potami have rejected an offer from Alexis Tsipras to take part in a cross-party committee to agree proposals on pension reform. However, the context needs to be explained in relation to any proposals the Greek Government might make. In Memorandum 3, from pages 13 - 15, there is a section 2.5 Sustainable social welfare and a sub-section 2.5.1 Pensions. The measures related to pensions are outlined here, with the (usual) caveats about any alternative measures (proposed by the government) being exchequer-neutral. Memorandum 3 was agreed in Parliament some months ago by all the parties at yesterday's talks. The reforms  reported in the media are all in the Memorandum document and there is only very limited 'wriggle room' for the government in relation to alternative proposals. This leads to the question as to why the opposition parties have refused to support the reforms?  They have voted in favour of the Memorandum containing these reforms and are being offered the opportunity to have an input into any changes that might be of some benefit to the Greek people.

It could be argued that  for political reasons these parties do not want to be associated with pension reform because it will lose them votes. Nevertheless, if the reforms presented by the government in parliament are voted down, it could lead to another general election. It is almost certain the Greeks do not want another general election so the opposition will be blamed for precipitating one. It would be better to support the government, as happened with the Memorandum vote itself, than bring down the government for the sake of it. Moreover, if the logic of the past 6 years and three Memoranda is followed, then, whichever party or parties form the next government, they too will be presented with the same dilemma and set of proposals. Memorandum 3 calls for the full implementation of some of the proposals agreed in 2010 !

Therefore, taking all of the above into account, it would be foolish not to support the government.  If the opposition parties fail to support the government, causing a general election,  the only logical stance they can take is to fight it on the basis of exiting the Eurozone, in light of their failure to support a document they voted for in parliament.  However, if all the reforms were implemented, then in 4 years time who knows? People have short memories, especially about who voted for what, where and when. Also if all the main political parties all had a hand in passing the legislation, then they are all in the same boat in the eyes of the electorate. The last thing Greece needs is another general election and another process similar to what happened between January and July this year. Failure to implement previous Memoranda and the absence of viable alternative proposals from successive Greek governments, has led to a 25% decline in Greece's economy. The ongoing uncertainty led to increased withdrawals from Greek banks, culminating in capital controls during the Summer (still in place), which is further hampering economic growth. The political machinations in Greece however, are such that the appalling vista of another general election in the very near future cannot be ruled out.

Link to Memorandum 3.
http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/pdf/01_mou_20150811_en.pdf



26/11/2015
Pensioners protested today in the Centre of Athens against the measures set out in the Memorandum related to pension reform. The unions have also called (another) national strike on December 3rd in protest against pension reform and the merger of several pension funds into one fund. These same unions called a national strike on November 12th but it, like all the others,  achieved nothing. The legislation they were protesting against, related to the agreed 'prior actions', was passed in Parliament, albeit with the government losing 2 MPs.  Einstein is quoted as saying: "Insanity is doing the same thing over and over again and expecting different results". After more than 40 general strikes over the past 5 years with nothing achieved but disruption for ordinary citizens, the unions need to examine their policy at this stage. Their actions up to now match the criterion in Einstein's quote.

http://www.ekathimerini.com/203805/article/ekathimerini/news/greek-pensioners-rally-against-cuts-workers-to-strike-next-week


23/11/2015
The trend in employment which has been emerging in Greece since the financial crisis began is not very encouraging. It mirrors the situation in many European countries, where full-time jobs are disappearing and being replaced by temporary and part-time work. More and more people are facing uncertainty at work and this a big challenge, especially for trade unions. If employers can just hire and fire employees and keep workers on rolling contract or temporary contracts, the division between rich and poor will widen. It is already an alarming situation in Western society that wealth is becoming more concentrated in the hands of a few, resulting in an increasing number of people struggling to survive financially. The logic here is that there will be less and less people able to afford consumer goods, which will eventually hit big business. After all in order for businesses to make money, people have to buy their products, so concentrating so much wealth in the hands of an elite few, will, in the long-run, be counterproductive.

http://www.ekathimerini.com/203718/article/ekathimerini/business/more-jobs-in-commerce-but-most-new-positions-are-part-time


23/11/2015
Memorandum 3, agreed in July by the government, is now in the process of being legislated for and implemented. There will be huge opposition to the reforms and changes in the Memorandum. Already, the government has lost two MPs one from SYRIZA and one from Independent Greeks as a result of their failure to support the omnibus bill in parliament on Thursday. The contentious issue was allowing banks to foreclose on primary residences, where people were not paying their mortgages. The government promised they would not allow this to happen but they had to concede some ground and allow a certain amount of foreclosures. This was done by reducing the value of homes entitled to foreclosure protection, originally €300,000, to between €180,000 - €200,000.

The next phase, which includes higher tax for farmers will be very challenging for the government, especially as its majority has been reduced. The main opposition parties have all indicated they will not support the government, despite voting for the Memorandum in parliament.


23/11/2015
The fact that prices in Greece have seen minimal reduction has been highlighted here on many occasions over the past three years. In fact, prices for most products and services have increased. This is against a backdrop of a 25% fall in GDP and major reductions in disposable income because of wage and pension cuts. Once again, this is the subject of an article in eKathimerini, which indicates that Greece is one of the most expensive countries in Europe for many products and services. If a functioning market economy were in place, then one would expect prices to have fallen in the light of whats happening with disposable income but in most cases that's not happening.

http://www.ekathimerini.com/203677/article/ekathimerini/business/disposable-income-shrinks-twice-as-fast-as-gdp

Reality Bites

01/08/2015
It has been revealed that Yanis Varoufakis and a small group in SYRIZA had a plan to deal with a 'Grexit', which had the approval of the Prime Minister. Many within SYRIZA would prefer to leave the Euro but the Greek people in general want to remain part of the Eurozone. Thus, the plan would only be required if 'an accident' occurred and Greece found itself out of the Eurozone. This Plan B would have been a useful negotiating tool to see how far the EU was prepared to go to keep Greece in the Eurozone but once Germany introduced the possibility of Greece leaving, albeit temporarily, then 'Grexit' as a negotiating chip was rendered useless. However, it would have been irresponsible of Yanis Varoufakis not to have a Plan B and now he is being vilified for this, even by people who criticised him for not having made plans for a Grexit. The main criticism of Varoufakis on this blog has been in relation to his style, which is abrasive, but it still doesn't take away from the fact that he makes sense economically. At present, it is hard not to believe that the latest plan is designed to fail, resulting in Greece exiting the Eurozone. The IMF will not support this 3rd bailout without debt write down and the EU will not agree to any reduction in Greece's debt. Under the latest agreement, more austerity measures are being introduced, which will make it even more difficult for Greece to pay its debts as these measures will further depress economic activity. Take the increase in VAT: this is supposed to bring in an extra €2.6bn but this in very unlikely, taking the compliance with paying VAT into consideration, so the figure will be below budget forecasts, resulting in a shortfall and pressure from the creditors for more measures to offset this budgetary gap. This cycle has been happening since 2010 and Greece is far worse off now as a result. Perhaps the scene is being set whereby Greece is forced out of the Eurozone. Then the EU and IMF can blame one another, SYRIZA can blame both and everyone (and that includes SYRIZA) gets what they want - Grexit.

http://www.project-syndicate.org/commentary/varoufakis-agenda-defended-by-mohamed-a--el-erian-2015-07


16/07/2015
The point that SYRIZA did not hit the ground running in relation to reforms was previously made on this blog (11/05/2015 for example) yet the reforms agreed with the EU are now stated ( correctly ) to have always been necessary by Alexis Tsipras. Why then did SYRIZA not have a plan devised over the months from August 2014, when it was a government-in-waiting? Possibly because they would not have been elected had they published such a plan. The fact that SYRIZA is a combination of diverse groups merged into a single party would also make it difficult, if not impossible, to have an agreed manifesto that everyone in the party could sign up to and support. This explains why not having a clear plan worked initially i.e. to get SYRIZA elected but led to the negotiating difficulties encountered later. The fact that leaving the Eurozone was not an option was the main weakness in SYRIZA's negotiating strategy because the creditors were aware of this and only had to threaten it to force SYRIZA to capitulate. Had SYRIZA prepared a plan for 'Grexit', then the negotiations may have had a different outcome, or at least would have revealed if the EU were prepared to allow Grexit to happen. As things stand at the moment, we will never know the answer to this question. Also, if SYRIZA had voluntarily implemented some of the reforms forced on them by the EU, which they now say are necessary, then the issue of trust could not have been used as a stick to beat them with in the final phase of the discussions. However, this may also have been a negotiating stance not to give anything for nothing. Finally, one can only conclude that  membership of the Eurozone as a debtor country and being anti austerity are mutually exclusive and if 'The Left' want to govern in any of these countries - Greece, Spain, Ireland, Italy or Portugal then leaving the single currency is the only option.

http://www.theguardian.com/commentisfree/2015/jul/16/syriza-greek-alexis-tsipras?CMP=share_btn_tw


13/07/2015
Criticism of Alexis Tsipras as a traitor is totally uncalled for and disingenuous. A decision had to be made in the context of SYRIZA's mandate to remain in the Eurozone and while many (including myself) thought the treatment he received at the Eurogroup meeting warranted a walkout, he stuck in there representing the Greek people for an agreement. At least people know what 'European partners' and solidarity mean now.


13/07/2015

This article outlines the issues related to the financial crisis is Europe in general and the Greek crisis in particular. The point about short-termism is well made, as austerity will make German goods unaffordable in many EU countries. The same applies globally to the concentration of wealth in the hands of 'a few'. The less people have, the less they can buy, which will ultimately affect industry and services. Where will  J.P. Morgan,  Goldman Sachs etc. be when the real economy hits the skids? Moreover, if a boycott of German goods was initiated in some of the peripheral (austerity) countries, it could gain momentum via social media platforms and have a further negative effect on the German economy. Perhaps Wolfgang Schaeuble should do a cost/benefit analysis on the long-term effects of austerity on the German economy. It would probably be better to stop forcing austerity on the weaker EU countries, otherwise,  Germany may lose more than it gains financially under the current policies, apart from the damage being done to the concept of the EU by the current so-called solutions

http://marianamazzucato.com/2015/07/13/greece-and-the-eu-a-macro-and-micro-mess-up/



11/07/2015
If this is true, the Greeks should walk away from the Brussels talks again and leave the Eurozone.

This is Germany's plan—all of it—to make Greece sell €50bn of "valuable assets" or leave the euro for at least 5 yrs

09/07/2015
According to reports, Greece is going to submit proposals to take another €12bn out of its economy (which has shrunk by 25%) to borrow another €50bn to add to what everyone agrees is an unsustainable debt that can never be paid back. It's the same as giving more loans to a family that can't pay its debts and imposing a €100 pay cut on the wage earners in the family. Is the world gone mad?


05/07/2015
Today will end the current phase of the Greek crisis and the result of the referendum will begin a new chapter in the ongoing saga. One way or another, there is a very difficult road ahead for Greece. A 'no' vote is probably the best option but it is difficult (as always) to know how this will play out after the result. Taking most people's inherent opposition to change or aversion to risk into consideration, a 'yes'  of the order of 55% is very likely.


22/06/2015
There are positive rumblings from the Eurogroup in relation to the latest proposals from the Greek government. Perhaps this episode of the Greek saga is drawing to a close and the question must be asked; was Tsipras playing a shrewd game, taking the opposition within SYRIZA to an agreement into account? If the current proposal forms the basis of an agreement then there it will be opposed by elements within SYRIZA, such as the Left Platform. However, by dragging out the talks until the last minute, Tsipras may have outflanked the opposition in his Party. First of all, it's too late to be told to go back and get more. Moreover, there are a number of options available for passing the proposal through parliament. Firstly, the government can pass it by a majority vote of SYRIZA and Independent Greeks (ANEL). Secondly, the opposition could be asked to support the proposal. The Potami Party has indicated that they will support any proposal to keep Greece in the Eurozone. Also, more recently New Democracy has urged SYRIZA to make an agreement. Failing that, SYRIZA could call a referendum on the proposal or indeed call an election based on the proposal and, considering the fact that the vast majority want to stay in the Euro, SYRIZA would probably be re-elected with an overall majority. Before the election, Tsipras could eject anyone opposed to the party line from SYRIZA to ensure there would be no problems when the new government takes office. While this is speculation and conjecture it is still a plausible context for the discussions.

15/06/1950
The breakdown of the talks between Greece and the EU in Brussels over the weekend was entirely predicable. Pressure is being piled on Tsipras to 'fold' and agree an acceptable solution with the creditors. According to the article below,  Germany will not agree to any more funds for Greece unless the IMF is involved, which strengthens SYRIZA's hand, as the IMF has walked out of the talks. This is because the IMF want a reduction in Greek debt -  a measure opposed by Germany, so the IMF and Germany will have to sort out their differences if a solution is to be found. This is why Tsipras has hardened his stance following the breakdown in the talks. The European side continue to insist the ball is in Greece's court but from a Greece perspective, it is in the creditors court and that's why Tsipras is quoted in the second article below as saying "We will wait patiently for the institutions to move toward realism". It seems Tsipras is not backing down in this game of 'chicken' and has a good negotiating position, whereby the the EU (Germany) and the IMF have to get their act together or Greece will default. If that happens, then the blame game will really begin.

http://ekathimerini.com/4dcgi/_w_articles_wsite1_1_15/06/2015_551052

http://ekathimerini.com/4dcgi/_w_articles_wsite1_1_15/06/2015_551051


26/05/2015
The article below has a very interesting take on the discussions between Greece and its creditors. As the days pass, there is increasing uncertainty among Greeks as to what will happen - whether there will be an agreement or Euro exit. There are all sorts of conflicting opinions and reports circulating in the international and Greek media and it's difficult to get a clear picture of what's happening. There is a lot of brinkmanship from all sides, with statements being made to 'up the ante', depending on which side of the fence you are on.  The EU and IMF have the same message - not enough is being done, no specifics in the Greek proposals and time is running out. On the other hand, one or two Greek government ministers are saying the next payment to the IMF on June 5th will not be made in the absence of a deal. Of course another minister has denied this so it's hard to fathom what the real situation is at the moment. Each time it appears the endgame in in sight, another deadline passes and the charade goes on but June is a key month because the previous bailout agreement ends in June, necessitating another agreement. The solution will probably be to continue to 'muddle through' and hope for .................. what?

http://www.forbes.com/sites/francescoppola/2015/05/25/greece-the-eu-and-the-imf-are-dancing-with-death/

21/05/2015
Reform not stimulus is what Greece needs according to this article from Bloomberg. This is a well-constructed article and underscores the point argued consistently here - that it will probably be impossible for any Greek government to implement the type of reforms necessary to transform the Greek economy into the type of modern, free-market economy necessary in today's globalised world.  In a post below on 12/03/2015 a comparison between Greece and Ireland is made and the conclusion is that a radical economic transformation is required in Greece to approach the average EU economic indicators. Again the question must be asked: Can any Greek government implement the changes necessary to modernise the economy?


http://ekathimerini.com/4dcgi/_w_articles_wsite3_1_21/05/2015_550233


21/05/2015
The attached article below supports the opinion laid out in this blog on 15/05/2015. Basically, SYRIZA has done nothing to reform the Greek economy and it would appear that the faction within SYRIZA who want to return to the Drachma is gaining momentum. It is hard to disagree with most of the points expressed here in that everything from the government is expressed in general terms, with very little specifics. The arguments about healthcare and education are well made and accurate.

Another recent negative is the proposal to give a 3% reduction in VAT for card transactions, which seems to have been rejected by the creditors. However, for a party like SYRIZA to consider this option, which incidentally was also contemplated by the previous government, is totally against everything SYRIZA claims to stand for. While a reduction in VAT for card transactions would provide an audit trail for transactions incurring VAT, it would have the effect of making these goods and services 3% more expensive for those without cards, e.g. people on low incomes. That would be totally against the policy of SYRIZA in tackling the 'humanitarian crisis'

http://greece.greekreporter.com/2015/05/21/greek-debt-what-is-an-honest-deal/


15/05/2015
It seems there was internal arguments last night about the extent of the concessions by SYRIZA in the ongoing negotiations. The 'political secretariat' of the Party has issued a statement saying SYRIZA will not back down on its "red lines".  It goes on to state

  "the red lines of the government are also red lines of the Greek people, expressing the interests of workers, the self-employed, pensioners, farmers and young people." 

 It's all well and good to 'express the interests' of workers, pensioners etc, however it might be better to actually protect these interests. Most analyses of the current situation show that very soon Greece will not be able to pay pensions or public servants, for example, without receiving money from its creditors. It's clear to most people that this will not happen unless an agreement is reached soon. On the other hand, failing to reach an agreement will result in a default, with Greece either remaining in the Euro or exiting the single currency. The outcome of this is very uncertain but there is no doubt that, one way or another, the purchasing power of pensioners and public servants will be seriously eroded following the resultant devaluation of the New Drachma, parallel currency or whatever means is used to keep Greece running after such a default. These statements loaded with emotive language are all well and good for internal consumption but they won't "put food on the table" when the money runs out. There have been no positive statements from within SYRIZA related to these discussions so, as stated before, it looks like most of the Party are more comfortable saying 'NO', not coming forward with alternatives (apart from asking for more money from the creditors) and making lofty political statements, which in practical terms are meaningless.

http://ekathimerini.com/4dcgi/_w_articles_wsite1_1_15/05/2015_550058


11/05/2015
The article below in today's eKathimerini sums up the problems Greece is facing at the moment. The points about the lack of a plan have been made many times on this blog.  The fall in support for populist leftist parties, such as Podemos in Spain and Sinn Féin in the UK elections is evident now and in the main,  brought about by the failure of SYRIZA to achieve any concessions.. While the message from SRYIZA in general and Varoufakis in particular as regards the effects of austerity is correct, the way they are going about achieving any success is a disaster. There are various reasons for this, such as pre-election promises and the stance being taken by the 'Left Platform'  within SYRIZA. However, it seems there is not now, and there never was, a vision about reforming Greece. It is also safe to assume there was no Plan B  if the original plan of negotiating a reduction in the debt burden failed.  A total capitulation by SYRIZA would seem to be the only way to avoid an eventual 'Grexit', whether it's a default and remain in the Euro or default and leave the single currency remains to be seen.

http://ekathimerini.com/4dcgi/_w_articles_wsite3_1_11/05/2015_549889


27/04/2015
The media outside Greece is definitely getting tired of the continuing saga related to the Greek debt discussions. Also, it appears that many of the main players representing the creditors are also fed up that the ongoing talks have failed to produce an agreement. This could be termed 'Gretigue' where everyone is being worn down to the point that they just want an agreement reached. This is a negotiating strategy that can be used to wear out the opposition and get a better deal. In theory,  if Greece believes it will not be ejected from the Euro currency, then this is a good strategy. The scenario then is: the majority of Greeks want to remain part of the Eurozone so SYRIZA will not voluntarily leave, Greece won't be pushed out and will be kept afloat until eventually both sides come to an agreement. The talk of Greece exiting the Eurozone has increased but this is only talk at the moment so expect more deadlines to be reached and passed until a solution is found. Yanis Varoufakis has consistently stated that an agreement will be reached but with great difficulty. Time will tell (literally) if he's right.


24/04/2015
The situation developing in relation to the Greek debt crisis may be counter-productive to the EU and the position it has taken as regards the 'Talks'. The rhetoric from some EU ministers and leaders is becoming personal, while it appears that in public at least, the Greek government are dignified and genuinely looking for a compromise. They have not always behaved like this but they are learning. The criticism of Tsipras about his meeting with Merkel is an example. Some members of the Eurogroup have criticised him for 'going outside the process' and above their heads but Greece is in a serious situation and the Prime Minister must do whatever needs to be done to solve the problem. In addition, Varoufakis has been call a time-waster, a gambler and an amateur, which seems to be a reaction to his disruptive tactics in challenging conventional economic orthodoxy and even current negotiating practices. Obviously he 'is getting to' the Eurogroup and they don't like it. The criticism could re-bound on the EU and garner more sympathy for Greece than they have from other EU countries at the moment. (article below not directly related to this post)

http://www.bloombergview.com/articles/2015-04-22/europe-s-collision-course-with-greece


15/04/2015
The majority of reports about the current negotiations between Greece and its creditors indicate that very little progress is being made. There are several repayments to various creditors due in the coming weeks, as well as the payment of salaries to the public service and monthly pension payments this month. If a breakthrough is not made and some funding delivered to Greece, then a default is inevitable. Although some people think leaving the Eurozone will benefit Greece, it is more likely to be a disaster for the Country. It is hard not to believe that SYRIZA wants to be ejected from the Eurozone, as mentioned in earlier posts. There are cards the negotiators could use to force the hand of the creditors. For instance, there is a big increase in the numbers of illegal immigrants entering Greece (see below)  and over 100,000 are expected to arrive in 2015. Most of these are refugees fleeing conflict in countries like Syria. Greece made a repayment of €450m to the IMF on April 9th but it begs the question why the government did not refuse to pay this on the basis that the money was needed to help the thousands of immigrants arriving in Greece, in what is a truly humanitarian crisis. Refusal to pay back this money in order to cope with the influx of refugees would give Greece the moral high ground and present a dilemma for the IMF or any other creditor if they insisted on payment under these circumstances. The fact that this card hasn't been played leads to two conclusions; the Government didn't think of it or it wants to default and be ejected from the Eurozone. As mentioned before, the vast majority of Greeks want to remain part of the Euro, so it would be almost impossible for SYRIZA to opt out of the Euro on behalf of Greece but it's a different matter if they were to be 'kicked out'.

http://ekathimerini.com/4dcgi/_w_articles_wsite1_1_14/04/2015_549075


01/04/2015
The divisions among the various groups that compose the SYRIZA Party have been highlighted on a number of occasions and this issue is not being addressed. Most people in Greece desperately want the new government to achieve some measure of success but the current environment is exacerbating the already difficult position the government is in vis-a-vis the negotiations with the 'Institutions'. Government ministers are continuously speaking out on issues (a) that should not be referred to while negotiations are taking place and (b) areas that are not part of their remit as ministers. These ministers do not seem to realise they are part of a government with the collective responsibility of managing the political and economic affairs of Greece. The fact that the 'knives may be out', if and when the negotiating team arrive back with a deal, must surely add extra pressure on Greece's representatives at the talks. It seems that the Greek people continue to be badly served by the politicians they elect to represent them.

http://ekathimerini.com/4dcgi/_w_articles_wsite3_1_01/04/2015_548687


28/03/2015
SYRIZA seem to be very slow learners when it comes to negotiating or, as mentioned on March 18th, the actual agenda is for Greece to be ejected from the Eurozone. In the case of the former, it is stupid to present a set of options with the inference that if the proposals are rejected, the Greek Government is prepared to "go its own way".  There are two possible scenarios here: The Government feels the measures may not be sufficient to satisfy the Brussels Working Group and it is applying the pressure of a Greek default to have them accepted or the veiled threat will antagonise the Working Group to such an extent that the proposed reforms will be rejected , also eventually resulting in a default. The fact that this caveat has been verbally added by a SYRIZA government minister implies there is no room for negotiation and / or compromise in relation to the list of reforms. One way or another, it's a high stakes game being played by SYRIZA, one which could lead to an exit from the Eurozone.

http://www.theguardian.com/business/2015/mar/27/greece-submits-reform-proposals-to-eurozone-creditors-with-a-warning?CMP=share_btn_tw


20/03/2015
It is unfortunate that the Irish Prime Minister (Taoiseach) launched a very aggressive attack on the Greek Government yesterday. However, it was predictable for two reasons related to the upcoming general election in Ireland, probably in Spring 2016  Firstly, the coalition government in Ireland is very anxious that Greece does not win any concessions in terms of debt reduction or implementation of the bailout terms, as it would be viewed (correctly)that the Irish Government achieved nothing.  This would create a more negative impression in people's minds about the performance of the coalition. The view of most people in Ireland is that the government broke every promise it made prior to the election in 2011. Secondly, the government has requested a 'relaxation' of the budgetary rules under which Ireland must operate, even though Ireland is supposed to have exited the bailout. The purpose of this is to 'buy' votes in a give-away budget in order for the government to be re-elected. The subliminal message from Enda Kenny is that if his government is not returned to power, then there may be another "SYRIZA-type' situation in Ireland following the general election. Enda Kenny's comments are a contradiction in terms on the basis that there is to be no slack cut for Greece but he is there 'cap in hand' looking for concessions. The Greek government is fighting very hard on behalf of the citizens of Greece. While it may lack the diplomatic skills and tactical nous to operate at European level, it is standing up for its people. The backbone being shown by the Greek government is in stark contrast to the 'fight' the Irish Government put up on behalf of its citizens so perhaps embarrassment is another reason for the Taoiseach's remarks

http://www.independent.ie/irish-news/politics/taoiseach-launches-scathing-attack-on-athens-31081129.html


18/03/2015
Jeroen Dijsselbloem, the chairman of the Eurogroup, has hinted that capital controls may be imposed on Greek banks if the current rate of withdrawals continues or increases. The efficacy of this measure is debatable and it's argued in the article below that it would only assist Greece in the very short-term. A government spokesperson more or less told him (Dijsselbloem) to mind his own business and not go beyond his remit. The government did make an interim agreement with the Eurogroup, so it it is wrong to accuse Dijsselbloem of interfering, and he is more likely trying to get the government to show some urgency in presenting and implementing 'agreed' proposals. In the absence of further funding, there is general agreement that Greece will run out of cash before the end of the month and there seems to be no movement from the government to implement any reforms, which is what Greece's creditors have insisted on.  Moreover, the rhetoric from SYRIZA and Alexis Tsipras is becoming more confrontational, which is not conducive to finding a solution.

On that basis, it seems reasonable to assume that SYRIZA is gambling on not being ejected from the Eurozone and hoping for a political solution. SYRIZA is playing a smart game and may actually want to take Greece out of the Eurozone but if they moved to Grexit, it would be against the wishes of the majority of Greeks. Varoufakis is on record as being against the single currency but the SYRIZA mandate precludes leaving the Euro. However, if Greece were ejected, then the government could claim it was merely pursuing its mandate to eliminate austerity and the decision was made elsewhere, thus letting SYRIZA off the hook. This would add up to a win, one way or another for SYRIZA, in that they would get a political solution or be out of the single currency.

While the debate is focussed on macro-economic issues, there are changes at the micro level that could be implemented. For example, the requirement to get three different doctor's notes to go to a public swimming pool is just an example of the type of restrictive practices that exists in Greece. The Troika identified hundreds of these restrictive and anti-competitive practices, none of which, like the example above, add any value and just take disposable income out of people's pockets. The very people that this money is directed towards (doctors) are among the groups of people alleged to avoid paying income tax, which underscores the lack of value add to the economy. It is disappointing that SYRIZA does not seem to have any plans to reform Greek society or if they do, then they are not moving ahead very quickly. There is an impasse at macro level, which should give the government plenty of time to make internal changes and reforms in the economy but that's not happening either.

Stasis is a Greek word!!

http://openeurope.org.uk/blog/how-likely-are-capital-controls-in-greece/


12/03/2015
The chart below gives a picture of key statistics related to Greece 2008 - 2014. Greece was always one of the poorest countries in the EU and the chart shows that in 2008, it was worse than the European average in 7 of the 8 indices. The fact that Unit Labour Costs in 2010 are at the EU average is strange in the context of some of the other figures, such as the Unemployment Rate and Median Income.  The economic crisis has drastically worsened Greece's performance vs the EU as can be seen from the 2014  figures, Internet access being the exception.

The Greek government is basing its economic policy on growth but for the past three years the question has been posed here - where is this growth to come from?  In 1998, when the EU was liberalising the Telecoms Market, Greece, Ireland and Portugal received a derogation on the date of implementation because their economies were deemed not to be advanced enough. If Ireland and Greece are compared today, there are stark differences between the two countries. Greece is not a major exporting country and has very little comparative advantages compared to Ireland. It has no natural resources, although it is believed there is natural gas in the Aegean Sea. Greek is spoken worldwide by around 20 million people, although many Greeks can speak English. The institutions of the state are inefficient and some are dysfunctional and the education system is one of the worst in the EU. Another major problem for Greece is demographic, in that it has one of the highest dependency ratios in the EU. (see chart below). The major industries in Greece are Shipping and Tourism.

Ireland, on the other hand, has the highest number of people under 25 in the EU, although during the crisis, tens of thousands have emigrated. The workforce is well-educated and English is spoken. Ireland attracts a huge amount of foreign direct investment (FDI), especially in the areas of pharmaceuticals and IT. Most of the FDI is from US multinationals, who want access to the European single market. It must be acknowledged that the multinationals tend to skew GDP figures and there are issues around Corporation Tax Rates but they still provide a significant number of well-paid jobs, as well as supporting indigenous companies that provide goods and services for them. Ireland also has a highly lucrative agricultural sector, which exports worldwide. The institutions of the state - the Dáil (parliament), judiciary, local government and tax collection (Revenue Commissioners), while not perfect, function reasonably well. Finally, there is legislation related to trade unions, which provides a stable industrial relations environment for businesses. Indeed, many of the multinationals, such as Microsoft, Google and Yahoo for example are not organised and usually have a 'no union' policy.

Despite what all Greek governments have said since 2008 about  going for growth, the question remains where is this growth to come from. No concrete suggestions have appeared and it will take a massive transformation to reorganise the country to make it attractive to any investor. What industries could be attracted to Greece? Can Greece build up any indigenous industries capable of exporting goods or services? Will SYRIZA be able (where others have failed) to make the  reforms and changes to create the conditions necessary for businesses to thrive? Growth is aspirational and just a general term without any meat on the bones. It's akin to suggesting applying "innovative solutions" to solve problems, without defining what form these innovative solutions should take. Greece was one of the poorest countries in the EU 20 years ago and nothing has happened in the meantime to change that. The standard of living did rise during that period but it was mostly based on unsustainable government borrowing and largesse. Unless there is a radical transformation in Greek society it is hard to visualise Greece making up the ground to come anywhere near the EU averages on the chart above.

The article below entitled "The Agony of Greece" is from The Economist and contains a number of graphs and charts (two of which are used above) which outline the difficulties facing Greece.

http://www.economist.com/blogs/graphicdetail/2015/03/daily-chart-0


10/02/2015
Reality bites indeed. The article below from MacroPolis website relates to the current treatment of Greece by the European Central Bank (ECB). The nub of the argument is that rules are being strictly applied to bring Greece to heel in this instance, whereas in other cases, the rules have been bent by the ECB. Particular attention is given to the 'Promissory Notes' agreement with Ireland, which resulted in substantial savings to the Irish Government and Irish taxpayers.

It seems that if you cooperate with the EU, for example by fulfilling the terms of the various memoranda, then some leeway will be forthcoming. This explains why Enda Kenny (Prime Minister) and Michael Noonan (Minister of Finance) have been advising Greece to collaborate with the EU in tackling the problems in Greece. It would seem they are right in that outright opposition to the 'former Troika' is leading to nowhere at the moment. The key point now is, while the Irish Government was prepared to depart from its pre-election opposition to the bailout memorandum, is SYRIZA prepared to do the same?

The referendum idea, which was floated in the past few days, could be very misleading for ordinary people. For example, if the subject of the referendum is whether to remain in the Eurozone or not then it will be carried. This will give the government licence to do 'whatever it takes' to remain part of the Euro currency and the referendum result will be cover for SYRIZA for doing an even bigger climbdown on its pre-election promises. Whether internally the party is prepared to fulfil the agreement reached by the last government is questionable, even with a mandate to remain in the Eurozone.

On the other hand, if a referendum on a memorandum were presented, it would probably be rejected with the likely result of Grexit. While conditions in Greece are very harsh for many people at the moment, the hardship associated with an exit from the single currency is not fully appreciated or understood, even by so-called experts. A referendum on a memorandum, if supported by the government, would probably result in a split in SYRIZA and would also be a major problem for the other coalition party, Independent Greeks, who are opposed to the bailout. The only positive aspect (if it could be referred to as such) of this step would be to open the debate on the consequences of Greece leaving the Euro.

However, going back to the here and now, the message from the ECB seems to be play ball or get off the pitch.

http://www.macropolis.gr/?i=portal.en.the-agora.2329&itemId=2329


09/02/2015

After the initial euphoria, the performance of the new government has been disappointing. During the first few weeks the impression was given that SYRIZA had a strategy in relation to the economy and a blueprint for re-organising Greek society. A debt write off was to be pursued because SYRIZA said it had a mandate from the Greek people to achieve this objective. The 'oligarchs' were to be tackled in the context of a crack down on tax evasion, minimum wage to be restored to €751 per month, civil servants re-hired and some pensions increased.

It is now obvious that no such plan exists and the government is being compared to left-wing 'coffee-shop intellectuals' - great at talking but not much in the way of action. Alexis Tsipras has recognised this and told his cabinet (including Varoufakis) "less talk and more action". The letter sent to the Eurogroup at the weekend has seven proposals which vary from non-specific in detail to downright silly. The article below sets out a reasonable response to the letter, which was, inevitably, leaked.

https://medium.com/bull-market/greek-reform-proposals-a-first-review-58db3fe9436d

While there are difficulties with the policy or lack of policy from SYRIZA, there are also problems with the method of negotiation being employed by the government. The proposals were sent to the EU and there have been negative reactions from some of the players. However, there should be no comments from anyone in the government until an official response is received. Talking about a referendum if an agreement can't be reached is stupid and naive, especially when dealing with experienced EU negotiators. If the government continues 'blundering around' like this, Greece will be out of the Eurozone in no time.

The process necessary for Greece to survive as a member of the Eurozone must be incremental in nature with a long-term horizon. SYRIZA is in a unique position to do this because it has no political baggage and should be able to make the necessary reforms. However,  the debt write-down was not achieved and SYRIZA accepts that it will not happen. Moreover, instead of the large-scale tax evasion by big business being tackled, 'tax spies' are to be employed to catch small businesses like restaurants, shops and kiosks that don't issue receipts. This is a far cry from the stated objectives of SYRIZA before the election. Furthermore, rather than a 'citizens card' for interfacing with the public service being issued,  Business Process Re-engineering  (BPR) needs to be undertaken in the public service to make it more efficient and that will take time.

It now looks as if SYRIZA will have to conform to the terms of the memorandum if Greece is to continue to be funded from Europe. The alternative is to hold a referendum, according to some government sources but what is the referendum to be about? Is it to be about membership of the Euro or acceptance or otherwise of a memorandum. The most important thing about a referendum is the question that's asked. Where this will end is hard to forecast but 'Grexit' appears to be more likely with each passing day.

A New Chapter

28/02/2015
The stories are swirling round the place that the new government is split on the agreement with the Eurogroup. However, in an opinion poll published today, SYRIZA has jumped from 36% in the election to 42% and Alexis Tsipras popularity rating has soared. As mentioned previously, the dissent is within SYRIZA and it is foolish for MPs not to wait to see how things work out. Next week, the government will introduce the first of its new legislation. There are bills to tackle the 'humanitaris crisis' the payment of tax and social insurance arrears,  primary residence foreclosures and the re-opening of ERT, the former national TV channel closed by the previous government. These measures are unlikely to be cost-neutral, especially tackling the humanitarian crisis,  and it begs the question about where the money will come from to pay for them. There are all sorts of forecasts about Greece running out of money in the next two to four weeks as well as commentary that SYRIZA was not prepared for government so, as the article below points out, Tsipras is on a knife edge and the saga continues.

http://www.telegraph.co.uk/finance/economics/11441482/Humiliated-Greece-eyes-Byzantine-pivot-as-crisis-deepens.html


26/02/2015

A New Chapter in the Greek Saga.

The election on January 25th is well and truly over and a month later the new government, composed of SYRIZA and the Independent Greek Party (ANEL), has managed to negotiate a four-month 'extension' of the existing bailout agreement. The question of who won or lost is still being discussed but this will taper off as the government attempts to tackle the issues and points which form the basis of the extended agreement. 

Many people believe that Greece got very little and have made far too many concessions but they are still supporting the government, or at least not demonstrating against it yet. A very real threat to the stability of the government comes from within SYRIZA itself. A good number of SYRIZA MPs have communist backgrounds and are said to be unhappy about the agreement and the fact that many of the key electoral promises were dropped during the discussions with the EU. It's being reported that  Alexis Tsipras, the Prime Minister, spent 11 hours discussing and defending the agreement to the MPs in his party yesterday. Panayiotis Lafazanis is seen as a key figure in the hard left section of the party and disagrees with the party position about not rolling back on privatisations that have been carried out. So far there is no outward sign of major dissent within the SYRIZA but the opinion is being expressed in Athens that the situation is likely to boil over and SYRIZA may implode. While voters may be prepared to adopt a wait and see approach, a significant number of SYRIZA MPs, and  perhaps ministers,  may not. 

The government is inexperienced and it seems foolish not to wait to see how things develop. Generally, politicians get nervous when something spooks the electorate, resulting in a threat to their re-election. However, we haven't reached that point yet so there is no point in having 'a mutiny' at this stage. Also, if an election were called due to a government collapse, the people are likely to blame the politicians who caused that to happen and vote them out anyway. The scale of opposition within SYRIZA will become clearer fairly soon but where all this leads to is anyone's guess. 

Election 2015

23/02/2105
Most of the analysis concerning Friday's agreement focuses on the 'climbdown' by Greece in the face of tough opposition from Germany and particularly, German finance minister, Wolfgang Schaeuble. The fact is that SYRIZA's policy is to remain part of the Eurozone definitely weakened its negotiating stance, while willingness to go back to the Drachma may have given Greece a stronger negotiating hand. A contrarian view of the outcome of Friday's talks might be that Schaeuble was actually helping Greece and Tsipras by his outright, public rejection of the Greek proposals for Friday's Eurogroup meeting. What seems to have been agreed is very similar to what was being proposed on Thursday and SYRIZA had definitely rowed back on most of its demands at that stage. Had Schaeuble said on Thursday that the proposals were a basis for discussion, and the outcome was Friday's agreement anyway, then Tsipras would have been hammered back home for getting hardly anything. The stance taken by Schaeuble made him an 'ally' of Tsipras, as Greece is seen to have taken on the EU and, on the surface anyway, been given the opportunity to define its own programme of reforms, rather than having it foisted on them from outside. Even Schaeuble's remarks that this would be difficult to sell to Greek voters gives an indication he is aware of what he is doing. Many in the EU, like the commission and members of the Eurogroup were taken by surprise by Schaeuble's total rejection of the Greek proposals but there may have been another reason behind it - an attempt to help the Greek Prime Minister to sell the agreement at home by being the 'bad boy'.


21/02/2013
The link below outlines a key issue facing Syriza - the high level corruption that has been endemic in Greece for decades. A great deal of progress can be made if this is reduced.  it is probably impossible to eradicate totally in Greece, no more than in any other EU country but if business is transacted on an ethical basis, it leaves less scope for corruption and graft. The estimated annual loss to the Greek economy of €20bn tells its own story. It is these aspects of the economy, if tackled successfully, which can deliver the necessary growth, employment and revenue streams for Greece to fulfil its commitments.  

The article mentions 'a bloated Civil Service' and it is this area that I believe will cause SYRIZA big problems. SYRIZA's stated objective is to make the public service more efficient as well as making Greece more business friendly, by eliminating obstacles to business start-ups. If this is dealt with on the basis of process re-engineering, for example, then it is likely to lead to big job reductions in the public service and massive movement of public servants from one department to another. This will be a huge undertaking ( if it is undertaken) and, taking into consideration the level of external supervision by 'the institutions', will be subject to strict targets and milestones, as was the 2012 bailout memorandum. This is one aspect of reform that will test the internal resolve of SYRIZA to the limit, due to having to tackle one of its key areas of support - the Public Service. However, if inefficiency is to be addressed, it will be critical to re-organise the Public Service on the basis of more eGovernment and one-stop-shop operations for public services as well as less red tape, documentation and general bureaucracy. An efficient Public Service means less time spent interfacing with the Public Service, leaving more time for people to engage in productive economic activity. 

One can only hope that SYRIZA will tackle these issues successfully, otherwise investors will be very reluctant to take a chance on Greece. If Syriza fails, it is difficult to see how the problems of Greece can be solved, other than by exiting the Eurozone. Therefore, as the article points out, it is Europe's responsibility to support the new government in its endeavours as much as it is Syriza's responsibility to fulfil its obligations to the people of Greece and Europe.

http://www.nytimes.com/2015/02/21/opinion/in-greece-focus-on-justice.html?_r=0

21/02/2015
The agreement reached last night between Greece and the Eurogroup is in the true traditions of the EU - 11th hour consensus. Opinion is divided about who gained or lost in the process, which is a good thing because both sides can claim victories of sorts. It was summed up well in the comment "Greece gets to pick its own austerity". This is a key point, in that SYRIZA can begin to implement the type of reforms necessary to turn the economy around. The necessary measures were not introduced by the previous two governments and as a result, the effect on the economy was worse than anticipated. The real positive aspect is that a government, for the first time since the crisis began in 2008, has questioned and opposed the prevailing austerity orthodoxy and come away with something. This may have a knock-on effect in other bailout countries, where it seems to voters that centrist governments achieved no concessions in terms of their bailout agreements. The ball is in SYRIZA's court now and I believe there is a fair amount of goodwill behind them so there are grounds for optimism. If SYRIZA fail to deliver, then the picture would be very bleak, with an exit from the Eurozone the likely outcome. The article below is very informative about the situation and the necessity for Greece to regain the trust of its EU partners.

http://coppolacomment.blogspot.gr/2015/02/greece-and-eu-question-of-trust.html?showComment=1424508591444

20/02/2015
It appears the notion that German policy is pro Grexit is gaining traction. Paul Krugman believes this to be the situation and points out that if Greece is forced out  this means German policy is also "objectively pro Golden Dawn". 

http://krugman.blogs.nytimes.com/2015/02/19/insert-german-curse-word-here/?smid=tw-share&_r=0


19/02/2015
It's being reported that Germany has rejected the latest proposal to resolve the deadlock in the Greek debt talks. It appears that Germany is doing the talking for the other 17 Eurozone members, as they appear to have gone remarkably silent. Lots of discussion has centred around the fact that other governments, particularly those in countries who implemented austerity measures in return for bailouts, were opposed to any concessions to Greece. However, it would seem that this may not be the case considering the fact that they had very little time  to carefully assess the proposals. Perhaps Germany is sending a message to the other countries, such as Ireland, Portugal and Spain, that there will be no tolerance for any deviation from the austerity policies imposed under the bailout agreements. Another scenario is that the Eurogroup agrees at tomorrow's meeting to accept the Greek proposals and of course Germany is off the hook for any fallout if Greece doesn't deliver. 

It must be extremely difficult and frustrating for the Greek Government and its finance minister to be negotiating under these circumstances. They have made a number of significant concessions since the beginning of the process but Germany blocks everything without even a discussion. It is impossible to negotiate with someone who just says 'no' and insists on adhering to the status quo, which is widely regarded as a failure. The Greek negotiating position is honourable, unlike in the past,  and it is always better to adopt an 'honest broker' stance because you can walk away with your conscience intact if a deal is not reached. 

On the one hand, the situation arouses suspicions that Germany wants to push Greece out of the Eurozone. However, while there may be financial turmoil following a Greek exit, it might also lead to the unravelling of the Eurozone altogether. A Greek exit and fast recovery would undoubtedly trigger the emergence of political parties or policies calling for similar action in other financially-stressed or periphery countries. If one country can exit successfully, so can others. On the other hand, if Greece defaults on its debt Germany will be a big loser as it is the largest creditor. Taking that fact into consideration, it's hard to see why Germany is being so tough because if Greece is forced to leave the Eurozone, it will likely default on its debts and Germany will lose big bucks.

As ever with European politics, everything is messy but things could get messier.


19/02/2015
A new president has been elected in Greece by a large majority in parliament. Prokopis Pavlopoulos is a member of New Democracy and was supported by ND along with the New Government for the role. It must be remembered that the reason for the last election was the failure to agree a successor to outgoing president, Karolos Papoulias. We can see the new president in 'action' in the video (he's the person with the white hair), where he sits presidentially and aloof during the attack by Ilias Kasidiaris, a Golden Dawn MP. Kasidiaris threw a glass of water on Rena Dourou (SYRIZA)  and then he hit Liana Kanelli, a Communist Party MP. The president's role does not involve interfering with the 'political process', so he should settle in quite easily, based on his previous experience.


https://www.youtube.com/watch?v=Nte1UtRww_k


18/02/2015
The article below by Michael Taft from Unite trade union supports the argument that some countries don't want Greece to have any success in the negotiations with the Eurogroup. The stance taken by SYRIZA is in stark contrast to that taken by the Fine Gael / Labour coalition in Ireland. It should be noted that the current Irish government campaigned against the bailout prior to the general election in 2011, as did New Democracy, the majority coalition party in its 2012 Greece election campaign. Both governments went on to implement the terms of the bailouts in Ireland and Greece. Greece now has a new government, elected on the basis of opposition to the Greek bailout memorandum and so far, it has done just that. SYRIZA may have to compromise in the negotiations but no new austerity measures will be introduced. 

Hopefully, the election of SYRIZA will start a debate on the type of society Europeans want, one where the interests of the citizens takes priority over the 'discipline' of the markets. Politicians in Europe need to take back control of the economic issues affecting their respective countries and not allow banks, financial institutions, hedge funds and ratings agencies to dictate national economic policy. This can be done by effective regulation. Without doubt, this  would be strongly lobbied against, particularly by the UK. It is paradoxical that the 'financial industry', which produces nothing tangible, lectures countries about increasing productivity, increasing growth and cutting costs in areas and economies that actually produce goods. 

It is illogical for the Irish Government to oppose the efforts being made by the Greek Government, as a shift in EU policy will benefit all of Europe.


http://tinyurl.com/m94l56j

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18/02/2015
It's being reported that Greece has requested a four-month bailout extension. There is talk that it will be resisted by Germany, as it is viewed there as 'more money without reforms'. It will be unfortunate if the EU rejects this offer from Greece. The Greek position on the memorandum is that it has failed and there is no point continuing to run the Country under its terms. There is also resistance to a Greek deal from other bailout countries, such as Spain, Ireland and Portugal. The logic here being that centre right parties in these countries, who are currently implementing or have implemented austerity measures, do not want a more favourable deal for a left wing governed Greece. 

(comment on David McWilliams article in the Irish Independent 18/02/2015)

Greece's biggest enemy now is the Spanish Prime Minister, Rajoy, who is behind in the polls to Podemos, another left-wing party. He wants SYRIZA to be crushed. While SYRIZA may be known as the Radical Coalition of the Left, there is nothing radically left wing about its proposals. They make economic sense. The difficulty, as always with Greece, is can SYRIZA deliver on its proposals, where previous governments failed. The measures contained in the bailout memorandum have destroyed the Greek economy and any responsible government would oppose the continuation of this failed policy. Hopefully, Greece is given a chance because all the language from the EU up to now is stick to the terms of the memorandum. SYRIZA will not continue to govern under this agreement. 


It is probably Angela Merkel's call now whether to go with Greece's proposal or not. No one can say what the effects of a Greek default and exit from the Euro currency would be. The US government allowed Lehman Brothers to fail in September 2008 and there was a massive global financial crisis as a result. Lehman Brothers was a bank and the estimates of the cost of its failure were way off the mark. Greece is a country and, considering the inter-connectedness of banks in the EU, it is impossible to gauge the effect of a Greek exit from the Eurozone and a subsequent default. 

We are continuously told that the next meeting 'is the one' where it will all be decided so it would appear that Friday is the day - but as always with the EU, who knows?


17/02/2015
Yesterday's discussions at the Eurogroup meeting broke up suddenly and it looks likely that a deal that was on the table was altered. The German finance minister, Wolfgang Schaeuble, was quoted as saying before the talks that he was pessimistic because the Greek government hadn't moved. It must be pointed out that neither has he changed his stance either, so under circumstances like that it is difficult to get an agreement. The report below from Paul Mason gives an insight into what went on and it looks ugly. If this is a reflection of what happened it certainly says a lot about the Irish government's position in relation to Greece. It is unfortunate that we can be so tough with a country that's struggling badly, yet so meek when it comes to representing the interests of Irish people when dealing with Ireland's creditors. It will look even worse than it does already for the government parties if Greece achieves any concessions, so it's throw a country to the wolves - we want to be re-elected.

http://tinyurl.com/nfe5da6

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16/02/2105
It is reported in today's Irish Times (Arthur Beesley) that the Greek Government has not presented its proposals at the negotiations with the EU in the form of a single document. This is very disappointing (if true), as economic reform on the scale required needs a coordinated plan. In the past, what has been lacking in Greece is 'joined-up thinking', a necessary ingredient for national economic reform. An example of this disjointed planning is mentioned on the main page of this blog (http://melinnakis.blogspot.gr)  on the day it was first published three years ago. It relates to the proposal to reduce VAT for anyone using a credit card to pay for goods. SYRIZA has been waiting in the wings for the past two and a half years to govern Greece and has had plenty of time to come up with an overall plan to reform the economy. The fear now is that if the plan is not formed in a single document, all the elements are not in place. This could lead to internal squabbling over measures that have not been agreed within the party. With all the 'noise' surrounding the talks, it's hard to know who's telling the truth but the EU negotiators and national leaders have been saying they want Greece to give them proposals. The Greek Government has said it will need six months breathing space and Alexis Tsipras is quoted today ( Ekathimerini) as saying "Greece will [then], in six months time, be a completely different country". This implies that the plan is ready and it will take six months to implement it. It remains to be seen if a plan is presented to the Eurogroup at today's meeting. 


15/02/2015
There are reports that today SYRIZA has agreed with Greece's creditors that a 'National Reform Plan' is necessary to sort out the economy. In the Daily Developments section of the blog ( http://melinnakis.blogspot.gr ) reference has been made to this on many occasions over the past two years. The conclusion has always been that it would be impossible for either New Democracy or PASOK to implement the kind of changes necessary to reform the Greek economy and indeed, Greek society itself. One of the conditions for accession to the EU is a "properly functioning market economy" and in many respects that is not the situation in Greece. Vested interests, including trade unions, have continuously blocked reforms that had a direct impact on them. In the case of trade unions, on their members or in the case of businesses, market reforms, closed shops and restrictive practices. This is a significant factor in the cumulative negative effects of the bailout memorandum in Greece. 

It is probable that SYRIZA can manage to get some reforms through, especially on the market side of the economy but whether the trade unions can be brought onside is another matter. It has long been argued here that the only way out of the problems in Greece is to have a Social Partnership between the Government, Employers Organisations and Trade Union Organisations. The  economy needs to be opened up and made more competitive  but, as a quid quo pro, the industrial relations legislation needs to be revised, particularly in relation to strikes. Previous governments since 2009 had little chance, if any,  of achieving this but perhaps SYRIZA, which has no political baggage, will be able to begin the process in the context of a National Reform Plan i.e. a roadmap to economic reform.

http://tinyurl.com/no62q5w

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15/02/2015
Some Irish MEPs ( 6 out of 11) have have come out in support of Greece's efforts to deal with its debt problems and the difficulties facing the Greek people. The article rightly accuses Enda Kenny of suggesting that SYRIZA should backtrack on promises made during the election campaign. This is not surprising coming from An Taoiseach, as that's exactly what he did when he came into power. Independent and Sinn Féin MEPs outnumber Government and Fianna Fáil representatives in the European parliament. That's not surprising either, because they are paying the price for, in the former's case, deceit of the Irish electorate and the latter's, wrecking the Irish economy. 

http://tinyurl.com/otog4xl

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11/02/2105
It seems that Germany is totally opposed to any solution to the Greek debt problem, apart from the implementation of the agreed memorandum of 2012. It is widely acknowledged that this memorandum was a failure and caused major damage to the Greek economy and employment levels. The IMF itself and many leading economists have pointed out the flaws in the programme so it's hard to figure out why some countries insist on the continuation of this flawed strategy.

 It must be acknowledged that the two previous Greek governments (PASOK:2009 and ND coalition 2012) did not carry out many of the measures designed to reorganise the economy in Greece. This argument has been made many times in this blog under the 'Daily Developments' section.

http://melinnakis.blogspot.gr

It is probable, taking the hegemony in Greek politics into consideration, that neither of the previous two governments would ever have taken the measures necessary to restructure the Greek economy. The political connections to big business families, the media and the shipping industry, as well as the influence of interest groups such as trade unions, made it almost impossible for major reform to take place.

However, SYRIZA was never in government before and has no allegiance to any individual or group, apart from the trade unions. It is reasonable to assume that SYRIZA will tackle the corruption and major tax evasion without fear or favour. Therefore, it is incumbent on the powers that be in Europe to give SYRIZA, firstly a genuine hearing and secondly, an opportunity to carry out its programme if it is viable. 

Apart from dealing with the issues above, there are obstacles in the way of Greece when it comes to growth. It takes a long time to set up a business due to a raft of bureaucracy. This needs to change. It has long been argued on this site that the industrial relations environment also needs a major overhaul. Business likes certainty and if people can just walk off the job, investors will not be inclined to risk their money where this type of uncertainty exists. Social partnership between the government, employers and trade unions is the way forward. If a proper framework can be agreed, it will provide the stability to encourage investment in the economy, resulting in the much sought after growth.

Finally, today the Irish Finance Minister, Michael Noonan, has reiterated his stance about no debt write off for Greece. He is concerned that it would leave "a hole" in European Countrys' balance sheets, which from an national accounting perspective, is a reasonable argument. However, he does make a point about 'parking' the debt, where little or no interest is paid. This would certainly be a help and perhaps also an indication that it may be possible to work out a solution that is acceptable to both sides. It starts today.

10/02/2105
There is no doubt that Simon Coveney's comments on the Greek debt situation is orchestrated. Immediately, EU finance ministers were out of the traps saying Ireland would not benefit from a deal on Greece. It is obvious now what side Ireland will be on when it comes to the discussions, opposition to any concessions to Greece. Thick politicians being played like a violin by the 'aristocrats' of Europe. If the irish government had any idea about negotiation it would have said nothing on the Greek situation and looked for some crumb from its EU masters to stay onside. However, that type of skill, Machiavellian as it is, does not exist within the realms of Irish politics. The capabilities of irish politicians are in relation to 'parish pump' politics, survival within the party and funeral attendance.

http://tinyurl.com/mgkqvw3

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09/02/2015
Simon Coveney has said "Ireland wasn't nobbled by the Troika over support for Greek debt relief call". In other words the debt conference. My comment on this article is below.

There is no doubt that Ireland was 'leaned on' in relation to the debt conference. Whatever about Michael Noonan, Joan Burton was in favour of it so the opposition of both tells its own story.  I read that the exposure of Ireland to the Greek bailout is €350m. I'm certain that if the debt conference had taken place, Ireland would have gained more than it would lose. The speech by Alexis Tsipras in the Greek parliament last night has brought Greece closer to leaving the Eurozone and probably the EU, unless there is a positive effort to come to an agreement. I don't see our spineless politicians doing much to help the Greeks.

Of course Simon Coveney also stated in the interview that if Greece gets a deal, Ireland will want exactly the same. By saying this, it puts further obstacles in Greece's path and reveals exactly where Fine Gael stands. It's almost like the Irish government doesn't want a deal for Greece because they will look bad in the eyes of Irish people for not doing what Greece is doing.

In the meantime, SYRIZA is not backing down, although Tsipras' speech in Parliament last night is a pre-negotiating stance. It may be that SYRIZA is trying to get the EU to deal with this issue fast. The more the measures of the memorandum are rolled back, the harder it will be to get an agreement. Therefore, Tsipras is gambling that this will force the EU to begin discussions quickly and it will also smoke them out to see if they actually want to cut a deal with Greece. Tsipras has left room for manoeuvre by indicating that the changes will be introduced 'over time' and the SYRIZA programme is a 4-year programme. This will be a very important week for Greece and the EU and Wednesday's meeting of finance ministers should reveal whether a deal is possible. But there again, with the EU and its decision-making record in the past, you never know.



08/02/2105
There is a quote from an unnamed European official (probably unelected) in the article below which proves the point that most people are aware of.  In the majority of European countries, national governments don't make the decisions that count. The language employed is interesting as it would remind Irish people of the testosterone-fueled alpha male language used by Anglo Irish Bank executives during the unfolding financial crisis in Ireland and Anglo. The quote is in relation to the refusal of the ECB to accept Greek Government bonds as collateral:

"One European official described it as a "gentle kick in the n***" for Yanis Varoufakis, the Greek finance minister, who has been touring European capitals with Mr Tsipras to make Syriza's case."
"The idea was to remind the new government that, regardless of the Greek elections, it will be other people who make this decision. This is a fact of political life in the eurozone."

http://tinyurl.com/kb9yyby

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07/02/2015
The knives are out for SYRIZA from the European apologists as can be seen from the link to an article in the Irish Independent below. However, it is hard to see SYRIZA backing off to any great extent, even if it means Greece leaving the Euro or, more likely, SYRIZA resigning from government. The previous Greek government left a poison pill behind them by opting for a two-month extension to the bailout programme, instead of the six months on offer from the EU and its partners. SYRIZA will refuse to govern the country under the terms of the existing bailout agreement and have already stated that. The real issue is that people in Europe, especially those in the bailout countries, know in their hearts that they are being screwed by Germany. Most (like Ireland) don't want to do anything about it but the Greeks do and they deserve our support.


http://tinyurl.com/q2hoejg

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06/02/2015

The criticism of the new Greek government throughout Europe is very unfortunate. Holland and Finland in general and Germany in particular, have taken a very hardline stance against SYRIZA and its efforts to find a solution to the problems facing Greece. Under the present circumstances it is doubtful if Greece can ever pay off its debts and a fundamental restructuring of the economy is necessary to stimulate meaningful growth in a country where anti-competitive practices are endemic. This is one reason why the memorandum had such a drastic effect in Greece. The Greeks had their incomes slashed by a combination of horizontal wage and pension cuts, combined with increased taxes, such that demand fell through the floor, GDP shrank by 25% and unemployment reached a record 28%. 

It is hard to understand how prices continued to rise in Greece, despite a drop in labour costs. Moreover, prices are still rising despite lower energy costs in the past six months. One would imagine that all these savings would be passed on to the consumer but this has not happened, so obviously the savings are being added to profit margins. The previous government promised to tackle restrictive practices and cartels operating in Greece but failed. This is the reason why the memorandum has had a profound effect in Greece - prices didn't fall in line with incomes and most people are worse off than was ever visualised by Greece's debtors. 

Whether Greece's debtors like it or not, it was Greek politicians who caused this mess, and by their actions up to now have exacerbated the situation. The message from Europe from before the election in January was "we want familiar faces", which reads New Democracy as the main party in government. This party, by refusing to take on the oligarchs and big business interests in Greece, is responsible for the plight of the Greek people now. Of course, the damage is done and continuing the current bailout agreement is senseless unless the agenda is to condemn Greece to permanent indebtedness and financial slavery.

It makes sense therefore, for SYRIZA to try a new approach, which on the surface, makes economic sense. The difficulty with situations like this is that one side is going to have to admit it was wrong. The EU will not admit it got things wrong and continues with the same mantra that the conditions of the bailout agreement must be adhered to. By doing this they avoid discussing alternatives. It would be interesting to hear a proper debate on the proposals being put forward by SYRIZA but the indications are that Europe (or at least the main players) are not prepared to discuss anything other than adherence to the failed memorandum. 

The link below to Sony Kapoor's article contains a very reasonable analysis of the current situation and argues that Greece has done Europe a favour by highlighting the failure of austerity. It also mentions that Europe needs to re-orient itself now that some economies are beginning to recover. Finally, it says that SYRIZA should be given a chance for the sake of democracy, Greece and Europe itself.

http://tinyurl.com/knzl7ys

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01/02/2015

It is obvious that SYRIZA will face many challenges as the new Government of Greece. There are the economic problems and dealings with the EU at the top of the agenda. However, one hurdle they may have to confront is resistance internally in Greece. Given the hegemony of two political parties, PASOK and New Democracy, alternatively governing Greece for the past 40 years, it is probable that the public service at senior management level consists, to a large degree, of supporters of one or other of these parties. It is reasonable to assume that efforts will be made to thwart any changes proposed by by the new government, especially if it impacts on the public service itself. On that basis, SYRIZA's task is akin to "minding mice at a crossroads".

01/02/2015

It may seem that SYRIZA are a disruptive force in political terms. Europe has conventions in relation to 'how things are done and SYRIZA has never agreed with how things have been done up to now in relation to the bailout of Greece. Therefore they are going about that by ignoring the conventions of European politics. An example of this is the stance of SYRIZA in relation to Moscow and the continuation of sanctions from Europe over Ukraine. The re-imposition of these  sanctions requires unanimous agreement from member states, including Greece, and the response of the Greek government has rattled Briussels.

Many may view this as madness or inexperience but it should be noted that Yanis Varoufakis, the Minister for Finance, has co-authored a book on game theory "Game Theory: A Critical Text". There will be lots of threats from both sides over the coming days and weeks but if everyone approaches the problem with the intention of finding a solution then there is grounds for optimism.

31/01/2015

Yanis Varoufakis, the new Finance Minister of Greece, constructs a very interesting argument in relation to Germany's role in the Eurozone. In contrast to the previous post on 31/01/2015 below, he believes that Germany should adopt a policy of productive investment in peripheral European countries to produce the incomes that will allow these countries to pay off their debts, as well as stimulate demand in Europe, which German companies need to stay competitive. However, The role of the US (discussed in the article) was played while it had a relatively young population, whereas Germany has a negative birth rate and ageing population. So, while it may be the right thing to do, elderly German taxpayers, savers and pensioners are unlikely to support a 'risk-oriented' policy as outlined by Mr. Varoufakis. 

Despite all this, the problem still remains that austerity does not work and this is patently obvious in the case of Greece. The unemployment rate is 25% and 50% for people under 25. The Irish 'miracle recovery' is a myth. Unemployment in Ireland would be much higher if the 300,000 people who emigrated over the past 5 years were still in Ireland. Add to that all the people on internships and training courses, who are taken off the live register and Ireland's unemployment figure would be much higher. Since the formation of the Common Market, Europe has regularly faced hurdles and challenges and the present crisis is another one. Hopefully, Europe can come together with some innovative thinking and initiatives, as it has in the past,  to overcome the current difficulties and bring some hope to beleaguered countries, like Greece, where many are suffering poverty an deprivation.

http://tinyurl.com/l35ny6r

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31/01/2015

The argument has often been made that Germany is the problem in relation to the EU debt crisis. Indeed, it has sometimes been argued that Germany should leave the Euro and leave the rest of the Eurozone in the currency. Paragraph 2 of the article below re-iterates that point that German economic policy is a contributing factor to the problems in the EU. Growth in the Eurozone is falling and deflation is a real problem. The ECB is trying to stimulate growth with a Quantative Easing (QE) programme, which is also opposed by Germany. The situation with Syriza is interesting because they are trying to change the policy direction of the EU, currently driven by Germany. Francoise Hollande also attempted to do the same and failed. It appears that many governments have been elected in Europe since the crisis began based on overturning, or not complying with, the austerity measures being imposed. However, none, including Ireland's coalition of Fine Gael and Labour, have succeeded. This has led to accusations of broken promises and U-turns in some countries, such as Ireland and Greece. Antonis Samaras was opposed to the memorandum but proceeded to implement it or at least legislate for its implementation. Ireland has almost fully implemented the terms of its memorandum and has 'exited' the bailout programme, although the Country is till being monitored by the EU and the IMF. So will Syriza buck the trend or do markets (and Goldman Sachs) rule the world ?

http://tinyurl.com/n89vnrt

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29/01/2015

The attached article by Paul Mason of Channel 4 is an excellent analysis of the situation at the moment in relation to the new Syriza government and Europe's reaction to it. It deals mainly with economic issues but waves are also being created in relation to the government's foreign policies, particularly as regards Russia and its involvement in Ukraine. There are historical connections between Russia and Greece, which have always influenced Greek foreign policy in relation to Russia - a common religion (Orthodoxy) and the communists fighting the nazi occupation in Greece for example. However, the economic crisis and the humanitarian problems in Greece are the main focus of attention for Syriza at present.

http://tinyurl.com/jw9j7xw

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Conventional political behaviour, in Europe especially, may be about to be turned on its head with the election of Syriza. If Europe abandons the Greeks, the whole European project will be open to question. Solutions will have to be found, or other citizens of Europe will be asking could the same thing happen to us if the economic crisis in Europe (which has not gone away) were to continue and or maybe get worse.

27/01/2015

SYRIZA elected to form the new government in a big anti-austerity vote. Somehow, being anti-austerity is akin to being anti poverty, neither problem being very likely to be solved. Alexis Tsipras deserves a shot and most people wish him well in what is certain to be a very difficult beginning to his term as Prime Minister. That being said, I cannot reconcile his immediate priorities of undoing the measures brought in by the previous government. Whatever about bringing the minimum wage back to €751 per month, it is the reversal of the changes in the public service that do not add up. While it will be obviously extremely difficult to contain costs under this measure, It will be impossible to improve public services because the re-hiring of public employees who lost their jobs will add to bureaucracy that exists already. One of the main problems is all the red tape. forms and processes that the simplest task requires in Greece and any chance of this being alleviated will disappear with these re-hirings. It is positive that the number of ministers will be reduced and government departments will be rationalised but the problem remains about the efficiency of public services.

In relation to growth, this has always been an issue in this blog. Where is the growth to come from? The revenue from tourism will only do so much and, apart from agriculture, Greece does not have an export-oriented economy. Even agriculture is not developed and one problem plaguing Greece over the past 10-15 years is agricultural imports, especially produce that could be grown locally.

The labour laws are inimical to attracting Foreign Direct Investment (FDI) and also act as a brake on indigenous and local companies expanding or starting up. The process involved in starting companies and businesses is further exacerbated by the 'Red Tape' and bureaucracy, a situation mentioned earlier, which is unlikely to change with the policy of re-hirings in the public service.

Greece is in a very difficult situation and it is hard to be optimistic but sometimes a person comes along, and to everyone's surprise, grows into the job and manages to turn things around. Perhaps if other bailout countries were to support Greece's new Prime Minister, a change of policy at EU level might emerge. One wonders if this support for a reduction in debt would be forthcoming, as most of Greece's debt (80%) is held by the ECB and EU governments. However, if the knock-on effect of reducing Greek debt benefited other periphery countries to a greater degree than the amount they are owed by Greece, who knows?