First published in the old style Apokoronasnews.gr in November 2014
What a difference a month makes in the life of a country. In early November, universal political euphoria descended together with the rains on New Greece, that imaginary land invented by the government to convince prospective voters that life is getting better. The reason for that feeling of well being was in part due to the results of the stress tests on the Greek banks, which as local media reported they had passed with flying colours.
I guess there is no point in arguing about the success of the Greek banks, which between them have so far received €50 billion of taxpayers money. However, the fact that the same test results were headlined in a slightly different way in the international media makes the reported extent of the success of the banks appear a bit optimistic. If Reuters and the Financial Times are to be believed, only one out of the four surviving banks, Alpha Bank, passed the stress tests with the other three needing an additional €8.7 billion capital injection.
But then came along Greece’s Central Bank governor and former finance minister, Yannis Stournaras and told us that under a more optimistic scenario, assuming equity growth and a couple of other good things, only one of the four banks has a capital shortfall and that is only a measly €17.5 million. And that became the official government line, faithfully reproduced by the bulk of the mainstream media. Which, not only did it give the government political mileage for prudent financial management, but more importantly, left spare the €11.4 billion reserved for additional bank recapitalisation. An amount that, the government hoped, could be used to cover some of the country’s lending needs in the coming year, when it would be at the mercy of the money markets. And that encouraged the government to proceed with its own plans for getting a divorce from the troika. The greatest achievement of a Greek government since…, oh, I don’t know, since the primary surplus.
Now, the impending departure of the nasty troika that blackmailed us to do all those nasty things to the Greek people to get the next instalment of the loan was something to celebrate. The coming of a new era, with no more loan instalments, no more inspections, no more salary and pension cuts. Just taxes and the money markets. The government would be able to run the country as it pleases without interference from Europe or the IMF.
However, as soon as the announcement was made that Greece would withdraw from the support mechanism, a wave of panic went through the money markets, the lenders and the German government alike.
And about three weeks into November, as the government continued to talk the country out of the money markets, the problems could no longer be ignored. The government got publicly slapped down several times by its political allies in Europe, who do no longer seem to be scared of the spectre of an early election or the change of government. After all, what less can a new government do, they thought, observing their preferred government getting demob happy, ready to abandon the programme of reforms that started almost five years ago.
Now you would think that four years and more is a long time in politics; it is certainly considerably longer than a week, but not a lot has happened in the country by way of the reforms agreed with the lenders in the memorandum years. There is still stifling bureaucracy, corruption, restrictive practices, closed professions, tax evasion and a deeply unjust tax system that penalises lower income earners, new business startups and the self employed. Not because there was not enough time, but because the government did not want to make these changes. The EU lenders had to agree with Athens several times at the end of each inspection, that structural changes would be politically damaging and left satisfied with tax increases, unemployment, poverty, and pension cuts. Also politically damaging, but obviously not as much. They agreed the budget surplus even though the accounting system used was specifically designed for Greece. They agreed with the growth figures without much argument even though the Greek recovery is at best a jobless recovery and, while the memorandum lasted, they agreed with putting off reforms in the name of political stability, because there was always next year. But it would seem that now, time has run out.
The new aid package has not been agreed yet. Athens disputes the more pessimistic European figures, saying that Europe ‘has been wrong in all its predictions in the past, otherwise how is it that Greece managed to turn in a big budget surplus this year?’ How, indeed.
The government coalition is shaky after the internal turmoil for the future of the junior partner PASOK, and the only thing the two coalition leaders absolutely agree on, is that meeting the troika conditions for the continuation of the programme into 2015 and beyond, would be politically damaging for the government. And with the possibility of an election in the early spring of next year, political damage is not what either coalition party wants.
In the end, from wanting to drive the troika out of the country a month ago, the government are now trying to entice the inspection team back to Athens with offers of an increase on the lower rate of VAT and pension fund reforms. Otherwise there will be no final evaluation, no final instalment of the loan and no extension of the support programme. As before, the government despite its protests would claim to have no choice but to give in to most of the demands of the troika, and in exchange for a postponement of the implementation of the structural changes, accept measures for increasing revenues and cutting public spending, something that they have promised not to do. But then, no one expects anything different from a government fighting to preserve its position in power at all costs. And instead of the beginning of a new era, it brings Greece back to the same place the country was in the beginning of the crisis. Excluded from the money markets, with a lot more debt, more poverty, more unemployment and a more uncertain future.
yannis xamonakis
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