Jan 29 2015

From hope to concern and from concern to hopefulness

Vassilis-June-201485x116By Vassilis Monastiriotis

SYRIZA’s central pre-election motto was ‘hope’ – ‘hope is coming’. In fact, what would perhaps describe better the pre-election sentiment of the Greek public, including a big part of SYRIZA’s voters, is the word ‘concern’: concern over whether SYRIZA will ‘make it’; whether “they will throw us” out of the Eurozone; whether they will back-track, emulating a U-turn similar to that of Samaras’ New Democracy after the 2012 elections; and whether they will be able to really alleviate the pain of 5 years of austerity and, indeed, end it.

It is of course too early to tell what the answer to these questions will be. But if the first couple of days of the new government provide any serious measure, it would seem to me that concern should give way to some (not hope but) hopefulness – because many of the first signals given by the new government are indeed hopeful. There are two elements to this: one concerning the new government’s stance to the issue of the debt and the loan agreement negotiations; the other concerns the type of policies that are being prioritised domestically. In this article I am discussion the first of these two elements.

Continuing on the earlier trend of a gradual but unmistaken softening of language and of meaning, in the first three days after the election we already see strong signals for a more pragmatic stance on the issue of the negotiations with the Eurozone. Of course, the new government is right to claim that the existing memorandum agreement is dead: there is clearly no way that the new government would continue implementing the policies agreed with the troika in the past – and, indeed, there is no electoral mandate for this. But they now seem to recognise that a programme – a programme of reforms and of fiscal consolidation – is needed and will be negotiated (or discussed, or devised, or whatever) with the Eurozone.

The new Finance Minister Prof Varoufakis, who had in the past insisted that the Greek crisis is simply a problem of capitalism with very little to do with Greece itself, talked on Wednesday (28/1/15) about the new agreement that will provide a bridge between the old programme and the new policy framework in Greece. To me, this sounds like clear news that the Greek government will apply for an extension of the current programme, from the currently extended deadline of 28/2 to sometime perhaps in July – a four or six month extension – on the very real grounds that time is needed for a new adjustment programme to be designed and agreed with the country’s creditors.

This is not a trivial issue. Extension of the programme will allow the ECB to continue providing access to its ELA mechanism to the commercial banks in Greece. This means that banks will be able to draw liquidity, which is absolutely necessary even for their day-to-day functioning, at rates much lower than what they could draw from the markets. But, more importantly, it also means that the banks will be able to continue participating in the short-term cash injections to the public finances (through the purchase of 3-month T-bills) which the Greek state will need desperately and unambiguously. But this is probably not enough. The Greek government will need a few more billions of euros well before July – without even counting the additional euros that it will need if it is to implement with immediate effect some of its pledges, for example to re-hire large parts of those made redundant from the public sector by the previous government. I am pretty hopeful (to return to my opening lines) that this money will be found – most probably by a technical window that will be found (or invented) for the temporary use of the reserves of the Greek Financial Stability Fund to finance ‘temporarily’ core budget needs of the Greek state.

For this to happen, the new government has between now and the end of February, or perhaps a bit later, to communicate two things to its Eurozone partners: first, a credible and coherent economic programme that will be consistent with the objective of fiscal adjustment whilst, naturally, focusing more on pro-growth and pro-poor measures; second, a clear and well-specified commitment to structural reforms, that will entail most probably less privatisation and marketisation than the previous programme but will nevertheless be consistent with the rules of the EU (e.g., on competition policy) and will, as a minimum, provide a credible prospect for the tackling of high- and medium-level corruption, clientelism, public sector inefficiencies and red-tape, problems of cronyism, etc – including confronting crony capitalism, on which the EU is as much in favour as is SYRIZA.

This is not an easy (t)ask. It is not an easy task under normal circumstances and it is definitely not an easy task under conditions of crisis, immense and urgent fiscal pressures, and within the context of a newly formed government with little public office experience, a rather academic understanding of how state bureaucracy and policy processes work, and – it should be emphasised – with some important and unresolved internal differences on key policy beliefs and priorities – e.g., between the different ‘sections’ and ‘groupings’ that comprise SYRIZA. It has not been an easy task for Greek governments before SYRIZA or for other governments elsewhere, such as those of Hollande and Renzi, who would also like to see – but have not been able to deliver so far – an end to austerity and a more Keynesian response to the crisis and to the challenge of fiscal consolidation.

But it seems now just a little bit more likely that the new government – and SYRIZA in particular – has the intention and the clarity of mind to work in this direction with pragmatism and soberness, understanding the constraints as well as the wants, and showing the willingness to find a balance between what is desirable and what is feasible, between the programmatic slogans of the pre-election campaign and the constrained realities of modern-life government. In this sense, although the concern remains, everybody in Greece should feel that they have the right to be – at least moderately – just a little bit more hopeful.

Dr Vassilis Monastiriotis is Associate Professor in the Political Economy of South Eastern Europe at the LSE. Dr Monastiriotis’ research focuses on economic policy and performance at the regional, national and supra-national levels, with emphasis on trade, FDI and the labour market. 

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4 Responses to From hope to concern and from concern to hopefulness

  1. ElliP says:

    Mr. Monastiriotis,

    While agreeing that Syriza’s softened tone and strong electoral support may, hopefully, mark a turning point for European austerity, it is the second element (i.e. the type of policies that are being prioritised domestically) that rightfully causes concern. Besides preventing investments in the old Greek airport and the Port of Pireaus (and threatening the already profitable operation of the Chinese Cosco), besides stating that the privatisation of DEH is out of the question, thus directly contradicting the agreement with troika (with the issue of breaking DEH’s lignite monopoly not even entering the discussion), it is most worrisome that Syriza abolished an education law voted by a supermajority in parliament in 2011 which had absolutely nothing to with the much-hated referendum. To me this is a clear indication that this government will not be one of social salvation (as they call themselves), but one condemning the emergence of competitive practices by taking us back to the statist status quo of the past.

    • Vassilis Monastiriotis says:

      I agree about the importance of the second ‘element’ (domestic economic policies). But, like in the first element, the signals are still very mixed and it is difficult to (fore)see what in the end the policies will be. Until yesterday we thought the ‘restoration’ of the minimum wage would happen within weeks, if not days. Now we are hearing that it will happen gradually and perhaps selectively. Similarly unclear is the situation with some of the other proposed changes, from educational reform to the re-hiring of public sector employees. It is all very confusingly (and worryingly) unclear…

  2. Hopeless article! says:

    Dr Monastiriotis must be living in the fantasy la-la land of Syriza sympathisers if he truly believes that the past few days have given anyone “hope” and not been a cause for grave, serious concern and even alarm among Greece’s partners and allies (and soon, as reality sinks in, among the Greek population itself).

    He obviously didn’t notice the crash in the Greek stock market by about 10%, the astonishing collapse of the value of Greek banks by up to 30% and the huge spike in Greek bond yields, to up to 18% in some cases, after the “hopeful” new ministers each, with a bad bout of verbal diarrhoea, made their policy announcements, which basically amounted to huge, pie-in-the-sky spending plans, the reversal of hard-won reforms and the introduction of new hard-left policies.

    Dr Monastiriotis also didn’t notice the message of the general secretary of the social insurance funds Romanias that pension payments after March are in danger because the money doesn’t exist. While, at the same time, the new “intellectual” finance minister Varoufakis keeps telling Greece’s creditors that the country does not want their 7 billion euros!

    When new policy announcements are alarming and outraging even the Chinese – the last resort of all hard-left governments around the world – who are seriously concerned about their investments in the port of Piraeus, by Syriza threats to renationalise the port, surely some mistake has been made. Piraeus is an important plank in the Chinese “Silk Road” plan for trade routes between China and Europe. Many other European governments are also banking on the Silk Road, as China plans to help build railway connections between Piraeus to central Europe for the transport of goods. So, all those other governments will be alarmed too.

    Just wait until the official government programme announcements are made from 7-9 February for an even greater Athens stock market crash, a huge spike in Greek bonds, and even more alarm in foreign capitals, from Brussels to Beijing.

    Monastiriotis is also unable to comprehend the speech and writings of all EU officials and politicians in EU countries who have said, explicitly, there will be no write-off of debts and Greece has to continue with the programme. All that is being offered is a possible extension on debt repayments, but only if Greece continues with its reforms. Syriza will soon find itself having to do exactly what Papandreou and Samaras did, and that is make cuts and push through reforms. Also, increase tax collection and fight tax evasion – but, tax evasion at all levels of Greek society, not just the mythical “rich”, because tax evasion is endemic throughout Greek society, especially given all the tiny, small “enterprises” which often operate through cash-in-hand and, as such, are unable to grow, offer good services and products, and create jobs. The whole mentality behind what is an “enterprise” in Greece and they ways in which they operate need to change.

    When the messages coming from leading European politicians are “we want Greece to remain part of our story” and “we will do what we can to keep Greece in the Eurozone”, it means if Greece doesn’t honour it’s side of the bargain, then there is the possibility that we may no longer keep it in the Eurozone.

    Of course, Greece could always turn to Mother Russia for financial assistance, as they so generously offered yesterday. Which is another serious point of great concern – the new Greek government’s relations with far-right Russian nationalists, particularly through the new foreign minister Kotzias, who had the Russian arch-nationalist Dugin speak at the university he is professor at (so many professors in the new Greek government! No doubt voted in by the hard-left Greek student factions – it will also be very alarming if the new government tries to reverse the very hard-won reform of not having the student factions vote to appoint new professors).

    Then, there was the appalling attack by the new government on the EU, for the EU announcement in response to the murderous attack on innocent civilians in Mariupol – an attack condemned as a war crime by UN officials, who specifically blamed the pro-Russian separatists. Aside from ringing alarm bells in EU capitals, Washington and NATO, this incident also showed the extreme inexperience and ignorance of the new government in EU procedures.

    Then we have the participation of the right-wing, nationalist, conspiracy-theorist ANEL in the new Greek coalition government, which even “sympathetic” EU politicians like Martin Schulz are appalled and disgusted by. It’s like the French government being in a coalition with Marin le Pen!

    The truth is – and why the previous Greek governments failed – is that Greece needs to change radically and deeply, but Greeks don’t want to change, they don’t understand the need for change, and Greek political elites certainly haven’t understood the urgency for radical reform and a serious evolution of Greek behaviour and mentality.

    If it’s the “memorandum” and the “troika” that are the problem, and not the Greek refusal to change that is the cause of Greece’s woes, then how comes Ireland and Portugal stuck resolutely with the necessary changes, have now exited the bailout programmes (“memoranda”) and are even offering to pay their debts back to the “troika” of creditors earlier? How comes Spain, which had a bailout for its banks, has managed to implement deep-rooted reforms, resulting in the creation of 400,000 new jobs and 3% growth? Why is it only Greece that has been unable to stick with the programme and make the changes?

    The fact that 36.5% of the Greeks who voted chose Syriza shows not that Greeks are fed up with the nasty “memorandum” – because the “memorandum”, the actual terms of the bailout programme, has never been fully or properly implemented. What it actually shows is the Greek people don’t want real change, and they do not fully comprehend that Greece is in a serious mess of its own making and requires deep and wide-ranging reforms. They wanted to go back to the pre-2009 system of government largesse based on heavy borrowing and a continuous flow of funds from the EU. They actually believe the complete distortion of reality that the “memorandum” is not an expression of the serious changes Greece needs to make, but was the imposed will of the nasty neo-liberal Nazi Angela Merkel and other beastly northern Europeans!

    It’s ok though, because reality will sink in very soon.

    • Vassilis Monastiriotis says:

      There are some good points in this comment – despite the tone in parts of the text. Of course, I do not claim to have any ability to predict the future; so, what will happen in the next few days and weeks is anybody’s guess. But at least I do not seem to be alone in my reading of the ‘hopeful’ signs (see http://www.kathimerini.gr/801885/article/epikairothta/politikh/wall-street-journal-endei3eis-symfwnias-anamesa-se-ellada-kai-ee) – and certainly the Wall Street Journal cannot be classified as a “SYRIZA sympathiser”… (As for my ability to “comprehend the speech[es] and writings of all EU officials”, I think my academic and professional record provide enough evidence for this.)

      In any case, my point was rather different: that against the very concerning pre-election rhetoric, post-election one can see signs of moderation, both in tone and substance, which should make one just a little bit less concerned (and just a little bit more hopeful that the ‘nuclear option’ will not be pursued). It is true, there are at least as many ‘concerning’ signals as there are ‘hopeful’ ones. Dragasakis’ statements about the banks (see http://www.kathimerini.gr/801315/article/epikairothta/politikh/pyrosvestikh-paremvash-dragasakh) are part of the latter; but Varoufakis’ press conference with Dijsselbloem weighs heavily on the ‘concern’ side.

      On the other points, I do agree (and have argued in the past) that Greek mentality has not changed, that the Greek state and economy is in need of a deep and radical restructuring, that the failures of the ‘austerity recipe’ in Greece have more to do with Greece than with the actual memorandum, etc. (On the latter, you can see for example https://www.ucy.ac.cy/erc/documents/Monastiriotis_71-92.pdf). But, to be fair, it is not SYRIZA that is to be blamed for all this…

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