GREEK CRISIS New and Old Realities in Greece

After a year in office, Greek Prime Minister Alexis Tsipras has learned the rules of politics, but still lacks a model for his country’s future. How much will Europe's enfant terrible compromise before Greece needs money in summer?
In Athens, Alexis Tsipras spoke as his party Syriza celebrated one year in office.

When Greek Prime Minister Alexis Tsipras recently received the newly elected opposition leader, he wore a gray three-piece suit with statesman-like dignity.

But what attracted most attention was his tight-fitting vest and the pounds he’s put on in recent months. Alongside Kyriakos Mitsotakis, the alert new leader of the conservative New Democracy party, the six-years-younger head of Syriza seemed heavyset and older than his years.

His first year in office has had a visible impact. But as he marks his anniversary leading Greece, many political observers question whether Mr. Tsipras has also had an impact on the country.

Greeks voted for Mr. Tsipras, the outsider from the radical left-wing party, in January 2015, hoping he would not only end the nation’s economic crisis, but also launch a sort of revolution to a complete, new beginning.

Running on an anti-austerity platform, Mr. Tsipras pledged to expel the hated troika of foreign financial lenders, the European Commission, IMF and European Central Bank.

Greece’s hope for growth of up to 1.5 percent this year is considered wishful thinking, according to the International Monetary Fund and Eurogroup finance ministers.

Looking back, it seems few Greeks believe the prime minister has followed through on his promises. It’s not just farmers who are challenging state power, in demonstrations against new taxes on agriculture. Surveys show that more than half of his voters are unhappy with his policies.

And yet it seems the 41-year-old leftist and his young followers will continue to have the say in Greek politics. In office, Mr. Tsipras has learned to play the power game perfectly. But the big question remains: What he will do with that power?

Just like their predecessors, his people are masters at making grand announcements.

“This government is determined to implement everything on schedule as agreed,” Economics Minister Giorgos Stathakis said in an interview. On his shelf was a small bust of Karl Marx, a gift from a German labor union delegation.

Mr. Stathakis, who expects an end to the recession, pointed to negotiations over privatization, which were long resisted by the new government. Talks on selling the Piraus harbor operations to a Chinese company, Cosco Pacific, are close to completion, he said, adding that a private operator would soon take over the state-run railway freight service.

The state is also withdrawing its support of big Greek banks. It has lowered its stake in Piraeus Bank from 67 percent to 26 percent and from 64 percent to 11 percent in Alpha Bank.

But Greece’s hope for growth of up to 1.5 percent this year is considered wishful thinking, according to the International Monetary Fund and Eurogroup finance ministers. Moreover, the emergency lenders fear tax revenues will be significantly less than what Athens calculates.

The year-old government is apparently playing the old accounting trick of cooking the books. Since Mr. Tsipras took office, the state has paid salaries and pensions, but not outstanding accounts – from craftsmen or service providers, for example.

Meantime, the troika of lenders — the European Commission, IMF and European Central Bank — says Greece has heaped up new debts of €6 billion, or about $6.5 billion.

“The state should finally settle the invoices,” said a representative of the donor institutions. “The Greek economy is feeling the lack of that money.”

Up to now, nothing can be seen of the campaign proclaimed by Mr. Tsipras against nepotism and the powerful Greek oligarchy.

“(Mr. Tsipras) hasn't passed a single law,” said Stathis Kalyvas, a political expert at Yale University.

 

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A top Greek banker who asked to remain anonymous agreed: “I would have expected the oligarchs to be encountering more difficulties, but there is no trace of that.”

The situation with the media remains similarly unchanged. There is whispering in Athens now about Alpha television, whose reporting on the Syriza government has been astoundingly favorable — ever since Alpha’s owner was deemed to owe back taxes. The owner seems to be trying to avoid payment, following a long Greek tradition of cozy deals between private broadcasters and the government.

Just like the parties that dominated Greek politics for decades, Syriza is now catapulting its followers into high positions. Both the renowned Athens Art Festival and the Cinemathek film library have received new directors. The head of the Athens hospital Elpis, which specializes in treating cancer, was replaced because he didn’t carry the correct party-membership book. And Transport Minister Christos Spirtzis has put two new managers in charge of public transportation services. More are likely.

There continues to be an acute lack of ideas about how the economy can be stimulated and how capital can be lured into the country. Investments, which made up 20 percent of gross domestic product before the crisis, have fallen below 12 percent.

Although Greek businesses claim claim there's growing international interest in the country, they say the political situation quickly cools investors. At the beginning of December, for example, the Canadian mining company Eldorado cancelled the extension of a gold mine in northern Greece after the government repeatedly delayed and rescinded authorizations.

Many Greeks are disappointed at the reform standstill.

Public-opinion expert Dimitris Mavros, of the influential opinion-research institute MRB, has identified a new trend in Greece with everyone seeing themselves as victims. “The wealthy," he said, "because their tax burden is rising and the poor because their situation is not improving.”

Since Mr. Mitsotakis has been at the helm of New Democracy, the largest opposition party, Mr. Tsipras’s Syriza party has slipped to second in opinion polls.

But the young prime minister, who has won two elections and a referendum, knows that polls are not the deciding factor for him. For him, it is far more crucial to maintain the difficult balance between his party, which must support reform policies in parliament, and financial donors in Brussels and Washington, who have to approve desperately needed loans.

Up to now, Mr. Tsipras has at least been able to count on the Europeans. They have become accustomed to the former enfant terrible, who last year pushed his country perilously close to leaving the euro zone. Even Klaus Regling, the head of the European Stability Mechanism who is always careful with his words, said Mr. Tsipras and his cabinet as “capable of reform.”

The gentler tones disguise the fact that Greek cooperation with its financial donors is still dysfunctional. The government's proposal for pension reform arrived without accompanying statistics in Brussels, where the figures for its 2016 budget are also still lacking. Because the data was incomplete, chief negotiators at the relevant institutions postponed their most recently scheduled trip to Athens. They were supposed to arrive on Monday to evaluate progress on reforms.

In Brussels, a senior European Union official voiced his anger over Greece once again not adhering to all requirements for pension reform. The Greek government wants to impose reductions only on future retirees.

The financial lenders fear harm will come from the planned 1-percent increase in contributions to the pension fund, which would equally impact workers and employers. With the unemployment rate at 24.5 percent, new jobs could scarcely be expected under that scenario. Mr. Stathakis, the economics minister, dismisses criticism and argues that incidental wage costs were lowered beforehand.

But policymakers in Athens can't entirely thrust aside the reservations from Brussels. They desperately need money from the third aid program agreed in August 2015. Under that agreement, funds will only flow when a pension reform program is in place and Athens has fulfilled the previously imposed conditions.

“If things go badly with the economy, the Greek government could once again have a payment problem by the middle of this year,” the Eurogroup, the body of finance ministers from euro-zone countries, said in a report.

In July, the country will have to pay back loans of more than €3 billion.

This is another reason that has promted Mr. Tsipras to change course once again. The prime minster expects the IMF to participate in a third rescue package, though there is limited enthusiasm in Washington for further loans to Greece.

Still, in the final analysis, the Washington-based lender doesn’t want a failed state on Europe's external border. “If push come to shove, the American government will make sure that the IMF doesn’t jump ship,” a Eurogroup official said.

The highest trump card held by Mr. Tsipras, however, is the chaotic political situation in Europe. The refugee crisis, which has seen thousands fleeing war and poverty in the Middle East and North Africa, has powerful politicians on the continent so tightly in its grip that Greece’s problems have slipped off the agenda – especially since Germany depends on cooperation with Athens, where many refugees continue to arrive.

For that reason, no one wants a new fight with the Greeks, not even Finance Minister Wolfgang Schäuble, who last year favored allowing a Greek exit from the euro.

Now everyone is sticking together. When Mr. Schäuble recently dared to propose an approach to an E.U.-wide gasoline tax for financing refugee programs, he was roundly criticized. One of the few expressions of support came from Athens.

 

This article first appeared in WirtschaftsWoche. To contact the author: [email protected]