Published on 24 Feb 2015

Missing from the Greek deal: figures

There’s a crucial thing absent from the Greek letter to the Eurogroup, outlining the reforms they intend to carry out: it’s as if Yanis Varoufakis’ laptop was missing the key marked €.

There are no costings for the Greek programme, and therefore no way of calculating how much “fiscal space” Greece has won from the former troika. “Fiscal space” in the Greek crisis is the codeword for non-austerity: how much relief from austerity did the Greek electorate gain by putting the Syriza-ANEL coalition into power?

We won’t know the answer until a crucial blank space is filled in. Greece is supposed to run a primary surplus on its budget – ie the opposite of a deficit – to the tune of 4 per cent of GDP. As the economy is tanking due to uncertainty, and tax receipts dried up in the last two months of the old government, that is impossible – and to achieve it would only require even further cuts to public spending.

So once we know what the overall budget envelope of Greece is going to be this year – and Varoufakis asked for just a 1.5 per cent surplus – we have a baseline against which to cost what they plan to do.

As flagged before it looks like they will be allowed to carry out the humanitarian aspect of Syriza’s so-called Thessaloniki Programme – ie anti-poverty measures. This, plus one of the most aggressive anti-tax avoidance offensives ever planned in the western world, is the centrepiece of Varoufakis’ plan.

If they are allowed to use €10bn in an earmarked fund to recapitalise the banks, then the issues that remain are ones that demarcate the radical left from the centre: privatisations, trade union rights, universal healthcare, pensions and the minimum wage.

On all these things, the fiscal implications are completely reliant on the way you implement them. Reversing privatisations, for example, was always going to be low on Syriza’s list; letting those underway go through sounds like a retreat. But privatising a port where workers have guaranteed union rights, moral support from the ruling party and where the government refuses to take kickbacks  from vested interests, is quite different from the old system. My hunch is that such privatisations that are underway will go very slowly.

On pensions, limiting the Greek tradition of early retirement is going to require a “guaranteed basic income” for the over 50s – a one line promise but radical no less.

Another promise – universal access to healthcare in a country where tens of thousands have lost it – would be a major reform. It would free up the labour market for young people because setting up as self-employed involves crippling self-insurance costs to keep access to healthcare.

It’s common the hear western politicians promise to revive growth and balance the books through efficiency savings and a war on red tape. But Greece is the one country where inefficiency and bureaucracy are so entrenched that it might actually deliver. And it has to – because with or without an € key, Mr Varoufakis’ spreadsheets will not add up otherwise.

The arrangement with creditors still leaves Greece under week by week control, since the government is very short of cash. And if tax receipts don’t rebound, the country could actually need more in terms of short-term loans,

But the fiscal part of this story is not the whole story. What happened on 25 January was a social and psychological revolution: the end of a period that began in December 1944, whereby the left was excluded from power in Greece.

Many people who voted for Syriza are privately up in arms over the scale of the retreat – but they blame Germany first, Europe second and their own government a long, long third. They will, for now, swallow evisceration of their party’s programme on two conditions: one, that the government goes on delivering on non-fiscal policies.

It costs nothing, for example, to dissolve the detested riot squad DELTA, created after the unrest of 2008. The current plan is to “merge it” with the more established, less fascist infiltrated riot squads of the ordinary police. I would also expect the beefed up tax authorities to go in hard on a few symbolic members of the so called oligarchy.

Success in such endeavours would barely register at the ECB, yet be seen as massive delivery on promises by the 42 per cent of voters who voted left on 25 January.

Ultimately however, there may have to be a second big shift in Greece. The Syriza leadership miscalculated the level of support they would get from Italy, Germany, Britain and the USA – all of whom wanted the institutions to cut the Greek government more slack than they got.

The shock in Syriza’s upper echelons, symbolised by the expression on Alexis Tsipras’ face as he addressed the nation on Saturday, was real. It was the shock of realisation that, Germany was stronger than Italy and France combined, and that there really is no space inside the euro for a radical left government.

Since this realisation, many ordinary Greeks, and some previously pro-euro politicians and advisers,  have come to the conclusion that Syriza should prepare Greece for a “controlled exit”. Instead of “we were kicked out”, it would be sold as “we escaped” – and I think however positively today’s deal is spun, the push for Grexit will grow stronger as constraints become obvious.

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13 reader comments

  1. Themos Tsikas says:

    “What happened on 25 January was a social and psychological revolution: the end of a period that began in December 1944, whereby the left was excluded from power in Greece.”

    Do you know what you’ve done here? You’ve agreed with some totalitarian radicals that “the junta did not end in 1974”. The left has been free to win elections since then. In 1981, many people thought that the left had won the elections, in the form of PASOK. I don’t know who’s feeding you their own ideology as fact but you’d do well to keep a certain distance from it, if you want to maintain a sense of objectivity.

  2. Thomas Widmann says:

    Do you think it’s likely the Greek government will spend the next four months preparing the groundwork for a Grexit so that they have an effective threat during the coming negotiations?

    It would also be interesting to ask Varoufakis whether he’s preparing to dust off his plans for a Bitcoin-style Future Tax currency so that Greece won’t run out of money while staying inside the Eurozone.

  3. Alan says:

    Syriza behave as controlled opposition. Greece needs to exit the Euro and prioritise ridding themselves of all IMF influence. Unfortunately the Greek people will be bled dry.

  4. Edna M. says:

    You write that the shock on Mr. Tsipras face was real. If so, I find inexcusable that someone would run for Prime Minister and yet be so uninformed. I live outside Greece but I have been following the news there. One thing that surprised me, in the years following up to the election, was that Syriza party members, many of whom are smart people, were unable to answer the question regarding what they would do if the Troika said No to their demands. They have been asked some variation of this question for years. Why would the Troika listen to Syriza, people would ask. Their answers were always unsatisfactory. The Syriza members for some reason seemed to think they knew better than everyone else. I always wondered if they had an ace up their sleeve. But now we know they were just winging it. I find inexcusable that they would give people false hope. I don’t even think they are a Leftist party. A handful of them probably are. They are more like the American Democratic party, gaining votes by being just barely the lesser of two evils. I think they will be the death knell to the Left in Greece.

  5. Makoum says:

    It’s not really accurate to say that Germany is stronger than France and Italy combined – France is perfectly capable of resisting German pressure when it cares to exert itself (e.g. on its own budget deficit). Greece’s problem wasn’t French/Italian weakness, it was the unwillingness of France and Italy to stand up and fight Greece’s corner.

  6. Frank Wilson says:

    We’re learning more about the nitty gritty and significance of various events in the Greek crisis from Paul Mason’s reports on Channel 4 than by reading many of the Greek and German newspapers.

    While the elites of Europe play their games, it’s the guy at the bottom of the pile that is paying the highest price.

    Good to see that one of the motivating factors for Paul Mason when he compiles his reports and interviews German officials is what the whole thing means for the weakest guy in the food chain.

    Good stuff Paul, thanks for searching out the real story instead of the German, Dutch and Finnish versions of what should constitute order in the eurozone.

    I’m reading a book on Germany’s takeover of the Czech and Slovak economies after the Munich debacle in 1938 and the similarities between what happened in Czechoslovakia then and what is happening in Greece today are frightening.

  7. Mark says:

    The left has been excluded from power in Greece since 1944? That’ll come as news to PASOK. Although I suppose who the true believers are is as much a matter of fervent debate within the left as among Christian sects.

  8. aramiska says:

    Why don`t you just say it without semantic, pseudo jargon and catchphrases ?

  9. Daphné C. says:

    “The Syriza leadership miscalculated the level of support they would get from Italy, Germany, Britain and the USA ”
    I believe in this sentence, you mixed Germany for France, otherwise it doesn’t make sense with the next sentence : “It was the shock of realisation that, Germany was stronger than Italy and France combined”

  10. joseph halevi says:

    Excellent analysis.
    In this context I think that Varoufakis negotiating strategy was deeply flawed thereby leading to a far steeper climb down than the unknown fiscal space Athens has obtained.
    Varoufakis’s approach is summed up here:
    http://www.huffingtonpost.com/2015/01/30/yanis-varoufakis-blow-the-whole-thing-up_n_6583014.html

  11. Goeff says:

    I, like many other people around the world, have watched as the Greek people, democratically elected a government that gave them and us hope that there was/is a better way forward than the strangulation of Capitalist austerity. It seems to me the EU ECB and the IMF have actually enjoyed removing that hope and embarrassing the Greek delegation at the same time. The comments from the German finance minister were designed to show where the power lies, as if we didn’t already know, and to confirm the game that is played out, should anyone dare to challenge them or, god forbid, take a humanitarian line to help the beaten and humiliated people they were elected to serve.

    I would like to ask this question, would it be possible to start a fund to help the Greek Government pay for some of the humanitarian policies they would like to introduce. Ordinary people, from around the world, donating money for specific policies. Even if it proved to be a small beginning I would hope the Greek people would grasp the symbolism and take strength from it. I feel there’s a willingness to do something in the face of these powerful and dominant Capitalistic organisations, my plea is why don’t we try something different?

    1. pamela hope says:

      I endorse Geoff’s suggestion to start a fund to show friendship and solidarity with Greece, Syriza and their quest for some ‘fiscal space’.

  12. Chris Piché says:

    The headline “Missing from the Greek deal: figures.” Yes, this is the troika’s concern too, though from a neoliberal perspective. This murkiness is intentional. We’re entering into the dialectics of ambiguity. A cunning, cat and mouse game Varoufakis can play better than his overseers. They would have rather caught the willy mouse and given the deal more teeth.

    Greece is also turning attention within. The national and international battle against corruption will amplify and focus the struggle. Vested interests who use the traditional left-right center parties aboveground, could also turn to right-wing parties who bridge the underground, for help. If I were Varoufakis, I wouldn’t dismiss my bodyguards so nonchalantly.

    By stepping into the ring and getting slammed, Greece stood up for the little guy. The waves are still reverberating. It was heroic. Syriza’s rhetoric was never challenged as untrue. It was the power structure that recoiled, hit by the reality of austerity and new ideas to fight it. Then it re-congealed. It was a shock to the system. Many blows opening fissures are needed before real change happens.

    Syriza didn’t lose. It’s expectations were high. If they were more realistic, they wouldn’t have fought so hard. This was a rebellion, not the start of a revolution.
    Syriza set its picket post in European soil. It emerged in a tempest to defend a wounded people and their country. It took ground from the center and the right.

    The war has just begun. From the left, It’s off to a good start.

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