The below numbers allegedly come from the 2016 Draft Budget. They speak for themselves as a record of the performance of the first SYRIZA-led government.
Some of the most important statistics are not even included in this table (e. g. non-performing loans, past-due taxes, state arrears, deposit flight, etc.).
It seems quite obvious from the above that Greeks will have to pay for quite some time for the SYRIZA-experiment. Greek voters seem to have thought at the last election that the best qualified people to clean out an unnecessary mess are the ones who caused it in the first place. Or they thought that everyone else would be even worse.
Either way, seldom have so few done so much damage to so many!
Some of the most important statistics are not even included in this table (e. g. non-performing loans, past-due taxes, state arrears, deposit flight, etc.).
It seems quite obvious from the above that Greeks will have to pay for quite some time for the SYRIZA-experiment. Greek voters seem to have thought at the last election that the best qualified people to clean out an unnecessary mess are the ones who caused it in the first place. Or they thought that everyone else would be even worse.
Either way, seldom have so few done so much damage to so many!
To attribute it all to Syriza is wrong.
ReplyDeleteAs we know, Syriza tried to wrest control of the country back from the Troika. The Troika tried everything it could to stop that, including starving the banking sector of funds, leading to the closure of banks.
Now the fall of investment is the main reason for the fall in GDP. Which is understandable, given the negotiations.
Now the country is really run by the Troika policies (syriza is just implementing them), and they are responsible for the continued fall in GDP.
I agree: to attribute it all to SYRIZA is wrong in the sense that if the Samaras government had not blown it so much in the second half of 2014, SYRIZA would not have come to power and things would have developed positively; not rapidly, but positively.
DeleteThe remainder of your argument, that is to say everything other than the first line, sounds great but is wrong! It is based on the false assumption that wresting control back from the Troika is a matter of negotiation. Instead, wresting control back from the Troika and gaining more sovereignty is strictly and exclusively a matter of performance. If Greece were to perform well, it would get all the money it needs from other sources and it could kiss the Troika good-bye.
The Troika did not have to "try everything it could to stop that". All the Troika had to do was to stick to agreements and the ECB stick to rules. It was Greece that needed something from the Troika, not the other way around. THAT IS THE CRUCIAL ISSUE!!! If one does not understand that, one will
remain unhappy.
It is a fallacy to think that all SYRIZA wanted was to wrest back control. Yes, they did want that but in order for that to happen, they also needed fresh money. Not just money to pay off maturities but money to fund current operations. If you need money from someone, it is generally not a smart idea to tell them "give me your money but otherwise go and fly a kite". Of course, you can try it that way out of inexperience and naive ideologic enthusiasm but the price for that can be high. And it was high for Greece.
You are obviously not so familiar with my thinking, so let me restate it. I argue that this whole issue of Greece's suffering under an undue debt load is a soap opera. A soap opera which most people are buying but, nevertheless, a soap opera (in fact, I once told Varoufakis that in the same words and he did not disagree!). Whether you think in terms of annual debt service as percentage of GDP or as percentage of tax revenues, Greece has – to my understanding – the lowest percentages in ALL of Europe. Put differently, as a percentage of national income (about 3%) or of government tax revenues (less than 10%), Greece needs to allocate less to debt service than ANY OTHER EUROPEAN COUNTRY! And it will stay that way at least until the early 2020s.
Dreamers like Costas Lapavitsas have put out the tale that if Greece discontinued service its debt, there would be at least 10 BEUR which Greece could spend on other things. Well, in 2014, Greece spent a grand total of 5,7 BEUR on debt service (and that includes debt service to domestic holders of sovereign debt) and that figure would have been less than half if the IMF and the remaining private creditors did not have such high rates on their small loan portfolio. So, Lapavitsas should better do his numbers before he puts out a "Program for social and national rescue".
Please remember this: DEBT SERVICE IS PRESENTLY (UNTIL THE EARLY 2020s) NOT THE PROBLEM OF GREECE!!!
You make reference to the drop in investments. Please step back and think why investors invest. They do so for one simple reason: because they think that, at the end of the day, they will get more money back than they invested. SYRIZA has done just about everything in the book so that investors lost confidence that they would even get their money back, not to mention more money than they invested. Look at my post of the other day about Tsipras’ talk at the Clinton Global Initiative. Even after closing an 86 BEUR bail-out deal, Tsipras could not be very confident that investors would get their money back if they invested now. Well, anyone who descends from the academic world of macroeconomic thought down to the world of the real economy will say at this point: I rest my case.
Klaus - all good arguments, but your original post omits this simple fact: what you see in the table is the cost of resisting austerity; of trying to change the EU paradigm vis-a-vis its ‘errant’ member-states; of trying to negotiate a deal that the Greek people considered fair.
DeleteYou can say it was a cost too much for Greece to bear; you can say it was wrong-headed of Syriza to think they could succeed (and indeed they did lose, at least in this first round - memorandum 3 was a battle, not the war); you can say they shouldn’t have dared; you can take issue with the way they tried to fight...
But let’s at least be clear and honest about why the cost was so high. (And let’s not be dismiss the Greek people’s democratic choice as an ‘experiment’. It’s condescending to say the least.)
@ Anonymous at 11.17
DeleteOk, I see your point. If the majority of the Greek people had voted on January 25 to support the strategy of changing Europe even though failure to accomplish that would cost dearly, your point could be made fairly. First, not a majority but only about 36% voted for SYRIZA and SYRIZA never warned its voters that there might a cost associated with their strategy. If anything, they promised milk & honey. Who wouldn't vote for milk & honey?
The same farce was repeated at the referendum. Of course it speaks for Greeks that they can become passionate about resisting foreign orders and Tsipras would have had all the right in the world to accept the vote, say 'no' to the EU and watch the country fall apart. Except the voters were never told that a 'no' might make the country fall apart.
A vote can be both, a democratic choice and an experiment and there is nothing condescending about that. If Americans vote for Donald Trump, it will be their democratic choice but it will also be an enormous experiment.
If Greeks had said 'nai' instead of 'ochi' to the Italians and to the Nazis, the 1940s would have brought much less economic pain to Greeks. However, that pain was for a noble and worthy cause and got Greeks a lot of respect. What SYRIZA did was an attempt to disprove the economic laws of gravity. With all due respect to democracy, Greek voters cannot democratically determine that the tax payers of other countries will give them the money which their own tax payers refuse to give them.
My point is: both at the January election and at the July referendum, Greek voters were irresponsibly mislead by SYRIZA. The cost now is not the cost for having failed to change Europe but, instead, the cost for having allowed oneself to be mislead.
There was one straghtforward SYRIZA leader whose name I forgot but he had the nerve to say: "Let's face it: if we hold on the the Euro, it's memoranda and austerity. There is no other way!"
Mr. Kastner,
DeleteMuch more respect to you for all of the above. Thanks for making things again to our commentor clearer.
I will not hide behind my finger and say i was not contributor to voting for Syriza last January. Simultaneously though i had no ambitions that they would enforce their Thessaloniki plan. I knew most of it was political rhetoric. Most people did too i believe.
Basically in January 36% of the people said, ok go try and negotiate better terms. "It seems like you guys are well organized with smart people and will get some changes to lessen austerity."
Likewise in the referendum i voted no. Both for the proposed Junker plan and to the enforcement of Austerity. Not a no to EU.
Both were costly messages and unfortunately, Syriza proved it had no plan whats so ever. They were and are litterally winging it. Even now they are trying to make changes to increase taxes as to avoid more damage the decayed system of the past.
This time i did not vote for Syriza. I voted Potami because we need change. It dawned on me as i have written on your blog, that "the system" is this of the west. We are part of this system and we need to work within this system. Anything else is chaos as we will be a part of nothingness. Although being alone is not bad but we can't manage ourselves we can manage our country? No.
The austerity plan like i said as a name, needs to change. Change in name. It is not austerity, it is a plan for change. And within change there is pain. There is pain more for those that have been sitting on their ass doing nothing. Unfortunately, there is pain for innocent bystanders like myself and worse off old poor people who depend on an income from an ailing pension system.
Even with troika right now i am fed up with Syriza, they have done nothing. They did very little and in retrospect it seems Samaras did alot. The changes need to happen. If enough has not been done we will be in election very soon again.
It does not matter, more pain, but it will be worth it. Both Adonis and Mitsotakis are the Anti Tsipras, have worked in deperamnt head of governement under troika and made successful changes. They know how to implement.
I recently read Leventis plan (centralist). His plan is even more "austere" than troika's. He is amazing.
I think that parliment will change soon. more people who are not from the old system and will improvise change.
That which i only hope that Syriza does get done are the few privatizations, as so at least something has been done and some time has ben saved.
Sincerely,
V
Hello Klaus - apologies for jumping in again and reviving this thread. I am the original commentator (@ Anonymous at 11.17). I think our points are converging, but I see things very differently! Allow me to explain.
Delete(In two parts, because of the character limit. My apologies for the length.)
PART 1 OF 2:
On experiment/democratic choice: OK, fair enough.
On the pre-election rhetoric in January. If you call that milk and honey, well, every politician has promised that since democracy was invented. Let us not hold Syriza to an unreasonable standard.
Syriza was elected in January to resist austerity—something that previous governments said they were doing, and did no such thing. Again, you might disagree on the process, or oppose it for ideological reasons. But we should not confuse that process (resistance) with the result (scrapping the memorandum and keeping Greece in the Euro).
Now, on the process, how can we say Syriza have not done it? Did they do it well? No — but that is a separate question. Did they underestimate the power of the troika? You bet. Are they bruised? YES (memorandum 3!). But they were elected to fight and they fought, and the Greek people understood that. And the fact that they are still in power after another election and a referendum in their favour, does support that view.
Also - we always forget the second reason Syriza was elected: to keep Greece in the euro! Many say this is impossible with a parallel track of scrapping austerity, as Syriza’s pre-election rhetoric suggested they were seeking. Is that impossible though? Of course not! What are these divine rules, Klaus? TINA? Everything should be open to negotiation if it's not working for a people, and if so many independent indicators and testimonies back that up. Everything should be rediscussed, in these cases.. And because the Greek people voted Syriza, it was.
To say Syriza 'mislead'... well, I don't think that's what happened. Were they less than competent? Yes, though they were probably the most competent shot that Greece had. Did they communicate poorly? Yes. Should they have been more transparent? Yes. Should they have had an effective Plan B? YES YES AND YES! (What the hell were they thinking not having that, even if only for leverage?)
BUT they have also done something that Greeks are simply unaccustomed to... they have asked for a mandate from the people, again and again. So when they sat in front of the Europeans, they were the truest representatives of their people we could hope for. And they stuck to their guns until a cannon was held to their heads.
I don’t think the Greek people thought there would be zero cost to negotiating. (Let us please stop suggesting they are naive, mislead, etc.) But Greek people had little to lose, after all these years of austerity, and they believed in Syriza’s programme, they wanted fresh faces with no ties to the old system, and there was no alternative that could do something better for them.
PART 2 OF 2
DeleteAnd since you hold Syriza to (what I believe is) an unreasonable standard, I guess you would have liked them to have made a cost estimate in their campaigning. Then of course they would not have been elected in January, while their competitors promised milk and honey! Looking at this hypothesis, we can see exactly why a status quo, why TINA, sometimes prevails when ideologies are stuck to so rigidly.
On the referendum, again I see it differently. I saw it as a mandate to continue fighting. And of course I voted NO. I find it ridiculous, that so many people accepted the framing of the outside (troika, international media) that the referendum was an in/out vote for the Euro (or even more crazily, for in/out of Europe itself - see "menoume evropi!"). We needed to look no further than Syriza themselves to understand what the referendum was about. (Irrespective of whether you believe that the deal they ended up signing was worse than what was offered initially — and I would agree with that! But that’s not what we’re discussing here.)
Now, in the war against austerity you should also tally up what has been won, for that cost, that the Greek people are paying, and which you rightly point out. We are so soundbite-driven and numbers-obsessed that we only look to see how many concessions they won in the talks. But the real benefits are long-term, and systemic. Syriza exposed the antidemocratic foundations of the EU, the Eurogroup, and its other institutions - it forced their masks to come off. It highlighted an unprecedented propaganda campaign against Greece and its elected government. It taught movements across Europe, who disagree with the austerity paradigm, a way forward, with lessons to learn. And it also expose the corruption of Greece's own systems: the media, polling, etc, which Syriza is now going after.
Do we read this anywhere? No! We are too obsessed with who climbed down, which who broke whose promises, to see the bigger picture.
On whether Greek voters can determine what tax payers of other countries can do.. No, of course they can't. But that is the *process*, Klaus, to negotiate. Discuss! Not impose. Yes, even in situations where countries are loaned money. This is the EU we are talking about, with principles of solidarity and respect, not a private bank, right?
Did Syriza negotiate well? Of course not. But did Varoufakis' plan get a fair hearing? No it didn't! Instead, his mistakes were amplified into a character assassination campaign in ‘serious media’, driven by the interests of big finance and Brussels and Berlin, that made him a laughing stock among his interlocutors in the talks, and among much of his people. V. made it easy for them (dare I say, he wasn't surrounded by top-tier advisers here). And sure enough he got played.
To sum up. You say Greeks were mislead. I say: 1) No, Syriza did what they said they would, though they lost the battle they are still fighting the war. 2) It wasn’t deception but lack of competence (a green government, thrown into the maelstrom, which was a tiny party a few years ago), though they are still the Greek people’s best option. I believe if we give them time they will learn, and will work for the benefit of the country — even within memorandum 3. And if not, vote them out next time!
Seldom have so few-----------------------.
ReplyDeleteYes, the Greek voters have created yet another bill that their leaders are presenting Europe with in the form of debt relief.
Or much shorter.
ReplyDeleteIt was the cost of refusing to balance the budgets and create a half way civilized business environment. I also fail to understand that it should be democratic that a few millions Greeks should impose these costs on 400 million Europeans.
Debt relief may be in the cards, but don't hold your breath. and don't expect too much. The point of view that Klaus Kastner has aired, that "it's not the stock but the flow" is shared with Klaus Regling, and has been for quite some time.
ReplyDeleteThis rather unassuming person has become very important since the Troika became the Quadriga. He is well worth listening to, apparently he only give interviews when they are in depth, no sound bites or slogans. His latest to FT is a good example, not in the abstract that are quoted in the Greek press, but the full transcript. He has access to a lot of influential people with interests in the matter. I would not be surprised if he could sway the IMF to his opinion, or as an alternative, Schauble to accept that the IMF only participates as a non-financial partner. His views fit well with present prevalent opinion in Germany, that relief should be staggered and only "if and when".
I have nearly forgiven him that he is an economist; he behaves like a conscientious hanseatic banker.
Lennard
One good example why flows can be more important than stocks are the social security systems of many countries. The total stock of promises made by governments to their citizens when it comes to future pension and/or health payments is absolutely unfulfillable, and everyone knows that. However, for the time being and for some time yet to come, they can manage the flow of annual payments and they hope that sooner or later the stock problem will go away by itself (or become the problem of future generations).
DeleteLennard & Mr. Kastner,
DeleteWhen i was growing up in America and although I was only a child, i heard president Reagan mention that the pension system in the next 40-50 years will be ailing. When i heard this, in the most powerful nation in the world at the time, I knew as child whatever i did in my life, i would have to create an environment that i needed to depend only on myself and anything else acquired by government was a bonus.
Then i heard Bush junoir make a clear statement that pension of the future will not be that as so senoir citizens can live off. ever since then i knew what i did with my earning was critical as toprovide me with survival without brudening my children in my old age.
When i moved to Greece soon afterwards my colleagues told me to to join the pension system for engineers which is was the best pension system in greece. I choose the most basic and cheapest manditory pension system IKA. All of my colleague engineers are kicking themselves now.
Even now the term 300 euro pension per month is being spoke and is nearly in practice. Even though i will have paid high dues, when i reach the riping age of 80 as to retire, i know i will not get more than 300 euro.
Sincerely,
V
That you pay for your naivete or stupidity is a natural learning process we all go through. The bulk of that learning is normally finished when you reach maturity.
ReplyDeleteThis Regling argument, that it does not matter that Greece has about 200% debt to GDP ratio, as it only has to service the debt at a very low interest rate will BY ITSELF not attract investors.
ReplyDeleteYet, here kleingut is saying, the stock of future promises (to pension/social security) matter!
Now what is it? For Greece's external debt the flow matters, but for its liabilities relating to future social security payments it is the stock?
Clearly they are both important. Stocks and flow, and investors will look at both. They will look at the overhang of the huge debt, and know that that will not go away. There is no capacity for the Greeks to deal with external shocks, and they rather invest in another country if they have a choice.
Or, if they are Greek, they do not invest at all, and leave the money Switzerland or Germany.
I would be very pleased for the Greeks if I was proved wrong, and investors do invest despite 200% debt to GDP ratio. But somehow I doubt it that they take Regling's word for it that it does not matter. (What I think of Regling you can see on the FT transcript underneath his interview with the FT. It is not really his fault he has the job, but he should really shut up. He is a civil servant, and should not have political views)
The only thinkg which might work for Greece, longer term, if the austerity stops. Then they have a base from which to grow, and more growth will bring back confidence. So we have to wait for 2016 at least, or 2017.
You misread what I said. I compared the stock of social security liabilities with the stock of sovereign debt. Both matter, of course, but what matters more in the foreseeable future are the flows. The stocks matter in the long run when we are all dead...
DeleteAll investors want to know about debt is that the debt is regularized. In other words, they don't want to live with the risk/fear that every couple of years a bomb might go off.
Suppose all of Greece's debt were restructured into a 50-year maturity with little of not interest payable at least during the first 20 years. Investors would know that no bomb will go off in the next 50 years.
@kleingut
ReplyDelete"Suppose all of Greece's debt were restructured into a 50-year maturity with little of not interest payable at least during the first 20 years. Investors would know that no bomb will go off in the next 50 years."
That would be a phantastic idea. but the "aid package" is of course structured in way to review progress every three years (£86bn for next three years) which will make investors pretty nervous, as each time a review comes up there are political difficulties.
This will of course continue, until financial aid (EU strcutural fund/agricultural budget) is structured in a way which would only be paid out if Greece meets certain conditions.
Just like a bank loan. You only get assistance if some conditions or loan covenants are met.
That is quite different from interfering in the country with a Troika, making political decisions for the Greeks.which they really should take by themselves. But the Troika believes pensions need to be cut and VAT raised, when there is a million other ways to achieve budgetary aim of producing a primary surplus..
Bear in mind that once the 50-year deal is struck as suggested above, there is very little the creditors can do. Greece is unlikely to default on payments because principal payment is not due until 50 years from now and interest payments, whenever they become due, will be very moderate (in essence, this proposal is a haircut in disguise).
DeleteOnce the money is out the door, it is going to be very difficult for the creditors to impose conditions, etc. Even if there are conditions with a regular review process, what can the creditors do when Greece does not comply. Declare technical default? I don't think the Eurozone could declare well over 300 BEUR which are not payable until 50 years from now in default and make them immediately payable simply because there has been a technical default. That idea would not carry the day in the markets.
Creditors can exercise pressure in two situations: (a) when the borrower cannot make payment which is due and (b) when borrower needs fresh money. Once these situations are eliminated, everything becomes smooth sailing.
There is, however, one effective way how creditors can exercise control: they can (and should) limit the amount of new debt which Greece can take up from third parties. That would lead to fiscal discipline. No third party will lend to Greece if it knows that it is doing something which is not allowed under loan agreements with the Eurozone. At least it wouldn't do that without approval from existing creditors.