-
Podcast - How much is Greece getting out of the RRF?
-
Podcast - Between investment grade and rule of law: Greece's contrasting images
-
Where is Greek growth coming from?
-
Bravo, Bank of Greece
-
Podcast - A year on from Tempe train crash, trust fades as questions mount
-
Podcast - SYRIZA embraces the chaos
Everybody be cool
It’s less than three weeks since the Greek government was elected and its Finance Minister Yanis Varoufakis has just taken part in his first Eurogroup – an experience that some of his predecessors have described as traumatic. Yet, a surprisingly large number of people appear convinced that Greece is heading for a showdown with the eurozone and may be counting its last weeks in the single currency.
There is no doubt that it has been a tumultuous start for the new Greek government. The first week revealed its inexperience and often uncontrolled enthusiasm. The personalities of certain government members may have caused a clash with the idiosyncrasy, mentality or political orientation of certain Northern European colleagues. Rhetoric or certain symbolic moves were not fully understood or may have sent the wrong message. All this might be absolutely true but I still find it impossible to buy into the idea that this noise is reason enough to convince anyone that the appropriate path from here on is for the eurozone to gradually choke Greece and force it out of the euro in a disorderly fashion.
The US still regrets having let Lehman Brothers collapse and Timothy Geithner admitted having told Wolfgang Schaeuble that if the Americans had another chance they would have never let it happen. How has it become the prevailing view that leaders and figures that proclaim themselves to be Europhiles will take on the responsibility of causing an economic and social crisis of underrepresented proportions by kicking Greece out of the eurozone?
Regardless of what has happened over the last two weeks, I have not seen any convincing evidence that it is not in the best interests of everyone involved to work out a sensible solution. Merkel herself had once claimed that a compromise leads to a solution with which neither side is satisfied. There is the possibility here to reach a compromise that will lead to neither side losing much face and leave them in a position to deal with the domestic political repercussions.
There is so much more that keeps Greece and its lenders together than actually separate them. At least there is nothing of significance that does not allow the gap to be bridged.
Following an unprecedented effort to wipe out a primary deficit of 25 billion euros at the end of 2009, Greece has now been in surplus for two consecutive years. It is universally acknowledged, though, that the primary surplus target of 4.5 percent of GDP over the next decade is unachievable. It served its purpose back in 2011 and 2012, when a figure was needed to make the Debt Sustainability Analysis add up. But it now needs to be reviewed downwards into something more sensible and achievable.
With two years of primary surpluses confirmed, the eurozone just needs to honour its commitment to provide additional debt relief to Greece as per the November 2012 Eurogroup agreement. This is not a move that requires any eurozone government to invest huge amounts of political capital and can be easily managed. It does not require anything that the eurozone has not done before with regards to Greece. The first bailout package consisted of 3-year loans with interest of Euribor plus 3 percent and a handling fee. Now, these loans do not have to be repaid before 2020 and the margin is down to 0.5 percent.
The end of the troika is here regardless of what Alexis Tsipras wants. The European Central Banks has taken on so much more since it assumed its role in the troika in May 2010 that there are serious concerns over conflicts of interest. Stepping down is a natural development for the ECB.
It is also accepted that the micromanagement of the Greek programme by the troika over the last four years was counterproductive and just caused unnecessary friction over insignificant issues and measures that otherwise would be a rounding error. Everyone agrees a broad framework of interventions and the enhanced supervision by the Commission on fiscal compliance would suffice to keep any government, including the “unruly” leftists, in check.
If these key issues can be resolved easily, there is ample room to negotiate the little details and get from Tsipras the compromises that would probably satisfy Northern european countries and calm down Spain, where the rising Podemos is giving Mariano Rajoy headaches.
Although some consider Tsipras a Marxist maverick, they should not underestimate the political instincts of a man who took over a radical party polling around 3 percent at the age of 33 and seven years later has managed to become the prime minister of Greece. He will see the need to make many small concessions so he is able to get back to Greece and offer people the debt relief that he promised them, along with the end of the troika and potentially the end of this sad story in about a year's time.
Five years of the euro crisis have shown us that the solutions were never dictated by economics but always by politics. Usually there have been small tactical short-term fixes, just enough to allow everyone to move on with a manageable domestic political aftermath.
Having come such a long way and with the possibility of a respectable and relatively painless compromise so close, it is beyond logic that those in control of the situation should choose to go down in history as those who ruined a nation.
Follow Yiannis: @YiannisMouzakis
25 Comment(s)
-
Posted by:
Here is in a nutshell the compromise Mr. Tsipras is asking, "write off the Greek debt and lend us new money without conditions." i wish him luck!
-
Posted by:
You put 2 and 2 together and got 22. In a nutshell.
-
-
Posted by:
Here is our reply to Berlin (Warning: it may sound awfully familiar):
We shall go on to the end. We shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island (aka our sacred Land of Greece), whatever the cost may be. We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender. -
Posted by:
I am afraid we have not framed the issues properly in this article.
The real issue is not to be cool and see whether this new untested government could pull an ace up its sleeve as if by miracle.
The real issue and the one that absolutely terrifies EU elites is that Greece most likely would very much succeed outside the eurozone, therefore, opening the floodgates for others to follow.
As a result I am not saying not to be cool but to try to stay cool when the real solution is at hand which is an irrevocable and final withdraw from the this mal-constructed euro whose only function is to increase German trade surpluses at the expense of all others.
Our trues aim ought to be to torpedo the euro and sink Germany once and for all because that is good for humanity and our civilization. This is the part we ought to be cool about; when our submarines release the torpedoes to sink the Bismark. Get it?
Come on patriots, Greece is a naval state in the sea our victory can be found. Arm your weapons and fire. It's an order. -
Posted by:
There is nothing worse than peddling false hope to desperate Greek people. The time is nearing for "e tan, e epi tan" for Mr Tsipras and Mr Varoufakis
-
Posted by:
George: Fair enough,but there is a Catch22 element to it as per the words of Heraklitus of Ephesus:
Ἐὰν μὴ ἔλπηαι, ἀνέλπιστον οὐκ ἐξευρήσει, ἀνεξερεύνητον ἐὸν καὶ ἄπορον.
If you do not hope, you will not win that which is not hoped for, since it is unattainable and inaccessible.
-
-
Posted by:
Let me summarize: Greece wants more debt, less payments, less oversight.
You failed to discuss the domestic plan that will make the new terms work. So far I have only seen headlines of increasing expenses, and tax revenue. Those generally don't go together.-
Posted by:
It's not surprising that you don't see SYRIZA's programme described here, since the article addresses a completely separate issue.
For a description of SYRIZA's plan go to their website Dave, to Thessaloniki Programme and press 'English" in the upper right corner.
-
-
Posted by:
When the amateurs tell you "be cool" and you don't - at minimum - panic it means something it's wrong with you.
-
Posted by:
Please get out so we might also get out of the Euro one day -i want my Guldens back with a passion, and this whole affair has made it painfully clear that our governments cannot keep their promises. Let us part as friends before we get frustrated with each other even more.
-
Posted by:
Greeks should show absolutely no gratitude to other European citizens who were duped into backstopping the losses of banks who participated in vendor-financing scams with the corrupt Greek elite. These were robberies conducted in broad daylight by the EU elite. And no one talks of it. And yet here we have people who wants Greeks to apologize while they gladly handover their money to banking elites. Absurd. Get out of here.
-
Posted by:
Dear Marcel,
I agree there would be consideral backlash for the Dutch economy, but it wouldn't be in shambles and it would be 100% Democratic, as we get more representation and accountability in politics back, 2 things we never properly had or will get in the Euro zone - in my book thats "allright", even if it means recession and less money. For me its the pinciple of having a sovereign state, apparently not high on the agenda of Dutch politicians. -
Posted by:
Velthausz:
Of course as you said Greece is no position to impose terms.
However, the present Greek government consists of Kamikaze jihadists. Would you rather deal with them? But I think you have no other choice. You created them and now you have to deal with them. -
Posted by:
Marcel Visser:
Even kindergarten 5-year olds know that my country was never bailed out. The so called bail-out was strictly for German and French banks.
All Berlin did was to ensure the survival of the flawed euro so that it could continue its blunder of world markets. Berlin helped itself and not Greece.
This is why we have the mess we have today. -
Posted by:
@Velthausz, you clearly lack a sound understanding of basic economic theory. The Dutch economy is one of the most open economies worldwide. A collapsing Eurozone would lead to a serious decrease in European spending, and as a result, a sharp decrease in Dutch exports. Furthermore, if the Netherlands would exit the Eurozone their superior economic performance would lead to a skyrocketing value of their new currency. Even though this might have some positive effects, increased purchasing power for Dutch citizens due to cheaper imports, it would also mean a decrease in exports. However a more pressing issue would be the increase in currency risk, which we all no investors hate.
@Dean Plassaras, how do you have the audacity too criticize the country who financed your bailout. Northern governments, generous as they are, are in general willing to help out a country which got in a huge mess by their own stupid decisions and then lying about it. It would be classy if the citizens of Greece show some gratitude next time they receive heavily subsidized loans. -
Posted by:
Sounds good, but it's not up to me and my government is blindly obedient to Brussels/Strassbourg -besides, it seems to me Greece is not in a position to dictate additional terms to their leave of the Euro zone. The Dutch will be all right regardless, although i would prefer the collapse of the whole undemocratic federal Europe movement and Euro zone. I hope the greek people will have it easier and that the corrupt get punished.
-
Posted by:
Be more than glad to oblige you but here are the terms:
Only a coordinated exit of a whole block of eurozone countries all exiting at the same time will do. This way we could make sure that the evil EUSSR and its criminal instrument, the euro, implode.
Otherwise, if Greece exits alone and voluntarily this is a German wet dream which ensures that Greece suffers all damage and once again Berlin retains all benefits.
I hope you mean it about your national currency because this is the only way to bring the Beast of Berlin to its knees: by destroying the euro and thus all export markets for Germany. The ONLY WAY, I tell you.
-
-
Posted by:
>"there is ample room to negotiate the little details and get from Tsipras the compromises that would probably satisfy Northern european countries"
With that sentence it is proven why Grexit is the least harming solution for everybody. Obviously the author together with the Greek voters do not see that there are MAJOR differences between the parties.
Greece should not have abandoned the Drachma and it will happily live again with it, independent of the rest of Europe and the world! -
Posted by:
"No, it hasn't"
Yes it has-
Posted by:
Elf:
Primary surplus is part of the current account but unfortunately tradingeconomics.com does not report it as a separate item.
I chose tradingeconomics.com as an independent platform instead of using ELSTAT or BankofGreece statistcs which you may find biased or needing further interpretation.
The bottom line is this: Our economy has 2 main engines. Tourism and Merchant Marine fleet. For tourism you have to come to Greece to get the product (it's like going to the farm to cut your own produce - it's nice and fresh). As to our merchant marine fleet (which happens to be the largest in the world) we move 60% of all Chinese sea commerce with it around the world.
Therefore our die is cast. Our comparative advantage is the beauty of our landscape and our cooperation with China. End of story.
This is why Germany does not fit into the picture for us. Not only our interests with Germany are completely unaligned but Germany has an issue with us for supporting China (their main export competitor and one of the very few countries which outsells Germany in bilateral commerce). It does take too much to realize that Greece and Germany are competitors and not collaborators, therefore, making Germany a very unlikely enforcer of any type of discipline over Greece.
We have 10 times more reasons to cooperate with Turkey (our largest export market) than Germany in both geostrategy and commercial interests.
Once you understand this then you could easily understand that our number 1 geopolitical objective is to deflate export potential for Germany and the only credible way to do so is by a malfunctioning euro. Or a totally destroyed euro, have your pick. -
Posted by:
Excuse me? Current account surplus and primary surplus are not the same thing. And what is all that about the mood in summer and winter? The random walk approach to economic commentary, you could be on the Greek negotiating team!
-
Posted by:
Elf:
Greece had a primary surplus for both years 2013 and 2014 as you can see here:
http://www.tradingeconomics.com/greece/current-account
The problem with Greece is that its surpluses are unbalanced and always seasonal. During the summer, due to tourism, Greece achieves its targets while the rest of the year it consumes more than it raises.
So when you start conversations about Greek economics in the middle of the winter, everything looks bleak and horrible. When things get much better during the summer, you can't talk about improvements until the numbers are verified by fall but by then things look horrible again.
Greece is not like Germany that throughout the year hits export targets and thrives. Greece is a tale of 2 cities, one economically good and another quite bad. -
Posted by:
Elstat figures show general government balance as -13% for 2013 and the primary balance at -9%. As far as I know, 2013 is the last two years, so hard to see how Greece has run a surplus for two consecutive years. However, if you are talking about memorandum definitions, then that is something else altogether and isn't really an economic number - rather some sort of political concoction.
In the absence of evidence, I stand by my 'no, it hasn't'
-
-
Posted by:
'Greece has now been in surplus for two consecutive years'
No, it hasn't-
Posted by:
Indeed. Today's news was that Greece seriously blew its January budget.
What the author does not understand is that without cash you have no staying power and as a result you can negotiate nothing.
"Stay cool" is code for "honey, I blew the kids".
-