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Ireland's political and cultural magazine
66 February 2015
N
EWLY elected Syriza has
told voters it will end the era
of austerity in Greece (and
beyond). It has pledged to
stop what its 40-year-old
leader, Alexis Tsipras, has called the
“fiscal waterboarding” policies that
have turned Greece into a debt colony.
It is the first time in more than 40
years that neither New Democracy nor
the Pasok socialist party will be in power
and Syriza has a mandate for fresh and
feel-good policies, including tax cuts, a
public-sector hiring spree, and a slash-
ing of Greece’s debt, which stands at an
unpayable 170% of GDP.
It will govern in coalition with the
right-wing Independent Greeks which
shares little with it politically except a
determination to repudiate the debt and
INTERNATIONAL
Also in this section:
Clooneys in hot water 70
Nation states 74
Charlie Hebdo
77
Private Aid 78
Syriza
seizes a
moment
for
Europe
In Greece the backlash finds concrete form.
By Michael Smith
February 2015 67
end Greece’s status as a “laboratory ani-
mal” for austerty.
Greek voters remain outraged that
GDP has shrunk by almost 20% since
2010 and that unemployment is still
as high as 26%. The social safety net
that was perhaps the biggest achieve-
ment of the post-1974 democratic era
was the by-product of the prosperity
spurred by EU membership after the
junta (1967-74). But it had almost col-
lapsed since the onset of the debt crisis
in 2009 and the austerity measures
demanded by the EU and International
Monetary Fund in return for €245bn in
bailouts.
Pensions had been reduced by an aver-
age of 40 per cent; most unemployment
benefits were cut after 12 months; and
charges for prescription drugs were up
by more than 30 per cent. Many long-
term unemployed lost access to the state
healthcare service. Middle-class Greeks
faced stringent new levies on property,
the default investment for them given
the nation’s historically high inflation.
Cynicism about the squeeze is wide-
ranging and high-powered. Economist
James Galbraith says: “It is clear that the
policies that were specified as a condi-
tion were at bottom not recuperative,
but punitive in character. Punitive
in character against the whole Greek
nation, and on an improper princi-
ple of collective responsibility for the
admitted mismanagement of the affairs
of the Greek state by previous govern-
ments and by the Greek political class….
If you read Timothy Geithner’s mem-
oir, it’s clear that he was very struck by
this attitude [in Germany, particularly
articulated by its CDU finance Minister
Wolfgang Schauble], which reflected a
moralizing indifference to the future of
Europe”.
Paul Krugman believes that if the
troika had been truly realistic, it would
have acknowledged it was demanding
the impossible. Writing in the New York
Times, he declares that:
“Two years after the programme
began, the IMF looked for histor-
ical examples where Greek-type
programmes, attempts to pay down debt
through austerity without major debt
relief or inflation, had been successful. It
didn’t find any”. And he entirely sympa-
thises with Syriza’s radical agenda:
“If anything, the problem with
Syriza’s plans may be that they’re not
radical enough. But it’s not clear what
more any Greek government can do
unless it’s prepared to abandon the
euro, and the Greek public isn’t ready for
that. Still, in calling for a major change,
Tsipras is being far more realistic than
officials who want the beatings to con-
tinue until morale improves. The rest of
Europe should give him a chance to end
his country’s nightmare”.
Writing in the European press on 23
January Alex Tsipras took a swing for
the good guys, albeit a measured one:
“Greece changes on January 25th, the
day of the election. My party, Syriza,
guarantees a new social contract for
political stability and economic secu-
rity…We must end austerity so as not
to let fear kill democracy. Unless the
forces of progress and democracy
change Europe, it will be Marine Le Pen
and her far-right allies that change it for
us…Austerity is not part of the European
treaties; democracy and the principle
of popular sovereignty are. If the Greek
people entrust us with their votes,
implementing our economic programme
will not be a “unilateral” act, but a dem-
ocratic obligation. Is there any logical
reason to continue with a prescription
that helps the disease metastasize?”.
A Syriza advisor recently told the Wall
Street Journal the party’s platform is “a
Keynesian program with redistribution
attached, with some Marxist view of the
world”. He added: “We are not ashamed
of that”.
Syriza seems to have most in common
with the parties of the radical left here,
even down to nervousness about tax-
ing the family home. Paul Murphy TD of
the Anti-Austerity Alliance – speaking
breathlessly from the electoral centre
in Athens claimed “the ideological wall
saying ‘There Is No Alternative’ to aus-
terity has been decisively breached”. But
in fact Tsipras spent his recent visit to
Dublin canvassing for Sinn Féin.
Modelling themselves on Syriza,
which is an alliance of 13 parties, Sinn
Féin and People Before Profit are look-
ing to collaborate with unions and other
activists, though the Socialist Party is
standoffish about Sinn Féin’s leftist cre-
dentials, and hostile to its fetishisation
of nationalism. What any of them think
of the new Greek government’s indulg-
ing of Russia’s breaches of Ukranian
sovereignty and the irredentist helicop-
tor flight of the new Defence Minister
over the Turkish islets of Imia, is not yet
recorded.
In Ireland, perhaps the emphasis for
the Left needs to be a little different:
to equalise pre-tax wages and impose
greater taxes on wealth. This is because
taxes on income here are actually quite
progressive and we have a much smaller
black economy.
It is notable too from some of Syriza’s
prioritised reforms how much deeper
austerity bit in Greece. Many of its min-
isters are jazz-loving academics, a type
not known in this jurisdiction since the
heyday of the Labour Party in the 1970s;
and they’re going to have some politi-
cal fun.
The estimated total cost of the
“Thessaloniki Programme” is €11.4bn,
while it proposed to raise a concomi-
tant €12bn in new revenues. If it pulls
the Programme off it might become a
template all over Europe, including in
Ireland.
Its first pillar is “social”. The par-
ty’s spending priorities are food and
electricity subsidies for impoverished
households including free electricity
supplies to 300, 000, to implement
a Programme of meal subsidies to
300,000 families without income via a
public agency of coordination, in coop-
eration with the local authorities, the
Church and solidarity organisations, a
Programme of housing guarantee for
30,000 new apartments by subsidis-
ing rent at €3 per m², free medical and
pharmaceutical care for the uninsured
unemployed, a special public transport
card for the long-term unemployed and
those who are under the poverty line, a
pension boost for the poorest retirees, a
hike in the minimum wage and tax cuts
for low earners. The party promises to
restore the minimum monthly wage to
the pre-crisis level of €750 ($1,020), an
increase of 50%, hand out cash incen-
tives to revive farming, renationalise
companies that have been privatised,
offer free medicine and hospital care for
the unemployed.
The second pillar is “restarting the
economy and promoting tax justice”.
It includes: settlement of financial obli-
gations to the state and social security
funds in 84 instalments, immediate
abolition of the current unified prop-
erty tax (ENFIA), introduction of a tax
on large property, immediate downward
adjustment of property zone rates per
m². The new tax will not apply on pri-
mary residence and will not affect small
and medium property.
It proposes restitution of the €12,000
annual income-tax threshold, an
increase in the number of tax brackets
Debt stands
at over 170%
of GDP, GDP
has shrunk
by almost
20% since
2010 and
unemployment
is still 26%
“
68 February 2015
to ensure progressive taxation, per-
sonal debt relief by restructuring
non-performing loans (“red loans”) by
individuals and enterprises. Tsipras
believes in imposing a 75 per cent tax
on the rich and nationalising public
services (including the banking system,
which he argues should be operated for
the public good and not for profits), and
an end to privatisations sucha s those of
energy companies and ports.
The third pillar is “a national plan
to regain employment”. It entails an
employment programme for 300,000
new jobs.
The fourth pillar is “transform-
ing the political system to deepen
democracy” and embraces regional
organisation of the state, empowerment
of citizens’ democratic participa-
tion, empowerment of the parliament
and regulation of the radio/television
landscape.
Reflecting the environmental compo-
nent of its alliance, Syriza is eco-friendly
on renewables, energy efficiency and
decentralised energy production but
it faces internal tensions over plans for
new coal plants and, potentially, the
world biggest gas pipeline. Syriza also
proposes withdrawing from NATO.
For the moment of course dysfunction
remains a staple in Greek politics and
economics. Its debt stands at €317bn,
or 175 per cent of gross domestic prod-
uct. €1bn of income and property tax
goes uncollected every month. Its banks
hang by a thread even before the elec-
tion. Their shares led the stock-market
plunge after the election. The ratings
agencies are inevitably now trending
negative. The bailout hasn’t gone par-
ticularly well. In the spring of 2014
the penultimate tranche of EU bailout
funds was released after the govern-
ment enacted reforming legislation that
included everything from the pharma-
ceutical sector to the shelf-life of milk.
In the summer, troika inspectors
returned to Athens, but discussions
soon broke down as the government
pleaded for more leeway.
In December, euro finance ministers
granted Greece a two-month extension
on the EU portion of its bailout loans
but warned Athens that it still needed
to implement further measures in order
to get the final €1.8bn of EU money.
A central theme for Syriza thinking
is that political and economic dysfunc-
tionality are inextricably linked and
symbiotic, and it is not possible to
succeed in reducing the latter without
tackling the former. This might actually
play well in Berlin and Brussels, unim-
pressed with what might disdainfully be
called the past Greek model.
However, abandonment of reform
along with austerity fails to chime with
commitments by Greek governments in
exchange for the bailouts. The European
Central Bank holds about €7 billion in
bonds that mature this summer and
could generate Eurodiscord or at least
Euroangst. Greece doesn’t have enough
cash to repay the bonds but can borrow
the money if it complies with the bail-
out terms.
Though scarified capitalist com-
mentators contrive breeziness when
required, there is no doubt the gulf
between Syriza and the creditors is
wide and fractious. The head of the IMF,
Christine Lagarde, has said the country
has “no wiggle room”. Channel 4’s eco-
nomics editor has written “most market
analysts before the election that Syriza
would be forced into a U-turn. As some-
one who has grilled all of its economics
team on camera, and Alex Tsipras him-
self, I can report they have no intention
of backing down”.
So clearly there’s going to have to be
some tough compromise over the vast
debt. About 80 per cent of it is owed to
the troika, and earlier restructuring has
lengthened the average debt maturity
to more than 16 years, with an effec-
tive interest rate of 2.4 per cent. Still,
the burden of debt in a slow-growing,
deflating economy remains heavy. In
fact, in 2014 Greece’s interest payments
amounted to 2.6% of GDP. By contrast,
Ireland, which has a much lower gross
debt pile, paid the higher amount of
4.1% of GDP.
For these reasons it will be difficult
for Syriza to convince sceptics in Berlin,
Frankfurt and Brussels that the debt is,
indeed, not repayable.
In the short term, it will be in the inter-
ests of both sides to take the simple but
very useful step of extending Greece’s
financial bailout beyond February 28,
when it is due to expire.
The Economist s u g g e s t s an i n t e r e s t i n g ,
if unexciting, trade-off: abandonment of
left radicalism for write-offs.
An optimistic letter to the Financial
Times by Joseph Stiglitz and others
noted that “... macro-economic stabili-
sation can be achieved through growth
and increased efficiency in tax collection
rather than through public expenditure
cuts, which have reduced the revenue
base and led to an increase in the debt
ratio”.
Some optimism may be justified
since, ironically for Syriza and for the
rest of Europe, the Greek economy is
actually improving giving succour, as
in Ireland, to redistributionists. GDP
growth is likely to have been 0.6-0.8%
in 2014 thanks to a successful summer
tourist season, improved exports and
increased EU subsidies for infrastruc-
ture projects. Greece’s budget deficit
has just about been eliminated, while
the primary balance is predicted by the
IMF to be between 3 and 5 per cent of
GDP in 2015. Greece also has an exter-
nal surplus of about 1 per cent of GDP,
compared with a deficit of over 14 per
cent in 2008.
More precisely, in fact no further
major reductions in public spending are
planned under existing programmes,
but tax and revenue increases are still
Its debt stands
at €317bn, or
175 per cent of
gross domestic
product.
€1 billion of
income and
property
tax goes
uncollected
every month.
Its banks hang
by a thread
“
INTERNATIONAL GREECE
Greece’s tragedy
February 2015 69
expected to leave austerity regnant in
an economy that remains in depression.
Euro-wide quantitative easing may help,
though it is also recognition that auster-
ity has failed.
All in all, Berlin and Brussels are likely
to insist that Greece persist on its current
course and implement already agreed
policies, perhaps with tweaks here and
there. A leading concern is to avoid the
kind of concessions on debt terms and
conditions that could give rise to claims
for similar treatment elsewhere, includ-
ing Spain but also in Ireland which many
feel is undeserving anyway due to it
lethal melding of profligacy and growth.
The fact Ireland has lent Greece €385m
as part of the Greek bailout also gives
Ireland another dog in the race. After
initially supporting it the coalition is
now against a debt conference.
Greece is now proposing to end con-
frontation by swapping outstanding
debt for new growth-linked bonds,
running a permanent budget surplus
and targeting wealthy tax evaders. A
2009 report by Helvea SA suggested
Greeks may have hidden up to $47bn
in Swiss bank accounts and in 2011 the
European Commission there was €60bn
in unpaid taxes because of avoidance and
lack of compliance.
Though 74% of Greeks say they want
to stay in the euro (the drachma, any-
one?), German officials discreetly tell
journalists they are prepared to see
Greece leave it, while professing the
pious opposite in public. They imply that
finally the euro zone is reasonably well
placed to cope with a Greek departure.
An EU bailout mechanism is in place,
Europe’s banks are in better shape and,
after most private bondholders accepted
a short haircut in 2011, over three-quar-
ters of Greek debt is in “official” hands,
reducing fears of contagion to other
delinquents. Foreign investors are better
able to distinguish between euro mem-
bers. Bond yields outside Greece have
remained flat throughout the electoral
vicissitudes.
The Breugel research think-tank has
done some estimates of the likely losses
that Germany would incur if there is a
‘Grexit’, i.e. Greece is forced out of the
Eurozone. It notes that the Eurosceptic
IFO Institute reckons that Grexit would
cost Germany €76bn while a Greek
default within the Eurozone would cost
€78bn.
Not much difference.
IFO suggests that direct losses can be
calculated precisely but it omits three
major factors: the different haircuts
likely under the two scenarios, private
claims, and other second-round losses.
All three factors suggest that direct
losses for Germany would be much
larger if Greece were to exit the euro.
But Breugel also reckons that IFO has
ignored the impact of losses for German
corporations if there is Grexit and many
Greek companies default on their trade
debts. German banks and industry could
take a big hit if Grexit happens.
It is worth recalling that it was only
after substantial debt relief that the
German economy was able to grow – and
reform itself – in the 1950s.
To concentrate recalcitrant German
minds, Tsipras visited a World War II
National Resistance Memorial in his
first outing as the country’s leader. The
memorial is located at the site where
the Nazis executed 200 Greek commu-
nist resistance fighters in May 1944.
During the recent campaign, Tsipras
called on Germany to pay Greece repa-
rations for damages incurred during the
Nazi occupation. A 2013 governmen-
tal study determined Germany owed
Greece $170bn.
A further and dangerous uncertainty
arises from the condition of Greek
banks, which had been experiencing
deposit outflows even before the elec-
tion, and which remain dependent on
nearly €50bn of Emergency Liquidity
Agreement financing from the Bank of
Greece, as approved by the ECB.
If Greece pushed its demands, approval
could be withdrawn, triggering a crisis.
The ECB could hardly approve loans,
where the Greek government guaran-
tor was attempting to dilute or cancel
pre-set conditions.
Writing in the Irish Times, Stephen
Collins took a predictably polar stance:
“What Syriza is hoping for is that other
EU bailout states such as Spain, Ireland
and Portugal will see the advantages for
themselves in an EU debt conference, but
it looks as if the reaction will be the exact
opposite.
Governments in the countries that
have successfully completed their bail-
outs or are on the point of doing so have
no desire to open up the issue again, par-
ticularly as it would expose them to the
charge that they failed their own citi-
zens by accepting the terms in the first
place”. And implicitly open the door to
the radical Left.
The most we can say is that if Greece’s
creditors blink, there will be economic
relief in the south and angst in the north,
hardly furthering the cause of political
unity.
If, on the other hand, Greece blinks,
leaving its economic renewal programme
toothless, the eurozone’s narrative of
north-south mistrust and perhaps the
disenfranchisement of the poorest,
and of the angriest, will intensify with
fraught consequences for Europe’s citi-
zenry, though not its Left; and least of
all Ireland’s resurgent Left.•
EVERY centimetre a child of
the post-dictatorship era – he
was born the son of a wealthy
collaborationist contractor, four
days after the collapse of the
seven-year junta in July 1974 –
Tsipras is the country’s youngest
prime minister in living memory,
its first leftist leader and the first
to refuse to take a religious oath on taking office.
His meteoric rise to prominence is no small feat
considering he was a relatively unknown entity
to most Greeks a decade ago, when he was a
member of the leadership of Syriza’s forerunner,
Synaspismos, a party that generally found itself
struggling to cross the parliamentary threshold.
Tsipras is a fine looking fellow, almost Elvis-
like with his large crop of gelled-up black hair
has been well known in Greece since his days as
an activist schoolboy. After collecting a degree
in civil engineering, in 2008 at the age of 34
he became the leader of the Syriza party, which
was formed in 2004 as a coalition of left-wing
groups ranging from the Maoists to the Greens.
Tsipras’ unsuccessful but well-publicised run for
president of the European Union’s commission as
the candidate of the European left/Nordic Greens
also helped boost his credibility back home.
Despite criticising existing EU policies, Tsipras is
not a traditional eurosceptic, and he says he wants to
keep Greece in the euro whilst tearing up the bailout
agreement and ending the policies of austerity.
A cool, mild mannered politician who avoids
ties, marriage and lifestyle photo-shoots, and
likes to get around on his motorcycle, Tsipras can
be a fiery orator in parliament, railing against
austerity. According to the
Daily Telegraph
:
“People who know him well say he is a
perfectionist. He is thorough and scholastic on
projects he undertakes, which sometimes can drive
colleagues up the wall. It may have to something
to do with his civil engineering background”.
PROFILE Alex Tsipras
