Trouble in Greece

5 Sep

A “troika” of officials left Greece in the evening of Friday 2nd of September after what seems to have been a falling out with the Greek government. Representatives of the European Commission, the European Central Bank and the IMF were in Athens as part of a mission aimed at ensuring that Greece was fully complying with the terms of its first loan, agreed over a year ago. The details of the disagreement are as yet unclear, with speculation mounting over how far Greece will overshoot the targets it had agreed to under the terms of the bail-out. The goal for the budget deficit in 2011 was 7.5% of GDP; as it stands, it looks like it will remain above 8%. The main point of contention seems to be that the “troika” insists the overshooting is the result of poor implementation and foot-dragging by the Greek government; Greece’s finance minister, Evangelos Venizelos, believes the real culprit is the bleaker than expected growth figures. Greece’s austerity measures were based on a calculation of a 3.5% fall in GDP in 2010. The actual contraction for 2010 has been 4.5%. As a result, tax receipts in Greece for the first 7 months of 2011 are 6.4% behind those of the first 7 months of 2010.

Opinions are divided about whether these poor figures are the result of government failings. There is no lack of anecdotes concerning the frequency with which Greek businesses, such as hotels and bars, function only on the basis of cash as a way of escaping the clutches of the tax inspector. Le Monde (4-5/09/11) notes that publicity drives by the government such as the one that highlighted the use of Google Earth as a way of reducing tax evasion on the ownership of swimming pools has failed to generate much by way of results. But much of the resistance within Greece is both reasonable and rational. The “troika” has upbraided Athens for not finalizing its list of companies to be privatized. The reason for this is that the share prices for those companies, listed on the Athens stock exchange and due to be sold off in the next couple of months, have fallen to five-year lows. At this moment, selling them off to international investors would mean offering up Greek assets at bargain prices – a little like what happened in Russia after the collapse of the Soviet Union where state enterprises were sold-off at cut-down prices transforming a lucky few into overnight billionaires. It would seem to make sense to hold off privatizing Greek companies until their share prices see better days.

The broader point is that the Greek government is not an administrative arm of the European Commission. It is a standalone constellation of interests, ideas and of people. The difficulties around the introduction of the austerity measures points to the complex political dynamics within which the Greek crisis is situated. The current PASOK government is itself only a creation of its supporters. The difficulty with the austerity package is that it demands that the government bite the hand that has fed it in the past: it attacks its own constituencies directly. Two different conclusions can be drawn from this: one is that instead of these implementation delays, the austerity measures should be administered directly from Brussels. Many are thinking this, few are arguing for it aloud though this may soon change. The other is that current difficulties are only an illustration of what really lies behind all the talk of austerity, rigueur and cuts: a fundamental change in European societies. The PASOK government is in difficulties because this change is being demanded of its supporters without any vision or plan. Yet the government survives because those out in the street don’t have an alternative vision themselves. Marked by this lack of direction, Greece is stuck between the diktat of the Eurocrats and the anger on its streets.

3 Responses to “Trouble in Greece”

  1. Alastair Fraser September 5, 2011 at 2:01 pm #

    Nice post guys. It reminds me of the privatisation of the Zambian copper mines in unfavourable circumstances in the early 2000s, under World Bank / IMF direction. In shameless self-pomotion, a little segment from my introduction to a recent edited volume on the subject: “The process featured accusations of corruption on the part of the team selling the mines, concerns on the part of the Zambian state that private buyers were colluding with international aid donors, and incredibly drawn out negotiations that did Zambia no favors. With every delay, the losses at ZCCM mounted, the world copper price hit new record lows, and the pressure from the donors increased. As prospective buyers knew all of this, their leverage gradually increased, and the terms of the sales became worse and worse (see Adam and Simpasa, this volume).

    The eventual sale of the mines was precisely the economic and political embarrassment the MMD had feared. The party had shifted from attempting to justify unpopular measures in terms of the value of the policies themselves, to describing them simply as sacrifices necessary to secure debt relief and donor support. Whether this was admirably honest, it was not a politically successful approach.”

    • The Current Moment September 6, 2011 at 7:34 am #

      Thanks. In fact, something like this may play out in Greece. Privatization at cut-down prices might end up being justified as the only way that Greece can access the loans promised by the EU-IMF. There is also an ongoing discussion about whether Greece should provide to individual countries like Finland collateral on the loans i.e. that should Greece be unable to pay back the money, the Finnish government would have a direct claim on some assets of the Greek state. The Dutch also floated this idea, which as far as I can tell is being resisted by some other member states but it may well end up going through as part of the overall deal.

  2. Svobodan September 23, 2011 at 1:24 am #

    Most of protests are Staged and very well Orchestrated, they pretend fighting but do not hurt each other. This is worth it to get hundreds of billions from EU. Greeks are very smart; the deception started with the Trojan Horse and is going on with very well orchestrated “PROTESTS”. If you want Greece to be paid off, for the Enormous Army, Universal Free Health Care, Lucrative Pensions, and Taxes that they never Pay, then you pay them by yourself, PAY THEM OFF, BY YOUR OWN POCKET.

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