Trouble in Greece

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.