Greece will ultimately choose its own path
IT would be easy to say the fate of Greece and the euro will be decided by this evening’s meeting of the leaders of the 19 eurozone countries.
But in the half-baked currency union, only incremental steps are possible with a new corner to turn or an inventive fudge to prevent the unthinkable.
So far, nobody has dropped the ball, as was feared. The weekend’s meetings and that between the euro experts from the member states this morning will try to plot the next stage.
At the emergency summit this evening, the ideology games will come to an end, the statisticians will put away their calculators, the personalities will be relegated to the sidelines, and the politicians will find a way to present what they want to, and will, do.
They want to keep Greece in the eurozone, Greece in the EU, the euro afloat, and the recovery on track. The alternative is a festering, open sore, bearing an increasing resemblance to a rogue state on the EU’s south-eastern periphery.
Then it will be down to the magnanimity of the main players as to how it will be presented to the world, with the best of them talking about a win-win situation, giving as little as possible to their own domestic parliaments to beat them with, while allowing the Greeks sufficient latitude to spin it as they need.
Because whatever the outcome of these meetings, they will decide little that tackles the roots of the problems, but should set the direction for the EU and the eurozone of the future.
Tonight’s meeting should decide if the IMF will be paid its €1.6bn tomorrow week with money from Greece’s second bailout fund.
It should also get them through the summer of repayments, leaving just enough probably to pay wages. But it will be released just in the amounts required as required, used like a carrot and a stick to have the Greek government introduce the reforms they will sign up to.
And if their will falters, or the government collapses, the ECB will be at their elbow, releasing just enough to keep the ATMs open, but ready at any time to refuse the Bank of Greece’ request for emergency liquidity — the lifeblood of the daily economy.
The whole Greek story has been one of cannibalism — from a country whose rules were fashioned to suit certain elites, figures forged to ensure euro-membership, a government selling people’s futures with the aid of hedge funds, and a population that operated corruption like third-world states.
The centre-right government of Antonis Samaras agreed to the changes demanded by the Troika that resulted in four years of reducing the country to a skeleton, with GDP down a mind-boggling 25% but no change to the system that created the debacle.
Ill thought-out changes precipitated the emergency — Vat hikes on oil and electricity saw energy-hungry businesses collapse; cuts to public servants saw a drop in tax collection; fears of changes to pensions saw a jump in retirements with fewer earning wages to pay those pensions.
Yanis Varoufakis, probably the strangest finance minister the EU has ever had, said that tourism on the island of Myconos increased by a quarter last year but Vat receipts dropped by a quarter.
People fearing the worst squirrel away money while the administration has not increased the number of Vat inspectors, or put in place a workable system, saying that the more inspectors there are, the greater the likelihood of more money disappearing as inspectors help themselves.
There is little doubt that the troika’s austerity programme reflects just one imperfect dogma of economics and that the structure of the euro deprives countries of most of the tools for coping with changes.
Efforts to help Athens change from their ink-stained ledgers to computer programmes to track and account for tax collection and payments have not been successful. Some might say sending a German to head up the ‘help team’ might not have been very sensitive. But the current situation is the sum of the past. And when the bright new government of Syrizia took office, they knew not how to govern and, whereas in other countries the civil service could be depended on to keep the systems afloat, not so in Greece.
Syrizia imported their own experts and advisors in an effort to reflect their more Marxist view of economics. While Mr Varoufakis subjected his fellow ministers to clever, interminable lectures on his bright new world, for the meat and potatoes men around the table, it has always been an issue of “show us the money”.
Greece has not produced the annotated detail of timelines and amounts, together with the means to achieve them. While they may have been capable of doing so, Mr Varoufakis was, from an early stage, undermined by his prime minister, who has made it clear that only he decides, and for him there is no solution with figures, just a political solution.
The Greek retirement age has been increased to 67 years, the 14 annual pension payments is cut to 12, payments are down by between 44% to 15% to an average of €713 a month, out of work benefits are €360 a month for one year. But the country is into a vicious circle, with 49% of Greeks relying on pensions for their income compared to 35% depending on salaries.
Pensions account for 16% of its GDP, the highest in the EU compared to the lowest, Ireland at 7.3%. Together with wages, it consumes 80% of primary state spending before debt servicing, and Greece has the third most elderly population after Italy and Germany.
The creditors want to abolish the ‘top-up’ paid to 200,000 to bring their pensions up to €799/pm and changes to save 1% of GDP. Greece has put forward savings of €71m a year — 0.04% of GDP.
Greece has agreed to a basic 23% Vat rate, 6% for medicines, books and theatre tickets and 11% for electricity and water rates, fresh food, newspapers, and magazines.
The creditors want fewer exemptions to the 23% rate.
The primary fiscal target demand of 3% is now down to 1% for this year and 3.5% by 2018. The creditors want a minimum income scheme rolled out by 2016. Greece has agreed to most of these, but the problem, the commission says, is “how credible are the commitments to achieve these”.
Any agreement finalised tonight will doubtless see a more generous creditor emerge, with debt forgiveness not too distant, repayment options pushed further into the future to the second half of this century, and in the meantime sufficient to allow Greece limp through the next few months. But overall, the country’s fate will be up to its leaders and the third bail-out programme next year could be no more than a meagre package of life support to keep the Greek sirens at bay.
