Wednesday, July 18, 2012

Assessing the New Greek Government: A Month Later

It has been a month since the June 17 election and the subsequent formation of a New Democracy-led coalition government. Where do things stand in Greece?

First, the sense of relief that came on the night of June 17 – as the country recognized that left-wing SYRIZA would end up in second rather than first place – has proven somewhat durable. The country is far from normalcy, of course, and there is a lot to be done. But the near panic that permeated the Greek public at the fear of what a SYRIZA government might do to the country has subsided. In and of itself, this is a good thing.

Second, there has been a marked change in tone. For much of the campaign season, the emphasis had shifted from what Greece can do for itself to what Europe can do for it; as I put it before, “Greece’s new motto is: ask not what you can do for your country; ask what Europe can do for you.” This has now changed. Instead, we now hear about how much Greece has not done, how few of the provisions of the memorandum it has implemented. This is, again, a very good development.

Third, we appreciate a lot better just how much the elections put on hold. There is an intense discussion about the measures that the new government has to take; but these numbers, (€11.9 billion in cuts through 2016) were part of the new bailout agreement and were known since, at least, March 2012. Yet we are just now getting to talk about them. Sad as it is, this fact underscores how much of a wasted opportunity the election season truly was. In three months and two elections we managed to avoid talking about the most important fiscal challenge that the country faced. Pity.

Fourth, the new government is picking the right battles. Instead of focusing on what to renegotiate, it understands that it first needs to restore some credibility. Credibility means a commitment to reforms and it means convincing its partners in Europe and the IMF that it is serious about change. Privatizations and the reform of the public sector are indeed urgent priorities and the government is right to put them front and center in its new agenda.

Fifth, we will know very soon what this government is made of. Gearing up for a fight with the power company’s union will tell us a great deal about the government’s stomach and appetite for change. So far, the government has indeed shown a willingness to fight; but it has also said publically that it will not fire people from the public sector, a non-serious starting point for reforming the state. Therefore, the signals so far are mixed. But they will be unmixed shortly. And that is good news since we will then know whether this government is for real or not

8 comments:

  1. It would be best if they took dismissals off the table and kept reducing the public sector through attrition,privatizations,etc.

    I'm afraid,however,that Greece is doomed to insolvency irrespective of who's in charge,even if this new cabinet inspires credibility and commitment to the terms.More austerity means less revenues,the fact that many in Greece haven't submitted their tax returns for 2011 is proof of that;that is,unless the Eurozone agrees to extend Greece a few more years to meet the targets.But with the Dutch general elections this year and the German federal elections the next one,it all seems rather unlikely.

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  2. Forgive me, but all signals coming from this new Government so far are bad.

    This Gov does not want to reduce the number of civil servants (although promised and utterly necessary) and refuses to look into public sector productivity.

    The announcements on privatisations remain completely unrealistic.

    Numbers are put forward on savings but no details are given.

    Looking at this from the outside most people will only see new promises and new lies. Among my fellow Europeans I sense a mistrust of Greek politicians that will take generations to go away. As Selene rightly comments things will be even more bleak once Dutch and German voters have spoken (which will also change the attitude of public opinion across the EU as the votes of nearly 100 Mio. people can hardly be ignored).

    More stories are coming in on how Ireland and Portugal are starting to sort things out. This also puts Greece more and more on the backfoot.

    And the better informed are still missing Greek gestures that would show a country that is truly committed to Europe. Nobody understand the petty argument with Macedonia about a name. Nobody understands why Greece cannot control 150 km of Schengen border with Turkey. It increasingly looks as if incompetence is amalgamated with ill will.

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    1. Since 2009 total public sector employees were reduced by 130.000,fixed-term employees were reduced by 68.000 and paid interns were reduced by at least 50.000.Moreover,Greece is following the rule of ten exits for every one recruitement under the auspices of the bail-out agreement.

      Aside from the fact that terminations will worsen the already bad social unrest,let alone the recession,you'd have to consider whether radically firing people is in accordance with the Greek constitution.They can however reserve such measures for employees who have recieved brown envelopes.

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    2. The issue with Macedonia is quite simple: The area surrounding Thessaloniki is Macedonia. It's as if all of a sudden Atlantic City starts calling itself New York City. Thus FYROM's stance is very provocative and condemnable since Fyrom has other possible alternative names which could be acceptable to Greece of which Macedonia is a region, such as Skopje or Vardar. This issue is far from trivial as the misuse by Fyrom of the name Macedonia creates unnecessary confusion and tension. As to Schengen and the control of the Evros region, may I remind you that 90% of all illegal immigration to EU, ie. over 100'000 persons pa. is thru this route. How can you expect Greece, with its limited means, to police the full length of the Evros river without much more subtantial aide from other Schengen space countries ? These two issues are not solely a matter of incompetence or lack of will...

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  3. So much contradictory information floating about.

    Internet chatter says ‘Greece has fired 160,000 public sector workers’; Selene just posted that they "were reduced by 130.000”, but the government says total went from 770,000 (9/10) to 712,076 (4/12) - mostly retired, some transferred; that PASOK hired 28,000 after the crisis started; that 450,000 have lost work - NONE from the public sector…

    What’s the truth?

    How are citizens supposed to make any sort of responsible decisions when there is no substantive, reliable source of information available?

    It’s almost as though ‘they’ are afraid of revealing the details about SOEs and DEKOs and public sector perks. Perhaps it’s time the hapless souls who live here get the facts.

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  4. Also, Greek media wrote that overwhelmingly temporary workers, those who don't have a permanent employment contract, have been laid off. And this is credible, since under Greek law it is impossible to fire an administration offical. As long as those laws aren't changed, deadbeats and crooks will continue to enjoy the benefits of a public sector job without providing anything of any value to the nation. Maybe needless to say, the unions and powerful groups within virtually all parties have successfully prevented such a legal reform so far, and will probably continue to do so. It's rather hopeless.

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    1. There is always the chance that your perception about all the alleged deadbeats and crooks in the public sector is either deadbeat or crooked.

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  5. That is nice talk (for the creditors to hear, at least) but it remains true that Greece (and also Portugal, for that matter) is being micromanaged by the troika. For this sort of centrally directed, soviet style, rule, the troka's region of perception (umwelt) has no bearings on the task. Wall Street umwelt seems to push away the fact that the fundamentals of the economies of both Greece and Portugal, mired by deflationary constraints, will never be able to survive inside the eurozone. The required fiscal policy is just impossible (without massive foregn aid, at least). Thus, default is inevitable. And the constaints of the troika's umwelt will gear it towards an unmanaged default.

    I will use a figurative image. The economies of Greece and Portugal are now besieged by deflation, much like the 9th German army in Stalinegrad was besieged by the Red Army. Before the deflationary crisis set in, the situation was similar to before Manstein's push towards the bulge of the 9nth army: there was hope the army could join with the main force. But the 9th army was forced, by Hitler, to stay put in the city, as not to give away any territory; Hitler was too greedy to accept any losses. Manstein's offensive stopped 40 Km short, and after that the Red Army counterattacked and forced Manstein and the bulk of the German Army to positions hundreds of Km behind the 9th army. Help from the main front was now impossible, and the situation of the 9th army became hopeless. As a result, BOTH the strategic objective (the city of Stalinegrad) and the 9th army were lost. Forever.

    Now, only when the situation becomes hopeless they will realize that both South Europe and the agenda of a monetarist revolution in the Western World will be lost.

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