Reinventing Mr Tsipras
The events of the last six weeks in Greece will probably leave a lasting impression on a great many people about a country’s near-death experience. As a colleague recently observed “for all of us who lived and worked in the country during this tumultuous period it felt like we were aboard a gigantic airliner whose pilot was purposely steering it to crash to the ground and we were unable to get off or do anything else to save ourselves”.
With the crash literally averted on the eleventh hour, Prime Minister Alexis Tsipras met his destiny in Brussels where he made a huge U-turn on his die-hard communist principles and agreed to a massive EUR 86 bln bailout deal – the third in a row since 2010. With the far left Syriza government unable to convince foreign investors and big industrial and commercial groups that business could soon return to normal, the country has since faltered with the economy set on a recessionary path estimated to contract by 2.5% to 3.0% by the end of the year, as most economists predict.
With capital controls still in place, and likely to remain for a considerable time, and the Athens Exchange, which opened again on Monday after a five week closure, plunging to record lows of -16.0%, the signs for an economic and business rebound look slim. The latest Consumer Confidence Indicator, calculated by the Foundation of Economics and Industry Research (IOBE), shows managers and consumers confidence and expectations have hit new lows as uncertainty looms high on the business horizon.
The main driver of uncertainty appears to be the government’s apparent inability and unwillingness to implement the set of measures agreed with the country’s creditors on July 13 and hence to be elaborated and included in a detailed staff level agreement, currently being worked out in Athens by the visiting representative of the four institutions - ESM, ECB, IMF and EC - now known as the “quartet”. The government now has just a few days left until August 12 to reach an agreement with the “quartet” on a number of highly contentious issues, with bank recapitalisation topping the list.
Greek banks are estimated to need between EUR 10 bln to 25 bln of fresh capital since the latest bailout in 2012 and following a flight of EUR 50 bln deposits and a surge in non performing loans over the last eight months.
The other pending issues include pension system reform focusing at eliminating early retirement, a wide ranging privatisation programme to counter the failure of the one agreed in 2010 where only EUR 3.0 bln of proceeds were achieved, and the roll back of measures introduced by the Syriza-led government which clearly violated undertakings by the previous government and included in the last bailout agreement.
However, the voting through parliament on July 16 and July 23 of two packages of reforms regarding VAT increases, the broadening of the tax base, pension system reform, banking operation and civil justice, all connected to the bailout agreement has left the governing Syriza party and Mr. Tsipras with deep scars. During the most recent vote a total 36 of Syriza’s MPs, belonging to the hard core communist left platform, defied Tsipras refusing to support him in a vote on banking sector and penal code reform. The country’s creditors have insisted that parliamentary approval is necessary prior to the commencement of talks on the EUR 86 bln bailout agreement.
To enable him to secure a majority vote in the 300-seat legislature, Tsipras was forced on both occasions to accept support from the three pro-European opposition parties. Now, he is left to govern with his 123 loyal deputies and opposition comfort votes, which in Greek politics appears as a rather unsustainable option. Given the exceedingly strong Syriza anti-bailout stream, Tsipras is now facing a survival problem as he will be trying to implement an austerity-type agreement and creditor dictated structural reforms, against a background of deepening public unrest and with his authority being questioned by party members.
At the same time, the PM will have to contend with the huge damage caused to his party’s, and his own, reputation by the reckless behaviour of his highly controversial and now discredited former economy minister, Yanis Varoufakis. As has emerged through a series of recorded conversations, recently revealed by the daily Kathimerini, Varoufakis was secretly planning to force the government to abandon the euro and adopt a parallel virtual currency he would have created, backed by a close-knit team he had put together, by hacking his own Ministry’s confidential tax payers’ data base.
As a highly placed EC official, who had participated in the latest round of Brussels talks with the Greek government recently told us on condition of anonymity, “it looks rather absurd (for the EU) to demand now of young Mr. Tsipras, a radical left populist politician, to introduce and implement a wide ranging package of market reform that his conservative predecessor was clearly unable to deliver”. Herein lies the rub and the real challenges now facing Tsipras and his incoherent party.
With the prime minister having precluded for the time being the formation of a national unity government, where all three pro European opposition parties would have participated, the only realistic option left for him in order to remain in power, note political analysts, is a snap election sometime over the next two months.
Meanwhile, time is once again running out for Tsipras and his fragile government and elections or no elections next autumn, he will have to strive to reinvent himself as a responsible socialist leader, decrying his communist past in an effort to transform his far left radical party into a left leaning pro-European one, with a much broader electorate base and capable of introducing reform and jump starting Greece’s moribund economy.