Rein­vent­ing Mr Tsipras

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.