The last tango

Kathimerini English - - Front Page - BY ALEXIS PAPACHELAS

In a spec­tac­u­lar about-face, Alexis Tsipras, the left­ist prime min­is­ter who once warned that the mar­kets “will have to dance to the tune” of his gov­ern­ment, is now danc­ing to their tune in­stead. It’s a mas­ter­ful chore­og­ra­phy. I would not be sur­prised if Tsipras were ac­tu­ally mon­i­tor­ing bond prices re­al­time through a Bloomberg ter­mi­nal in­stalled at his of­fice – it would not be the first time. Greece, mean­while, is for the first time be­ing ruled by a left-led gov­ern­ment im­ple­ment­ing – again, for the first time – a tough ne­olib­eral eco­nomic pro­gram. The key prin­ci­ple is la­bor flex­i­bil­ity, which is re­sult­ing in lower un­em­ploy­ment. Wages have come down to the point where un­qual­i­fied work­ers are at­tracted to Cyprus where the ba­sic salary is now higher than Greece. Mean­while, the re­tail mar­ket is ex­pe­ri­enc­ing a tec­tonic shift as small- and medium-sized busi­nesses give way to chains and big multi­na­tional firms. Pen­sions have been se­verely slashed and pen­sion funds are be­ing in­te­grated. Unions are also cav­ing in, and the coun­try’s main re­gional air­ports have come un­der pri­vate con­trol. In other words, the gov­ern­ment that so proudly styled it­self as the “first left-wing ad­min­is­tra­tion” is push­ing through a purely ne­olib­eral pro­gram (save the dev­as­tat­ing taxes). Para­noid and para­dox­i­cal as it may be, pub­lic re­ac­tion has been close to zero. There are very few strikes and protests are lim­ited. The gov­ern­ment is try­ing to keep up its ide­o­log­i­cal pre­tense by en­forc­ing the bad side of so­cial­ism and mak­ing a norm of the low­est com­mon de­nom­i­na­tor in every pos­si­ble area, in­clud­ing ed­u­ca­tion and the pub­lic sec­tor. Lit­tle does it know that is a ma­jor put­off to in­vestors. Mean­while, a big dan­ger lurks. Tsipras could soon find him­self on the bed of Pro­crustes, be­ing pulled in dif­fer­ent di­rec­tions by the mar­kets and his SYRIZA party. Greece in­deed faces the prospect of fi­nally ex­it­ing the bailout pro­gram and the straight­jacket of out­side eco­nomic su­per­vi­sion. This is some­thing that the coun­try re­ally needs, also for rea­sons of self-re­spect and na­tional self-con­fi­dence. But as we head to­wards the next elec­tion the pres­sure for po­lit­i­cal fa­vors and hand­outs will grow. Tsipras has shown him­self to be ex­tremely vul­ner­a­ble here. Should he give in, he can ex­pect the aus­ter­ity hawks to re­spond with yet an­other bailout, es­pe­cially in the event of a rev­enue short­fall. The gov­ern­ment nar­ra­tive would come un­done and the sac­ri­fices of the Greek peo­ple would go to waste. At the mo­ment Tsipras ap­pears to be en­joy­ing his dance with the mar­kets. The pro­gram al­lows the mar­kets to dance with a fis­cally prodi­gal and in­sti­tu­tion­ally weak part­ner with­out risk. But once su­per­vi­sion is over the mar­kets will put Tsipras un­der scru­tiny and their su­per­vi­sion will be much stricter than the IMF’s. Tsipras’s care­free tango with the mar­kets this sum­mer will prob­a­bly be his last.

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