Author: George Mangion
Published on Malta Today, 24 September 2015
Visiting Athens last week, I could not help noticing the tranquil pre-election feeling in the streets with minimum fuss and no heavy coverage by the media, neither the deluge of printed candidate posters in the main streets. Last Sunday, it was really a surprise that Greek voters gave Tsipras and his reconstituted party the benefit of the doubt, considering how the leader made a dramatic summer U-turn, when he ditched his anti-austerity platform to secure a new bailout and avert ‘Grexit’ – that is, a Greek exit from the euro zone. The turnout last Sunday was low, reflecting the mood of an exasperated electorate who has been asked to give its opinion in previous elections yet saw the elected party break its own mandate. Simply put, only one in five eligible voters actually chose Syriza. Can you blame voters, when Greek society is burdened by years of austerity and one of the worst depressions in an industrialized country in modern times?
Brussels however has repeated its dictum that there will be no flexibility for the new government to renegotiate the punishing terms of its €86bn rescue. The media reported EU spokeswoman Olga Gerovassili saying that the result was still “the beginning of a battle” for the country, which faces three more years of draconian budget targets and a root-and-branch overhaul of its tax and pension system. Despite Tsipras very much acting as an ebullient prime minister promising to stick to the grueling terms of the new ‘Memorandum of Understanding’, there is still a high risk that his party will begin to slide on the implementation when in office. The stakes are high, and the stark truth is that officially unemployment levels reached 27% but in truth this is higher. Can you blame unemployed city dwellers to leave for the country and secure temporary work in farms to bring something to the table? It is true that most Greeks prefer to stay in the Euro but not at the high price of austerity that was a prerequisite for a third bailout of €86 billion.
It was a tough agreement for Greece to swallow its pride and accept more credit primarily to strengthen its banks and to pay arrears to creditors. The new agreement saw no debt relief yet it ushered sweeteners both in terms of debt restructuring and even some economic stimulus. Not surprisingly, European governments, particularly Germany, show steely opposition to the concept to writing off part of Greece’s gargantuan debt and some economists contend that unless this happens there is little chance that the country will be able to meet its entire obligation. How fast can it grow rich to reap a bigger harvest so as to sustain its fragile economy and report a surplus to please the creditors? This is an enigma.
A triumphant Tsipras, now re-elected as prime minister, has promised to implement the tax increases, spending cuts and market reforms mandated by creditors under the bailout program, which most agree will place him and his party in a straitjacket diluting his ability to set policy. In a bold re-election statement, he promised that the new bailout agreement comes with built-in flexibility to cushion the impact on vulnerable Greeks.
This is a promise heard many times before, and many are skeptical that the new manifesto is doable when stiff labour reforms are on the agenda – including higher fiscal controls on tax evasion, pension cuts and measures to tackle the non-performing loans.
The latter have mired the balance sheets of banks. With hindsight, one may comment that the Titans of the Syriza party were buffeted and cornered by German politicians and yet although the agreement took an agonizingly long time to be brokered, the final version now seems a clever compromise – one aimed to retain Greece in the club and prolong the life of a faltering Euro. The euro zone is reluctantly surfacing from the pangs of a credit squeeze and its economy is only just started to recover, yet it wants the Greeks to honour its obligations for its profligacy. In an unbridled rush to punish an archaic and corrupt bureaucracy in Greece the paymasters in Berlin are solidly resisting the temptation to announce any debt relief – at least not for the immediate future.
It goes without saying that sympathy goes wholeheartedly to the plight of so many pensioners who will soon have to face new austerity rules. As if belatedly, the illuminati in Brussels discovered a black hole in the Greek pensions system having a backlog of more than 400,000 pension applications (many of which are requests for early retirement) that will add to the country’s existing tally of 2.65 million pensioners. On the contrary, creditors expect pensions to be trimmed by the equivalent of 1% of gross domestic product while supplementary pensions stop being paid by State but financed directly from contributions.
The demographics are bleak, as roughly 20% of Greeks are over 65 and this is to be taken into the broad picture of high youth unemployment – a rate which is stubbornly high. Another characteristic is that Greek society is aging fast, and relies heavily on pension incomes, which in practice means that for every 100 people of working age in Greece there are 30 people aged 65 or over. There are also abuses in the system (due to hazardous working conditions) where under certain conditions cases arose when early retirement was successfully claimed at age 40.
Similar to the situation prevailing in Malta – where we pay today for tomorrow’s pensioners with no permanent state fund – we are not surprised to note that Greece’s system is not sustainable and needs a major reform. It is evident that the Greek pension system is creaking under its weight since it consumes 17.5% of GDP, a rate higher than any other EU country. Critics lament that ever since Greece was first bailed out three years ago, the stark reality is that it is branded as a battered economy with accumulated national debt reaching 180% of GDP, where regrettably incomes have fallen by a quarter in recent years.
Another major challenge for Tsipras and his Syriza party is the growing refugee crisis. Greece is the gateway for hundreds of thousands of migrants as they flee their homeland in the hopes of reaching richer European countries to the north. Most cross the sea from Turkey to reach the Greek island of Lesbos which is now over crowded with migrants and its reception centers are bursting at the seams. Migrants fleeing Syria, Yemen and other trouble spots reach Turkey then continue onwards overland across the Balkan Peninsula to richer EU countries further north.
Ideally, an agreement is reached on how to finance the countries that are expected to receive 160,000 refugees and a quota system is worked out by the 28 member block to give asylum to such persons. Tsipras was quoted to say that “Europe has unfortunately not taken steps to protect reception countries from a migration wave which has taken on uncontrolled dimensions.” In conclusion, he may have triumphed at the polls but his second mandate calls for nerves of steel while he is expected to face an uphill climb supported by a fractious party. He definitely needs full support of his own party members not to trip him but support him to avoid yet another resignation.
Author: George Mangion
Published on Malta Today, 24 September 2015
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