Greece, February 2015: “Hope” vs. Tough Reality: Can Paulo Coehlo be proved right?
October 1981. Athens, Constitution Square. In his historical speech, Andreas Papandreou, leader of the Socialist party PASOK promised to Greeks anything possible, whatever they could imagine. Hundreds of thousands were screaming “EOK kai NATO, to idio syndikato” (European Union and NATO represent the same syndicate), following Papandreou’s rhetoric of Greece abandoning its pro western orientation, in favor of uncertain experiments.
Once installed in power, Papandreou acted almost in the opposite direction of what he had promised. He strengthened Greece’s presence in the EU, securing for the first time EU grants for the Mediterranean countries, so as to support their weak economies. Needless to say that Greece did not abandon NATO. In 8 years’ time, the public debt rose from 25% of GDP to 85%. Millions of citizens were able to fundamentally change their life status. Greeks got used to the idea of a State borrowing from abroad so as to distribute indoors.
A wrong mentality, a better life
Step by step, through a process of changing the society, its education and approach about life, business and work, a new mentality was established in the minds of at least 30 – 50% of Greeks. “Profit” became a bad word, while the easiest way to become rich was to somehow work / interact with the State. In 2002 Greece entered in the Eurozone totally unprepared. Its main target: To increase its consumption to EU standards, so as for its inhabitants to live better.
In 2009, the last year before its financial collapse, Greece had almost achieved this ambitious plan. While the opposition was complaining about poverty, the country led by Kostas Karamanlis, was one of the top 26 richest ones in the world and its consumption had reached 94% of the European average. How did it reach there? With very poor exports, massive imports and a tremendous budget deficit of about 36 (thirty six) billion Euro just for that year! The equivalent of Romania’s total debt back then!
The debt was almost 350 billion Euro, part of it caused by major economic scandals in which European companies were also involved.
Austerity without future
In the early elections of October 2009, having been taught to vote for populists who promise one and do something else, Greeks voted for Papandreou’s son, Giorgos, who promised them that “there is still money” (later on he explained that “there is still money, if you know where to go and find it”). After the elections he simply realized the truth and signed an agreement with the international lenders (troika), before the country to bankrupt, in May 2010.
Greece needed major reforms, but Papandreou had no intention to implement them. Soon he lost control and the government, when he proposed a referendum for the country’s future.
In June 2012 Antonis Samaras and his conservative party took the lead. He promised to negotiate with the lenders and stop the austerity, but did exactly the opposite. Very few reforms were implemented, while more than 1.000.000 people lost their jobs and pensions / salaries were slashed. The State remained untouched. 200.000+ public servants simply swifted to pension, just 3.600 were fired. An extremely heavy taxation was chosen as the solution to balance the country’s poor finances. While numbers started improving a bit, the end of 2014 had brought Greece to a state of alert:
- 1.500.000+ citizens unemployed, 65% of the young
- 1 – 1,5 billion Euro / month new unpaid taxes (= Greeks could not pay anymore)
- 2.500.000 people working, 3.000.000 pensioners
- 50 billion Euro (more or less) annual State revenues
- 28 billion Euro / year for pensions, out of which 15 billion Euro supported by the State budget
While the country had an excellent year in Turism (23 million foreign tourists in 2014), the economy barely reached a weak positive growth rate.
Alexis Tsipras, the “ultimate magician”
In June 2014, 63 years old Samaras lost the elections for the European Parliament and changed approach. No more hard measures, “now it is time for the austerity to end”. In December Samaras chose not to finalize the new agreement with the international lenders, as they had identified new budget holes to cover. Without reforms, the only solution would be new taxes. He tried to get a new President elected by the Parliament and when he did not achieve this, he announced early elections. His campaign: “Alexis Tsipras and his radical left party will destroy Greece”. His message was ignored.
Alexis Tsipras is 40 years’ old. He is accused of imitating Andreas Papandreou, even in his way of speaking. His party, Syriza, rose from 4,5% to 36,3% in just 5 years’ time, mainly receiving voters who used to vote for the Socialists. His official “governance program” was announced in September 2014 in Thessaloniki and it was estimated at 12 billion Euro, “but there will be no new taxes for the people”. Even when it was clear that he would easily win the elections of January 2015, he kept on promising, almost everything to everyone. He guaranteed that he will not leave the Eurozone, as the majority of Greeks wanted as well.
Probably at the most critical moment of Greece’s history, Greeks voted so as “to remain in Eurozone, but without measures and taxes”. This is what Tsipras promised plus “hard negotiations with the Europeans, so as to change the Europe itself”. “Hope is coming” was his slogan…
“Hope” vs Tough Reality: 0 – 1
Tsipras won the elections and created a coalition with “Independent Greeks” party (something similar to PRM for Romania). The radical left agreed to form a government together with radical right. Their first measures:
- A statement regarding EU sanctions against Russia that was perceived as a pro Russian one
- Cancelling of all almost all reforms
- Nationalizations
- Cancelling of ongoing privatizations
- Rising the minimum salary from 410 (under 30 years old) and 586 respectively, back to 751 Euro / month
- A totally new education system
- And more
The stock market instantly collapsed and the interests of Greek bonds rose close to 18 – 19% (Romania’s interest rates on bonds are around 3 – 4%). On Thursday and Friday European officials visited Greece and met with the prime minister and the minister of finance Yannis Varoufakis who welcomed them dressed casually, explained that Greece will not receive loans anymore and prioritized a new solution for the Greek debt.
Europeans did not seem to agree. Jeroen Dijsselbloem, the President of Eurozone, stood up and left the press conference on Friday.
http://www.zerohedge.com/news/2015-01-31/caught-tape-dijsselbloem-varoufakis-you-just-killed-troika
During the weekend, Erkki Liikanen, the Governor of the Finnish central bank and member of European Central Bank explained that Greece’s agreement with the lenders ends on February 28th and without a new one in place, its banks will no longer have access to ECB.
Things turned out so bad, that Tsipras had to act, with interviews to international media, stating that nothing bad will really happen and a deal will be reached.
Even President Obama interfered, with a positive statement for Greece, something like “stop squeezing Greece with austerity”.
As we speak, Tsipras visits Cyprus and Varoufakis travels to Paris, London and Rome, so as to ask for support on his government’s proposal to organize an international summit on the Greek debt issue, something Dijsselbloem has already refused. Spain and Portugal also said “no”.
Now Greece says that “Obama and Juncker wish to reach an agreement with Greece”, while the foreigners “leak” that
- “Ok, we can change the process of verification, by replacing the visits of troika to Athens with a new process”
- “We can discuss about your debt, without cutting its face value, but you have to assume the reforms made so far and proceed with new ones”.
- “If you don’t like our agreement to be called “memorandum”, we can call it “development plan”.
The most critical February in Greece’s recent history
In 2012, ECB sent to Greece over 40 billion Euro in cash, so as to support its banking system. Already since the end of December 2014, after the elections were announced, Greeks go to ATMs and get banknotes that are used for the first time. The Governor of the National Bank has stated that the system is testing its liquidity limits. During January, 2 Greek banks asked for support by ELA.
http://www.keeptalkinggreece.com/2015/01/16/bog-confirms-two-banks-requested-ela-funding/
On Friday 30.01 and during the weekend several top Greek analysts have anticipated that things can further escalate, pointing at the banks in Greek territory. Without an agreement with the lenders, they will lose access to ECB. The majority of Greeks declare in polls “proud about their government”, while a strong minority holds its breath and prays for a solution which will leave the country IN Eurozone, without major incidents and damages.
Greece has probably entered in the most critical February of its recent history. Government officials continue stating that there is not much to be afraid of, while they announce new populist measures and ask for time so as “our arguments to be heard”. Europeans insist that the Greek debt will not be cut. If they do so, Spain and Italy will ask for the same benefits. (Greek debt: Circa 340 billion Euro. Spanish and Italian debt: Over 3.000 billion Euro).
Is the Greek Government going to step back and change position? Are the Europeans going to accept what Greece’s radical left (and radical right) is asking for? The odds are against the Greek hoping optimists and an “unexpected incident” can simply end the discussion.
Can Paulo Coelho be right this time too?
With its banks having asked for support, its public revenues down and its liquidity at very low levels, the Greek government enters in a negotiation that the majority of Greeks considers “an act of courage” and wish with all their hearts to succeed. Can Paulo Coelho be right this time too? Is it possible that “when you want something, all the universe conspires in helping you to achieve it”? Or during this week or the next one we will hear that Greece faced the fate of Cyprus?
PS.1. The undersigned, being Greek as well, wishes that the Greek government will protect the country and maintain its European orientation. He also prefers for Greece to pay its debts, but this is a personal opinion.
PS.2. A possible solution: Greece to “obtain” some minor advantages in exchange of a new agreement, which the members of the government will hardly accept.
PS.3. The Greek banks in Romania, being regulated by the National Bank of Romania and under the guidance of Mr. Mugur Isarescu, do not have any problem at all.