Wednesday

31st Aug 2016

Analysis

Greece in search of dignity, as crisis subsides

After more than four years of international humiliation as the result of an economic crisis that has piled innumerable indignities on its people, Greece is keen to restore some national pride.

"Our common quest" is the grandiose motto of the Greek government's six-month EU presidency, which began last week in Athens with a succession of ministers lining up to tell foreign reporters that the country has turned the corner in both economic and political terms.

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  • Greece heading back towards normality says prime minister Samaras

The Greek economy will emerge from six years of recession in 2014, they say, and record a primary budget surplus of 1.6 percent of GDP in the process.

Falling spreads on Greek government bonds has given ministers hope that Greece's treasury will hold its first bond issue since 2010 in the second half of 2014.

"We want to get back to the market and show we are a normal country again," Prime Minister Antonis Samaras told reporters in Athens on Friday (10 January).

But although the Greek government will want its presidency to be marked by legislative achievements - such as sealing a deal on the final tranche of EU banking union legislation - its economic difficulties will not disappear from view.

The country needs to find an estimated €11 billion to pay its bills through 2014. Samaras claims that under the bailout deal struck with its creditors - the Troika - in the small hours of 12 November 2012, the costs of its debt burden will be eased as soon as it delivers a primary budget surplus.

"When the data arrives from Eurostat we will try to reach a decision on reducing the interest rate and maturity of the bailout loans," he says.

What the response from the rest of the eurozone will be is less clear, particularly if Greece attempts to begin the conversation before the European elections in May, potentially provoking a public backlash in creditor countries such as Germany, Finland and the Netherlands.

In any case, it is difficult to see what changes can be made to the interest Greece pays on its debts.

Greece now pays an average rate of around 3 percent on its €240 billion of bailout loans, a rate which is not much higher than cost. One option is to extend the maturity of the loans just as the eurozone did for Ireland and Portugal last year.

This could see the repayment of Greece's loans - most of which are due in between 15 and 30 years - extended to 50 years or even longer.

Samaras also says that the agreement means that for every percentile of surplus over and above Greece's annual target, 70 percent will be redistributed back into the Greek economy and earmarked for the unemployed and pensioners who have been the worst affected by the crisis.

One thing for sure is that Samaras' government is tired of glib assertions about Greek fecklessness and wants the rest of Europe to appreciate the huge price its people have paid.

"We want to make sure that our sacrifices are recognised," the Prime Minister told reporters, adding that the average Greek's disposable income has fallen by over 35 percent - a huge drop in living standards.

Neither have the cuts been particularly effective. For every euro of cuts, the Greek budget deficit only fell by 40 cents.

Culture minister Panos Panagiotopoulos is among a number of ministers to underline that austerity has reached its limit.

Ordinary Greeks "cannot take any more sacrifices" he says.

For his part, Kyriakos Mitsotakis, the minister tasked with slimming down Greece's bureaucracy, believes that the requirement to trim 15,000 more public sector jobs as part of the latest Troika review will mark the end to big staff cuts.

The Greek civil service has been cut from 900,000 to 600,000 in four years. 100,000 of which have been lost due to an attrition rule that means only one in five retiring or sacked officials are replaced, while big savings have been made from cutting the use of temporary contracts which had been abused by successive governments.

"We are leaving behind a system of political patronage which left Greece with an administration that was far larger than it should have been," says Mitsotakis, adding that a new bill on human resource management will tighten the rules for hiring and firing officials.

Despite having a parliamentary majority of just two seats and a junior coalition partner that is on course to be wiped out when Greek voters next go to the polls, ministers insist that the government is stable.

Samaras states that there will be no national elections until at least the Greek presidential elections in 2015 and believes that there is little appetite among voters for another poll.

Below the optimistic surface, however, Greece's domestic politics remains uncertain and often ugly.

In September, left-wing hip hop musician Pavlos Fyssas was murdered by a Golden Dawn supporter, sparking a government crackdown on the party involving the arrest of more than 20 of its senior members, including a handful of its 18 MPs.

But despite its leader and deputy leader being amongst Golden Dawn officials facing charges ranging from being part of criminal gangs and money-laundering to assault and murder, the popularity of the neo-Nazi group remains undimmed.

They are currently polling at 11 percent according to recent surveys, enough to leave them in third place and almost certain to win MEP seats in May's European elections.

With his conservative New Democracy party anxious not to lose the support of right-wing nationalists, Samaras has trained most of his ire on Syriza, the leftist party which burst onto the scene by finishing a strong second in the 2012 Greek elections, and currently tops the opinion polls.

Samaras says that Alexis Tsipras' party takes a "schizophrenic" approach to politics by sounding pro-EU to foreigners and eurosceptic to Greeks.

He and New Democracy officials also complain that Syriza has taken a blind eye to violence by left-wing activists and anarchists.

For all the talk of stability and recovery, it would not take much of a setback, be it economic or political, to put the heat back on the Samaras government.

A panic-free and low key presidency is the best that Samaras and his crisis-weary ministers can hope for.

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