Dieser Beitrag wurde von Jens Bastian exklusiv für EurActiv verfasst. Bastian ist ehemaliger Beamter der Europäischen Agentur für Wiederaufbau und Forschungsbeauftragter bei der „Hellenic Foundation for European and Foreign Policy“ (ELIAMEP).
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"It is now obvious that the next, fifth financial tranche will be paid out. An agreement with the Troika was announced on Friday (June 3rd) and then relayed by Prime Minister [George] Papandreou to his colleague [Jean-Claude] Juncker in Luxembourg.
The interesting detail is that Papandreou did this himself, not his Finance Minister [George] Papaconstantinou, as in the past. Possibly the PM is taking a more assertive role; a manifestation that many having been waiting for during the past months.
But even if payment of the tranche has been secured, each subsequent quarterly evaluation is becoming ever more difficult and subject to higher levels of risk (i.e. non payment) and conditionality (e.g. redundancies in the public sector).
The danger moving into the second half of 2011 and early 2012 is that at some stage one of the Troika's members is going to 'pull the plug'. If I had to put my money where my mouth is, I would think that it is the IMF that is coming ever closer to withdrawing from the financing arrangement.
The IMF repeatedly warned that it could withhold the €3 billion share of the fifth €12 billion Troika tranche to be paid out in July 2011. The IMF is seeking assurances that Greece is fully funded in the next 12 months and would thus default.
But as has been the case so many times before in the past 16 months, simultaneously with the evaluation of the Troika one of the rating agencies has again downgraded Greece. In this case it was Moody's, which downgraded Greek sovereign debt to Caa1, on a par with Cuba (!) and raised the country's risk of default. For a sovereign rating to fall within less than two years from A to this [junk] level is entirely new territory, not only in the euro zone!
However, the timing of the downgrade without awaiting the outcome of the evaluation is a political scandal in my view. In a way, the three leading rating agencies' untimely but deliberate interventions suggest that they have through the back door become part of the policymaking process in Athens and beyond.
Such repeated rating action and unprecedented influence must be addressed in current discussions about regulatory reform on rating agencies in Europe, as is being considered by the [European] Commission and the [European] Parliament.
After all, how stable is a currency union in which member states and millions of citizens literally depend on the assessments of three private institutions who hold a monopoly over ratings and governments to ransom?
The negotiations with the Troika during the past weeks in Greece have illustrated that a radical tax reduction programme, as proposed by the leader of the largest opposition party, Nea Dimokratia (Antonio Samaras), has no support among the government, the IMF, the EU and the ECB [European Central Bank].
Samaras' proposition for the introduction of a 'Flat Tax' of 15% misses the key structural problem of Greece, namely the improvement of collection capacity (enforcement) and the enlargement of the tax base.
Government revenues fell in the first five months of 2011, creating a 2.6-billion-euro fiscal hole. Specifically, revenues for the January-May period fell to 17.9 billion euros, from 19.7 billion in the same period last year. The Finance Ministry had expected to collect 20.5 billion euros for the five-month period.
By contrast, the Papandreou government has adopted a yearly, staged corporate tax reduction roadmap, in which a one percent reduction is introduced, starting this year. Corporate tax currently stands at 23% and is to reach 20% by 2014.
If any further tax reductions are to be introduced this year and 2012, then I expect this to be the case in the field of reducing value added tax (currently 23%) and merging existing VAT categories from three to two, 20% and 10% respectively.
A second aspect of the concluded negotiations between the Papandreou government and the Troika is the gradual enlargement of its thematic focus. After one year in operation, the present framework as agreed in May 2010 between the Papandreou government and the Troika is showing to have been unrealistic in substance and far too optimistic regarding the timetable (e.g. when Greece would be able to return to bond markets).
Hence we are now entering the re-engineering phase of the framework. Today, both sides are discussing issues such as:
- Stimulus packages for the economy;
- a targeted investment component including projects in sectors such as tourism, shipping, green technology and retailing;
- the scope and range of collective bargaining agreements and to what degree employers are bound by them;
- public sector employment levels (new replacement ratio 1 for 10), merger of public organisations (schools, hospitals, insurance + pension funds) and utilities;
- broadening the tax base (reduction of tax free income threshold from €12,000 to €6,000), and;
- privatisation, the creation of an independent agency to oversee the privatisation drive and how to use privatisation revenue, re-profiling (different versions).
This extension of the agenda is necessary and constructive. It leads away from a far too narrow focus on spending cuts (€6.4 billion in 2011) and austerity policies.
What are the political consequences and challenges resulting from these developments? First and foremost, Papandreou is seeking a broader consensus across parties in parliament, in particular with the largest opposition party Nea Dimokratia.
These efforts have not been successful to date. However, while he seeks such consensus between parties he risks losing consensus inside his own governing party. 16 PASOK deputies have recently written a letter to the prime minister asking that parliament be given time to properly debate the new set of austerity measures Greece is about to agree with the Troika. What are possible scenarios in the short-term, i.e. until end-2011?
Rejected at the political level in Greece and in the EU is the option of voluntary euro exit of Greece. However, gradually a groundswell of scepticism and even outright rejection is gaining force within parts of Greek society. The protesters from the 'Won’t Pay’ movement, who refuse to pay road tolls, as well as the 'indignant movement’ (Αγανακτισμένοι) from Syntagma Square articulate a populist undercurrent of drachma nostalgia and anti-EU/anti-euro sentiment.
The composer and national icon Miki Theodorakis publically called for Greece to exit both the euro zone and the EU during a 7 June 2011 protest rally in front of Athens University, receiving long and loud applause for it. Finally, the Greek EU commissioner for fisheries, Ms. Maria Damanaki, is said to have warned that either the crisis [must] soon [be] resolved or Greece should exit the euro.
A second and rather dire option concerns Greece declaring or being forced into insolvency. This option, while considered realistic by many and even essential by some commentators, is politically a non-starter for the Papandreou government, the ECB, the EU and – so far – the IMF (see Lorenzo Bini Smaghi interview in the FT; 30 May 2011).
A third perspective addresses explicitly the European dimension and euro zone responsibility. More specifically, the European members of the Troika agree to foot the IMF share in case the latter –temporarily – withdraws or withholds further financial assistance for Greece. A new assistance programme for Greece would then not be necessary.
However, the question is where would the additional financial resources come from? (i) The EU facility (EFSM) is already stretched with the Greek, Irish and Portuguese obligations. (ii) Alternatively, the EFSF could be involved in the Greek financing architecture. But this would require a mandate extension of the EFSF.
The advantage of this option is that it does not require approval from national parliaments. The disadvantage is that the non-inclusion of the IMF would be particularly alarming for Germany, which has always insisted on the Washington-based lender to be involved.
A fourth scenario includes new loan guarantee programme agreed by eurozone finance ministers and the IMF to the tune of roughly €60 billion to €70 billion for Greece. But the devil is in the detail to be addressed. They are manifold, complex and politically charged.
What would be defined as a voluntary burden sharing with private bondholders? Any consensus on co-operative debt approaches, e.g. bond roll overs as a pillar of a new aid package, has to be structured in such a way that it does not trigger a so-called 'credit event'. Investors may be given incentives such as preferred creditor status, higher coupon payments, collateral or preferential treatment in the future if another rescheduling is needed.
A German plan being considered calls for investors who hold Greek bonds maturing between 2012 and 2014 to voluntarily exchange those for new sovereign debt instruments with an extended maturity of seven years. Creditors would have to be motivated to join in such a voluntary exchange with the help of a so-called 'collective action clause'.
These would need to be introduced into existing bond contracts in the event not enough private investors were prepared to take part. However, to structure a conversion of sovereign debt while avoiding the classification of a 'credit event' by rating agencies is akin to squaring the circle. Moreover, debt rollovers may do little to reduce Greece's rising public debt load.
In order to receive a second bailout package the range of additional conditionality that Athens has to adhere to is considerable. Further tax increases, significant downsizing of public sector employment, restructuring, mergers or closure of public entities and the rationalization in entitlements are all on the agenda. What was only recently considered a 'red line' is fast becoming the order of the day, mandated by the Troika and subscribed to by the Papandreou government in June 2011.
Greece is facing the end of an era. Everybody knows it. There is nothing left in the state budget to distribute. There is no more cheap money available on international bond markets to borrow. And there is no social contract any more between citizens/society and the state/political elites. Against this background, one group will fight 'tooth and nail' to protect their entrenched interests.
And the other group will continue meeting in ever greater numbers at Syntagma Square - under the Spanish-inspired umbrella term 'indignant' - and shout 'thieves' as well as 'out, go away' towards those sitting in parliament. At the end of the day what we are facing today and in the coming months in Greece is the challenging and desperate attempt to formulate a new social contract between state and society, between political elites and citizens."
