Economist: Distrust rife between Greece and its lenders

Greek prime minister Alexis Tsipras welcomes commissioner for Economic Affairs Pierre Moscovici earlier this year in Athens. [European Commission]

Following on from EURACTIV’s exclusive interview with Alexis Tsipras, our partner WirtschaftsWoche spoke to Greece expert Jens Bastian about Greek distrust of its donors, Tsipras’ political future and how Angela Merkel has made herself popular in the country.

Greece expert and economist Dr. Jens Bastian works as an independent economic and financial analyst in Athens. From 2011 to 2013 he was a member of the European Commission’s Greece Task Force. He worked for a private bank in Greece for a decade.

This Friday (9 September), a sort of south alliance gathers at the behest of Greek Prime Minister Alexis Tsipras in Athens. What do Greece and the other southern Europeans want from the rest of the EU?

There are three matters to address. First, Greece wants to restructure its debt and hopes for support from other southern Europeans. Secondly, Athens wants to really question the austerity policy of the eurozone and reduce the primary balance target of 3.5% of GDP. The last point on the agenda is the failure of the EU’s refugee distribution plan. Greece, Italy, Malta and Spain want to work out a common strategy.

Tsipras: Euro-Med summit will unite Europe, not divide it

EXCLUSIVE / The meeting of leaders from Southern European countries taking place in Athens today (9 September) will put Mediterranean issues on the EU agenda, without attempting to create divisions, Greek Prime Minister Alexis Tsipras told in an interview.

But Greek interests aren’t necessarily Spanish or Italian interests.

Yes, that is why there is a lot of political symbolism at play here. At the beginning of his time in office, Tsipras dreamt of forming a south alliance in Europe. But Spanish Prime Minister Mariano Rajoy, for example, is a conservative and will not be attending the meeting because he is currently only head of a caretaker government. Nevertheless, the meeting will seek to set up shop against austerity. That is the unifying factor here, in spite of all their differences.

In May, EU finance ministers agreed to postpone the issue of restructuring Greek debt until 2018, after Germany’s all-important federal elections. Is this a compromise?

Debt sustainability dictates whether a country will be able to pull off an economic recovery. Without restructuring, there is no investment. That is why Tspiras wants to organise an international debt conference, similar to the London conference of 1953 that dealt with West Germany.

But the position of German Finance Minister Wolfgang Schäuble is clear: no nominal haircut. This is the clear majority opinion of the Eurogroup.

Tsipras reminds EU partners of Germany’s post-war debt cut

Sixty-three years after the 1953 London Debt Agreement (8 August), Greece’s Prime Minister Alexis Tsipras stressed that Europe should rise to the occasion and grant Athens a debt relief.

Can a compromise be struck when it comes to the primary surplus?

Well, the International Monetary Fund (IMF) now doubts that Greece can pull off such an over-ambitious goal. It is now considering a target of 2.5% instead of 3.5%. When it comes to the issue of debt sustainability, the IMF comes to different conclusions that the European lenders.

Does Greece need a fourth aid package?

Greece cannot stay in a continuous loop of bailouts and economic crises. In my view, a fourth programme would not be politically feasible, neither for Greece nor the lenders. Athens and its donors have to settle on some crucial points, which can realistically be worked on, such as privatisation, investment, debt relief and continuing administrative reform.

Has Greece delivered over the last 12 months?

There has been progress, but a lot of disruptions as well. For example, the port of Piraeus was sold to a Chinese state-owned company. At first glance, the deal was a success. But then the Greek Ministry of Shipping tried to fiddle with the contract details, leading to much delay and confusion. This will only cause potential investors to wonder whether getting into bed with the Greek state is worth the hassle.

The Greek drama continues.

Yes, Greece will remain somewhat in intensive care. Tsipras makes it clear time and time again that he is not convinced by the third aid package and is only a reluctant convertee. He speaks of conditions, rather than reforms.

It sounds like there is not a lot of trust between Athens and its donors.

Mutual distrust appears to be the dominating factor. Pierre Moscovici, the European Commission’s head of financial affairs, recently indicated that if it does not meet its obligations, Greece will not be eligible for the next tranche of €2.8 billion.

Alexis Tsipras is down in the polls, why is that?

Tsipras has broken and gone back on almost all of his election promises. He assured the people that the troika and other austerity measures would become a thing of the past. Now we have a Syriza government that is overseeing rising taxes and even lower pensions. Nobody thought that would have been possible under a left prime minister like Tsipras.

Only four Greek TV channels get licences, eight to close

Greece cut sharply today (2 September) the number of television channels operating in the country, awarding just four broadcasting licences to an industry which authorities say is mired in mismanagement and corruption.

So Tsipras’ time in office is coming to an end?

No, he still has a stable majority. My impression is that he is looking to last the full four years of the legislative period, without calling early elections. New elections tend to be called by the opposition anyway.

Finally, the refugee crisis. How can Greece cope?

Greece is overwhelmed. It lacks the resources to house, care for or feed them. Much that was promised by Brussels, like asylum officials, interpreters and border guards, has still to materialise.

It sounds like a dramatic situation.

Some already call Greece the Lebanon of Europe. Before the Turkey deal was brokered in March, Greece was a transit country, now it is a host country. Greece is now having to integrate and find jobs for refugees, despite having unemployment near 23%. The only reason the situation hasn’t escalated is the Greek people themselves.

In what way?

The Greeks are very helpful and assist the refugees, even though many have very little to give in the first place. Without the solidarity of the Greeks, the situation would be completely out of control. I have the utmost respect for that.

Greece must have the impression that it has been abandoned twice, first on the matter of debt, now because of the refugee crisis. What is going to be the result of this?

The relationship between Greece and Germany has been fraught for some time, but it is improving because Angela Merkel’s refugee policy has been met with a lot of approval. But many Greeks are disillusioned with the EU. But, surprisngly, there are not calls to scrap the whole project or even the euro.

Why is that?

Most Greeks are very distrustful of their political elite. They don’t want Greek politicians, no matter their political affiliation, to be allowed to start printing their own money again. They hope that the euro will keep the government in line.

Is this a glimmer of hope in the European-Greek relationship?

A small one, yes. Whether it will grow into something more substantial, I really can’t say.


Subscribe to our newsletters