Greece: The ‘D' day
Greek Prime Minister Alexis Tsipras and his Coalition of the Radical Left (Syriza) party came to power a few weeks ago. Their electoral victory, despite almost giving them a majority in parliament, did not allow Tsipras to form a single government. His idea to get a right-wing anti-EU party as a junior coalition partner has surprised more than one observer. But Tsipras's strategy, established together with Yanis Varoufakis, his charismatic finance minister, was just that - first to wage a frontal attack on the EU troika - the International Monetary Fund (IMF), European Central Bank and European Commission - and EU member states, then retreat after having obtained a number of concessions regarding the payment program and perhaps installments. The support of an anti-EU political movement would come in very handy for the first step. The second step of the strategy was to really tackle one of Greece's perennial structural problems - the taxation system.
To be able to implement his immediate social measures, Tsipras needs about 12 billion euros for 2015. About 6 million euros would come from different European structural funds and payments. In addition, he wants to implement a serious taxation system on large fortunes, which would bring in almost an additional 3 billion euros. Nobody knows how the remaining 3 billion euros are to be found, perhaps by establishing severe cuts in non-social spending of the budget, maybe some military expenditure cuts.
His apparently blunt and precipitous plan was perhaps not so careless after all. But the real problem is not Tsipras' strategy; it is the fact that Greece has lost all credibility among its creditors and European political elite. Varoufakis's perambulations around European capitals have been more of a Waterloo seen from a French viewpoint than the victory at Marathon. The Greek economy walks a very tight rope. Two bailouts have only just stabilized the banking system of the country, which remains extremely vulnerable to foreign dynamics. Syriza wanted the first step of its strategy to gain "time" rather than money. It seems that EU decision makers want to dissipate as rapidly as possible the kind of "alternative eurozone functioning" professed by Tsipras and Varoufakis. The latter has won only a four-month breathing space, with very little money they could save on IMF payments. This would have worked as a first battle station where the new Greek government could breathe a little, implement some of the social measures it promised and attack the second phase of its strategy of taxing Greek ratepayers who do not pay much in taxes, especially not on their own personal wealth.
Now this strategy, already having a very thin chance of succeeding, seems to have missed its first objective. It is true that Syriza has obtained some (very minor) gains regarding the finances it could spare for social payments, but the turmoil created by Syriza's political campaign has already reduced tax revenues by almost 2 billion euros. Thinking that the "austerity" period would be over people have stopped paying the few taxes they were paying, thinking that there would be a general pardon for unpaid taxes.
The first step of the strategy having been missed, how will Syriza wage a large structural reform in Greece to tax bigger revenues and fortunes? It seems that it will not really be able to do so. Varoufakis recently declared that a referendum or anticipated parliamentary elections could be organized if the government fails to deliver. This is perhaps what decision makers in the EU and the conventional political elite in Greece are expecting, but not that soon. Depriving Syriza of the right to remain in power for more than a couple of months will not discredit Tsipras and his political team, but make "heroes" out of them. Therefore, we might see more leniency by international institutions toward Greece in order to allow Tsipras to carry out his taxation reform and create a large consensus against him at home among the wealthy classes. This "falling from bad to worse" situation can only be avoided via very courageous political openings. Obviously, Tsipras's minister of foreign affairs is not the man for the job. Can Tsipras find a "Varoufakis" for foreign affairs and totally alter the parameters of Greek foreign policy?
To be able to implement his immediate social measures, Tsipras needs about 12 billion euros for 2015. About 6 million euros would come from different European structural funds and payments. In addition, he wants to implement a serious taxation system on large fortunes, which would bring in almost an additional 3 billion euros. Nobody knows how the remaining 3 billion euros are to be found, perhaps by establishing severe cuts in non-social spending of the budget, maybe some military expenditure cuts.
His apparently blunt and precipitous plan was perhaps not so careless after all. But the real problem is not Tsipras' strategy; it is the fact that Greece has lost all credibility among its creditors and European political elite. Varoufakis's perambulations around European capitals have been more of a Waterloo seen from a French viewpoint than the victory at Marathon. The Greek economy walks a very tight rope. Two bailouts have only just stabilized the banking system of the country, which remains extremely vulnerable to foreign dynamics. Syriza wanted the first step of its strategy to gain "time" rather than money. It seems that EU decision makers want to dissipate as rapidly as possible the kind of "alternative eurozone functioning" professed by Tsipras and Varoufakis. The latter has won only a four-month breathing space, with very little money they could save on IMF payments. This would have worked as a first battle station where the new Greek government could breathe a little, implement some of the social measures it promised and attack the second phase of its strategy of taxing Greek ratepayers who do not pay much in taxes, especially not on their own personal wealth.
Now this strategy, already having a very thin chance of succeeding, seems to have missed its first objective. It is true that Syriza has obtained some (very minor) gains regarding the finances it could spare for social payments, but the turmoil created by Syriza's political campaign has already reduced tax revenues by almost 2 billion euros. Thinking that the "austerity" period would be over people have stopped paying the few taxes they were paying, thinking that there would be a general pardon for unpaid taxes.
The first step of the strategy having been missed, how will Syriza wage a large structural reform in Greece to tax bigger revenues and fortunes? It seems that it will not really be able to do so. Varoufakis recently declared that a referendum or anticipated parliamentary elections could be organized if the government fails to deliver. This is perhaps what decision makers in the EU and the conventional political elite in Greece are expecting, but not that soon. Depriving Syriza of the right to remain in power for more than a couple of months will not discredit Tsipras and his political team, but make "heroes" out of them. Therefore, we might see more leniency by international institutions toward Greece in order to allow Tsipras to carry out his taxation reform and create a large consensus against him at home among the wealthy classes. This "falling from bad to worse" situation can only be avoided via very courageous political openings. Obviously, Tsipras's minister of foreign affairs is not the man for the job. Can Tsipras find a "Varoufakis" for foreign affairs and totally alter the parameters of Greek foreign policy?