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Greece in 2016 - unpredictable politics and deteriorating economy

11 January 2016 / 22:01:38  GRReporter
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Anastasia Balezdrova

Following an eventful and turbulent 2015, the New Year began very dynamically for Greece. New Democracy has a new leader, who however was supported by the traditional voters of other political parties, because they saw in him an alternative to the government of SYRIZA and Independent Greeks.

The cabinet itself is concerned over the upcoming voting on a series of bills in parliament, which will change the pension system and the taxation of the agricultural sector. The painful reforms may cause a rift in the parliamentary majority and changes in the government coalition.

Meanwhile, the country's economy is frozen and the refugee crisis, especially the crisis with migration flows continues to deepen, at least for the time being.

Political analyst Plamen Tonchev discussed all these issues with GRReporter and made his risky forecast for the first half of 2016 for Greece.

Mr. Tonchev, we see that despite the measures taken, which are directly inconsistent with the campaign promises, the government of SYRIZA and Independent Greeks is surviving for the time being. Do you think that it will be able to survive this year too and what will this depend on?

I suggest that we look at the situation as an equation with many unknowns. The fate of the government and of Greece as a whole depends on what values they will have. I would even say it would be a little safer to talk about the first half of the year because I think that totally different types of events could mark the second half.

In my opinion, in the coming weeks, directly and immediately, the government of Alexis Tsipras will have to turn three corners. The first is pension reform that is a very sensitive issue. The second is the taxation of farmers, which will also face major and strong reactions: because the so-called farmers in Greece have always been very privileged. The third obstacle to the government is the settlement of outstanding housing loans. This issue is also very pressing in society and even the survival of the government depends on it.

I would say that pension reform and housing loans are probably the two major and immediate obstacles to the cabinet that could break it down.

Would the government be able to overcome them?

It is likely that the government coalition will lose seats. Anyway, it has a slim majority of only two members. Probably there will be shocks and if things came to such an end, a new government should be considered.

I can say nothing more about it, but this issue is one of the key parameters that will be at the core of unfolding events.

Analysts’ debate over this probability is whether a new cabinet will form from this parliament or if there will be new elections. What do you think?

I guess that creditors will not allow new elections to take place. Moreover, after the election of Kyriakos Mitsotakis as leader of New Democracy, I do not believe that Tsipras is so sure that he will win new elections.

Anyway, he went too far, since only last year there were three electoral contests in Greece – the parliamentary elections in January and September and the referendum in July. Announcing new parliamentary elections in the spring or mid-year would be excessive. I think that people are tired, and creditors will not allow them either. If the government loses its current majority, I think it is more likely that it will seek partners in this parliament. It will not be easy, we know there will be scuffling and pressure, but it is still the more likely scenario.

How do you assess the progress of negotiations between the government and creditors?

The problems are many, negotiations are very difficult and I think they are even worsening. In no case are we where we were last August, when almost all pro-European parties and SYRIZA supported the new rescue agreement. Negotiations with creditors are very tense and I think this will become clear when the quartet of their representatives arrives in Athens on 18 January.

Which are the main issues of confrontation?

Tsipras and his government are facing bitter irony on two levels. His strategic goal that he has constantly repeated for years is that Greece’s main task is to cut the national debt or somehow defer it over time.

I think this is silly. It is a legacy from the time of Varoufakis, Tsakalotos and other popular persons among the discontented speakers in Syntagma Square in the summer of 2011. The accumulated huge debt (400 billion euro) is not Greece’s major problem. Firstly, because obviously, it cannot be paid and will be rescheduled for decades and probably it will be paid off until the end of the century. Creditors are hinting at such a decision more or less.

Secondly, paying off the capital of this debt will begin after five years, in 2021. Greece is currently paying relatively small amounts that are current instalments and interests on loans servicing. That is, servicing the huge public debt is not and never has been the main problem of the country.

The top priority has always been structural reforms in the economy and public administration. And here lies the hypocrisy of Tsipras and Varoufakis who have always presented the debt relief and even the debt haircutting as the most serious problem facing the country. They emphasized the public debt with the sole purpose of distracting attention from the real priority that has always been structural reforms.

The bitter irony that I am talking about is that of the four creditor institutions, the International Monetary Fund is Greece’s most conscientious ally regarding debt relief. At the same time, it has the most stringent requirements for the implementation of structural reforms. It offers the most painful among them too. This is precisely the dilemma which is facing SYRIZA and which is making difficult negotiations with creditors as a whole.

The three obstacles that I previously mentioned are precisely the painful structural reforms imposed largely by the International Monetary Fund. If the government overcomes them within 3-4 months, it can begin negotiations on debt restructuring.

Simultaneously, the official position of the government is that it does not want the International Monetary Fund to participate in the creditor quartet. That is, on the one hand, it wants negotiations on the debt, in which the International Monetary Fund would be its most reliable ally, but on the other, to launch these negotiations, it has to implement all painful structural reforms that are offered mainly by the International Monetary Fund. This huge contradiction to the so-called "strategy" of Tsipras and SYRIZA, which is no strategy at all, is aggravating negotiations and making them so confused.

What does Kyriakos Mitsotakis’ victory in the fight for New Democracy leadership mean for the party?

I believe that it is very positive news for New Democracy itself, at least because the party is quite outdated, not so much in terms of the age of its voters, but mostly as a supply of ideas. New Democracy needs ideological renewal. Let us hope that Mitsotakis will achieve it.

He is an interesting political personality himself. He is relatively young, at the age of 47 years, yet he has already gained life, professional and political experience. He has a good mix of qualities.

Kyriakos Mitsotakis also has a lot of challenges ahead of him, at least as a party leader. I think that inside his party he will inevitably face the momentum and the outdated ideas in the party apparatus. Interestingly, he is already accelerating the procedures, announcing an extraordinary congress in February. Obviously, he wants to clear the political physiognomy of New Democracy as quickly as possible, which really needs it.

In my opinion, as it is quite outdated, the party needs a new dose of radicalism. Of course, there is a great deal of radicalism in SYRIZA and its positions, but it is harmful and destructive. I believe that New Democracy needs a beneficial and constructive radicalism to shake both society and the economy in a good way. And it should merge into the new party ideology at this extraordinary congress.

Another major challenge faced by Kyriakos Mitsotakis as New Democracy leader is the need to mobilize the dynamic segments of Greek society. To some extent, he achieved it during the internal party election and was therefore elected. People outside New Democracy participated in this process and in the end, they were the critical mass that chose him. Therefore, his personal goal and that of the party should be to mobilize far greater segments of Greek society that are mostly young people with a relatively good education. People that are apparently oppressed by the crisis in the country and want to fulfil themselves in social and professional terms, not just to keep their privileges, as was the position of the majority of New Democracy voters until recently.

Moreover, he must convince the public and the creditors that he represents a real alternative to SYRIZA as a government. This will not be easy because creditors themselves may prefer SYRIZA in power at this stage, not in opposition. It is not difficult to remember how SYRIZA fuelled protests and clashes in the streets until recently and it would once again be an unproductive opposition, saying "no" to everything.

What does his victory mean for the government?

In all cases, Kyriakos Mitsotakis will more sharply oppose SYRIZA. Recently there have been a lot of rumours about a subversive and tacit understanding between the old party apparatus of New Democracy and SYRIZA. I hope that Mitsotakis will lead a more open policy and will have a clearer position. He himself said that he would be a fierce opposition. Let us see how constructive it will be, because there are very serious issues that need national consensus. Pension reform is an obvious example.

How will the Greek economy develop this year under these conditions?

Very badly. At this stage, I see no signs of improvement of the situation in the first half of the year, which we are discussing. The government is saying it will try to completely eliminate capital controls by mid-year but prominent economists are commenting that this is not possible. Their argument is that people's distrust of government is so great that the moment this control is removed, they will withdraw en masse the few remaining bank deposits. This will cause a collapse of the banking system. I do not believe that the government will be able to inspire public confidence during this period, to the contrary. I expect that things will instead get worse.

If capital controls continue, which is the more likely scenario, the Greek economy will continue to suffocate and shrink. Estimates of global organizations expect negative economic growth in Greece in 2016, although the government is talking about economic rise and upsurge.

After six years of economic crisis and especially after an extremely difficult 2015, could we talk about a mature Greek society in terms of reforms?

2015 was a very traumatic year in the first place but on the other hand, it might contribute to demythologization of Greek society. Modern Greeks, especially over the past five years, have believed in various fables that we politely call "myths".

I think many of these fables are already starting to be forgotten. There is some sobriety in Greek society. But at this stage, it does not translate into something positive. For example, if a person believed that creditors’ aeroplanes sprayed a poisonous gas over Greece and now he understands that this is actually a fable, it does not mean in any way that he suddenly becomes a European-minded citizen.

People who are drifting far from fables at this stage become apathetic and I often hear statements like, "I will not vote for anyone in the next elections." I think that if elections were scheduled for tomorrow, the percentage of low activity would be even higher.

We are facing the withdrawal of parties and the complete discrediting of the political system. This also applies to SYRIZA.

What determines the maturation of these people for reforms?

It is very important that the opposition, I do not mean only New Democracy, plays a constructive role by presenting convincing, realistic alternative proposals to solve everyday practical problems.

I am not sure whether this is achievable, but it is the big challenge, especially in front of New Democracy, because it is the main opposition party.

At the same time, it is expected that it will increase its percentages by attracting voters from other opposition parties like Potami and PASOK.

We have recently observed changes in the government migration policy, even in respect of the terms used. For example, two days ago Minister for Migration Yiannis Mouzalas was talking about illegal migrants that should be returned. How do you assess the role of Greece in tackling the refugee crisis? What will the government's actions be in this direction in the coming months?

Alexis Tsipras’ first government is to blame for having attracted not so many refugees but migrants through Greece to Europe, with its irresponsible behaviour actually leading almost to the threat to eliminate the Schengen area.

The new position of the Greek government is now slightly more serious and more mature. Under European pressure, it makes a distinction between refugees and migrants. Reasonably, the terminology now includes the term "illegal migrants", which is absolutely true. I think that, again under pressure from the EU, Greece will be forced to accept international contingents under Frontex in the Aegean Sea and on the border with Macedonia. All this began after it became clear that if Greece continued in the old way, it would be excluded from the Schengen area. The danger was very real and is not over yet.

This led the Ministry for Migration to the decision to distinguish people and not to admit all of them. That "hollow" solidarity for all poor and suffering people to pass through Greece to Europe now belongs to the past year.

I believe that in 2016 Greece's position will be much more responsible. If the necessary infrastructure is created on the islands, the process will be much more regulated. And Europe itself is now more prepared to manage this chaotic process. In any case, I expect a more regular process of migration to Europe via Greece.

I do not know how the negotiations with Turkey will contribute to this, but there are some developments in them too. It depends on whether it will fulfil its commitments.

I hope that 2016 will not be marked by chaotic developments as happened in 2015. However, because migration is one of the external factors that significantly affect Greece and Europe as a whole, we must consider some other factors as unknowns in this equation.

Besides the migrants, which is a very big problem, things depend on what will happen in Syria and Iraq, on the outcome of negotiations for a truce that are currently in preparation, especially in Syria. If these negotiations fail and the battles continue in both countries, obviously this will ‘nurture’ migration flows to Greece.

Another unknown that must be included in the equation is the political events in Europe itself. 2016 will be turbulent, because there will be disputes over the referendum in the UK. Elections in France are approaching, which will take place next year, but apparently this will be a pre-election year for the country, which will naturally affect both it itself and the political developments in Europe. We see that Spain is likely to hold new elections too. Poland is a big country and with its new government, it may negatively affect the balance in the European Union.

All these things are unknown, but they may play a role. Outside Europe, it is not excluded that we may see once again instability in financial markets, as is happening now in China. The situation there has a very negative effect on all stock exchanges in the world. The crisis is not over. These external factors affect everybody, the whole of Europe, and not only it. The bad thing is that Greece is very fragile and it must be borne in mind that all these unpredictable factors can have a very negative effect on a weak country like Greece, which is literally eking out a miserable existence, depending on international aid.

 

Tags: PoliticsEconomicsGreeceForecast for 2016Plamen TonchevStructural reformsPublic debtNegotiations with creditors
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