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Anastasia Balezdrova

The European Union summit and the meeting of Greek Prime Minister Alexis Tsipras with Eurogroup President Jeroen Dijsselbloem had created expectations that Athens and Brussels would probably reach an agreement on the future of the Greek rescue programme, regardless of how it would be called.

Moderate articles followed the initial cheerful publications in the Greek media, according to which it was unlikely that Greece’s European partners would abandon their firm position on the extension of the present programme to satisfy the request of the new Greek government to sign a new one.

At the same time, European Commission President Jean-Claude Juncker said that the Greek government has declared that it agrees with 70 percent of what is stipulated in the memorandum of economic assistance, adding, "We have to see which of the planned actions fall in these 70 percent and which are in the remaining 30 percent that Athens rejects." He however stressed that each measure rejected by the Greek cabinet should be replaced by another measure, which would give the same financial result.

Under these conditions, it is difficult to predict the outcome of the upcoming Eurogroup meeting on Monday and its impact on the Greek economy.

The policy of SYRIZA and its impact on Greece’s economy was the main topic of a discussion organised by the Institute of Diplomacy and Global Affairs in Athens with the participation of economist and former expert at the International Monetary Fund Miranda Xafa.

She pointed out that the first statements of the new ministers to discontinue privatisations, nationalize enterprises and once again reorganise the tax system are already causing concerns about the poor orientation of the economic policy of the cabinet. "The nationalisation of an enterprise that operates at a loss will be of no use. They have to consider not how to increase tax revenues, but how to reduce government spending."

According to the economist, the memorandum that the great majority of Greeks detest is nothing more than a document that presents recommendations on achieving budget recovery and improvement of competitiveness.

"What the majority of Greeks tend to forget is the fact that the Greek crisis was not caused by toxic bank products but by the collapse of the public sector, which was due precisely to state intervention in the economy."

Miranda Xafa was clear that no government that had been in power after the beginning of the crisis had implemented the indispensable reforms that would trigger the economy.

"The changes were introduced in the wrong way. Instead of reducing government costs, they imposed more taxes and carried out half-way reforms at the same time. For example, professions are not yet liberalised. All governments without exception implemented them reluctantly, always saying that all this was done under pressure from the supervisory Troika. When you carry out reforms in this way, society cannot accept them well."

According to Xafa, the "silent majority" of Greeks are for the reforms but no politician has explained so far what the benefits to society will be. She paid attention to the strong interests that the reforms will affect and that resist them for this reason.

But despite the rhetoric of the members of the new cabinet formed by SYRIZA and Independent Greeks, the economist said that the only way for Greece is to reach an agreement with its lenders. "The only alternative to this path is uncontrolled default. In March, a loan of 1.5 billion euro must be repaid to the International Monetary Fund. Greek banks no longer obtain funding from the European Central Bank but from the Emergency Liquidity Assistance, the price of which is 1.5 percent higher. Government spending may be covered only by internal loans and government bonds worth 7 billion euro are due in June."

Miranda Xafa agreed with the opinion of Minister of Finance Yanis Varoufakis that the Greek government debt, the ratio of which to Greece’s GDP is almost 175 percent, is unsustainable but said that other ways for its management have to be explored since the lenders reject any option of haircutting it.

"Either way, however, even if the lenders had agreed on its haircut, this action would have made no sense without the implementation of structural reforms. The new government must take action in four areas to restore the Greek economy, as follows: reforms, attracting private investment, settling the banks’ issue with problem loans and debt restructuring. Its reduction cannot be achieved without these prerequisites."

As for a solution to one of the sickest sectors, social security, Xafa firmly stated that the government has to cancel all the pensions of people who have not turned 62. "At the moment we are living in the paradox of cutting the pensions of 80-year-olds to give pensions to 50-year-olds. Aligning pensions in all social funds is urgent because pensions in some of them are several times higher than in others. They are the result of pressure from the strong unions, which have been able over time to secure higher pensions and lower age limits. This is the definition of the clientelist state. The taxes in favour of third parties, which are at least one hundred in number, must be removed too."

In conclusion, she stressed that if SYRIZA really wants to end clientelism, as it claims, it must implement the memorandum of economic aid.

In his comments, director of the Institute and former minister and mayor of Piraeus Andreas Andrianopoulos said that the bad attitude towards the memorandum is due to the fact that there are almost no talks in the public sphere about the root cause of the bankruptcy of Greece. "Here the state is bankrupt not the banks, but all ignore that. I remember the reaction of my interlocutors when I quoted an IMF document issued in May 2010, which showed that 75 percent of government spending went to pay salaries and pensions in the public sector."

Andrianopoulos recalled that it is not the memorandum that has imposed higher taxation in Greece. "It describes only the goal which is to reduce the government deficit, it does not impose a certain way to achieve it. Therefore, the only thing that all governments after 2009 undertook was to impose new taxes. At the same time, they left the state sector absolutely intact. The result was the total breakup of the private sector. Now 1.3 million unemployed are former employees of private companies. A minimum number of employees in the public sector were fired, with a lot of reservations and the government of SYRIZA is now preparing to reinstate them to work."

He described Greek society as the core of the problem. "People want to hear insane promises that politicians generously make to be supported by them."

As for the strategy of the Greek cabinet regarding Greece’s strategy in the negotiations with the lenders, Andrianopoulos warned that Yanis Varoufakis’ favourite game theory is hiding many, and real, dangers. "From their actions I realise that they rely on the fact that compromise is deeply embedded in the DNA of the European Union. They believe that, to avoid a conflict, Brussels will give way to the pressure they are trying to exercise."

He explained that the argument in favour of the particular strategy is that if Greece causes a collision the euro zone will collapse. "This is completely wrong. Things today are not the same as in 2010 and the consequences of such an event are calculated. The rest of the countries may suffer, but only for a specific and short period of time. For Greece, however, the consequences of bankruptcy will last for years and will be very painful," he said in conclusion, giving the case of Argentina as an example of this disastrous scenario.