Home' Trinidad and Tobago Guardian : February 15th 2015 Contents FEBRUARY 15• 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
INTERNATIONAL | SBG15
When the far-left Syriza party won
the Greek election last month,
the hope was that the new prime
minister, Alexis Tsipras, would
moderate his demands so as to
compromise with his country s creditors. After all, like
the vast majority of Greeks, he wants to stay in the
Even as he prepared to meet fellow European Union
leaders for the first time this week, however, he was
making a Greek exit from the euro ever more likely.
Tsipras has put forward some good arguments against
the austerity that has been imposed on Greece as the
price of its bailouts. He has sound ideas on attacking
corruption, fighting tax evasion and shaking up Greece s
cozy business elite. His ministers now talk of keeping
70 per cent of the old government s reforms.
Nonetheless, his first moves in office included prom-
ises to raise the minimum wage to pre-crisis levels,
reverse labor-market reforms, restore pension increases,
rehire thousands of public servants and scrap privati-
sation projects. These would not only breach Greece s
bailout terms, but also wreck the country s economic
To reverse course in this way, when Greece s economy
is at last growing and unemployment is falling, is per-
verse. Greece needs more reforms, not fewer. Despite
progress in regaining lost competitiveness, its exports
remain weak. In its business climate it lags behind
neighboring Bulgaria, the poorest EU country, in areas
such as enforcing contracts, registering property and
Keeping Greece in the euro will require compromises.
Greece s creditors need to decide what to trade, and
when. Tsipras foolishly refuses to prolong Greece s
bailout program when it expires, at the end of this
month, talking instead of a bridging loan that would
create time for negotiations to take place without mon-
itoring by the hated "troika" of the European Com-
mission, the European Central Bank and the Interna-
tional Monetary Fund.
There is a case for removing the ECB, which is
politicised by its involvement in the troika. Tsipras
cannot expect more loans without conditions, however,
as the bad-tempered breakup of this week s Eurogroup
meeting demonstrated. Instead he needs to extend the
bailout fast, and then enter talks.
In those talks there is scope for a deal. Greece s total
debt stock stands at an unpayable 175 per cent of GDP,
up from 109 per cent before the euro crisis, and Tsipras
has dropped his demands for an immediate debt write-
down. The maturity and interest cost of the debt, two-
thirds of which is owed to official European creditors,
are so generous that Greece pays a smaller share of
GDP in debt service than Italy or Portugal, whose
economies are at least somewhat healthier. These terms
could be made more generous still.
The creditors also should be prepared to adopt a
version of the IMF s old HIPC (highly indebted poor
countries) initiative for Africa: a promise to write down
debt in stages at indeterminate future dates, but only
in return for defined progress on reforms.
It should also be possible to give Greece more fiscal
breathing space. The government is now required to
run a primary, ie pre-interest, budget surplus of three
per cent of GDP this year, rising to 4.5 per cent as of
2016. Tsipras wants to cut that to no more than 1.5
per cent. A compromise of around 2.5 per cent would
allow him to spend more on social programs.
Here, then, is a simple message for European leaders
to give Tsipras: They will negotiate, but only once the
bailout is extended. They will help him on debt and
the budget, but only if he is prepared to make his
economy more competitive.
If an athlete insists on running backward, even the
most patient trainer cannot help him.
Greece hits the
these giveaways could cost around US$9
To balance the books Tsipras is pinning
his hopes, optimistically, on a tax crackdown.
Smuggled cigarettes and fuel cost the gov-
ernment around US$1.7 billion a year. Tax-
dodging tycoons could furnish some extra
income too. Panayotis Nikoloudis, a former
anti-money-laundering czar who heads a
new anti-corruption ministry, said that there
are 3,500 cases of large-scale tax evasion
amounting to US$8 billion, which could
yield US$2.8 billion in 2015. In the unlikely
event that all this money were collected,
however, Greece would still be US$4.5 billion
Many governments plans do not add up,
of course, and Tsipras already has signaled
a willingness to compromise. On February
9 he outlined a four-part plan.
First, Greece would keep "70 per cent"
of previously agreed reforms. Those ditched
would be replaced by 10 new measures
agreed upon with the Organization for Eco-
nomic Cooperation and Development, rather
than the despised "troika" of the ECB, the
IMF and the European Commission.
Second, it would reduce its primary---ie,
excluding interest payments---budget surplus
to 1.5 per cent of GDP, from a target of three
per cent this year and 4.5 per cent in 2016.
Third, it would swap much of its existing
debt for two exotic types of bond: a "per-
petual," meaning that the principal never
would be repaid, and a "GDP-linked" bond,
with payments tied to the health of Greece s
Finally the government would spend an
extra US$2.1 billion on "humanitarian assis-
tance" for struggling Greeks.
Greece s creditors can give some ground.
Despite the low interest rates the country
is being charged, the loans are profitable,
since most European governments can bor-
row at even lower rates. Cutting them to a
profit-neutral level and further extending
the duration of Greece s debts could generate
savings worth 17 per cent of GDP, according
to Darvas. In the spirit of not profiting from
Greece s depression, euro-zone officials also
could release US$2.1 billion in profits from
an earlier ECB bond-buying programme.
Greece s government will have to offer
much more in return, however, and Tsipras
will have two constituencies in mind if he
One is the extreme left of Syriza. On pri-
vatization, for example, both Finance Min-
ister Yanis Varoufakis and Development
Minister George Stathakis have voiced sup-
port for completing the sale of the state s
67 per cent stake in Piraeus Port Authority.
China s Cosco, which already runs a prof-
itable container terminal at the port, and
Denmark s Maersk were front-runners
among the shortlisted bidders. However,
one of the left s stalwarts, Shipping Minister
Theodore Dritsas, has vowed to block the
deal. Panayotis Lafazanis, who heads a new
ministry for "productive reconstruction,"
environment and energy, has blocked two
other deals aimed at bringing Greece fully
in line with European Union energy direc-
The other group Tsipras will have to keep
happy is an electorate buoyed by the gov-
ernment s feisty dealings with the rest of
"Whatever happens next, Syriza has given
us back our dignity," said Roula Zlatani, a
68-year-old Athenian retiree.
"The government s finally standing up to
the foreign powers that have made our lives
@2015 The Economist Newspaper Ltd.
Distributed by the New York Times Syn-
Backdropped by the Houses of Parliament in central London, protesters hold placards at a rally to show solidarity with Greece,
Wednesday, February 11, 2015. Dozens of protesters gathered in support of the new government and the anti-austerity movement in
Greece. Greece's new government is set to clash with its eurozone creditors over easing the terms of its bailout programme at an
emergency meeting in Brussels.
From Page 14
Strong government support
Greek Prime Minister Alexis Tsipras, right, speaks with the media as he arrives for an EU
summit in Brussels on Thursday, February 12, 2015. EU leaders meet for a one-day summit
on Thursday to discuss, among other issues, European banks and the situation in Ukraine.
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