No debate please, we’re European

On the eve of Greece agreeing its first EU-IMF bailout in May 2010, the CEO of investment firm PIMCO, Mohamed El-Erian, expressed doubts about the package,  what it demanded of Greece and whether the Europeans would be able to manage the  process. “This is a daunting challenge,” he wrote in the Financial
Times. “The numbers involved are large and getting larger; the  sociopolitical stakes are high and getting higher; and the official sector has  yet to prove itself effective at crisis management.”

El-Erian raised the  issue of private sector involvement, or PSI, almost two years before it happened  and warned the eurozone that it was walking into a potential disaster. “What started out as a public finance issue is quickly turning into a banking problem too; and, what started out as a Greek issue has become a full-blown crisis for  Europe,” he wrote.

This week, Bloomberg revealed that PIMCO has been selling the Dutch bonds it was holding. Until now a financial, AAA-rated safe-haven in the eurozone crisis, the Netherlands’ bond yields are edging upward, its coalition is under pressure and “austerity fatigue” is apparently setting in. El-Erian’s warning in May 2010 that the Greek debt crisis would “morph into something much broader” has been proved correct.

Ring of fire

“I want my life back, now!” was one of the chants heard at a teachers’ rally on Friday, when they protested against job transfers and sackings in the civil service. It’s been clear over the last three years that our daily comforts, as small as they may have been, are slipping away one by one and being replaced by uncertainty or, even worse, dead ends. To be alarmed by this is only human. We shouldn’t forget, though, that for some Greeks the wish of having their life back is not a slogan but the basis for their epitaph.

The death of three employees at the Stadiou Street branch of Marfin Egnatia Bank in central Athens remains one of the most shocking moments of this crisis. Coming on May 5, 2010, shortly after Greece agreed its first bailout agreement with the troika, the arson attack on the bank and the deaths of Angeliki Papathanasopoulou, 32, Vivi Zoulia, 34, and 36-year-old Nondas Tsakalis serve as one of the bookends for this crisis. When the other will arrive, marking the culmination of this exacting period, nobody can be sure.

In the meantime, Greece has to deal with the fallout from its dire situation and the truth is it hasn’t done that particularly well. The fact that the hooded arsonists who smashed the windows of Marfin Bank during an anti-austerity protest and then set fire to the building are still at large is symptomatic of the country’s failure to deal with some of its most obvious problems. That it is unable to provide justice for three of its young people denotes wider failings in caring for this generation. Bright, hardworking and foreign-educated, Papathanasopoulou, Zoulia and Tsakalis had much to offer but Greece, tragically, missed out. It is missing out in a similar way as more young Greeks with similar qualities and who have the skills to be agents of change abandon the country due to a lack of opportunities and eclipsing faith in decision makers.

Is VAT all you’ve got?

Grabbing a coffee for 20 cents less doesn’t really sound like the start of an economic recovery but who knows, maybe after this week’s decision to cut value added tax at restaurants and cafes, Greece will soon be measuring out its success with coffee spoons.

Naturally, the government has made the most of the skeptical troika finally giving in on a longstanding Greek demand for VAT in the food service sector to be reduced from 23 to 13 percent. Even so, Prime Minister Antonis Samaras announcing the temporary measure in a televised address was a touch excessive given he only informed the nation that a nightclub drink would soon be about 50 cents cheaper. For the government, though, the symbolism of the reduction is perhaps more important than its economic impact.

Samaras presented it as a personal triumph of persistence. Deputy Prime Minister Evangelos Venizelos said it was a sign that the troika had begun listening to Greece. Indeed, the VAT reduction represents something of a milestone in the Greek bailout program as tax hikes have been the norm and a regular source of much anger over the last three years. It was billed as the first tax cut since the program began, which is not quite accurate. Technically, it was the second as a 15 percent reduction in the emergency property tax introduced in 2011 had been agreed a couple of months earlier. This came after pressure from Democratic Left, which was still part of the coalition at the time. There was no televised address, though.

Greece: A reality check

Petros Giannakouris/Associated Press

And like that… poof, the crisis is gone. More bailout loans approved by the Eurogroup, a sovereign rating upgrade from Fitch, economic sentiment at the highest it’s been for the last 40 months, the Athens Stock Exchange becoming the best-performing stock market in the European Union and Greek bond yields dropping below 9 percent for the first time since 2010 have helped give the impression Greece has overcome the worst of its problems and that recovery is within touching distance.

This is certainly the story that the government will, understandably, run with. The three parties in the coalition have taken on considerable political cost in sticking with the EU-IMF fiscal adjustment program and their only hope of survival is to convince a large enough section of the Greek population that the chosen path leads from economic catastrophe to stability and then prosperity.

In Athens, there is also a belief, which seems to be shared by decision makers in Brussels, Berlin and elsewhere, that a change in mood alone will make a significant contribution toward overcoming the crisis. This rising tide to lift Greece’s boat will not only make the program more acceptable to the public, it will also make investors more buoyant, the thinking goes.

Greece and the IMF: Three years of not understanding each other

Illustration by Manos Symeonakis http://xpresspapier.blogspot.gr/

Three years ago, then Prime Minister George Papandreou stood on Kastelorizo’s harbor as the Aegean glistened in the background and children yelped with joy. The ensuing period has proved anything but sun-kissed child’s play for Greece. The appeal made by Papandreou to the eurozone and the International Monetary Fund that day has set the tone for almost everything that has happened in Greece over the past three years. Where it will lead is far from clear.

Even though the European Commission, the European Central Bank and the IMF make up the troika of lenders that have provided Greece with some 200 billion euros in bailout funding during the last 36 months, the Washington-based organization’s role has grabbed the attention of most Greeks. Even now, April 23, 2010 is referred to by many as the day Papandreou “sent Greece to the IMF.” Even though the Fund has provided only a fraction of the loans disbursed so far, its actions often come under the greatest scrutiny. Although there has been a growing realization that some of Greece’s partners in the eurozone and the ECB have been behind some of the troika’s toughest demands, the IMF continues to be a regular target for critics.

The problem is that these often indiscriminate attacks, dismissing the IMF as a Trojan horse for neoliberalism, mean that proper analysis of the troika’s three elements is pushed aside. In this fog, it has become difficult to work out where there are grounds for genuine criticism of the IMF. In this respect, an op-ed by Mohamed El-Erian, the CEO of PIMCO investment firm, on the Fund’s shortcomings is timely and extremely useful.