Tsipras returned to the Greek parliament on Wednesday to seek support from opposition parties on measures that parts of his own party did not accept. A vote on two pieces of legislation required by creditors to qualify for bailout negotiations. Alexis Tsipras urged lawmakers to stop the country from being forced out of the euro. Tsipras won the support of 230 lawmakers in the country’s 300-seat legislature for a bill that will simplify court decisions and apply European rules to failing banks. Tough and unpopular reforms than even conservative parties did not have the courage to vote are now going to be implemented by a Prime Minister elected against austerity policy. And this it is probably the biggest challenge to the new bailout: the Greece’s ability to deliver on reforms without a collapse in support for Tsipras’s Syriza party, which campaigned on an anti-austerity agenda.
Because let be clear, the third financial rescue package has still to be negotiated. With no credibility, no clear majority, Tsipras is not in the best position to negotiate it, even with this vote.
If the precise contents of this third buyout are still to be negotiated, for sure it will include many policy commitments that the Greek government and much of the population will hate. There will be targets for the government’s finances, specifically for a primary surplus – that means the government must take in more in tax revenue than it spends, putting to one side the interest it is paying on the national debt -. Greece has managed primary surpluses for the last two years. But after a renewed decline in the economy starting at the end of last year – and severely aggravated by the bank closures this month – it will be very hard to repeat that this year. To achieve that aim will mean more austerity. Not saying that there has been massive austerity already. The adjustment to the government finances has been extraordinary: there is a measure called the structural budget balance budget: that went from a deficit of 18.6% of GDP in 2009 to a surplus of 2.2% in 2013. Greek population could take it more, I have my doubts.
For somebody leaving in Greece the answer it is easy. Basically, Greek people do not pay current taxes. The reason is simple, they cannot pay it. So increasing taxes or implementing new taxes are not going to help or change the situation, people will not pay because they can’t. And this basically is the danger of this dictat imposed by Europe and helped by an absolutely stupid Greek strategy in the negotiation.
Under the pressure of French, Chancellor Merkel decided not to push Greece out the Euro area and this against the voice of his Finance Minister. The “monster” as Greek called him proposed what I think was the most decent proposal for Greek: going temporarily out of the euro area. Indeed, details would need to be negotiated, but as I wrote before, it was the only way for Greece to rebuild its competitiveness and put in order its public finance on the long run. Merkel hesitated but decided under the French pressure to give a chance to Greece inside the Euro area.
The result is a dictat, the loss of the full economic control by the Greek government of its own public policy. Budgetary and monetary they have no space and they have to complain about the plan or the Troika would cut liquidity forcing Greece to go out. Greece became the first colonised modern economy.
The optimist is saying, it will hurt on the short-term, but in the long term is going to be good for the country. One my Greek friend summarised the situation:” I do not trust my own people to make such job, so may be it is the only way to move Greece to a modern state”.
It is indeed possible. However, I doubt the Greek government will be able to implement such program, I doubt population can take anymore, so sooner ou later, the Greek case is going to come back in the front page.