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What we've got here is a failure to communicate
Following a chaotic beginning to its first days in office, the SYRIZA-led coalition is beginning to settle into a more stable pattern in terms of its relationship with the eurozone. Those first, faltering steps have left a blot in the government’s copybook that it will be hard to erase over the coming days and weeks.
The negative impression was the result of the inadvisable actions of a raw cabinet, in which only two of its 41 members have any experience of governing, made tipsy by inhaling the intoxicating vapours of what was for SYRIZA an historic election victory.
This led to a raft of lofty statements or gestures being made with regard to the new government’s intentions to restore wages and pensions, roll back some reforms, halt privatisations and resist the European Union’s wishes over Russian sanctions.
Unfortunately, the new government’s amateur handling of its arrival interlocked with the limited understanding many observers had of SYRIZA and the clear intention of some commentators to read the worst they could into the coalition.
This led to a frenzy of information and misinformation about the government’s intentions, which did nothing to help people understand where a compromise with its lenders might lie.
Thankfully, the last few days have helped clear up some of the doubts, although a totally clear picture has yet to emerge. The initial impression was that the government would immediately rehire thousands of sacked workers, raise the minimum wage, kick out investors and seek a closer alliance with Russia.
Once the dust settled, Deputy Administrative Reform Minister Giorgos Katrougalos revealed that the coalition aims to rehire some 3,500 civil servants who it believes were fired illegally. Katrougalos said that these rehires would be subtracted from the 15,000 new hires that the previous government had planned, with the troika’s approval, for this year.
On the minimum wage, Labour Minister Panos Skourletis was also quick to play down expectations of immediate moves. He said that the minimum salary would be raised gradually to 751 euros and only after agreement with social partners.
The government also toned down its rhetoric on privatisations, withdrawing its request for the heads of Greece’s sell-off fund, HRADF, to stand down and halting any plans to dismantle the organisation. SYRIZA has now indicated that it will not touch any privatisations that have already taken place but will review those which were in the pipeline.
There was also a lot of confusion about SYRIZA’s goals in its negotiations with eurozone partners. This too was a result of the new government’s mixed messages and observers from abroad failing to pick up on nuances.
Commentators spent days trying to unravel what Finance Minister Yanis Varoufakis meant when he said Greece would not negotiate with the troika. Of course, for anyone who had been following SYRIZA’s statements during the election campaign and before had become used to the mantra that a leftist administration would not direct its request for talks to the technocrats who represent the European Commission, European Central Bank and International Monetary Fund in Greece but to the institutions themselves.
For those who joined the game late, though, it appeared that there was a blatant contradiction in the government’s approach. Maybe this was part of an intentional ploy to create confusion and imbalance, with the aim of securing gains for the Greek side. For non-insiders, though, it created the impression of a government winging it.
This impression was compounded by Varoufakis suggesting a debt swap rather than a haircut. Again, anyone observing what key players in SYRIZA had been saying before the elections (rather than taking as gospel the official party line) would have been aware that the leftists never expected their hopes of securing a substantial writeoff or a debt conference to get off the ground.
SYRIZA’s position on the debt issue has evolved over time. In January 2014, Giorgos Stathakis (now Economy Minister) indicated that the main goal of any attempt to tackle Greece’s debt problem must focus on reducing debt-servicing costs, which will run at about 9 billion euros annually over the next few years and will demand primary surpluses of 4.5 percent of GDP from 2016. This principle is now at the centre of what Varoufakis is proposing.
In fact, Varoufakis has gone as far as suggesting that Greece’s primary surpluses should be 1 to 1.5 percent of GDP, which is a far cry from the “campaign to reverse five years of spending cuts” that a Bloomberg article referred to on Friday. Again, though, there appears to have been a breakdown in communication.
The same goes for the idea of the bridging agreement that Varoufakis has asked for. To some this appeared as backtracking on his pledge to end the bailout. Again, this is a case of crossed wires. Just days before the January 25 elections, Yiannis Dragasakis (now Deputy Prime Minister) spoke of negotiating a six-month window for discussions to take place on a broader agreement with the eurozone. This is the “bridge” that Varoufakis now wants to create between the end of the existing bailout on February and the possible agreement of a “new contract” by the end of May. The details of how this could be achieved without conditionality, or with different conditions from the ones included in the bailout, remain unclear.
The SYRIZA-led government may yet be forced to make an about-face (or kolotoumba as it is known to Greeks and an increasing amount of foreign commentators) but the line it has followed over the last two weeks was not as erratic as it has often seemed. Its communication strategy, though, was tremendously inconsistent. This may come with a heavy price because much of the goodwill evident within Europe when SYRIZA was elected evaporated quickly. Winning it back in an environment where the key players carry an inherent scepticism about the new government and are reluctant to trust it will be an immense task. Greece has plenty of those.
Follow Nick: @NickMalkoutzis
*This article was published in last week's electronic newsletter, which subscribers can receive via e-mail or mobile app. The apps can be downloaded for free at the App Store and Google Play.
So the Greek government is now running a primary surplus. I would like to understand if this is sustainable given the size and the deplorable state of the Greek economy? In other words: is the Greek economy large and strong enough to carry this burden in the longer term? For example: wouldn't a structural larger tax intake crowd out private consumption and investment?
Re: Dean Plassaras 17:59:
May I suggest the most intelligent leader for Europe:
LOL! You misspell it, but I happen to be a very forgiving leader. :)
O.k. Syriza is an amateurish group that is learning on the job without any particular assurance that it will finally learn.
But what to make of the other incompetent idiot called Berlin? They had a totally subservient Samaras with whom they could easily have concluded a much more beneficial deal last September and spectacularly failed to do so.
So now in addition of having to cope with missed opportunity, incompetent Berlin has now to deal with its mirror image or each own creation which is none other than Syriza.
What were the Berlin geniuses thinking? That Syriza would give them better terms? or that an untested political class would not cause an accident down the road?
Who exactly are these idiots who fashion themselves as the leaders of Europe?