In debt-ridden Greece all logic seems to be lost after Friday’s announcement by Eurogroup chief Jeroen Dijsselbloem that the second bailout review is close to being completed and lenders will return to Athens to iron out the final details. The Greek government is celebrating a victory for accepting the required austerity measures that should have been accepted last autumn!
However, Greek officials rushed to sprinkle harsh pension cuts and the lowering of the tax-free threshold with the gold dust of some imaginary “counter-measures”, claiming that the austerity measures they are about to legislate will have no financial impact whatsoever because they will be balanced by social benefits of equal value. Yet, so far no government official has given a convincing explanation of how that would work out. They talk in general about lowering the property tax and raising pensions, but without being specific.
Furthermore, what the officials fail to say is that the “counter-measures” will apply only if Greece meets the fiscal targets set by lenders. Indeed, creditors agreed on principle that any surpluses would go to alleviate the burden of Greeks who suffered most. But who is to guarantee that Athens can reach primary surpluses of 3.5% when the economy is in a downward spiral? Especially when the administration shows that attracting investments and expediting the required privatizations is not a priority?
Only a month ago, the Greek government was trying to get a 3-billion-euro loan from the World Bank, as if borrowing money is the only way the country can stay afloat. How can Mr. Tsakalotos and Mr. Tsipras guarantee that they will meet the fiscal targets required when they demonstrate that they seek solutions such as loans from the World Bank?
Another victory the cabinet celebrated is that creditors backed down on labor law reforms such as the lock-out, the percentage of mass lay-offs and the return of collective bargaining as of September 2018, when the bailout program ends. But these achievements are purely symbolic.
Strikes in the private sector are almost non-existent in Greece. Strikes are a thing of the public sector, so the absence of such for companies doesn’t mean much in reality.
Regarding mass lay-offs, the difference between Greece and creditors is that the latter wanted 10% and Athens was insisting on the existing 5%. Given that the average number of employees a company has in Greece is 30, all the fuss was whether three or one and a half employees were laid off without ministry of labor approval.
On collective bargaining that will be reinstated as of September 2018, wages are already so low and the labor market is in such disarray that bargaining of whole labor sectors is not a guarantee that workers will get better wages.
Another reason the purported success of the Greek negotiating team and the political intervention of the Greek prime minister is unfounded is because the deal is not signed yet. Creditors’ negotiating teams are returning to Athens to continue talks and new obstacles may arise. So the rush to celebrate might be a little premature, to say the least. At this point, the words “Solution” and “Agreement” that are the headlines of the two government-friendly newspapers are as believable as Mr. Tsipras’ many pre-election pledges.