The New Greek Government Promises Everything to Everyone But Creditors



tsipras2_1The announcement of the new Greek government policy by Prime Minister Alexis Tsipras was very touching to a populace that has suffered five years of harsh austerity measures. He spoke soothingly and full of emotion. He aimed to restore the wounded pride of Greeks, while giving them hope for a better future. Something on which the previous government failed abysmally.

It is rare for a leftist to address issues of national pride, but Tsipras did. He spoke of the Greeks’ wounded national dignity and promised he will never back down to those who want Greece on its knees, a poor debt colony. We will not be blackmailed, he said and he was applauded. Even opposition party members seem to support the new government’s struggle to convince creditors to accept the Greek proposal for the country’s burdensome debt.

Greece’s youngest Prime Minister promised too much to too many, while saying that he has a plan to fulfill all these promises. He spoke touchingly of the humanitarian crisis, restoring to the populist politics of charity and handouts. He promised free electricity to 300,000 have-nots, subsidies to the poor, raises to low pensions.

His speech brought to mind his election campaign declarations. He blamed the previous government, and rightly so, in order to remind people how much they suffered. By doing so, he also prepared viable excuses in case of failure. He even accused them of extending the bailout program for two months instead of six. Like blaming them for not extending the “hated Memorandum.” A minor contradiction, one might say.

Because the sad reality is that the party that is now ruling, owes its victory on the promise to abolish the hated Memorandum. Yet, SYRIZA was funded — like all parties are state-funded — by money borrowed by those who composed the same, unpopular Memorandum. It is ironic, but for five long years, the wasteful Greek state survived mostly on borrowed funds. And all anti-Memorandum parties took advantage of that.

Still, Tsipras said a lot of good things. He pledged to create a fair tax system that will lift the burden off the backs of the poor and the middle class and tax the rich. Especially those who evade taxes; and, unfortunately, they are too many and they are doing it for too long. And he has to do that very fast as cash is running low.

He stated that the property of every Greek will be registered and everyone will be taxed accordingly. He spoke of a new Large Property Tax (LPT), without specifying how large is Large. Or how each individual property will be registered. Will tax officials visit every household and register works of art or jewelry, for instance?

The new PM will also hire back all public sector employees who were laid off, he will crack down corruption, abolish bureaucracy, cut state spending, and other wonderful things that are truly needed.

Unfortunately, as is usually the case with politicians, he never mentioned where will the funds come from. Politicians rarely touch the bottom line. People don’t want to hear about reality when it is painful. Greece is strapped for cash and all reassuring statements from government officials mean very little. The “we’ll tax the rich and give money to the poor” is not enough for a country that needs growth to come out of the crunching depression. And despite the good feeling all these promises create, much more is needed for economic growth.

Nevertheless, Tsipras has convinced Greek people that all is financially feasible. The question is, when Finance Minister Yanis Varoufakis goes to the dreaded Eurogroup on February 11, will he convince Greece’s creditors to wait for a “bridge period” of three months before Greece presents a solid plan acceptable by all?

Greece’s European creditors have shown that the bridge plan Greece is proposing is not what they want. Yet, only a compromise on both sides can bring a viable solution. Despite Germany’s hard stance, the rest of the European leaders seem to realize that easing the burden on Greece is the only way to keep stability in the Eurozone.

Tsipras needs to compromise too. The pressure from within his party to maintain his leftist rhetoric is not good for Wednesday’s negotiation. So far he has shown that he is full of good intentions. What he really needs now is another bridge; one that will connect his good intentions with reality.


8 COMMENTS

  1. Very well written. However, why keep Greece in the Eurozone if both an agreement with Mr. Tsipras or a Grexit means that the Greek debt is written off? The money will be lost for the creditors in both scenarios. If Greece gets a debt write-off and is allowed to stay in the Eurozone Mr. Tsipras will spend and spend and after a few years ask for a new write-off. It doesn’t make sense.

  2. The money currently already spent is of less concern. Greece makes up less than 2% of GDP for the euro. The greater concern is moral hazard where all economies that splurge will then want a bailout. Greece has been bailed out twice in the last 5 years and they want a third bailout.

  3. The EU is really playing down the effect of a Grexit. The fact of the matter Greece was insolvent before the 2010 crisis. The reason for the bailout wasn’t to help the Greek people it was to maintain the stability of the banking system, which would have suffered a tremendous loss via Greek bond haircut. All of this private debt was then moved to public debt in Greece and other countries. Greece saw approximately 8 percent of the “bailout” and is on the hook for all of it. This isn’t how modern democracy should be. This is still the truth today. These banks are hyper leveraged and a haircut would cause a domino effect throughout the global financial system. Personally I think Greece should look elsewhere for funds and lets see how the ECB and other private institutions handle calling their bluff.

  4. From the Greek view, it shouldn’t matter who they owe the money! Those Euro had been spent by previous Greek governments in the country, the money did evidently trickle down, boosting employment, wages and consumption, and there is no ethical reason why Greece should not repay them. The only way to avoid that is default and Grexit. The Eurozone can’t tolerate members who refuse to stand by their obligations.

  5. Actually no.. the majority of that money is bond yields, that have been manipulated by the ECB on behalf of their primary shareholders. You need to do some reading.

  6. Sounds like u need to learn more about bond yields, and ecb manipulation of those rates. interest rates and bond yields are completely different. When u have the 3 yr yield at close to 20 percent. How cheap is that? Way more than 2.1 percent which is effectively what banks are getting in emergency funding due to bank runs. Maybe u should hit the books. that 2.1 percent is also double the rate of other banks.

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