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Between obedience and catastrophe

26 June 2015 / 17:06:30  GRReporter
3090 reads

After the failure of creditors and Greece to agree even at yesterday's meeting of euro zone finance ministers the Greek government was warned that the issue should be solved by Sunday, and in all cases, before the financial markets open on Monday.

The proposals of Athens for budgetary measures and reforms continue to differ from those of creditors despite the statements of Alexis Tsipras and other government sources that agreement would be reached.

Uncertainty and tension are growing with the passing of the last hours within which the government has to finally decide what steps to take and no one is able to predict what will happen after the rescue programme expires on 30 June.

What are the options available to the Greek cabinet and what would the result of turning the balance to either side be? Greek journalist Kostas Stoupas answers these questions in his analysis for the online economic edition capital.gr, which GRReporter presents to its readers:
 
"The Greek Prime Minister and his government are faced with very limited alternatives. Mr. Tsipras must decide whether to accept a humiliating agreement of total obedience or to prefer rupture.

The first option would have disastrous consequences for him and Greece but it would allow it to keep its membership in the euro zone. The second option would also be disastrous for him, but the consequences for the country would be much more severe.

Signing the agreement would mean political suicide not only for him but also for the populism that is based on the opposition to the memorandum and that has prevailed in the political debate in Greece over the past years.

The rupture would lead to exiting the euro zone and possibly the European Union, and to disastrous economic, political and geopolitical consequences for Greece.

Mr. Tsipras’ climbing to power can be compared with the "leap of a dead cat" of the period after the restoration of democracy in Greece. I mean the efforts of party clients, state salaried slackers, the so-called unionists, pensioners under 60 years of age, unmarried daughters, "smugglers" of free healthcare systems and education who are making up the political majority and who want to keep their privileges at the expense of society and the prospect of recovering a productive economy.

This system is not sustainable, even if instead of taxes amounting to 8-12 billion euro in 18 months the government proposes or adopts taxes equal to 20 or 30 billion euro.

The private economy is at death's door and those taxes will not be paid anyway. The fact that the amount of unpaid taxes has increased from 25 billion euro to nearly 80 billion euro over the past years proves this.

In Greece, we have 3 million pensioners and slightly fewer than 1 million employees who are often hired without any criteria and who receive pensions and salaries from the state budget. The people who provide their income are 2.5 million employees in the private sector and 1.5 million unemployed. This balance is unstable and the moment that the last bank deposits melt, it will be just a matter of time before it collapses.

The left wing of Mr. Tsipras and Mr. Varoufakis and Co. believed it would be able to keep straight that bottom upward pyramid in two ways.

One was robbing deposits (many of which are the product of the informal economy) by imposing very heavy taxation and the second was through blackmailing the 'stupid Franks' with the possible blow that Greece’s exiting from the euro zone would have inflicted, in order to gain some "development package" over the coming years.

The outflow of deposits from banks and the extreme rise in the number of non-performing loans excluded the first option. Obviously, the hard line of creditors against the government of Mr. Antonis Samaras did not aim at passing the power into the hands of Mr. Tsipras to give him things that they did not give previous governments.

If the government of SYRIZA stayed in power until the end of the year and applied what it presented as a programme, the number of unemployed would exceed 2 million and the majority of the few large companies that have remained in Greece would transfer their tax headquarters outside the country.

Consequently, the government, being the most outspoken representative of the "front against the memorandum" is in a deadlock.

If it signed an agreement, it would commit political suicide and its total withdrawal and obedience would be only a matter of time. In this case, it would begin to reduce government spending and the high pensions of people who have not reached retirement age. Liberalization of markets and professions would occur and their profits would decrease in favour of the economy and consumers.

If it chose rupture, exiting the euro zone and possibly the EU would be just a matter of time. Then, the average salaries and pensions would fall to their levels in Bulgaria and other Balkan countries, i.e. their purchasing power would be 350 euro and 120 euro respectively. Today, the average salaries and pensions are amounting to 900-1000 euro and the lower to 500-600 euro.
 
If the government chose rupture, it would have to announce early elections. If it took a stance in favour of leaving the euro zone during the elections, faced with the above dilemmas, closed banks and uncertainty about the payment of salaries and pensions, it would be difficult to win them.

On the other hand, it would be ridiculous to choose rupture and go to elections with rhetoric in favour of staying in the euro zone.

Tags: PoliticsGreek governmentNegotiations with creditorsSigning an agreement or ruptureAnalysisKostas Stoupas
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