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Greece in 2016 - unpredictable politics and deteriorating economy

11 January 2016 / 22:01:38  GRReporter
3036 reads

Anastasia Balezdrova

Following an eventful and turbulent 2015, the New Year began very dynamically for Greece. New Democracy has a new leader, who however was supported by the traditional voters of other political parties, because they saw in him an alternative to the government of SYRIZA and Independent Greeks.

The cabinet itself is concerned over the upcoming voting on a series of bills in parliament, which will change the pension system and the taxation of the agricultural sector. The painful reforms may cause a rift in the parliamentary majority and changes in the government coalition.

Meanwhile, the country's economy is frozen and the refugee crisis, especially the crisis with migration flows continues to deepen, at least for the time being.

Political analyst Plamen Tonchev discussed all these issues with GRReporter and made his risky forecast for the first half of 2016 for Greece.

Mr. Tonchev, we see that despite the measures taken, which are directly inconsistent with the campaign promises, the government of SYRIZA and Independent Greeks is surviving for the time being. Do you think that it will be able to survive this year too and what will this depend on?

I suggest that we look at the situation as an equation with many unknowns. The fate of the government and of Greece as a whole depends on what values they will have. I would even say it would be a little safer to talk about the first half of the year because I think that totally different types of events could mark the second half.

In my opinion, in the coming weeks, directly and immediately, the government of Alexis Tsipras will have to turn three corners. The first is pension reform that is a very sensitive issue. The second is the taxation of farmers, which will also face major and strong reactions: because the so-called farmers in Greece have always been very privileged. The third obstacle to the government is the settlement of outstanding housing loans. This issue is also very pressing in society and even the survival of the government depends on it.

I would say that pension reform and housing loans are probably the two major and immediate obstacles to the cabinet that could break it down.

Would the government be able to overcome them?

It is likely that the government coalition will lose seats. Anyway, it has a slim majority of only two members. Probably there will be shocks and if things came to such an end, a new government should be considered.

I can say nothing more about it, but this issue is one of the key parameters that will be at the core of unfolding events.

Analysts’ debate over this probability is whether a new cabinet will form from this parliament or if there will be new elections. What do you think?

I guess that creditors will not allow new elections to take place. Moreover, after the election of Kyriakos Mitsotakis as leader of New Democracy, I do not believe that Tsipras is so sure that he will win new elections.

Anyway, he went too far, since only last year there were three electoral contests in Greece – the parliamentary elections in January and September and the referendum in July. Announcing new parliamentary elections in the spring or mid-year would be excessive. I think that people are tired, and creditors will not allow them either. If the government loses its current majority, I think it is more likely that it will seek partners in this parliament. It will not be easy, we know there will be scuffling and pressure, but it is still the more likely scenario.

How do you assess the progress of negotiations between the government and creditors?

The problems are many, negotiations are very difficult and I think they are even worsening. In no case are we where we were last August, when almost all pro-European parties and SYRIZA supported the new rescue agreement. Negotiations with creditors are very tense and I think this will become clear when the quartet of their representatives arrives in Athens on 18 January.

Which are the main issues of confrontation?

Tsipras and his government are facing bitter irony on two levels. His strategic goal that he has constantly repeated for years is that Greece’s main task is to cut the national debt or somehow defer it over time.

I think this is silly. It is a legacy from the time of Varoufakis, Tsakalotos and other popular persons among the discontented speakers in Syntagma Square in the summer of 2011. The accumulated huge debt (400 billion euro) is not Greece’s major problem. Firstly, because obviously, it cannot be paid and will be rescheduled for decades and probably it will be paid off until the end of the century. Creditors are hinting at such a decision more or less.

Secondly, paying off the capital of this debt will begin after five years, in 2021. Greece is currently paying relatively small amounts that are current instalments and interests on loans servicing. That is, servicing the huge public debt is not and never has been the main problem of the country.

The top priority has always been structural reforms in the economy and public administration. And here lies the hypocrisy of Tsipras and Varoufakis who have always presented the debt relief and even the debt haircutting as the most serious problem facing the country. They emphasized the public debt with the sole purpose of distracting attention from the real priority that has always been structural reforms.

Tags: PoliticsEconomicsGreeceForecast for 2016Plamen TonchevStructural reformsPublic debtNegotiations with creditors
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