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For one year in power SYRIZA has totally collapsed the economy

25 January 2016 / 20:01:17  GRReporter
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Anastasia Balezdrova

Just a year ago the radical left SYRIZA won the parliamentary elections in Greece with a convincing victory over its main opponent New Democracy. The party came to power with promises that it would cancel the memoranda signed with creditors, eliminate the property tax, reinstate to work all dismissed civil servants, restore the state television ERT to its form before the closure in June 2013 and above all that it would break "the spiral of austerity in Greece" by successfully concluding the negotiations on debt reduction.

Alexis Tsipras’ preference to choose as a coalition partner Panos Kammenos and his populist party Independent Greeks, which is often defined as far right, fairly quickly cast a gloom on the initial euphoria of the majority of SYRIZA’s traditional supporters regarding the materialization of their fundamental dream, namely for the left wing to govern Greece. Lengthy negotiations with creditors followed, which ended with the signing of the third bailout programme under far more adverse conditions for Greece. Meanwhile, capital controls were imposed in the country, which stood as a barrier in front of the economy that was suffocating anyway.

Despite the apparently unsuccessful outcome of the negotiations and the metamorphosis of the government that pledged to fulfil the commitments against which it fought while in opposition. SYRIZA again won the second parliamentary elections in September 2015.

Four months later, negotiations with creditors on the first monitoring of the programme implementation are still questionable, the social reactions against the decisions of the cabinet are intensifying, the economy is gasping, local companies are withdrawing and foreign companies are showing almost zero investor interest.

The reasons for the deepening crisis in Greece over the past year were the topic of the conversation that GRReporter held with Greek journalist and economic commentator Kostas Stoupas.

Mr. Stoupas, how has the one-year rule of SYRIZA and Independent Greeks affected the Greek economy?

The consequences are already measurable. One of them is the withdrawal of deposits of around 40 billion euro from banks. Apart from this, banks lost tens of billions of euro thus the need to be recapitalised under very negative conditions for their previous shareholders. This happened at bank share prices very close to zero.

A bad climate has been created in the real economy resulting in the withdrawal of thousands of companies abroad as well as of tens of thousands of Greeks, mainly their senior employees. For me the "escape" of talented and productive Greeks is the worst long-term consequence. This also applies to companies because they provide jobs, generate income and wealth in every society and could potentially take a country out of a crisis. The longer the withdrawal of companies continues, the more the Greek crisis will deepen.

Many companies have already left the country. It is not yet apparent but I think the picture will clarify even more in the coming months, especially after the increase of taxes and social contributions.

One year after the left government came to power in the country we see the collapse of everything that it had claimed prior to that. The government itself is not doing most of the things that it has promised but almost the opposite to them. This fact marks the end of this concept and the end of the confrontation regarding the pros and cons of memoranda (the bailout programmes – author’s note) that has monopolized political life in Greece in recent years.

Do you think that something changed in the economic policy of the government after the Minister of Finance was replaced?

No. During the first six months while the government was in power, there was no economic policy at all. And I think that the advantage that secured SYRIZA’s victory in the second parliamentary elections in September was the suspension of the collection of taxes on the part of the state. The option of deferred payments of tax liabilities, in 100 contributions, allowed the collection of the income tax to start after October. Households felt a relief from the heavy tax policy applied by the previous government. This was regarded as a positive development and a feeling of mild euphoria was created, which secured the second victory of SYRIZA.

Since October, however, the state has begun to reach the pockets of households and this has changed the general atmosphere. The change is evident both in the results of public opinion polls and in the discontent that is rife in society. It will become even more distinct very soon, when taxes will increase even more and citizens will have to pay them, although they will be excessive for most of them.

The exacerbation between Greece and its creditors is obvious. To what extent is it due to the government and to what to the creditors?

I think that creditors have held a constantly firm stance towards Greece in recent years. They are not ready to yield. In the case of Greece, they have found themselves in a mess of contradictory and mutually rejecting policies showing that they lead to a deadlock. In fact, this is partly associated with the creditors, since they did not have a productive action plan to apply to Greece. But the main problem is that no Greek government implemented any plan that was drawn up for the country. The only thing that was applied was horizontal cuts in salaries and pensions as a result of which the economy is increasingly sinking.

Incentive policies were not applied. The horizontal cuts in wages and pensions mean absolutely nothing. For example, in the public sector it was necessary to give incentives to those employees who are doing their jobs, in the form of better pay and to dismiss the unskilful ones. This is the only way to create an effective public sector. Incentives for private companies would be the low taxation and the reduced bureaucratic chaos.

Five years after the bankruptcy of the Greek state, and of society that is governed by a leftist and a parasitic ideology, the climate continues to be negative for companies. A large part of currently unemployed Greeks is paying a very high price for it. All those who are migrating to other countries in search of better opportunities are paying for it too.

Recent polls indicate a 4% lead for New Democracy whereas on this day last year SYRIZA won the elections with a double-digit margin. How do you explain this change in the attitudes of society?

As I said earlier, the reason is that since October the state has reached the pockets of households. The moment that there were signs of forthcoming early elections in November 2014, the majority of households stopped paying their tax contributions. The law on deferred payment in 100 contributions was adopted in February-March 2015. In this way a taxpayer, a representative of the middle class, who paid contributions in the range of 500-600 euro, could pay 50-60 euro. The remaining income was available to the family to use it for their own needs.

It might have created a false sense of growth in the private economy on the other hand but above all, it created a positive attitude towards the government. It wanted to collect the money last October, after the early elections in September, thus succeeding in winning them. The attitude of society towards it began to change in September and it will continue to do so while this process continues. I believe that this process will accelerate even more in the coming months.

There have been changes inside the party over the past year, while SYRIZA has been in power. Some of its representatives have left it and founded a new party. Are more divisions expected in SYRIZA and what can cause them?

I think we should have to consider certain the likelihood of further divisions, both to the left of the political spectrum and to the right - that is, to the centre-left space. One of the reasons will be the pension reform.

Any pension reform, even that of the current Minister of Employment George Katrougalos which provides a solution to the problem by increasing the social security contributions can provoke public reactions. In the parliamentary group of SYRIZA, there are people who are influenced by different social groups and the tension is already there. I think that there will be divisions in both directions of the political spectrum over time and due to the deepening deadlocks.

My opinion is that Mr. Tsipras’ structure was based on a lie and he is now paying the price. A funny semblance of a poll is circulating the social networks, asking who has contributed more to Bulgaria’s prosperity. The choice is between Todor Zhivkov and Alexis Tsipras, who is winning 95 per cent of the votes. Why? Because he has contributed to the withdrawal of companies from Greece.

The data still show that not tens of thousands of companies have moved, as alleged. Moreover, Bulgaria has problems of a different nature, which do not make it a "heaven" for doing business, as it is presented.

Yes, the situation is not "heavenly" and in fact, not so many companies have withdrawn. But on the other hand, they are many. For the first time in recent years I have met with Greek businessmen who have bank accounts in Bulgaria in order to be able to work.

This is a significant and very important detail. A few days ago, I was told an indicative story. A plumber who carried out repairs at a house in Athens gave his customers an invoice for services rendered issued by a Bulgarian company. This is a tragedy for any country. And here it is happening en masse.

What are your forecasts for the economic and political 2016?

In economic terms, things are more easily measurable, because deadlocks are progressing at a rapid pace. I think that in 2016 there will be a new rise in unemployment and further withdrawal of companies from Greece.

Anyway, the year did not start well with confrontation between the government and the Canadian company El Dorado, which is caused by narrow political motives. Because the government will be forced to increase the social security contributions and taxes, or to cut the pensions, it is deepening the confrontation with a private company to show that it is still consistent in a particular matter. However, this is a disastrous step, not only for one or five thousand employees whose job depends on the company. This is a very negative signal sent to foreign countries, with regard to the economy of the country. But the government does not understand this because the people who have leftist views on economic issues do not understand that rumours have much greater consequences for the economy than direct accounting.

In political terms, I think all options are open. But probably because our European partners would not want us to have new elections, I would consider possible an expansion of the government coalition, i.e. that more parties would support the parliamentary majority. Anyway, I do not think that elections would provide a solution at this point.

Tags: PoliticsSYRIZAOne year in powerEconomyCrisisEconomic analystKostas Stupas
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