Greece mired in vicious cycle of recession

If the function of a parliamentary opposition is to express "loyal dissent", then many would see the current Syriza-led government of Alexis Tsipras as "disloyal assent".

In government, Tsipras has reversed the policies he voiced in opposition. He has not only accepted the bailout he inherited, but has succumbed to what seems to be the indefinite national debt.

Today, he cuts the ribbon on highways whose construction he had opposed, and welcomes the incoming German operators of Greek airports whose sell-off was anathema to the left only three years ago.

The impasse between Greece and its creditors is due to Greece's apparent incapacity to introduce reforms into a top-heavy public administration and Syriza's resistance to tax increases and pension cuts.

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Every meeting of Tsipras or his finance minister Euclid Tsakalotos with the EU or IMF is heralded as leading to a breakthrough in this impasse. Every post-meeting statement explains why the breakthrough didn't happen.

As long as the EU and IMF are dissatisfied with reform progress, and the balancing of the exchequer by whatever means, there is little question of debt restructuring and even less of debt relief.

A newspaper headline in September 2016 read “Reforms to be done by early October, government says”; it didn’t specify which October, and we are still waiting.

Original bailout

The facts of economic life on the macro-scale are terrifying. The original bailout in 2011 was supposed to reduce the debt-to-GDP ratio from 160 per cent to 110 per cent. The ratio now stands at 177 per cent, due in large part to the IMF’s incorrect calculations which have created a self-perpetuating recessionary cycle.

Greece was bankrupt in 2011, is even more bankrupt now and will be further into bankruptcy next year.

The current debts will not be repaid until at least 2040. The state itself owes €3.8 billion to its suppliers. In July it must make interest repayments to creditors of €7 billion, money it simply doesn’t have.

Supermarket turnover is down 15 per cent; it is reckoned that 40 per cent of retail businesses will have closed between 2014 and 2017. On the level of the average household the increases in VAT (especially on foodstuffs) from 13 per cent to 23 per cent in 2015 and to 24 per cent in 2016 are putting many domestic budgets at risk. 20 per cent of all electricity bills are unpaid.

Two-thirds of all households have an annual income of less than €12,000, of which 23 per cent goes in tax, leaving the average family with €9,250. Unemployment among the over-45s is up from 20 per cent to 30 per cent.

A major problem with assessing the Greek condition is the inconsistency of statistics and the variability of projections. The latest triumphant announcement that in 2016 Greece achieved a primary surplus of 3.9 per cent (instead of the expected 0.5 per cent) was immediately capped by another which pointed out that that figure included overtaxation which has to be repaid in the current year.

Debt restructuring

A week earlier,

Brussels

had reduced its forecast for the Greek economy; now it had to rejig the figures. With the IMF on one hand admitting it got the original bailout figures wrong, and on another arguing with

Germany

about the point at which debt restructuring can start, no-one really knows what is going on.

Greeks can be justified in thinking that Brussels and Berlin do not care what happens to Greece as long as the euro zone and the EU itself are preserved. A Grexit would not be as serious as a Frexit or a Spexit, but it would set up a tsunami of its own. Greeks see the posturings of the EU and IMF as having little to do with the Greek economy.

Sources in the ministry of finance acknowledge that while relations with EU inspectors are cordial, the various announcements about progress are merely public charades. The reality is that progress is impossible while Greece lacks a comprehensive computerised tax-gathering programme, something which was born in 2009-10, went missing in 2011 and has yet to phone home.

The IMF spring meeting in April was very largely concerned with the question “What should we do about Greece?” Clearly no answer was found, as reports of the meeting indicate that a “breakthrough” is as far distant as it ever was. One EU official states “We are close to a deal” while another admits “There is no deal on the table”.

A survey of the Greek economic future by PriceWaterhouseCoopers published in the same month argued the obvious: that there is a vicious cycle of recession which can only be exited by measures to stimulate growth and competitiveness and drastically reform public administration.

TS Eliot, echoing Plato, wrote: "Between the idea and the reality, falls the shadow." If it were not for the resilience of the Greek people, and their capacity to tolerate confusion, their dissent would erupt into disloyalty of a dangerous kind. But loyalty to the "idea" of Greece, even if it nowhere matches the reality, allows dissent to inhabit this shadowland of unknowing.