Greek gloom as economy stalls amid latest bout of EU wrangling

Greek gloom as economy stalls amid latest bout of EU wrangling

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Pro-communist protesters march through Athens on Friday.

Eight years into Greece’s ordeal to escape bankruptcy, thousands of Communist party sympathisers packed into Syntagma Square in Athens on Friday to protest at the latest concessions made by Alexis Tsipras’s leftist government to keep the country afloat.

Massed before parliament in the fading light of day, they did what they had come to do: rail against the cuts that loom in return for further disbursement of the emergency aid now needed to avert economic collapse. The serial drama of Greece’s debt repayments will reach a climax again when loans of €7.5bn mature in July.

That communist-aligned unionists can still muster such protests is testament to the party’s zealous determination to make itself heard. Most Greeks gave up demonstrating long ago.

Two years short of a decade in freefall, and with little prospect of recovery, the nation has succumbed to protest fatigue. With the exception of pensioners – the great losers in Greece’s assault by austerity – anger has been replaced by malaise, the lassitude that strikes when loss becomes commonplace.

Friday’s protest, one of more than 60 nationwide, came within hours of Europeescaping another dose of Greek drama after eurozone finance ministers announced that bailout talks – stalled as Athens bickered over the terms of its latest compliance review with lenders – could finally resume. International auditors representing the bodies behind the three bailout packages the country has received since May 2010 are expected to return to Greece on Monday. Once technical issues are addressed, the delayed bailout payment will be disbursed, ensuring default is averted in July.

In exchange, the once fiercely anti-austerity Tsipras has signed up to further reforms worth €3.6bn, the equivalent of 2% of GDP, to be put into effect once the current programme ends next year. “It is in the nature of every agreement for there to be compromises,” said Greek finance minister Euclid Tsakalotos, who faces the thankless task of having to sell the prospect of more pension cuts and tax rises to sceptical leftists in the ruling Syriza party when it convenes on Sunday. “There are things that will upset … the Greek people.”

After more than a year of hard talk and bluster – the review was meant to have been concluded in February 2016 – the government once again conceded on its own red lines, reflecting Athens’s overarching policy of keeping Greece in the heart of the eurozone. Tsipras, who fought hard to ensure countermeasures can also be taken to offset losses if economic indicators are better than expected, was quick to sound optimistic. “The Greek economy,” he announced, “is ready to leave the crisis behind it.”

But the breakthrough falls far short of the all-inclusive package the government was hoping for. Once again, promises of reducing the country’s staggering debt pile – at 180% of GDP, the biggest impediment to real economic recovery – will have to wait. The International Monetary Fund, which has steadfastly refused to finance the latest bailout until meaningful debt forgiveness is assured, repeated that without “a credible strategy” it would be unable to even present the programme to its own board.

Without the IMF formally signed up, many are reluctant to get into a party mood. “In the circumstances it was the best the government could get, but in essence it only prolongs the crisis, it doesn’t solve it,” said Syriza MEP Stelios Kouloglou. “Personally I neither trust the IMF nor [German finance minister Wolfgang] Schäuble. The IMF is still waiting for Trump to clarify his policy on Europe, and Germany is in the midst of an election campaign.”

In the standoff, the Greek economy has shown grave signs of slippage. This year was meant to be a year of recovery – instead, the uncertainty has prompted the central bank to revise its growth projection downwards following the economy’s contraction in the fourth quarter last year. Unemployment has increased from 23.2% to 23.5%, with investors – the only guarantee of soaking up such an oversupply of labour – staying away. In a repeat of the chaos that beset the country’s financial system at the height of the crisis in 2015, an estimated €2.5bn of deposits left Greek banks in January and February.

Consumption is also down. “The 37% of Greeks at risk of poverty and social exclusion really cannot make ends meet,” said Aliki Mouriki, a leading Greek sociologist. “They no longer have the means to meet basic needs, with consumption of milk and bread right down and payment of electricity bills at an all-time low.”

The situation on the ground contrasts greatly with the expressions of optimism leading EU officials are prone to offer. But seasoned observers say the language used about Greece ceased to have any real meaning long ago.

The nation long at the centre of the eurozone’s economic crisis still remains its weakest link. The latest détente buys Athens more time – and Tsipras further time in office – but it is far from being a lifeline. By the summer of 2018, when Greece’s current €86bn adjustment programme ends, few believe that Athens will be able to get access to international markets or avoid a fourth bailout.

“In the interval Tsipras will rot and Greece will rot with him,” said Dimitris Keridis, a political science professor at Panteion University and a prominent commentator.

Keridis is among those who believe that “Grexit” is still a possibility. “There is growing Euroscepticism among Greeks. The country is no longer the systemic threat to the rest of Europe that it was at the beginning of the crisis, and that means there is less incentive to keep it in. If the economy doesn’t pick up, Grexit will be back on the table.”

It is a view held by many in the large-windowed, carpeted offices of MEPs in Brussels. Until now Europe has muddled through on Greece, rallying with professions of euro unity when the shockwave of Brexit hit last summer. With the bloc potentially facing other existential crises – in France, where victory in May’s presidential election for the far-right Marine Le Pen has not been ruled out, and in Italy, where the Eurosceptic Five Star Movement has a real chance of winning elections next year – the risk of its geography changing cannot be ruled out.

As the union’s soft underbelly, Greece is unlikely to be spared. Entirely reliant on the European Central Bank for funding, its banks would automatically become the biggest transmission mechanism for a spreading crisis.

“The EU is buying time, governments are buying time, the Greek political system is buying time,” said Giorgos Kyrtsos, a Greek MEP with the conservative New Democracy party, looking out at the grey skies above Brussels.

“There are two Grexit scenarios. One made in Greece, the result of the inability to restart the economy. And one made in the eurozone because of political developments in France or Italy. In my view, the big danger is the permanent political and economic crisis in Italy. You can’t have Greece trapped in the eurozone if Italy leaves.”

The alternative is more muddling through: but how long Greece can continue bumping along the bottom, without the risk of implosion or political tumult, is far from certain.

[Source:- Gurdian]