November 28, 2014


A leaked memo on how Syriza spooks investors

We got hold of two leaked memos of two meetings in London with Syriza’s George Stathakis and Yiannis Millios, who gave a detailed explanation to investors’ plans in case they win the elections. The two made it clear that Syriza is going to play hardball: they insist on debt- forgiveness from the EU, a debt rollover by the ECB, an end to privatisation, and to austerity, specifically an end to primary surpluses; and instead they want the public sector to increase employment, raise wages and pensions.

On sovereign debt, they want ideally a haircut, but a lengthening of maturities might be a first step. According to one of the notes, the plan is that the ECB should buy the entire Greek debt for 60 years and to forfeit any interest, arguing that Germany got a 62% haircut in 1952, so Greece can get one too. They expect Greek debt to reach 20% of GDP by 2080 (Note this is not a typo!). Stathakis said there will be no more haircut for the private sector.

As for structural reforms, Stathakis said it already went too far. They want to stop austerity, raise minimum wages to €750 pm 14 times/year, pensions to €750 pm 13 times/year and reintroduce collective bargaining. They want to abolish property taxes, move towards a more progressive tax system, expecting revenues to flow from their ‘more effective’ fight against tax evasion. Syriza also wants to force banks to give credit to small and medium enterprises. They also advocate a debt moratorium for private debt, so that debt servicing is maximal 20% of disposable income for incomes above €750 per month.

Questioned by investors about why the EU would agree to such a deal, Stathakis said there was a mutual interest to support Greece and that the current programme was obviously not working so negotiations should lead to a more realistic outcome. There is no Plan B.

The investors’ reaction ranged from worries to sheer disbelief. They expect some heavy volatility in the months ahead. The question seems no longer whether there are elections (Syriza is ahead in the polls by 4-6pp) but whether Syriza succeeds to get an absolute majority, which would give them another 50 seats in parliament. If they don’t get the absolute majority, Stathakis said Syriza would be open to a coalition with Potami or Pasok. He said if the current government succeeds to get a deal on debt relief, it would give Syriza more time to negotiate restructuring of official loans and with the ECB. If no deal is reached, early elections are going to happen for sure. Stathakis was confident, that early elections take place anyway and mentioned March 22 as a possible date. In case of Syriza winning the election with this agenda, one investor expects a massive run on deposits and FDI stop similar to Cyprus.

Syriza spent most of Thursday trying to deflect criticism of the meeting in London after the notes were leaked. Stathakis indicated that the leaks bore “no relation to reality” and that “Syriza’s positions now have an international audience, which understands that a comprehensive solution is needed to make debt sustainable so the Greek economy can recover,” according to Kathimerini.

Our other stories

We also have stories on how Greece is playing the troika; on the latest inflation figures from Germany and Spain; on what the Commission will do – or rather not to – about the French, Italian and Belgian budget overshoots; on Spain’s GDP; on the ECB’s financial stability report; and on the Pisani-Ferry/Enderlein report.

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