March 30, 2015
One of the civilised aspects of Europe is no matter how hairy things may be getting, people are taking off for their Easter holidays. We have been noticing this each year - when the newsflow suddenly drops of the cliff. We have noticed this today as well, though we have two big stories - the negotiations between Greece and the troika, and the French elections.
As for Greece, nobody really expected a miraculous breakthrough - and it didn't happen. The news coverage this morning is a little diffuse. But if you piece together the information from various sources, a more coherent picture emerges. Corriere della Sera has been told by a member of the euro working groups that the talks in Brussels with the Greek government about the reform programme have not been going well - so much so that no eurogroup meeting is about to be called. The article said the issue will overshadow today's scheduled joint Franco-German ministerial meeting in Berlin. It also said that Angela Merkel and Francois Hollande have penned in a possible bilateral meeting in case there is no agreement.
The Financial Times has the details of what has been proposed. Greece has accepted two demands by creditors that it previously refused: a rise in VAT in Greek islands, which are currently benefitting from a reduced rate, and the retention of the property tax imposed by the previous government, and which Syriza promised to abolish. The FT writes that the property tax concession constitutes the main element of the Greek proposal, as it would bring in €2.5-3bn in new revenues. The Greeks are estimating that these measures would produce a primary surplus of almost €3.5bn this year. The FT noted that the list failed to include any labour and pension reforms.
In Athens, meanwhile, Alexis Tsipras was busy selling the proposals internally, both within the party leadership and in cabinet. According to Kathimerini the programme would not include any devastating measures, leaving the primary surplus at approximately 1.5%, with positive real GDP growth of 1.4%. There would be no cuts in wages or pensions. In contrast to the reports above, Kathimerini describes the talks in Brussels as constructive (we presume that they spoke to the Greek sources). That report also added another detail that a eurogroup telephone conference will be convened for Wednesday to update ministers on progress. (In other words, they don't expect a deal by then).
The article also held out the possibility that the eurogroup and Greece reached a two-tier agreement - a primary deal to trigger an increase in the T-bill ceiling, which would meet the imminent liquidity needs.
Keep Talking Greece reports Yiannis Dragasakis as saying that if no solutions were found with the creditors, Greece would face an imminent liquidity problem. In the meantime, deposit outflows continue. On Wednesday alone, more than €350m have reportedly left, triggering yet another increase in the ELA of €400m.
Meanwhile, we noted a new poll, hat tip @MacroPolis_gr, according to which Greek support for Syriza's negotiating tactics is still strong, but has been declining gradually. The numbers are down from 72% on Feb 5, to 60.5% on Feb 26, and 56.5% now.
In an El País op-ed, José Ignacio Torreblanca writes Greece would have had a really easy time negotiating a favourable deal with its European creditors, were it not for an absurdly confrontational style. Torreblanca wonders whether to attribute this to bad advice, dogmatism, or ulterior motives. Tsipras and his government should have appealed to a higher political purpose to make an extension and modification of the rescue programme in favour of Greece. Just like Greece joined the European Communities through a political decision to support the democratic process in Greece in the 1970s, despite a negative economic assessment by the Commission which advised delaying entry, Torreblanca argues Greece should have sought the kind of political compromise that the EU runs on.
According to Torreblanca, Syriza entered government in a rare moment of EU consensus on the Euro's design flaws, the excess of austerity policies, Troika errors and the Greek population bearing a disproportionate part of the adjustment costs. In addition, Greece could have allied itself with Juncker, with Draghi's accomodative stance exemplified by QE, and with the governments in Paris, Rome and Madrid who, he says, wanted to use Athens as a wedge to demolish German economic dogmas.
We also have stories on the reactions to and analysis of France’s county elections; why a grass roots uprising against TTIP may be on the cards; what is happening to Finland; and commentary on the eurozone’s perpetual instability.