January 30, 2015

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Syriza's new charm offensive - a bluff?

Is the new Greek government rowing back or was it all a big misunderstanding? 

Nikos Kotzias last night backed the sanctions against Russia, extending the list of sanctioned individuals and a six-month extension of sanctions already imposed. Varoufakis earlier on his blog suggested that Greece did not want to block sanctions against Russia but wanted to be consulted, though energy minister Panagiotis Lafazanis, representing the left wing of Syriza in the cabinet, wants no sanctions indeed and said so. Even if Lafazanis is not representing the position of Syriza government, he is representing at least 30% in the party, writes the FAZ.  Russian Finance Minister Anton Siluanov exploited the situation and told CNBC that Russia could consider financial help for Greece. If Greece were to ask for help, then Moscow would consider it taking into account all aspects of the billateral relationship. Helpful indeed.

The Greek government was also putting in some effort to dispel market fears of a standoff with EU creditors. Yiannis Dragasakis rushed to say that initial comments made by new cabinet members were due to inexperience, according to Greekreporter. And yes, of course, Greece welcomes investors.  All the major banks are back up yesterday by between 8% and 20%. Alpha Bank shares went up by almost 20% yesterday after a collapse of 26.8% the day before. National Bank of Greece, which also lost almost 30%, rose 12.3%. Whether it slows down the deposit flight, is another matter. There has been an outflow of €11bn in January alone in the run-up to the elections, according to unnamed Bloomberg sources.

Martin Schulz  also emerged quite optimistic from meeting with Alexis Tsipras. He said the two men agreed on many points “while others needed more discussion” and expressing his view that Tsipras’ government was not aiming to “follow its own course” independently of its European partners, according to Kathimerini. He wecomed Syriza's plans to fight tax evasion. Behind the smiles for the cameras, there had been pressure though. Schulz pressed Tsipras to reach a decision on the extension of Greece’s European bailout, which is due to end on February 28, as quickly as possible to ensure the country does not find itself caught short. The German official also asked the premier to focus on presenting concrete examples of revenue-boosting measures before pressing demands for debt relief. Sources told the paper that Tsipras assured Schulz that a key government priority was to crack down on tax evasion and said that the two men agreed on two key issues: that austerity policies cannot help Europe emerge from its debt crisis and that Greece’s public investment programme should be excluded from deficit calculations.

And Yanis Varoufakis also played down a potential rift with the eurozone, insisting that there was no intention from the Greek side to turn its relationship with lenders into a “Wild West duel.” Varoufakis said he is seeking to win support for a renegotiation of Greek debt and a "bridge" deal to replace the current bailout programme, Reuters reports. 

Jeroen Disselbloem is due in Athens today, to kick off talks about changing the terms of the bailout agreement, writes the Greek finance ministry in a statement. Yanis Varoufakis will next week also travel to London, Paris and Italy. 

The comments of Dragasakis and Varoufakis are in contrast with the measures announced by the new ministers who took over their posts on Wednesday, including privatisation stop, minimum wage, extra pension etc. Those were clearly contrary to Greece’s bailout programme and suggest that while some government representatives are adopting a conciliatory line, the coalition will not hold back from taking steps that could upset its eurozone partners. The new coalition should thus not be expected to back down from its positions easily, writes Macropolis. There is a clear sense that it is determined to follow a hard line.

This is also the understanding of Paul Mason on Channel 4. Syriza clearly wants to open a debate in Europe over austerity and risk-sharing in the eurozone, and this goes beyond the debt relief talks. As for its alliance with the extreme right Anel party he notes that Russia links are deeply rooted. But Independent Greeks will have little or no influence on economic policies. Even if Anel fragments, Syriza would only need two votes. Also for anti-austerity votes, Syriza can rely on the support or abstention of 15 communist MPs, who have refused to join a coalition. Even if the communist KKE refuses to back nationalisations, wage rises and welfare increases on principle, just by abstaining it gives Syriza - voting alone - a majority on any measures. Mason also made the interesting point that Tsipras’ original position was that he would call a referendum if the ECB tried to force Greece out of the eurozone, or tried to veto anti-austerity measures. But given his surprisingly high showing in the elections he might do something different. Enrolling all those 18 year olds who were not allowed to vote last Sunday and those abroad, Tsipras might be tempted to call another snap election and win an outright majority instead. 

Our other stories

Greece continues to dominate our coverage. In addition to the latest developments in Athens, we are focusing on comments on Greek debt sustainability and foreign exposures to Greece. We also cover the cut in the Danish deposit rate, the Italian presidential elections, German deflation, and some moderately good economic news from Spain and Italy; and on Thomas Mayer’s view on the future of the euro - or lack of.

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