February 26, 2015


Tsipras got backing for deal

Alexis Tsipras got the political backing of his party for the extension deal. After a ten-hour discussion with Syriza MPs, Tsipras prompted them to vote Yes/No to the eurogroup agreement by show of hands, a sort of open "no confidence" vote inside the party. The result was 135 Yes, 5 No and 5 abstentions according to @keeptalkingGR, which essentially means no disagreement, though @YanniKouts noted that even 10% negative votes can hurt. The most outspoken critic was Panayiotis Lafazanis, who said that parts of the agreement have been written in the lenders' language, not Syriza's. He also resists privatisations in the energy sector and wants to cancel the privatisation of the former airport site at Elliniko. According to Kathimerini, Tsipras told the MPs that the opposition is only waiting for the Syriza government to falter amid the size of the challenges, and dub it the "left parenthesis.” The communist party decided to vote against the agreement.

It looks like the extended agreement is also passing through the German parliament, though German newspapers report on a brewing revolt inside the CDU/CSU. There will be trouble down the line, as the news reports already talk about a third programme. Ireland, Spain and Portugal won't be easy negotiating partners either. Michael Noonan said in an interview with Bloomberg that Greece needs to find a middle way between debt write-offs and Grexit to negotiate with the objective to make debt sustainable. This involves talking about increasing maturities and maybe parking debt for some period. Noonan also said he is not against GDP-linked bonds in principle, but that there are issues around them. 

As for Greece's short term liquidity problems, we note a couple of Yanis Varoufakis interviews. In an interview with Bloomberg TV, Varoufakis suggested that the ECB could return profits of €1.9bn it made from purchasing Greek bonds on the secondary market to help the Greek government to pay its IMF loan next month. “The ECB could simply hand over this money to the IMF as partial repayment,” he said. “The ECB recognizes that this is money we are owed. This is not borrowed money, it’s an overpayment to the ECB.”  He also said the tide is turning and money is returning back to Greece after the agreement, including €700m on one day alone. On CNBC (via Kathimerini), Varoufakis was confident that the short term cash flow problem would be solved and that the long term is looking good. “They can be confident that Europe is going to find a way of dealing with the cash flow problem," he said. "Can you imagine allowing the eurozone to fragment over a few billion euros?” There is also an interview in the latest edition of Charlie Hebdo, where he was warning Wolfgang Schauble and his collegues that "if you think you would do well to bring down progressive governments like ours, prepare for the worst," cites the FAZ. If democratically elected governments are cut off and voters despair, it is to the benefit of extremists, rascists and nationalists and all those who live on fear and hatred. He compared the budget cuts with the Medieval practice of bleeding the patient that made the sick often even more sick, which in turn prompted another prescribed bleeding.

As for the reform list itself, one recurring complaint about the Greek proposal was its lack of numbers to allow an assessment on its impact on the budget. Macropolis has put together some figures based on the measures and reforms that have been recently detailed. 

On the revenue side:

  • Settlement of overdue tax and social security contributions: Nadia Valavani expects to collect €3bn and €1.46bn respectively, assuming that €9bn of the €76bn in outstanding tax obligations are collectible.
  • Tax evasion: Panayiotis Nikoloudis expects to collect €2.5bn of the €7bn from 3500 confirmed cases of tax evasion 
  • Smuggling: Dimitris Mardas said that the estimated revenues from fuel and tobacco products’ smuggling stand at €1.5bn and €800m respectively.

On the expenditure side:

  • Settlement of non-performing loans: for the establishment of a a state-controlled intermediate body to manage NLPs Syriza put out an estimate of €2bn in costs, which Varoufakis had proposed to be financed by the bank recapitalisation funds;
  • Humanitarian crisis: The cost for measures included in the reform list are at €1.32bn.
  • Procurement: Mardas also counts on savings from using a common procurement system in local governments and hospital. He expects costs to be trimmed by 20% or €1bn through a new system for procurements up to €60000. 

Our other stories

We also look at the commission’s new approach to member-state deficits; Spain’s State of the Nation address; whether Brexit is a threat; a supply side problem with the ECB’s QE plan; Whelan vs Sinn; and the Geo-politics of Grexit.

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