Article / 12 November 2015 at 18:32 GMT

Massive strike halts Greece in new challenge to PM

Managing Partner / Spotlight Group
United Kingdom
  • Greek trade unions stage a general strike
  • Anger flares up against continued austerity
  • PM Tsipras in talks with creditors on further belt-tightening to secure €10 billion
  • Only by meeting creditor demands will fresh finance flow
  • Greek banks need an estimated additional €14.4 billion to stay solvent
  • Some money that could flow to banks will be tied to pace of privatisation 
  • Eurozone's woes are mounting

No-to-cuts badge
 Hundreds of thousands of Greeks joined in a general to demonstrate against austerity, bringing the country to a standstill. Photo: iStock



By Stephen Pope


Not everyone can be satisfied

Thursday, November 12, may well be remembered as the day when a genuine rift opened between the Greek trade union movement that had supported the left-wing Syriza party and the prime minister and leader of Syriza, Alexis Tsipras.

Across the land, but most notably in Athens, the unions were out on the streets waving their rose red banners to oppose austerity and chanting a hypnotic battle cry against cutbacks, restrictions and the external agencies that have enforced them.

This time, however, the unions are not at one with Tsipras who has won their vote twice, on January 25 and September 20. 

This time high-skilled professionals, such as doctors and pharmacists, have taken to the streets with the blue-collar workers and civil servants in a 24-hour general strike that has brought the country to a standstill for 24 hours.

Up to 20,000 protesters gathered in central Athens for a peaceful protest, while the response from anarchists was to hurl incendiaries at the police officers trying to keep law and order. Just as in 2009 and 2010, the air turned a shade of blue-white as tear gas and stun grenades were deployed. By now one might have expected the radicals to realise that anarchy achieves very little unless an overwhelming majority are for insurrection.

Return of the Ouroboros

The Ouroboros is an ancient symbol depicting a serpent eating its own tail. In Classical Greece, Plato described the Ouroboros as the first living thing; a self-eating, circular being.

So it is with the Greek left-wing as the biggest unions, ADEDY and GSEE, are accusing the prime minister of bending the knee to his creditors and imposing measures that "perpetuate the dark ages for workers…”

The Hellenic Statistical Agency has recently confirmed that 1.18 million Greeks, or 24.6% of the workforce, remained unemployed in August and that the level of youth unemployment is running at 48.6%.

How quickly the wheel of political favour can turn, as in January Tsipras led the charge against austerity and supported the unions as they conducted a series of national strikes.

It is, however, so much easier to sit on the opposition benches and criticise those in power and tell them what to do than it is to govern. Tsipras has learned the hard way that all the ideology counts for little as even with a hand on the lever of power if one must look elsewhere for cash when one is simply a political puppet on a string. Once again it boils down to the fact that “it is all about the money”. 

Ouroboros
  Ouroboros drawing from a late medieval Byzantine Greek 
alchemical manuscript. Image: Wikipedia

The prime minister is now in negotiations with creditors on a further round of belt-tightening to secure for Greece a disbursement of €10 billion ($10.7 billion) to be injected into the nation's struggling banks.

Failure to reach agreement with fellow Eurozone member states and the International Monetary Fund (IMF) on a range of policies, such as residential foreclosure, state asset privatisation and tax reform, would cast the solvency of the country’s lenders into doubt. A run on the banks, as seen this past summer, would create turmoil on the Athens stock exchange once more.

What did organised labour expect? After all, Tsipras had called for the nation to hold a referendum to reject one set of proposals for a third bailout and then, straight after his re-election, he chose to accept an even tougher offer. 

It didn't need to be this hard, and it is the fault of Tsipras alone. The Syriza-led government will now implement deeper cuts to achieve less ambitious fiscal targets.

Financial farce

The aggressive standoff between Tsipras and his former finance minister, Yanis Varoufakis, and the creditors led to such a breakdown in relations that financial aid was in essence frozen over the summer, leading to capital controls to prevent a devastating flight of capital.

The Greek banks are estimated to require an additional €14.4 billion ($15.4 billion) simply to remain solvent as their balance sheets creak under the weight of increased bad debts, diminished economic activity, expensive emergency funding requirements from the European Central Bank (ECB), and capital transfer limitations.

Even as the leading banks seek to tap the private sector through an investor book-building, most of the capital needed to stay afloat must come from transfers under the latest austerity-attached bailout agreement.

Part of the money that could flow to the Greek banks will be linked to the pace of privatising state assets. That is as wild a dream as it ever was. Since 2010 Greece has barely delivered 35% of the planned privatisation process, and now, five years later, the potential assets for state divestment are not worth the same as before, not by a long stretch.

Greek demonstrations
The Greeks were asked in July this year to vote on whether to accept a proposal by the country's creditors for more austerity to keep aid flowing. Photo: iStock


Politically poles apart

The hard-line German finance minister, Wolfgang Schäuble, has said that the Greek parliament needs to reduce the level of protection it offers to indebted homeowners and deliver an overhaul of the bank governance rules. If it does not, he is unwilling to sign off on the planned funding to recapitalise Greece's banks.

Some will say that is just Schäuble being an über-hawk. But some day, someone of power will need to have the courage to call the situation as it really is and say that Greece is a bust flush that is beyond repair unless major concessions are made.

The clock is ticking and on Tuesday, November 10, the Tsipras government indicated that settling its negotiations with creditors was a top priority.

That will require a further round of austerity if the funds to allow Greece to cover the budget requirements for 2016 are to flow down the pipeline. Further austerity will also be a condition for creditors to find any room to ease the Greek debt burden.

The damage of Eurozone dogma

It would have been better if the problem had been swiftly dealt with back in 2009-10 and Greece shown the door. There is, of course, little point in my pondering over what could have been.

The danger for Greece in struggling to meet the latest set of creditor demands is that it risks becoming a powder keg of emotion. The people can only be pushed so far before the mood erupts. Yet here is the difficulty.

Most Greeks wish to stay in the Eurozone and yet are not unhappy about the high price to be paid under the current terms and conditions of membership. The Eurozone has not had the courage to tell Greece how the club rules work and what will happen if it does not obey the rules. Instead, there is always a compromise, a fudge and a new bailout.

Instead of a reality check, a series of skewed compromises has been put in place each time, resulting in Greece requiring ever more capital. However, each time the threat is that additional credit demands another tighter rightward turn on the austerity tap. 

How long before public emotion over lost pensions and salaries boils over? How long before the majority agree to play the insurrection card? Once one sees wider home repossession, the mood may turn ugly.

The solution is surely bi-lateral. The Eurozone must accept that the money extended to Greece is gone and written off and, in return, Greece has a window of, say, three years to slim ownership of enterprises to reduce the size of the state overall.

Or it is time to cut the losses? Forgive Greece a large chunk of its debt, give it a severance payment and finally let Greece go? No, that will not happen. It is just not on the Eurozone radar.

I have a bad feeling that what we say about Greece today we will be saying about Portugal all too soon since the Left has taken power there, and we could be saying the same about Spain after the election in December.

The Eurozone's woes are mounting, and they will not be solved by a dash of Draghi monetary delight in December.

One thing is clear: the Eurozone's mess is deep-seated and written into its DNA. As a result of political stress and fissures, limited structural reform and a divergent monetary policy across the Atlantic, the euro is in decline and subject to the gravity of parity with the dollar.

Greek bank
 Queuing up for cash at an ATM outside a branch of a Greek bank 
during the economic crisis of July. Photo: iStock 


— Edited by John Acher


Stephen Pope is managing partner at Spotlight Ideas

3y
fxtime fxtime
What an utter farce the greek saga has become :-( The commentary under the first picture says it all....greek economy at a standstill.....but can we really believe Greece will ever accept structural changes to their finances are required or will they simply keep promising to their electorate anything to stay in power despite their inability to prudently manage what fiscal ''reserves/assets'' they have. Surely it is time to write off Greek debt and then tell them to stop asking for more? When will Greek electorates realise that their worst enemy is their own politicians.

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