[Marxism] reshuffle in Greece's economic team: speculation Tsipras wants a deal
daynegoodwin at gmail.com
Mon Apr 27 10:58:01 MDT 2015
Why Greece Could Now Tiptoe Toward a Deal
by Alen Mattich
Wall St. Journal, April 27
As the money runs out, the Greek Prime Minister Alexis Tsipras is
starting to recognize that extend and pretend might not be such a bad
strategy after all. Which rather leaves his finance minister, Yanis
Varoufakis, out in the cold.
The Greek government reshuffled its bailout negotiating team, with the
alternate foreign minister, Euclid Tsakalotos, taking over the new
team and the finance ministry’s chief economist leading talks in
Brussels with the country’s international creditors.
The frustrations Greece’s creditors have with Mr. Varoufakis hit a
pitch Friday when the latest Eurogroup meeting of eurozone finance
ministers ended with no deal and plenty of recriminations. Mr.
Varoufakis is seen as abrasive and confrontational. But most
crucially, he’s been resistant to agreeing to pursue the sort of
sleight-of-hand deals that fail to acknowledge Greece’s true economic
Greece, he’s argued, can’t pay its outstanding debts, which will need
to be forgiven. And Greeks can’t tolerate more of the same sort of
austerity that has contributed to a fall in national output by more
than a quarter since the start of the crisis.
His Syriza government might have been elected on a promise to end
austerity and shed the country’s onerous debt, but that doesn’t wash
with the country’s creditors. Not least because northern European
taxpayers already feel disgruntled about bailing Greece out and for
fear that other struggling member states would demand equivalent
Except Mr. Varoufakis is right. It is far-fetched that Greece could
ever pay back its debts, which total around 175% of national output.
And it’s likely that demanding further austerity would just send the
economy into yet another crippling recession.
Greece’s creditors aren’t economically ignorant. But they are
professional politicians, which Mr. Varoufakis isn’t–he’s an academic
economist specialized in game theory, which is a specialized analysis
of negotiating tactics.
Academic economics demands that eggs be called eggs. Politics
sometimes works better when they’re called avian originated ovoid
Greece’s eurozone peers know they can’t forgive Greek debt. But
outstanding Greek debt isn’t really an economic issue right now.
Notwithstanding the massive load, its impact on the Greek economy is
relatively modest. After earlier debt forgiveness, maturity extensions
and very favorable terms on its bailout loans, Greece’s nominal
interest costs in 2014 were, at 4.3% of GDP, lower than those of Italy
or Portugal. And debt maturities could be extended ever further into
the future so that one day, when conditions settle down, Greece’s
debts might well be quietly retired, when no one’s looking.
What’s more, the austerity Greece is kicking against is in part
self-imposed to protect inefficient parts of its own economy. Greece’s
total spending on pensions was 17.5% of GDP in 2012, compared with
13.2% on average for the European Union. It’s double that of some of
the European Union’s eastern European members with comparable
Even so, Greece’s creditors have offered concessions on austerity,
making it clear they don’t want to destroy the economy. Meanwhile, the
European Central Bank has been propping up the Greek banking sector
with ever rising infusions of emergency liquidity.
Mr. Varoufakis may not be politically minded. But Mr. Tsipras is.
He’ll have noted the polls that show three quarters of the population
want to keep the euro. And he’ll be aware that Greece holds a very
poor hand in this particular game of high stakes poker. Efforts to
extract even more from its creditors could well result in an angry and
frustrated response that leaves Greece with no time and massive
The market’s response to Monday’s news of a reshuffle said much. Greek
bond yields dropped sharply and its equities rallied.
A long term deal is by no means a nailed on certainty. But Greece
might well be on its way to gaining a few months’ grace to negotiate
its next rescue package.
Change to Greek Bailout Negotiating Team Fuels Market Hopes
by The Associated Press, April 27, 2015
in NYTimes <http://www.nytimes.com/aponline/2015/04/27/world/europe/ap-eu-greece-bailout.html>
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