Too early for good news from Greece

Ministers' claims that the economy has "turned a corner" don't bear up to scrutiny.

"Greece has turned a corner" is the general message Yannis Stournaras, the Greek Finance Minister, has been trying to spread in the past few months. Not only "The IMF has praised improvements to Greece's much-maligned tax collection procedures," as the Greek media have been reporting lately, but also, as Stournaras said, "Greece could return to international debt markets by next May." This same line has been at play since late last year, when the Bank of Greece Governor Giorgos Provopoulos stated in an interview with the Financial Times that the worst is over. "Greece could return to the markets in 2014," Stournaras went on. "We've turned a corner".

The international media have tried their hand at this, with Reuters columnist Hugo Dixon writing in his piece The Gloom Around Greece is Dissipating:

Athens now seems on course to achieve 'primary balance' this year. In other words, it will not have a budget deficit before interest payments. That means it probably will not have to implement another round of austerity next year, so the economy will not be struggling against that obstacle.

One might notice there is a quite big maybe in there, standing out. In the same spirit, Yannis Stournaras commented last week in an interview with NET that "this year we managed to make up for two thirds of the fiscal gap, without cutting pensions". Again, Stournaras seems to only be speaking about part of the money Greece will need within 2013 in order to avoid cutting deeper into pensions and public spending, while at the same time admitting that 2013 will be a very difficult year. His view is that unemployment will start falling in 2014.

There are several problems with this, and the unavoidable question arises: is Greece really doing better or is Stournaras simply spinning a positive vibe to soothe the markets and maybe help Merkel and co. look good ahead of the German elections in September? The first issue here would be a whopping €8.2bn the country owes to private companies and contractors. Greece has only managed to make its overall finances look good by stopping payments towards the domestic market. Part of the bailout funds will have to be used in order for this debt to be paid off, but a sense of "too little, too late" is in the air as this delay has strangled many businesses in the past 3 years. A "possible return to the markets" is more like a "necessary exit" as bailout funds run dry next April and additional aid looks unlikely to arrive. Any issues we might face on the road there, lie exclusively with the coalition's financial strategy.

The government's decision to increase taxation on heating oil did not only leave many Greeks unable to heat their homes last winter, but also caused general revenue from taxes to drop by €291m, after consumption fell by 68.7 per cent. Since the beginning of the year, due to this and other tax hikes, tax revenues were lower than the targets set by the government and the Troika in the first three months of 2013.

The most terrifying prospect Greece faces in the next few months though, is the devastating unemployment. Overall unemployment in Greece is now 27 per cent while it goes up to 28.7 per cent in certain regions. In the 18 to 25 age group, unemployment stands at a staggering 64 per cent. To give some perspective, unemployment stood at 21.9 per cent last January, and has more than tripled since the crisis began in 2008. It is likely that it will touch 30 per cent by the end of the year, despite the cuts in wages that now sees those making the minimum wage earning no more than €440 per month after taxes.

It is easy to assume that in his statement, Yannis Stournaras means that unemployment will start falling once it reaches the dreaded 30 per cent. This does little to comfort Greeks. Despite the numbers the government chooses to stress in order to support its position of "light at the end of the tunnel", the very real problems of unemployment, dwindling consumption and political instability are felt by ordinary Greeks. New cuts in wages and pensions are still on the table if Greece doesn’t achieve a primary surplus this year or if, let's be honest, this primary surplus is achieved on shaky grounds and new taxes await within the year.

We've yet to see the Greek government clash and cut its ties with the Greek oligarchs that have refused so far to pay their fair share of the burden. Ship-owners still enjoy scandalous tax-exemptions, while the same people who often found themselves facing charges for cheating the state out of millions (and still owe tens of millions according to the data released by the ministry of finance) appear to still be in business with the ruling New Democracy party. This only stands proof that the government will opt to put even more of that burden on the backs of those already finding themselves in dire position because of this unwillingness.

The ruling coalition and the Troika's spin dominates public discourse in Greece. According to a recent report, the government takes up 63.4 per cent of the time allocated to political parties, while the Troika and its representative’s statements take up 57.2 per cent of the rest. This may be helpful for the financial climate to improve at a superficial level and to make Angela Merkel and Wolfgang Schauble look good while elections draw near (a courtesy Schauble looks unwilling to grant Greece), but it does little in the way of truth.

A harsh summer that will bring hikes in electricity bills will find Greeks once again in discomfort, this time battling the predicted heatwave without access to air-conditioning. Health issues will inevitably arise. And that's only one part of the problem. No matter how much the Greek government wants us to believe things are bound to get better, it does to little to help those who actually need it: the people. If only wishful thinking and PR could replace reality…

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Greek finance minister Yiannis Stournaras. (Photo: Getty.)

Yiannis Baboulias is a Greek investigative journalist. His work on politics, economics and Greece, appears in the New Statesman, Vice UK and others.

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Under pressure at home, Donald Trump will struggle to deliver what Saudi Arabia wants

Above all, the Gulf states want stability. Can this beleaguered US president bring order?

There is a nervous energy around Riyadh. Fresh palm trees line the roads from the airport, punctuated by a wall of American flags and corporate slogans: “Together we prevail.” All the street lights are suddenly working.

The visit of any American president is always a lavish affair in Saudi Arabia, but there is an optimism to this visit that evaded the Obama years and even the recent visits of Theresa May and Angela Merkel.

Yet, there are two distinct parts to this trip – Trump’s first overseas engagement as president – that will determine its success. The first is relatively straightforward. Trump will sign huge defence contracts worth billions of dollars and offer trading opportunities that allow him to maintain his narrative of economic renewal for American businesses.

For the Saudis, too, these deals will fit into their ambitious project – known as Vision 2030 – to expand and diversify their economy away from its current dependence on oil revenues. Both parties are comfortable with this type of corporate and transactional government, enjoying the gaudy pomp and ceremony that comes with the signing of newly minted deals.

The more complicated aspects of the trip relate to its political dimensions. As the Middle East continues to convulse under the most significant turmoil to envelope it since the collapse of the Ottoman Empire, what Gulf leaders desperately want is the re-establishment of order. At its core, that is what will define Donald Trump’s visit to Saudi Arabia – and the Saudis are optimistic.

Their buoyancy is borne of shared regional interests, not least curbing Iranian influence. Ever since the Arab uprisings in 2011, Tehran has asserted itself across the Levant by organising hundreds of proxies to fight on its behalf in Syria and Iraq. Closer to home, too, the Gulf states accuse Iran of fomenting unrest within Shia communities in Saudi Arabia’s eastern provinces, in Bahrain, and in Yemen.

All of this has left the House of Saud feeling especially vulnerable. Having enjoyed an American security umbrella since the 1970s, Obama’s pursuit of the Iran deal left them feeling particularly exposed.

In part at least, this explains some of the Kingdom’s more frantic actions at home and abroad – including the execution of prominent Shia cleric, Sheikh Nimr al-Nimr, and the war in Yemen. Both are really about posturing to Iran: projecting power and demonstrating Saudi resolve.

Trump shares these concerns over Iranian influence, is prepared to look the other way on Saudi Arabia’s war in Yemen, and is deeply opposed to Obama’s nuclear deal. Riyadh believes he will restore the status quo and is encouraged by the direction of travel.

Just last month Trump commissioned a review of the Iran deal while the US Treasury imposed sanctions on two Iranian officials. Saudi Arabia also welcomed Trump’s decision to launch cruise missiles against a Syrian military base last month after Bashar al-Assad used chemical weapons in the town of Khan Sheikhoun.

These measures have been largely tokenistic, but their broader impact has been very significant. The Saudis, and their Gulf partners more generally, feel greatly reassured. This is an American presence in the region that is aligned to their interests, that they know well and can manage.

That is why Gulf states have rushed to embrace the new president ever since he first entered the Oval Office. Saudi Arabia’s deputy crown prince, Mohammed bin Salman (colloquially known simply as “MBS”), already visited him in Washington earlier this year. The Emiratis and others followed shortly afterwards.

A spokesman for Mohammed bin Salman later described the meeting with Trump as an “historical turning point” in relations between the two countries. A White House readout of the meeting baldly stated: “The President and the deputy crown prince noted the importance of confronting Iran's destabilising regional activities.”

Now that Trump is visiting them, the Saudis are hoping to broker an even broader series of engagements between the current administration and the Islamic world. To that end, they are bringing 24 different Muslim leaders to Saudi Arabia for this visit.

This is where Trump’s visit is likely to be fraught because he plans to deliver a major speech about Islam during his visit – a move that has seemingly no positives associated with it.

There is a lot of interest (and bemusement) from ordinary Saudis about what Trump will actually say. Most are willing to look beyond his divisive campaign rhetoric – he did, after all, declare “I think Islam hates us” – and listen to him in Riyadh. But what can he say?

Either he will indulge his audience by describing Islam as a great civilisation, thereby angering much of his political base; or he will stick to the deeply hostile rhetoric of his campaign.

There is, of course, room for an informed, careful, and nuanced speech to be made on the topic, but these are not adjectives commonly associated with Donald Trump. Indeed, the pressure is on.

He will be on the road for nine days at a time when pressure is building over the sacking of the former FBI director James Comey and the ongoing investigation into former national security advisor Michael Flynn’s contacts with Russia.

It is already being reported that Trump is not entirely enthusiastic about such a long overseas programme, but he is committed now. As with almost everything concerning his presidency, this extra pressure adds a wild air of unpredictability to what could happen.

Away from the lucrative deals and glad-handing, this will be the real standard by which to measure the success of Trump’s visit. For a relationship principally defined by its pursuit of stability, whether Trump can deliver what the Gulf really wants remains to be seen.

Shiraz Maher is a contributing writer for the New Statesman and a senior research fellow at King’s College London’s International Centre for the Study of Radicalisation.

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