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…

Follow Yiannis on twitter @YiannisBab

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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Q&A: Would Brexit really move “the Jungle” to Dover?

The 2003 Le Touquet treaty was negotiated outside the EU.

What is David Cameron’s most recent claim about Britain leaving the EU?

The Prime Minister is claiming that Brexit could result in France ending the agreement by which British immigration officials carry out checks on those seeking to enter the UK in France.  

More specifically, Cameron thinks that a vote to leave the EU would give the French government an excuse to revoke the Le Touquet treaty of 2003, and that this would cause refugee camps akin to the Calais “Jungle” to spring up along the English south coast.

What’s the Le Touquet treaty?

In February 2003, Tony Blair went to the northern French resort of Le Touquet to try and persuade President Jacques Chirac to support British and American military action in Iraq. (He failed). 

Blair and Chirac hogged the headlines, but on the summit’s sidelines, Home Secretary David Blunkett and his French counterpart, an ambitious young politician named Nicolas Sarkozy, negotiated a treaty establishing juxtaposed controls at each country’s sea ports.

This agreement meant that British border police could set up and run immigration checkpoints at Calais – effectively moving the British border there from Dover. The treaty also enabled French border police to carry out checks in Dover.

British border police had already been operating at French Eurostar terminals since 2001, and manning the French entrance to the Eurotunnel since 1994.

What’s all this got to do with the EU?

Technically, nothing. The Le Touquet treaty is a bilateral agreement between the UK and France. Both countries happen to be member states of the EU, but the negotiations took place outside of the EU’s auspices.

That's why eurosceptics have reacted with such fury today. Arron Banks, the co-founder of Leave.EU, said the Prime Minister was “resorting to scaremongering”, while Ukip’s migration spokesperson, in a surprising role-reversal, said that Cameron’s argument was “based on fear, negativity, and a falsehood”.

Cameron’s claim appears to be that Brexit would represent such a profound shift in the UK’s relationship with other European states that it could offer France an excuse to end the agreement reached at Le Touquet. That is debatable, but any suggestion that the treaty would instantly become void in the event of a vote to leave is untrue.

Does France actually want to revoke the treaty?

Local politicians in Calais, and in particular the town’s mayor, have been arguing for months that the treaty should be abandoned. Le Monde has also criticised it. The current French Interior Minister, Bernard Cazeneuve, hinted today that he agreed, saying that a British vote to leave “will always result in countermeasures”.

On the BBC's Today programme this morning, Rob Whiteman, a former head of the UK Border Agency, said that it was “almost certain” that the treaty would end if the UK left the EU. He said that France has benefited less from the deal than it expected:

“I think at the time the French felt there would be an upside for them, in that if it was clear that people could not easily get to Britain it would stop Sangatte building up again. The camp was closed. But history has shown that not to be the case. The French authorities still have a huge amount of pressure on their side.”

That said, the French government receives money from the British to help police Calais and its camps, and various French officials have acknowledged that their ports would receive even more traffic if refugees and migrants believed that it was easier to travel  to the UK than before.

If the treaty ended, would “the Jungle” just move to Dover?

There’s little doubt that because of linguistic and familial ties, and perhaps the perception that the UK is more welcoming than France, many refugees and migrants would come to the UK as quickly as they could to claim asylum here.

Whiteman also said on Today that since the 2003 agreement, the annual number of asylum claims in the UK had declined from 80,000 to around 30,000. So the UK could expect a significant spike in claims if the treaty were to end.

But the British asylum process makes it unlikely that anything like “the Jungle” would spring up. Instead, those claiming asylum would be dispersed around the country or, if authorities are worried they would flee, held in an immigration detention centre.

Why is Cameron saying this now?

This looks suspiciously like one of the Tories' election strategist Lynton Crosby’s dead cats. That is, in an effort to distract his critics from the detail of the renegotiation, the PM has provoked a row about migrants and refugees. Cameron is clearly keen to move the debate on from the minutiae of different European agreements to bigger questions about security and terrorism. Though getting bogged down in competing interpretations of a treaty from 2003 may not be the best way to move onto that broader terrain.