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.

Photo: Getty Images
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I'm far from convinced by Cameron's plans for Syria

The Prime Minister has a plan for when the bombs drop. But what about after?

In the House of Commons today, the Prime Minister set out a powerful case for Britain to join air strikes against Isil in Syria.  Isil, he argued, poses a direct threat to Britain and its people, and Britain should not be in the business of “outsourcing our security to our allies”. And while he conceded that further airstrikes alone would not be sufficient to beat Isil, he made the case for an “Isil first” strategy – attacking Isil now, while continuing to do what we can diplomatically to help secure a lasting settlement for Syria in which Assad (eventually) plays no part.

I agreed with much of David Cameron’s analysis. And no-one should doubt either the murderous barbarism of Isil in the region, or the barbarism they foment and inspire in others across the world.  But at the end of his lengthy Q&A session with MPs, I remained unconvinced that UK involvement in airstrikes in Syria was the right option. Because the case for action has to be a case for action that has a chance of succeeding.  And David Cameron’s case contained neither a plan for winning the war, nor a plan for winning the peace.

The Prime Minister, along with military experts and analysts across the world, concedes that air strikes alone will not defeat Isil, and that (as in Iraq) ground forces are essential if we want to rid Syria of Isil. But what is the plan to assemble these ground forces so necessary for a successful mission?  David Cameron’s answer today was more a hope than a plan. He referred to “70,000 Syrian opposition fighters - principally the Free Syrian Army (FSA) – with whom we can co-ordinate attacks on Isil”.

But it is an illusion to think that these fighters can provide the ground forces needed to complement aerial bombardment of Isil.  Many commentators have begun to doubt whether the FSA continues to exist as a coherent operational entity over the past few months. Coralling the myriad rebel groups into a disciplined force capable of fighting and occupying Isil territory is a heroic ambition, not a plan. And previous efforts to mobilize the rebels against Isil have been utter failures. Last month the Americans abandoned a $500m programme to train and turn 5,400 rebel fighters into a disciplined force to fight Isil. They succeeded in training just 60 fighters. And there have been incidents of American-trained fighters giving some of their US-provided equipment to the Nusra Front, an affiliate of Al Qaeda.

Why has it proven so hard to co-opt rebel forces in the fight against Isil? Because most of the various rebel groups are fighting a war against Assad, not against Isil.  Syria’s civil war is gruesome and complex, but it is fundamentally a Civil War between Assad’s forces and a variety of opponents of Assad’s regime. It would be a mistake for Britain to base a case for military action against Isil on the hope that thousands of disparate rebel forces can be persuaded to change their enemy – especially when the evidence so far is that they won’t.

This is a plan for military action that, at present, looks highly unlikely to succeed.  But what of the plan for peace? David Cameron today argued for the separation of the immediate task at hand - to strike against Isil in Syria – from the longer-term ambition of achieving a settlement in Syria and removing Assad.  But for Isil to be beaten, the two cannot be separated. Because it is only by making progress in developing a credible and internationally-backed plan for a post-Assad Syria that we will persuade Syrian Sunnis that fighting Isil will not end up helping Assad win the Civil War.  If we want not only to rely on rebel Sunnis to provide ground troops against Isil, but also provide stable governance in Isil-occupied areas when the bombing stops, progress on a settlement to Syria’s Civil War is more not less urgent.  Without it, the reluctance of Syrian Sunnis to think that our fight is their fight will undermine the chances of military efforts to beat Isil and bring basic order to the regions they control. 

This points us towards doubling down on the progress that has already been made in Vienna: working with the USA, France, Syria’s neighbours and the Gulf states, as well as Russia and Iran. We need not just a combined approach to ending the conflict, but the prospect of a post-war Syria that offers a place for those whose cooperation we seek to defeat Isil. No doubt this will strike some as insufficient in the face of the horrors perpetrated by Isil. But I fear that if we want not just to take action against Isil but to defeat them and prevent their return, it offers a better chance of succeeding than David Cameron’s proposal today. 

Stewart Wood is a former Shadow Cabinet minister and adviser to Ed Miliband. He tweets as @StewartWood.