The Syriza proposal. A surrender?
The Syriza proposal to The Institutions has been published by Ekhatimerini. Some quick remarks (from the top of my head, I did not check):
A) The Institutions could have seized the opportunity to combat corruption and rent seeking behaviour by oligarchs and banksters (some tax exemptions are supposedly enshrined in the Greek constitution…) but they did not put pressure Syriza to do what Syriza wanted to do and clearly wasted the opportunity.
B) The financial proposals are not sound as they are ‘parameteric’, i.e. as they do not take all kind of macro (and micro!) economic consequences into account.
C) As B) was the most important (and totally right) criticism of Syriza of existing measures this means that the proposals indeed surrenders (but see below). FYI: the macro economic failure of earlier programs is clearly shown by the extremely large difference between the calculated and the (much larger) real consequences of austerity. The micro economic insufficiency is clearly shown by the weird insistence of The Instiutions that average, economy wide labour costs are a measure of competitiveness – which leads to the idea that cutting wages of teachers enhances the competitiveness of manufacturing. The lack of macro (and micro!) economic logic of the proposals is a hallmark of all Eurozone austerity programs: so called ‘reforms’ of the labour market and the lack of reform of financial markets consistently both do not have a sound economic basis.
1) Regarding privatisations and tax evasions and a fiscal council the proposals are pretty much the same as earlier proposals from about three months ago.
2) On the labour market there are no real proposals
3) There are some very explicit remarks about banks in the sense that the government has to respect the private management of the banks blablabla and ‘no fiscal policies actions would be taken that will undermine the solvency of the banks’ (no need to, of course, we can leave that to the bankers themselves. And didn’t the Greek government veryu recently inject about 24 billions of tax payers money into these same banks – but that’s of course not disrespecting ‘private management’). This feels a bit like the Greek government has been forced to write this.
4) There is a remarkable lack of new wealth taxes (a little regarding yachts, but that’s peanuts).
5) Vague but extremely important: “The authorities will further develop and swiftly implement a comprehensive strategy for addressing the issue of non-performing loans”. This is a very important issue which indeed has to be addressed. But Ireland and Cyprus show that The Institutions have a clear idea about such policies: creditors come first and second (in Ireland in fact first, second, third, fourth, fifth, sixth and seventh – there are seven ‘experimental’ stages to squeeze money from creditors before a creditor can default). In combination with point 3 and accepting the idea that point 3 has been forced upon the documents by The Institutions it seems that The Institutions try to impose a very creditor centered system of dealing with non-performing loans on Greece, just like they try to do in Cyprus and Ireland. The Europe of the banks. Somebody seems to have forgotten that ‘bank‘ and ‘bankrupt‘ have the same historical etymology: when a moneylender couldn’t pay he did not get loads of government money but his bench was broken and his licence revoked.
6) The tax increases (VAT) and spending decreases (pensions): complicated. You have to know a lot about the details of the Greek VAT end pension system to be able to make a clear assessment of these proposed measures. With that in mind: as I see it the increase in the pension age is a necessary step which, by the way, is totally consistent with traditional socialist ideas about labour: jobs can and have to be decent and work can be dignified – no reason for early retirement. But such measures are at the moment not urgent from a macro economic point of view, as the unemployment rate is 27%. It might however help people with low pensions as they can work longer. Increasing VAT on the islands (tourist destinations!) is bonkers – tourism is very price sensitive. Increasing other VAT rates is, in a deeply depressed economy, very counterproductive: tax wealth (land?) instead. Increasing (medical) costs for rich pensioners might be fair but considering the fact that most pensioners are poor it’s just another hit to their purchasing power (though generic medicines may become cheaper) it does seem as if the vulnerable are hit. Which is of course the explicit political intention of The Institutions: weaken the core constituency of Syriza!
Aside: The Institutions want countries to install an independent ‘fiscal watchdog’, like the Dutch Centraal Planbureau (CPB) or the USA CBO. Though the Dutch CPB is decreasingly independent, it still takes heed of micro and macro consequences of policy measures. It won’t be long before The Institutions will notice this and start to press for an increasingly legal instead of economic nature of these watchdogs.