Greece on the fence over bailout renegotiation | Europe| News and current affairs from around the continent | DW | 27.06.2012
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Greece on the fence over bailout renegotiation

The renowned economics professor Jannis Stournaras faces a Herculean task as Greece's new finance minister. In Greece, he has to implement reforms; abroad, he has to renegotiate the terms of a non-negotiable bailout.

As the initial candidate for heading the Finance Ministry, Vassilis Rapanos, had to decline the job for health reasons, the Oxford-educated Stournaras was one of the few remaining alternatives. It is also a signal to the rest of Europe that the new Athens government is willing to put its trust in an actual economic expert rather than long-serving party politicians.

Vassilis Rapanos

Rapanos bowed out early due to health reasons

But even a respected figure like Stournaras will have to fall in line behind the political agenda of the coalition government. The alliance of conservatives, socialists and the moderate left had agreed on pushing Brussels to granting two more years for reaching the austerity targets. Also, the coalition parties want to implement several of the election promises that in fact run contrary to Greece's austerity goals. Salaries are no longer to be cut, VAT is to be lowered significantly, labor market reforms are to be reassessed. Beyond the domestic reforms, the details of the EU rescue package are to be "renegotiated" as well.

Economics professor DimitrisMardas remains skeptical. "A renegotiation of the deal can not be pushed trough. The EU partners will not be willing to give any leeway on the structural reforms and the modernization program," the expert warned on Greek television. However, extending the time Athens will have to implement the reforms is not only possible but also necessary, Mardas continued. Such a move would in fact be in the interests of the international creditors as otherwise Greece would simply not be able to repay its debt.

No end in sight

The latest figures from Greece seem to support these concerns: According to a report by the Center of Planning and Economic Research in Athens, the Greek economy will drop a lot lower than initially expected. For the third quarter 2012, the report predicts a record minus of 9.1 percent. In this scenario, not even the money saved by the severe cuts will be enough to stabilize the budget.

"Instead of the 11.5 billion euros ($14.4 billion) that were initially agreed on, the country would need additional revenues of at least 14 billion - unless we'd lower our targets or go back to Brussels to renegotiate the aid package," analyst Nikos Filipidis told Greek television.

The next month he said would be decisive for the new government. If the coffers are empty, there would have to be new negotiations by July at the latest. Until then, the government would have to improvise to fix budget gabs, added the Athens-based economist.

It is unclear if and when the new Greek Government will try to renegotiate the rescue deal. In his first post-election government speech, new Prime Minister Sarmaras ensured the European and international community that Athens would stick to its obligations and would try to re-establish itself as a reliable partner able to implement the promised structural reforms and privatizations.

Negotiating next move

Such statements can certainly be understood as a kind of tactical pullback, or as the attempt to win a bit of time. The journalist and former Papandreou government spokesman Dimitris Tsiodras said in a recent TV-interview that Greece would proceed on a step-by-step basis and show its colors at the next summit in Brussels, without intending to scare off its EU partners.

Greek market

Growth is nowhere in sight for the Greek economy

"Our strategy is based on three points: we want to stay in the eurozone and implement the measures necessary for this. Secondly, we are in agreement with the austerity goals set for us, but we also want to discuss certain conditions of the bailout package, because we simply cannot ignore the social reality facing us at the moment. And finally, we will pay off our debts in a timely manner," Tsiodras said.

In any event the new Greek government has gotten off to a rather rugged start. Only hours after being named deputy shipping minister, George Vernikos tendered his resignation after allegations surfaced in Greek media that he had used offshore companies in a bid to avoid taxes.

And before that Prime Minister Samaras missed his first EU summit due to a retinal detachment, for which he had to be hospitalized. The discussion that ensued over who should represent Athens in Brussels led to chaos: Foreign Minister Dimitris Avramopoulos was first given the job, but then that was rejected by Brussels because Avramopoulos was neither a head of state or government. Now it appears Greek President Karolos Papoulias will be representing his country at the EU summit.

"Our government spokesman lays the blame for the confusion on our diplomats in Brussels, who apparently gave false information to Athens," political journalist Prodromos Papailiopoulos said in an interview with DW.

"This is what led to the embarrassing situation with our foreign minister preparing for the summit, even holding consultations on it, and then finding out he wasn't even able to go. This does not make a very convincing impression," Papailiopoulos added.

Author: Jannis Papadimitriou / glb
Editor: Andreas Illmer

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