A canny leader tests the limits of charisma
The economist
ALEXIS TSIPRAS, Greece’s new left-wing prime minister, was always going to face a near-impossible task as he tried to balance the demands of the country’s creditors with those of his bitterly aggrieved and hugely expectant voters.
A month after his heady election triumph on January 25th, his political skills were being tested to the limit. Finance ministers from the eurogroup had grudgingly accepted as a “valid starting-point” the reform plan submitted by the Greek government in the hope of keeping its monetary lifeline intact.
But Mr Tsipras could hardly hide from his own radical supporters the fact that he had made a series of painful climbdowns to get to that point. First he had abandoned his Syriza party’s pre-election pledge to write off a big chunk of Greece’s sovereign debt (amounting to 175% of national output at the end of last year) and hence draw a line under five years of harsh austerity imposed by the hated “troika” of bailout monitors from the European Commission, International Monetary Fund and European Central Bank (ECB).
Yanis Varoufakis, the finance minister, capitulated at a meeting of finance ministers on February 20th. He asked for a four-month extension of the current €172 billion ($196 billion) bailout in return for more economic reforms. Mr Varoufakis blinked only just in time, given that Greece’s European Union loan programme was due to expire at the end of the month: without an extension Greek banks might have lost the financial backstop of ECB funding, triggering financial meltdown.
Athens bankers were already worried by a steady outflow of deposits: close to €20 billion has been withdrawn this year. If a deal had fallen through, capital controls would have been imposed, bringing a renewed threat of “Grexit” from the euro.
That prospect has receded for the moment but Greece is still on a knife-edge. Despite Mr Varoufakis’s insistence that Syriza’s programme was still on track, the list of tax, revenue and structural measures he proposed after several days of fraught exchanges with the troika (renamed “the institutions” to soothe voters) looked familiar. It resembled demands which the country’s guardians had made of the previous centre-right government.
Manolis Glezos, a 92-year-old hero of Greek leftist resistance to the Nazis, was one of the first to cry foul; he begged pardon from the Greek people for having campaigned for Syriza and contributed to the illusion of change. Mikis Theodorakis, a famous composer and another veteran of the Greek left, joined in the public grumbles. Even if those irascible nonagenarians can be satisfied, a lot of ifs and buts have to be negotiated. Details of the latest plan have to hammered out, the agreement must be approved by legislators and a start must be made to implementing promised changes. If all that happens, Greece is in line to receive a much-delayed €7.2 billion loan instalment from May, in time to meet €6.7 billion of repayments due in July and August and avert a default.
There are plenty of obstacles along the way, however. Syriza has promised its creditors not to roll back reforms already in place. But sticking to that would mean abandoning plans which are cherished by its voters, such as relaunching collective wage bargaining and raising the minimum monthly wage to €750, the pre-crisis level.
Privatisation is another thorny issue. Mr Varoufakis has said completed sales will not be reversed and those already under way will move ahead. Two important deals are in the pipeline: a €1.2 billion concession to run 14 regional airports, awarded last year to Frankfurt Airport in partnership with a Greek contractor, and the sale of 67% of Piraeus Port Authority, which pits Cosco, the Chinese state shipping company, against Maersk of Denmark. If these disposals go ahead as planned, other foreign investors will be encouraged to look for deals in Greece.
But Syriza’s second-ranking politician, Panagiotis Lafazanis, is likely to object. He is leader of the hard-line Left Platform faction, which is said to have the backing of 30% of the party, and strongly opposes selling off state assets.
Mr Lafazanis is also minister of “productive recovery” (ie, industry), energy and environment, with five big privatisations under his control. As Syriza’s 149 lawmakers met to discuss Mr Varoufakis’s list of reforms, Mr Lafazanis repeated threats to stop state property being sold.
