Sunday, June 17, 2012

Greek Election: The exit poll?

by Michael Roberts

“An old man marched over to me and declared: “I am voting for the thieves.” (This is how a lot of Greeks now refer to Antonis Samaras’s party, ND, and their left-wing partners, Pasok.)”  Guardian reporter.

So New Democracy (ND) has won a narrow victory.  Indeed, leftist Syriza led among 18-34 year-olds and 35-54s. So the ND victory is entirely due to seniors like those quoted above.  There has been a polarisation on the right towards ND and to the left around SYRIZA, but the anti-bailout parties still polled more than the pro-austerity parties by 53% to 47% (including those parties that did not make parliament).

ND’ s victory is a blow to the chances of the Greek people of getting out of the deep depression that the economy is in, with near 25% unemployment, a contraction in output of around 7% annual rate (down nearly 20% since the peak) and the government and utilities running out of money to provide basic services like health, lighting and heating.

ND is the leading right-wing party and responsible, along with ‘collaborationist’ ‘socialist’ PASOK, for the mess in the first place.  ND represent the rich, the people who don’t pay their taxes and big business and the banks in Greece.  They have ended up as the largest party ahead of the leftist SYRIZA through a combination of fear that Greece will be thrown out of the European Union if the people elect the left; through black propaganda against the left; and through hints and promises by the Euro leaders that the pro- bailout parties can negotiate a better deal on austerity.  During the campaign, much was made by ND that it could so.  The Euro leaders made it clear that a new deal could be negotiated.  And the OECD on the eve of the election called for a new package.  These promises just won it for ND.

The EU leaders are preparing a package of incentives to convince the Greeks to stick to the country’s current bailout deal.  The package includes further reductions in interest rates and extended repayment periods for the bailout loans, as well as EU money to spur investments in Greek public works programmes through the European Investment Bank.  As one Euro official put it, off the record, “In the scenario where Samaras wins the elections, we would like to see him committing very clearly to his adherence to the memorandum.  Then we would get together with the new Greek government and say: here is what we can now do to make life a bit sweeter, a bit less harsh.”
But this is all talk.  All it means is that austerity will continue, but at a slightly less severe pace.  For example, under some of the plans being considered, public investment spending would be targeted at upgrading government-owned properties so that they could be made more attractive for sale in Greece’s €50bn privatisation plan!  So Greece’s public assets will still be sold off for a song in return for a few concessions on spending.  It’s no surprise that PASOK is reluctant to join a coalition without involving SYRIZA in any austerity measures.  Indeed, any sort of government may be difficult to form.

The reality is that the Greek economy is on its knees and won’t be able to get up even with a little less whipping from the EU leaders.  Already many public health services have stopped.  Non-governmental organizations are filling in with the kind of aid more associated with the developing world.  Diseases such as HIV and malaria are on the rise.  The medical charity Medecins du Monde known for its work in the Third World, saw the number of Greeks coming to its clinics double in 2011. “Many patients are retired elderly citizens whose pensions have been substantially reduced because of the austerity measures implemented by the government in recent years,” the charity noted in recent research.

The escalating cost of heating and electricity, the result of tax rises brought in by the government following the bailout, coupled with a rising number of unpaid invoices, could lead to power cuts.  Energy companies in Greece are already struggling.  The state-run PPC needs to pay €450m (which it doesn’t have in its coffers after recent falls in revenue) by 22 June 22 or persuade its banks to roll over its debts. And people increasingly can’t pay their bills.  Close to one-third of the Greek population – the highest level in Europe – was considered at risk for poverty or social exclusion by Eurostat in 2010, when the economic and political situation was not as dire as it now appears. And nearly 20% of Greek children live in homes unable to afford at least 3 out of 9 basic items.

And the examples of hardship in general just mount.  Journalists at Eleftherotypia, who brought out one last special edition on Saturday, have been without pay since last August. They have survived through “personal Marshall plans” from friends and family or, in the case of Yannis Bogiopoulos, his wife’s unemployment benefit of €600 a month, which runs out in December.  Sustained by donations from labour organisations around the world and the communist trade union federation, the Halyvourgia steelworkers have also been unpaid since October.  Eleni Trivoulidou, a divorced, unemployed mother of four almost-grown but still dependent children, has been unable to find any kind of work for the past two years. She’s studying for an accountancy qualification at night school, but in the meantime survives on handouts from her parents – whose pensions have just been slashed – and ex-husband.

Government coffers could be empty as soon as July, shortly after this month’s pivotal elections. In the worst case, Athens might have to temporarily stop paying for salaries and pensions, along with imports of fuel, food and pharmaceuticals.  The new government will face a shortfall of €1.7bn because tax revenue and other sources of potential income are drying up.

The wrenching recession and harsh budget cuts have left businesses and individuals with less and less to give for taxes — and growing incentive to avoid paying what they owe.   An essential element of Greece’s recovery plan has been to collect more taxes from a population that has long engaged in tax avoidance. The government is owed €45bn in back taxes, only a fraction of which will ever be recovered.   When Nikos Maitos, a longtime official in Greece’s financial crimes investigation unit, and a team of inspectors recently prowled the recession-hit island of Naxos for tax evaders, a local radio station broadcast his licence plate number to warn residents.  “One repercussion of the crisis is that people are harder to find.  And when you do find them, they don’t have money.”  As Harry Theoharis, a senior official in the Greek Finance Ministry who helps oversee the country’s tax payment system, said. “You can’t keep flogging a dead horse.”

Still there has been an aggressive enforcement campaign aimed at 500 wealthy individuals and companies, including former ministers and heads of state agencies and enterprises. People took notice in April when a former defence minister was arrested on charges of corruption and making false declarations related to his income and taxes.   But Nikos Lekkas, a top official at the financial crimes agency where Mr. Maitos works, said Greek banks had obstructed nearly 5,000 requests for account data since 2010.  “The banks delay sending the information for 8 to 12 months,” he said. “And when they do, they send huge stacks of documents to make it confusing. By the time we can follow up, much of the money has already fled.”   One challenge lies in what Mr. Lekkas calls the big fish — 18,300 offshore businesses belonging to wealthy Greek individuals and companies. Authorities are trying to trace the owners through property records, and they recently seized several large properties linked to offshore companies whose owners owe tens of millions of euros to the state.

That leaves collectors having to go after mostly smaller tax evaders.  But even they have had to take large pay cuts and find it hard to pay for the gasoline needed to reach their targets. Salaries and pensions in the private and the public sectors have been cut by up to 50%, leaving Greece €495m short of its revenue targets in the four months ended in April. With less cash, consumers have curbed spending, leading thousands of taxpaying businesses to fail.  Income expected from a higher, 23% value-added tax required by the bailout agreement has fallen short by around €800m. That is partly because cash-short businesses that were once law-abiding have started hiding money to stay afloat, tax officials said.   Greece’s General Accounting Office said recently that the state collected 25% less revenue in May than it did a year earlier.  A pro-bailout government will be unable to change any of this.

So what is likely to happen?  Germany does not want a Greek exit because of the collateral damage it will do, but it also wants the Greeks to stick to the fiscal austerity programme. The Greeks don’t want or can’t stick to austerity, but they want to stay in the euro.

There are three possible outcomes:  1) in order to avoid a euro meltdown, the Euro leaders make significant concessions on the fiscal targets and on the time to meet them, write off more Greek debt and provide funding for growth projects; or 2) a new Greek government agrees to revised fiscal targets and persuades its parliament and people to implement them; or  3) Greece rejects the targets and/or cannot meet them at the next review by the Troika.  So the Troika stops further funding, Greece defaults and then exits the Eurosystem as the ECB stops funding the Greek banks.  The Euro leaders take a chance on handling the consequences of a Greek exit by offering more support for Eurozone banks and Italy and Spain.

Which is the most likely?  1) 20%  2) 30%  3) 50%
“If Greece get Germany in the quarter-finals, will Angela Merkel try to tell the Greeks how many goals they have to concede?” – black joke doing the rounds in Syntagma square.

No comments: