Will Greece choose the way of duty
Ralitsa Kovacheva, June 19, 2011
Former British Prime Minister Margaret Thatcher describes in her memoirs how at the European Councils in the 1980s, Greece always received what it wanted, even at the cost of performing ancient Greek tragedies. What is happening today is exactly the same, but this time it is a reality. Athens does not overplay the image of a failing state and the EU, the IMF and even Germany are ready to do everything to save it.
In the best tradition of Sophocles, Greek Prime Minister Georgios Papandreou is on the stage alone, abandoned even by his own Socialist party. From the streets you can hear the roar of the crowd, throwing stones at the parliament. Papandreou is ready to do anything to receive the support of the political forces for the new austerity package - a condition the country must abide with in order to get not just another tranche of the 110 billion euros bailout from the EU and IMF, but also additional funding.
Georgios Papandreou proposed a government of national unity and hinted he was ready to leave the prime minister's post if that is the price of compromise. But to get in power in such a moment is a suicidal step - it is far more convenient (by some perverse pre-electoral party logic) to stand aside and pretend for better conditions for the loan. “We must be guided by our national duty, not by the outcome of the next election,” Mr Papandreou called. Eventually, he was left alone on the way of duty.
As a desperate move to gain support from the political forces, the Prime Minister made a reshuffle in the government, sacrificing Finance Minister Georgios Papaconstantinou, although he was highly valued and trusted by Brussels and the international financial institutions. But the “people” did not like him because he cut expenses. His successor, Evangelos Venizelos, will hardly change that fact, as our colleagues from The Wall Street Journal smartly wrote: “Who wants the worst job in Europe?”
But the choice of Venizelos for the post is significant by itself - he is a lawyer by profession and has been Minister of Defense, but has no experience with finances. However, he is a populist politician, a longtime political opponent of Papandreou and his rival for the party leadership after the electoral defeat in 2007, The Financial Times recalls. Obviously, this was the price paid by the Prime Minister for his own party support. On Sunday, Evangelos Venizelos will participate for the first time in his life in a meeting of the Eurogroup (the finance ministers of the euro area). There he will need, however, to prove himself by other means.
While the Greek Prime Minister is struggling to reach a political agreement on the new package of austerity measures, the EU also strives to achieve consensus among the member states Greece to receive more money.
To remove the tension, EU Economic and Monetary Affairs Commissioner Olli Rehn announced that the job would be done in two steps - first, even in the next few days (by June 20) it should be decided on the payment of the fifth tranche of the Greek loan. It is the most urgent step because of the upcoming Greek debt payments in mid-July which, unless paid, will send Greece effectively to bankrupt. For the first time on the occasion of Greece the Commissioner, known for his reticence, used the word “default” 2 times in a statement of 15 lines.
”By doing so, we will avoid the default scenario,” Olli Rehn said in plaintext. “It has been difficult, but I strongly believe that with this two-step approach, in agreement with IMF, we can avoid any accident scenario. It means that the funding of the Greek sovereign debt can now be ensured until September, while we take the decisions for the medium-term, beyond September, in July.”
Olli Rehn noted that “it is regrettable that the efforts to build national unity” in Greece have failed. He urged the Greek parliament to approve the economic reform programme, as agreed by the end of June. “Indeed the efforts needed to avoid a default - which would be a catastrophe for Greece - are the responsibility of all political forces.”
Even more categorical was the president of the European Council, Herman Van Rompuy: “Greece has to reach an agreement in its Parliament on a new package of measures. I call on all Greek parties to take their responsibilities at this crucial juncture, and to act in a united manner. Subject to this, the IMF and the Euro area will be able to disburse the next tranche of the programme.”
By July 11 eurozone finance ministers have time to decide on the controversial issues surrounding the new loan. Its size varies, according to different sources, between 60 and 120 billion euros, but the bigger problem is the German request for private sector participation in the agreement. Berlin's insistence private investors to replace their Greek bonds with new ones provoked fears that this would be perceived as a coercive measure for the investors, the markets would explode, and rating agencies would announce a Greek default.
Like Mr Papandreou, German Chancellor Angela Merkel also remained alone on the stage. On the one side is EU's chorus, accusing her, not for the first time, of putting German national interests above the European ones. On the other - is the chorus of German political parties and the voters, who tend to blame her for spending their money outside, while cutting the budget inside if she agrees too easily on a new Greek loan. Once again, a compromise was hammered tete-a-tete between Chancellor Merkel and her trusted European partner - French President Nicolas Sarkozy.
Although we don't know yet what the deal is, it is clear that any involvement of private investors should be completely voluntary and in coordination with the European Central Bank - a very important clarification, provided that exactly the ECB took the most acute stance against the German offer. “There are worries that we want to cause a credit event. We do not want that. This is about a voluntary participation,” Ms Merkel said, quoted by BBC. Deutsche Welle cited her sounding even more categorical: “I want to stress this: There is no legal basis so far for there being obligatory involvement”.
Not for the first time in the past year, EU's efforts to calm financial markets caused exactly the opposite reaction. It is pretty much clear that the Greek bonds rose to the sky. But the feeling of insecurity and of a new upsurge of the debt crisis raised the borrowing costs of Spain to 11-year peak. The bad news comes at a time when Madrid had just managed to inspire confidence in the markets with its tight budgetary policy and fulfilled fiscal targets.
And as we already wrote, the “rescue” of Greece, Ireland and Portugal would seem a child's game to the EU, if it comes to considering financial aid to Spain. Not to mention how seriously the Greek crisis is affecting Ireland and Portugal, although the European leaders continue to cite them as an example of politically responsible behaviour.
After less than a week Georgios Papandreou will enter the Council building in Brussels to take part in the European Council. If he brings a political consensus on the rescue programme with him, surely the other 26 EU leaders will exhale with relief. Otherwise, they will be forced to give Greece literally alms, in order to save themselves. They will be driven not by solidarity, but by fear, because in this situation no one has a choice, at least Greece itself. It is worth Greek politicians to think about that while debating, as well as the protesters, while throwing stones at the parliament.