Destiny of Greece Will Be Determined by Its Attitude Towards Reforms

Jim Kuhn via Flickr as Tragedy Mask at the Majestic Theatre (Boston, MA). Creative Commons

Another part of Greek drama has a clear beginning and end as it’s surrounded by two important dates. First is January 25, the day of victory of the radical leftist party Syriza in Greek parliamentary election. Second date is Fubruary 28, when the current rescue program terminates, in which Greece has the access to finances in exchange for austerity measures, so unpopular in Greece.

Similarly, in this part of Greek drama two themes play key role: debt and reforms. By lowering the debt respectively significant debt relief will be achieved. The reforms of the previous government shall be revoked. These are the two key promises given by Syriza which brought Syziza’s clear victory in parliamentary election. Therefore January 25 was so important – it shed different light on questions of debt and reforms. Of the same importance is also the date February 28. After this date Greece will be out of money and it will not get to the new financing if there is no agreement with other states of Eurozone in which a solution to debt and the destiny of Greece‘s reforms will be contained.

Right now, the most discussed question is the one considering debt. Nominants of Syriza haven’t even settled comfortably in their key chairs in the new Greek government yet and new prime minister together with finance minister have already made their first compromise and step back from their pre-electoral promises. They refrained form talking about the debt write-off, started talking about restructurization of debt and went on a European tour to find out from creditors which particular forms of restructurization could be acceptable. In this context came up such proposals as a connection of payments of debt to the GDP growth or introduction of the so-called “eternal bonds“ by which Greece would pay off only interest but not the principal. This week, finance ministers of the Eurozone are sweating over the technical details of these proposals. But even these traditional ideas do not change a thing about the basic fact that we need to be reminded about all the time. The debt of Greece which is now 175% of GDP is impossible to be paid off in full. Whatever will the future agreements be, their essence will always be what amount of debt will the creditors be willing to lose respectively and what amount of debt will Greece be able to write off under the cover of restructurization.

Equally turbulent is the development in the most important area which is the attitude of Greeks towards reforms. Also here Syriza declares something else than before the election. They gained voters’ support by extensive critique of the austerity measures of the previous government and by the promise that in case of victory they will recall previous government’s reforms. Today the prime minister says that 70% of reforms will be maintained and only 30 % of reforms will be revoked. Important thing is though what is hidden behind that 30% of reforms. Is it really the fulfillment of part of their pre-election promises? If yes, the inevitable breakdown of public finances indicates just their brief account: return of the minimal wage to the pre-crisis level, i.e. from current 580 EUR to 751 EUR a month, pension increase, free housing, electricity, food and health insurance for the “victims” of the austerity measures of the previous government.

In the commentary for Financial Times, Tony Blair exactly got the point: “the main problem with Greek government doesn’t lie in the debt payments, but in their resistance towards reforms.” Let us only add that in Greece the reforms are perceived as an international complot against Greece and not as cruel, but inevitable tax for a very long period of wasting money by Greek politicians. If it stays this way, the next parts of this Greek drama will inevitably lead to catharsis and old Greek history will start to write down the new, post-euro chapter of history. 

Translation: Juraj Medvec

Jan Oravec