Greece: still corrupt, still unsound infrastructurally, still uncompetitive

Times are changing for Greece’s debt-ridden economy and the rest of the EU as new anti-austerity government Syriza takes power

January 29, 2015

World Finance speaks to Roman Gerodimos, Founder of the Greek Politics Specialist, on what the election of Syriza means for Greece’s floundering economy

World Finance: Roman, let’s be blunt, if Syriza were to win its negotiations with the rest of the eurozone, other EU anti-austerity parties would look more credible to voters, and yet if Syriza were to lose, investors might pull their savings from any eurozone countries where nationalists are dominant. So why aren’t European markets in more of a state of panic?
Dr Roman Gerodimos: Really everybody is waiting to see what the next steps of the new government are going to be. There are two ways this could go, one way would be for the government, Mr Tsipras, Syriza, to in a sense water down their promises a little bit. Some are talking about a rebranding of the bailout measures, and of the whole monetary environment. Others are saying that he will not actually do that and he will stick to his hardline metrics.

[I]f you look at Spain, Podemos, or even Britain and UKIP, and other countries around Europe, they share very little in terms of actual ideology

World Finance: This vote has had big implications for the monetary union. What are we looking at?
Dr Roman Gerodimos: It’s really interesting that all these anti-EU or eurosceptic parties have very different agendas. Some of them come from the left, some of them from the right, but if you look at Spain, Podemos, or even Britain and UKIP, and other countries around Europe, they share very little in terms of actual ideology, but they have a very clear anti-establishment agenda.

So this vote really is the first proper indication, the first major victory, for this anti-establishment camp. The problem is that once you’ve moved away from the current model of EU governance, with all its problems and faults, there really isn’t anything else at the moment as an alternative, because all these actors in different countries have their own agendas. So really it’s going to be very interesting to see where that takes us.

World Finance: Well of course there’s always such high hopes when a new government comes into power. But how many options for change does Tsipras have? As a coalition with Syriza, will they be able to push through reforms, or will they have to negotiate domestically before they can approach the EU?
Dr Roman Gerodimos: They do share this fundamental anti-austerity, anti-bailout package core philosophy. But they do disagree on many other things like human rights, like the place of immigrants, all sorts of other things.

The truth is that Syriza ministers, as soon as they were sworn in, they are repeating all their pledges about stopping privatisation, raising the minimum wage. All these measures they promised, which sounded quite radical and going against really fundamental requirements put forward by the troika, the real position is going to come from the lenders.

World Finance: So the new ruling party in Greece’s slogans are “the end of humiliation has come” and “spend spend spend,” but where’s the money coming from?
Dr Roman Gerodimos: We’ll find out very soon, because in fact by the end of February the Greek government is contractually obliged to complete certain measures and certain actions that are required by the troika, otherwise it will not get its next tranche and then we’ll see whether they are able to finance all these measures that they have pledged. Obviously pledging something is different to implementing it.

World Finance: In reality, the EU doesn’t have an option, Greece either defaults on their own authority or the EU authorises the default. But at the end of the day, it’s surely going to be the same result, or do you see something different for Greece?
Dr Roman Gerodimos: I don’t think we will necessarily get to that point because, there is a very strong core, 75-80 percent of Greek voters, who do not want Greece to leave the Eurozone. If we go for a default, then obviously anything can happen.

75-80 percent of Greek voters…do not want Greece to leave the Eurozone

World Finance: Hans-Peter Friedrich, a member of Chancellor Angela Merkel’s party in parliament said “the Greeks have the right to vote for whom they want, we have the right to no longer finance Greece’s debt.” That’s the crix of the matter isn’t it?
Dr Roman Gerodimos: Absolutely, but the thing is, and that is something that the more vocal, the more radical members within the government obviously need to take into account at some point, but Mr. Tsipras, judging by the outcome, judging by his success so far, looks as I said confident but also it looks like he knows what he’s doing, it looks like he has a plan.

World Finance: At the end of the day, Greece did get itself into this mess, as the country was riddled with fraud and corruption. So has it cleaned up its act?
Dr Roman Gerodimos: Greece still has a lot of fundamental structural problems, but what we have found over and over again is that there are structural deficiencies within the eurozone and within the EU, and also regulation issues around the world really.

A lot of the measures that were put in place and the way they were put in place to deal with the debt issue, actually made things worse to an extent. The previous government’s emphasis was more on the financial, and sort of budgetary issues rather than the more structural issues to do with corruption, to do with public administration.

I don’t think there’s been as much progress in cleaning up and making the Greek state more efficient, but to be honest it’s arguable whether that is a top priority for the new government.

World Finance: So what would you say is a realistic solution to the whole Greek mess?
Dr Roman Gerodimos: When you look into the broader structural issues to do with how the economy is structured, whether it’s competitive, it’s not really. What it’s producing, what it’s exporting, and so on, all these issues require a really radical rethink of what Greece’s identity is in the 21st century. We haven’t heard much about it in the campaign, let’s see what the new government does.