Greece leftist party's debt-free vision
No debt repayments, higher
salaries and freedom from EU-IMF tutelage: Greece under the radical leftists,
who are poised to win a June 17 election, seems a world removed from its
current recession nightmare.The Syriza party has pledged to tear up Greece's
loan agreement with the EU and the IMF, which is currently keeping the country
on its feet but at the cost of an unprecedented wave of austerity cuts and
structural reforms.If implemented, such a programme, which would also mean the
nationalisation of banks and a halt to privatisation, could well mean Greece's
ejection from the eurozone, potentially sending shockwaves through the global
economy.Fed up with two years of salary and pension cuts, Greek voters on May 6
punished larger parties associated with the bailout and catapulted Syriza to
second place, within striking distance of the top.Opinion polls show that the
radical leftists, only the fifth party in 2009, could even emerge as the
victors in this month's repeat ballot.The condensed programme of the
loosely-knit coalition of moderate Communists, Trotskyists, ecologists and
other leftist groups was announced on June 1.In it, the party's leading minds
set out their vision for a more equitable Greece, liberated from the excesses
of capitalism, heavy industry and political corruption.Under Syriza's
blueprint, state loan repayments to service a debt of over €350bn are to be
frozen to free funds for social support programmes.The privatisation of major
public companies - a key condition of the EU-IMF bailout deal - is to be
suspended as well.Greek banks that draw on European support funds to
recapitalise themselves after a landmark state debt cut brokered by the
previous government in March will be "nationalised and
socialised."And the EU-IMF bailout deal, dubbed here the "memorandum,"
which the leftists say has brought only recession and misery to Greece, is to be rejected and redrawn from
scratch."The first act of the government of the Left will be to annul the
memorandum and its application laws," Syriza's 37-year-old leader Alexis
Tsipras said on Friday."We will seek a new renegotiation of the debt at
European level, aiming to drastically reduce it, or a debt moratorium and a
suspension of interest payments until conditions for the stabilisation and
recovery of the economy are created," Tsipras said during a presentation
of the party's revised programme.A previous version of Syriza's platform, drawn
up in April, had pledged to outlaw offshore company dealings and shut down NATO
bases in Greece.The revised version released on Friday plans a withdrawal from
NATO operations, starting from Greece's mission to Afghanistan, and a future
"disengagement" from the military alliance altogether."At a time
when the international balance shifts and US hegemony increasingly comes into question,
the policy of Euro-Atlanticism and complying with NATO war plans has no
future," said senior party member Thodoris Dritsas.The older parties
Syriza decimated on May 6, the socialist Pasok and the New Democracy
conservatives, have dismissed its programme as unrealistic and Tsipras as an
arrogant demagogue still wet behind the ears."Those who speak of a
one-sided rejection of the bailout are like children playing with matches
inside an armoury," New Democracy leader Antonis Samaras said during a
presentation of his party's own programme on May 31.Syriza's leading economist
Yiannis Dragasakis, a former junior finance minister in 1990, believes Greece
could take a political decision to reject the loan agreement and dump unwanted
labour reforms yet still retain vital EU-IMF loans."Some elements of the
bailout deal can be rejected unilaterally. Others require cooperation to do
so," he said in a recent televised interview.Even European MP Daniel
Cohn-Bendit - a left-wing icon and staunch critic of Greece's bailout terms - recently
dismissed Syriza's plans to reverse wage cuts as "idiotic"."Europe will give no more money, Greek
coffers are empty," he told a Greens news conference on May 23, after
Tsipras had visited Paris and Berlin."It's like asking someone 'how
would you like to commit suicide, with a gun or an axe?'" he said.In
March, Syriza sued Germany's Bild newspaper for a million
euros ($1.26m) after it allegedly portrayed Tsipras as a
"half-criminal" who "openly supports violent
anarchists.""Will these radicals soon be governing Greece?," the tabloid asked its
readers.
ECB rate cut eyed as euro crisis bites
The European Central Bank
may cut interest rates again soon as the eurozone debt crisis deepens, but it
will continue to insist that it is up to governments to find a lasting
solution, analysts say.ECB watchers predict the central bank - which will hold
its regular policy-setting meeting next week on Wednesday instead of Thursday
owing to a public holiday - will not alter borrowing costs just yet this
month.But it could act in July as deepening fears about Greece and possible
contagion to other countries push the 17 countries that share the euro back
into recession, the analysts predicted. "The further escalation of the
eurozone crisis has intensified the pressure on the ECB to take further
remedial action," said Capital Economics' chief European economist
Jonathan Loynes."But while president (Mario) Draghi may hold open the
prospect of further support of the region's banks after the meeting on June 6,
he is likely to insist again that it is up to national policymakers to address
their broader economic and fiscal problems," Loynes said. The ECB has
never hesitated to act from the very beginning of the crisis.It quickly
reversed last year's rate hikes to bring eurozone borrowing costs back down to
an all-time low of 1.0% and embarked on a hotly contested programme of
indirectly buying up the bonds of debt-mired countries.Most recently, in two
so-called long-term refinancing operations (LTROs) in December and February, it
pumped more than €1.0 trillion into the banking system to avert a dangerous
credit squeeze in the euro area.Nevertheless, ECB officials have all along
insisted that such measures cannot cure the root cause of the crisis -
profligate spending by governments."Can the ECB fill the vacuum of lack of
action by national governments on fiscal growth? The answer is no," Draghi
said again during a hearing at the European parliament last week.The ECB argues
that its overriding priority, even in times of crisis, is to keep a lid on
inflation in the single currency area.The latest data indicate that price
pressures are indeed under control - area-wide inflation slowed to 2.4% in May
from 2.6% in April and in Germany, the bloc's biggest economy, inflation slowed
to 1.9%, its lowest level in 17 months.Further up the inflation pipeline, too,
the money supply expanded by just 2.5% in April, a sharp slowdown compared with
the previous month, despite the huge amounts of liquidity pumped into the
system via the ECB's anti-crisis measures."With the inflation threat
receding, the ECB has more scope to stimulate the economy," argued
Berenberg Bank chief economist Holger Schmieding.The ECB will also publish its
latest quarterly staff projections on inflation and economic growth on
Wednesday.They are likely to be revised downwards, "leaving the door open
for further policy accommodation," said Newedge Strategy analyst Annalisa
Piazza.She saw a "60% chance" that the ECB would trim its rates by a
quarter of a percentage point to 0.75% as early as this month.Nevertheless,
"the timing of a rate cut is highly uncertain," the analyst
cautioned.While the "weaker fundamentals and increasing stress in
financial markets fully justify a quarter-point cut this week, the ECB might
decide a later cut is the best tactical option" as borrowing costs are
already at record lows and the full effects of the anti-crisis measures have
yet to unfold, she argued.Berenberg Bank's Schmieding, too, saw a "good
case" for a quarter-point rate cut.But the bank would probably wait until
July by which time the outcome of the Greek parliamentary elections on June 17
will be known, the economist argued.Greece is heading to the polls for a second
time in six weeks after an inconclusive vote on May 6. And with the radical
leftist Syriza party, chief opponent of a massive EU-IMF bailout accord, tipped
to win this time, the election could lead to Greece quitting the single currency.
Commerzbank economist Michael Schubert also predicted the ECB would hold rates
steady again this week, "not least because it wants to maintain the
pressure on politicians."Nevertheless, ECB chief Draghi would "leave
the door wide open for further action," Schubert said.
