Thursday, February 17, 2011

High Drama: Greece under the IMF - the series

Translation of a poster by the king of Greek web agit-prop, Antista-chef

A couple of weeks ago a rather obscure dairy company, Neogal, based in the town of Drama, near the Greek-Bulgarian border, received a phone call from a representative of the troika (Greece's ruling authority, comprised of representatives of the IMF, the ECB and the EU Comission) - others say that they actually visited the town, but that's probably not true. They wanted to ask a few questions regarding the wage deal it had agreed with its workers.

A month earlier Neogal was the first company to announce that it would take advantage of the special company contracts mandated by the troika, a blunt instrument of destruction of Greece's supposedly stringent, but in practice rather laxly enforced, labor laws, and cut wages 9% beyond the collectively bargained levels. In return it promised not to cut back on any jobs. This was the neoliberal programme to further depress Greece's laughably low (private sector) wages was all about...

Anyway back to Drama: Neogal soon found out that the uproar against its wage decrease in the broader area of Northern Greece and the negative publicity it was receiving, was bad for business, so they went back on that agreement, especially after the Labour Inspectors [in Greek] noticed that they were a profit-making company with an improving balance sheet. Despite the fact that it could unilaterally impose it's "agreement" with the terrified workers (based as it was in an area where unemployment is over 30%), they decided to keep wages at current levels (which is a wage-cut anyway since inflation thanks to our IMF overlords is running at 5% annually - possibly more on a bare necessity budget) and promised to not fire anyone for the next two years, anyway.

This worried the IMF/ECB inspectors, whose main duty here seems to be overseeing the impoverishment of as great a slice of the population as possible, so they went calling to find if this was a result of any government pressure. It turns out that it wasn't, the Greek government was not subverting the troika's carefully planned disaster. All was well - no, not well, because those damn wages wouldn't free-fall fast enough. Apparently the troika members (known as "i troikani" - "troikans" - in Greece) had some other aces up their sleeves: It seems that they first demanded cutting across the board what amounts to 2/14 of Greek private sector salaries (Greek annual salaries are paid in 15 installments - one extra during Christmas and 50% of a salary on Easter and before summer leave). These they called "bonuses" when they demanded their elimination in the public sector, but really are part and parcel of already meager annual wages. This would have been a mandated wage cut in the private sector across the board. So much for state intervention in the economy.

We haven't escaped that danger yet. However it seems that the government has managed to appease the troikans: They are planning instead to abolish what little is left of collective bargaining (shreds of bargaining on a company level mainly) after their latest attack last autumn, and are aiming for generalized individual labor agreements, fewer and cheaper layoff remunerations (2d round), and diminished overtime pay. These measures they hope, will have the same effect...


The Commissioner [Olli Rehn] said Greece, Sweden and Latvia were examples of countries that have managed to promote bold reforms without consideration of any political costs.

Lets see what the reforms they're praising actually mean for the populace and what it is that makes them "bold". Here are some of the results that their implementation has inflicted over a very brief period of time:

- Recently, the Greek Statistical Authority (NSA) published its unemployment data for November 2010: Unemployment reached 13,9%, the highest I think I ever remember it at, up from 10,6 in November 09, and from 13,4 in October 2010. Youth unemployment in the country has reached 35,6%. At this pace, unemployment might reach 15% in 2011.

- Yesterday the NSA also published some more data:
Greece's economy slumped more than expected last year and will stay in recession for a third straight year in 2011 with economists seeing little hope for a strong recovery even after that.
The 230 billion euro economy shrank at an annual 6.6 percent pace in the last quarter of 2010, as the austerity-induced recession deepened from a revised 5.7 percent decline in the previous quarter, data showed on Tuesday.
Flash Eurostat estimates showed the downturn in economic activity for the whole of 2010 was 4.52 percent, worse than the government's forecast decline of 4.2 percent, as it struggled to cut deficits and tackle debt

The IMF's forecast in May was at 4% and the government's forecast in June was for an under 4% contraction (the low 3% range being hyped up by various banks' economic analysts).

This had the, expected, result of pumping up the spreads (again):

The Greek/German 10-year bond yield spread widened by 26 bps to 860 bps as the outright Greek yield climbed to 11.93 percent.

The Reuters report includes the following assessment regarding Greek economy prospects:
"We expect the economy to bottom out in the second half of 2011 but after that we do not see a strong recovery taking hold, rather stagnation with growth rates around zero," said Christian Melzer, euro zone analyst at DekaBank.
"The growth figures are miserable, the situation in the real economy is bad -- 2011 and 2012 are going to be difficult years for the Greek economy," he added

This should be seen in the context of the IMF's original forecast (which the Greek government subscribed to) which stated:
Real GDP growth is expected to contract sharply in 2010–11 and recover thereafter. Growth is expected to follow a V-shaped pattern: the frontloaded fiscal contraction in 2010–11 will suppress domestic demand in the short run; but from 2012 onward, confidence effects, regained market access, and comprehensive structural reforms are expected to lead to a growth recovery. Unemployment is projected to peak at nearly 15 percent by 2012

Note that the 15% unemployment mark seems likely to be reached a year earlier than the IMF said it would and that the Unions' analysts expect that number to reach above or near 20% in a year at most.

The Governor of the Bank of Greece (Greece's Central Bank) expects contraction in 2011 at -3%. This is down from last May's government forecast of 2,6% and is already considered by many to be very optimistic.

- 188.000 jobs were lost during 2010 [in Greek] while one in four Greek businesses (225.000) are in the red, at the brink ready to shut down. Most shopping areas around Athens are full of shops vacant, closing or empty of customers

                                           "70% off, the crisis is shutting us down"

- A quarter of those that do work in the private sector, work uninsured. Thus no benefits, unemployment or otherwise, no pensionable work years, no health coverage. This, in the context of the depression and the undercutting of the economic capabilities of the Greek family which has served as a societal safety net in hard times so far, is slowly creating a new underclass...

- Unrelated to the troika, but indicative of the unfairness of the austerity policies it is imposing through the "Socialist" government, is a story in Spiegel that made the rounds in the Greek press, apparently claiming that the total of (mostly untaxed and unreported) deposits of Greek nationals in Swiss banks reach 600 billion Euros, or 2,5 times the country's GDP. The number might be a bit high, but this is only Switzerland we're talking about. There are estimates floating around stating that total deposits of Greeks in banks around the world (tax and banking havens mostly) might be close to 1 trillion Euros. I note that a 10% tax on the 600 billion would solve most of the country's fiscal problems at a stroke - and we can't have that now, can we...

Sell, sell, sell

This was the situation, until a couple of days ago, when the troika gave a press conference at the end of its latest inspection round, their "Third Review Mission to Greece". In it they suggested, or announced depending on who you ask, that Greece should raise 50 billion euros over the next 5 years by selling assets it owns, including land. Mr. Tomsen of the IMF was also kind enough to inform the Greek public that some of the groups protesting the IMF-inspired "rationalization" measures are doing this only to protect their privileges. In fact he was quite prime-ministerial.

This provoked an angry reaction from the Greek government, it's first ever against the trio. They sounded upset:

Government spokesman Giorgos Petalotis told reporters early Saturday that the comments were unacceptable and amounted to interference into Greece's domestic affairs...
Greek Prime Minister George Papandreou also issued a statement Saturday saying he has expressed his dismay about the comments in a phone call with IMF managing director Dominique Strauss-Kahn.
Spokesman Petalotis said Saturday that while Greece is in need, it also has its limits. He said the Greek government only takes orders from the people of Greece and that no state land would be sold.

One would deduce from this fierce reaction, that was met with ostensible contrition by the triadic overlords themselves, that the Greek government was absolutely not willing to give up a shred of its sacred territory to the fiendish imperial scum who finally made one demand too many.

Well. No:
There is no divergence of views between the Greek government and the European Union/International Monetary Fund/European Central Bank (“Troika”) regarding the essence of an agreement, which includes a EUR50bn privatization program.
In fact:

Greece's harsh criticism of the EU and the IMF over its comments on the need for privatization is unlikely to affect Athens' austerity plans as it was mostly aimed at placating a sensitive domestic audience.
Government officials said on Saturday that the EU and IMF had interfered unacceptably in domestic affairs by announcing a high privatization target for Greece and criticising strikes after its review of progress on the country's 110 billion euro bailout deal.
Greece lashes out at EU/IMF but will stick to reform
Selling public assets is a sensitive issue in Greece, especially for the ruling Socialists. No privatisations have been completed in the party's 16 months in office.
But Athens' harsh comments appear to have been mostly a response to a media outcry and to some ruling socialists being caught out by EU, IMF and ECB officials -- dubbed the 'troika' -- telling a news conference on Friday that Greece should target 50 billion euros in privatisations over the 2011-15 period.
"I don't think this showed any difference on substance between the troika and the government," said Yannis Stournaras, head of the Athens-based Foundation of Economic Research.
"It was a communication error," Stournaras said.
"Perhaps the government did not expect the troika to come out and specify things in detail before parliament, or at least the ministerial council, have been informed."
Indeed, the government admitted in a note circulated shortly after the IMF/EU news conference that it had agreed to the higher target, which became the focus of the week-end uproar.

And then the government went on to claim that the 50 billion sale was its own idea after all, but they were not willing to sell land, actually, but "utilize" it somehow, unless of course the parliament authorized a sale, yet the details pertaining to this miraculous utilization have not been leaked yet. But anyhow they're not going to give up the majority share in DEI, the public power utility. Or water services. Nor sell coastlines.

Now the total value of privatizations over the past 12 years in Greece was around 10 billion Euros. The total value of Greek government land and building assets might be around 300 billion (no one knows for sure yet) but that is assuming someone is willing to buy at nominal values, which is unlikely. Thus, raising 50 billion Euros in 5 years is not feasible really, despite the Greek government's claims, without the intervention of fairies and benevolent deities, unless we are talking about fairly extensive asset stripping. Yet even if a government managed to pawn everything, and indeed raise against all expectations 50 billion in 5 years, this - given the size of the national debt - will barely equal the amount paid as interest alone by the national government to its lenders between 2011 and 2013. Since this will be a one-off payment, it won't go very far.

So what we saw was theater. And rather poorly acted theater at that. The only explanation for such a spectacular plunge into empty rhetoric, is that the Papandreou government is preparing for elections, since it knows that it cannot carry out this agenda of wholesale plunder and misery by itself much longer. Already cabinet members refrain from appearing in any unpoliced public space for fear of their safety. There seems to be a general acceptance of the idea that only a grand coalition ("socialists" and conservatives) might be able to keep up with the increasingly painful measures needed to satisfy the troika's need for blood. In the meantime, Greece is sheepishly supporting Ms. Merkel's plans in the summit and has shown no interest in resisting even the most wildly irrational of the policy choices that are being rammed down people's throats, as the mantra "we are all to blame" plays increasingly unconvincing in the background.

Yet as unions have failed up to now to demonstrate convincing muscle (here the president of the Greek Confederation of Labor is portrayed as "missing"), society is far from calm, its temperature reaching feverish heights, as demonstrated in actions of political disobedience and outright clashes and in the increasing frequency of strikes and labor actions against employers and government policies. At the same time the socialist government is reverting to a law and order agenda flirting with the far-right and xenophobia, while controlling or being in cahoots with practically all of the mainstream media (owned by government contractors and other IMF beneficiaries). Thus the cocktail of personal despair, anger, misinformation, racism and futurelesness, is ominous. In my next post, I'll discuss the faces of public anger, fight-back, despair and moral morbidity that the IMF/ECB/EC is presiding over...

Cross posted at the European Tribune