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| Euclid Tsakalotos: Greek finance minister on the hard path of post-bailout reform | Euclid Tsakalotos: Greek finance minister on the hard path of post-bailout reform |
| (about 4 hours later) | |
| Euclid Tsakalotos, the Greek finance minister, has Europe’s most unenviable job. If there is one thing on which he and his critics agree it is that. | Euclid Tsakalotos, the Greek finance minister, has Europe’s most unenviable job. If there is one thing on which he and his critics agree it is that. |
| As economics chief of a country not far removed from economic meltdown, in its worst recession in post-war history, stricken by debt and dependent on international aid, his is a lot few would crave. Even now – almost five months to the day after it was bailed out for a third time since 2010 – Greece’s future hangs in the balance. | As economics chief of a country not far removed from economic meltdown, in its worst recession in post-war history, stricken by debt and dependent on international aid, his is a lot few would crave. Even now – almost five months to the day after it was bailed out for a third time since 2010 – Greece’s future hangs in the balance. |
| “There are forces working in all directions,” the Oxford-educated economist says, legs crossed in his fastidiously ordered sixth-floor office. It is, he concedes, still far from certain Athens will come out of the crisis in the way the leftist-led government intends. | |
| Related: Greece: the election is over, the economic crisis is not | Related: Greece: the election is over, the economic crisis is not |
| But the climate has changed radically since the high drama of the early summer when Greece, under the financial stewardship of the flamboyant Yanis Varoufakis, came the closest yet to crashing out of the eurozone. And the recapitalisation of Greek banks – a touch-and-go issue barely a month ago – has gone unexpectedly well. Athens has even won praise from Germany’s hard-line finance minister, who had earlier suggested Greece temporarily leave the eurozone. | |
| “Even [Wolfgang] Schauble has said there is no doubt the Greek government is implementing what has been agreed and engages with institutions [creditors] in a much more constructive way,” says Tsakalotos. To a great degree it is the mild-mannered academic, who taught at the University of Kent before relocating to Greece, who has been credited with the mood change. | “Even [Wolfgang] Schauble has said there is no doubt the Greek government is implementing what has been agreed and engages with institutions [creditors] in a much more constructive way,” says Tsakalotos. To a great degree it is the mild-mannered academic, who taught at the University of Kent before relocating to Greece, who has been credited with the mood change. |
| Almost 11 months have elapsed since the radical left Syriza party won power with its anti-austerity rhetoric and determination to take on Berlin. | Almost 11 months have elapsed since the radical left Syriza party won power with its anti-austerity rhetoric and determination to take on Berlin. |
| In its second incarnation, following fresh elections in September, the party has emerged tarnished and tamed. For diehard supporters, appalled by the super-tough measures attached to the latest €86bn (£62bn) rescue package, it is a pale image of what it once was. Many have denounced the lifeline as the kiss of death. | In its second incarnation, following fresh elections in September, the party has emerged tarnished and tamed. For diehard supporters, appalled by the super-tough measures attached to the latest €86bn (£62bn) rescue package, it is a pale image of what it once was. Many have denounced the lifeline as the kiss of death. |
| Tsakalotos, who had to negotiate the bailout in his first week in office, was also forced to recalibrate his thinking as an alternative economist with Marxist leanings. But he insists there was no other choice. The three-year accord, the culmination of a 17-hour overnight summit, was “a very difficult compromise” made by a government with its back to the wall. Greeks who believe the country would have fared better returning to the drachma are wrong. | |
| “The case that things would have been better if we had left the eurozone in July seems to rely on an assumption that we wouldn’t have had any financing needs and that we wouldn’t have had to go to the IMF for a new loan to cover those financing needs and that the IMF wouldn’t have posed conditions,” he says. “This idea … that outside the eurozone you have a completely free hand to do what you like isn’t backed up by economic theory or economic history.” | “The case that things would have been better if we had left the eurozone in July seems to rely on an assumption that we wouldn’t have had any financing needs and that we wouldn’t have had to go to the IMF for a new loan to cover those financing needs and that the IMF wouldn’t have posed conditions,” he says. “This idea … that outside the eurozone you have a completely free hand to do what you like isn’t backed up by economic theory or economic history.” |
| Six years into the nation’s worst crisis in modern times, with unemployment projected to hit 30% next year, such thinking is not stopping unions or workers from taking to the streets. | Six years into the nation’s worst crisis in modern times, with unemployment projected to hit 30% next year, such thinking is not stopping unions or workers from taking to the streets. |
| Related: Greece crisis timeline: the rocky road to another bailout | Related: Greece crisis timeline: the rocky road to another bailout |
| The 2016 budget, described by prime minister Alexis Tsipras as difficult before being passed by MPs in a late-night vote last weekend, has not been well received. In recent weeks Greece has been disrupted by two general strikes with work stoppages on the increase and pensioners noisily staging protest rallies. More worryingly for Tsipras, the government’s parliamentary majority has been whittled down, raising fears that with controversial reforms still to be passed and its control of parliament reduced to a mere three MPs, political tumult is inevitable. | The 2016 budget, described by prime minister Alexis Tsipras as difficult before being passed by MPs in a late-night vote last weekend, has not been well received. In recent weeks Greece has been disrupted by two general strikes with work stoppages on the increase and pensioners noisily staging protest rallies. More worryingly for Tsipras, the government’s parliamentary majority has been whittled down, raising fears that with controversial reforms still to be passed and its control of parliament reduced to a mere three MPs, political tumult is inevitable. |
| Tsakalotos, who has made understatement a style, does not appear overly concerned. Worry, he notes, is an occupational hazard for any finance minister. | |
| Key to success is debt relief, now seen as vital to giving investors the “clear runway” that will restore confidence and create badly needed jobs. If Athens’ debt burden – slated to reach a staggering 186% of gross domestic product next year – is lifted, the government believes it will finally offer the security needed to remove the possibility of Grexit. | Key to success is debt relief, now seen as vital to giving investors the “clear runway” that will restore confidence and create badly needed jobs. If Athens’ debt burden – slated to reach a staggering 186% of gross domestic product next year – is lifted, the government believes it will finally offer the security needed to remove the possibility of Grexit. |
| Tsakalotos would like to see the debate on debt relief initiated in February, once reforms are completed and a first review of the country’s economic progress is concluded by creditors. With EU member states almost certain to rule out outright debt forgiveness, extending loan maturities and grace periods are likely to be pivotal to a deal. | Tsakalotos would like to see the debate on debt relief initiated in February, once reforms are completed and a first review of the country’s economic progress is concluded by creditors. With EU member states almost certain to rule out outright debt forgiveness, extending loan maturities and grace periods are likely to be pivotal to a deal. |
| “The debate on debt is absolutely crucial to the question of [Greece’s future] hanging in the balance,” he insists. “It is critical that the can isn’t kicked down the road.” | “The debate on debt is absolutely crucial to the question of [Greece’s future] hanging in the balance,” he insists. “It is critical that the can isn’t kicked down the road.” |
| But the secret to survival also lies out of the spotlight, in the radical initiatives the Syriza government will take such as tackling corruption and eradicating tax evasion as it enforces unpopular reforms. | But the secret to survival also lies out of the spotlight, in the radical initiatives the Syriza government will take such as tackling corruption and eradicating tax evasion as it enforces unpopular reforms. |
| “The litmus test for the left is not whether you implement the programme – other forces could have done that equally well,” says Tsakalotos, who heads the group of 53, the anti-globalisation far-left group within Syriza. “We made this compromise, and we have a duty to implement it but only if that allows the space for radical initiatives in health and education – the social sphere that the left would be proud of.” | |
| Going places other governments have refused to go will be crucial. In its first term in office, Syriza was widely criticised for failing to enact policies that would have set it apart from other administrations. Like Pasok and New Democracy, the two parties that alternated in power for the past 40 years and have been widely blamed for Athens’ financial woes, the leftists were accused of cosying up to an oligarchical elite. | |
| Related: Germany gives Greece names of 10,000 citizens suspected of dodging taxes | Related: Germany gives Greece names of 10,000 citizens suspected of dodging taxes |
| Tsakalotos ackowledges that not enough was done. Since the second world war, he says, Greece has been blighted by an upper class that has gone out of its way to avoid helping their country. | Tsakalotos ackowledges that not enough was done. Since the second world war, he says, Greece has been blighted by an upper class that has gone out of its way to avoid helping their country. |
| More than €100bn is thought to have left Greek banks since the start of the crisis, forcing the government to impose capital controls to avert the collapse of the system in July. | More than €100bn is thought to have left Greek banks since the start of the crisis, forcing the government to impose capital controls to avert the collapse of the system in July. |
| Tsakalotos says he is determined to use stick and carrot to pursue those who had got off lightly, with the aim of getting the affluent to contribute to rebuilding a country that has lost 25% of its national output. “We were so under stress, going from hand to mouth and crisis to crisis [during Syriza’s first term in office] that we didn’t have time to go after the rich and create a sense of fairness,” he says. | Tsakalotos says he is determined to use stick and carrot to pursue those who had got off lightly, with the aim of getting the affluent to contribute to rebuilding a country that has lost 25% of its national output. “We were so under stress, going from hand to mouth and crisis to crisis [during Syriza’s first term in office] that we didn’t have time to go after the rich and create a sense of fairness,” he says. |
| “Now we are seriously considering voluntary disclosure programmes for Greeks who have got deposits outside Greece. We are carrying out important work matching outflows of Greek banks with tax receipts and we are looking at all lists, including the list of Greeks who have real estate in London.” | “Now we are seriously considering voluntary disclosure programmes for Greeks who have got deposits outside Greece. We are carrying out important work matching outflows of Greek banks with tax receipts and we are looking at all lists, including the list of Greeks who have real estate in London.” |
| Neither New Democracy nor Pasok would ever have dared address the issue “because that would be like turkeys voting for Christmas – their whole social base is based on old clientelistic politics”. | Neither New Democracy nor Pasok would ever have dared address the issue “because that would be like turkeys voting for Christmas – their whole social base is based on old clientelistic politics”. |
| The path ahead will not be easy. Reform fatigue has set in and Tsakalotos fears Greeks may be pushed too far. Demands for an overhaul of the pension system – when pensioners in many cases are the main source of income for entire families – could be the tipping point. “My biggest worry is … reform fatigue, laws keep coming, laws keep being passed and people don’t see light at the end of the tunnel. We have had 12 cuts in pensions already.” | The path ahead will not be easy. Reform fatigue has set in and Tsakalotos fears Greeks may be pushed too far. Demands for an overhaul of the pension system – when pensioners in many cases are the main source of income for entire families – could be the tipping point. “My biggest worry is … reform fatigue, laws keep coming, laws keep being passed and people don’t see light at the end of the tunnel. We have had 12 cuts in pensions already.” |
| Creditors have to accept that certain reforms can only be enforced gradually, he says, predicting that capital controls would be lifted some time in 2016. “It’s important that Greeks begin to feel the benefits [of change]. It’s important that Greeks feel their sacrifices are paying off.” |