Greece Now Positioned to Negotiate a New Loan Agreement

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  February 26, 2015

Greece Now Positioned to Negotiate a New Loan Agreement

Professor James K. Galbraith, academic colleague and advisor to Finance Minister Yanis Varoufakis, says the extension of the loan agreement will allow for a change in the terms to be developed over the next four months
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James K. Galbraith teaches at the LBJ School of Public Affairs, The University of Texas at Austin. He is a Senior Scholar of the Levy Economics Institute and the Chair of the Board of Economists for Peace and Security. The son of a renowned economist, the late John Kenneth Galbraith, he writes occasional commentary for many publications, including Mother Jones, The Texas Observer, The American Prospect, and The Nation. He directs the University of Texas Inequality Project, an informal research group based at the LBJ School, and is President this year of the Association for Evolutionary Economics.


SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to The Real News Network. I'm Sharmini Peries, coming to you from Baltimore.

Did Greece capitulate to European powers and reluctantly agree to the terms dictated by Brussels and Troika in order to obtain an extension? This is our next topic with our guest, James K Galbraith.

Professor Galbraith has been in Athens with Yanis Varoufakis, the finance minister of Greece, advising him through these negotiations. James K. Galbraith teaches at LBJ School of Public Affairs at the University of Texas in Austin. He's the author of The End of Normal: The Great Crisis and the Future of Growth.

James, it's been a while. Good to have you with us on The Real News Network.

JAMES GALBRAITH, PROF. ECONOMICS, LBJ SCHOOL: It's very good to be with you.

PERIES: So, James, in an article that you penned in Social Europe, you took issue with how the European and the American mainstream press, mainly The Independent of London and The New Yorker and The New York Times, how they have been covering the negotiations leading up to the extension by the SYRIZA government of Greece. What is your contention with the coverage?

GALBRAITH: Well, as you noted in your lead end, the discussion has been conducted in the terms of whether Greece capitulated to the prior terms of the loan agreement and program under which the previous government had been operating. And the answer to that question is, no, it did not. There had been already significant changes in the terms. But more important than that, there has been a space opened for negotiation over a four-month period as to what this precise conditions that will be agreed to going forward will be. And that is very significant, because I do not think that in the history of this crisis there has been a remotely balanced negotiation between any country seeking to pursue a different policy and the European partners who have dominated policymaking so far.

PERIES: So, James, then the way in which the journalists in these media outfits presented Greece as if they capitulated, what are the nuances that we need to know to understand what actually happened?

GALBRAITH: Well, to begin with, there was a question of what was extended. And when we say that what was extended was the loan agreement--this is both technically precise, and it allows for a change in the conditions on the terms of the loan.

And, now, when we get to the question of what the terms are and what the changes are, there are three major issues that the Greek government raised. The first was the previous target for a primary surplus, which was the overall target for fiscal austerity. The Greek government believed--correctly, and basically every economist agreed with them--that the previous target was extremely harsh and unachievable in practice. Second issue was the terms under which privatizations of public assets would or would not go forward. And the third question is a question of the regulation of labor market and the specific issues such as minimum wage and the minimum level of pensions, on which the new government had specific disagreements from the previous loan agreement.

All of those matters are open now for discussion, with a general presumption that a different policy is possible. And that is, as I say, something that is quite significant. It gives the new government financial space and time to implement other aspects of its program and to discuss these issues with the European partners, with the institutions, and presumably also with creditor governments.

PERIES: So, James, are you saying here that in the next four months, even the list that's been tabled now by Yanis Varoufakis is up for negotiation? For example, the privatization clause that, from what I understand--and correct me if I'm wrong--that at this moment they cannot roll back on any of the privatization agreements that were signed by the previous government, nor the ones that are underway? Only they can address future ones. Am I not correct?

GALBRAITH: The agreement's certainly for the four-month period.

It's, I think, important to recognize here that the new government is not opposed on a categorical basis to privatization of public assets. There is one going forward, for example, that--it relates to the container port at Piraeus, the large port for Athens. The terms of that one, I gather, were acceptable to the new government. But there are privatization projects which would simply substitute, let's say, price-gouging private monopolies for the existing public utilities, and there are privatizations carried out under, let's say, extreme pressure of time, necessarily convey a bargaining advantage to the buyer, which drives down the price and makes the revenue targets from a sale of any particular time type of asset very hard to achieve. So having the flexibility to review future privatizations on a case-by-case basis is a significant improvement in policy compared to what was being expected before, which was basically ideologically driven and debt-collection driven effort to get as many assets off the public books as possible under whatever terms could be had.

PERIES: James, let's take that up in our next segment and continue this discussion. Thank you so much for joining us today.


DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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