Budget surplus targets were reduced, but this is no victory since it will be impossible to achieve and it will throw Greece into a perpetual depression, says Dimitri Lascaris
SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to the Real News Network. I’m Sharmini Peries coming to you from Baltimore. On Tuesday, [Greek] Finance Minister George Stathakis, has announced that he has negotiated the terms of another bailout agreement. It now has to be approved by the Greek parliament and the EU finance ministers. With this new deal the Greek government is required to immediately implement certain prior actions before they release the funds. Among the prior actions expected to be legislated this week is the 50 billion euro privatization program that is selling off Greek government assets, and two, the full liberalization of the energy market is also required. Here to discuss all of this from Greece is Dimitri Lascaris. Dimitri is a Canadian lawyer with the law firm Siskinds where he heads the firm’s class action practice. As always, thank you so much for joining us, Dimitri. DIMITRI LASCARIS, SECURITIES CLASS ACTIONS LAWYER IN CANADA: Always a pleasure, Sharmini. PERIES: Dimitri, what is in this new deal that concerns you the most? LASCARIS: Well, the headline is that a deal has been struck for Greece to borrow on top of its mountain of debt, which everyone now acknowledges is unsustainable, a further 86 billion euros in new loans over three years. Virtually all of which I think one can reasonably anticipate is going to be used to service the existing debt of Greece. So this is very much an extension of the five-year long exercise of extend and pretend that the Syriza government criticized so vehemently before coming to power. Underneath that headline, the next point of importance which I think the government is stressing and they’re going to characterize and they have begun to characterize as a victory of sorts is the primary budget surplus targets which have emerged. They actually are significantly lower than those that everyone anticipated would be incorporated into the agreement based upon the deal that was struck in broad strokes on July 13 in Brussels. The targets are now a deficit of 2.5 percent of GDP, or 0.25 percent of GDP this year, followed by a surplus of 0.5 percent of GDP in 2016, 1.75 percent in 2017 to 3.5 percent in 2018. What had previously been agreed was a surplus, not a deficit, in 2015 of 1 percent, 2 percent surplus in 2016, 3 percent in 2017, and 3.5 percent in 2018. The number for 2018 has remained the same. For the prior three years they are significantly lower. I’m going to come back to that in a moment, the significance of this and why this has been done. But the other thing I want to say is that this agreement apparently is premised on the [calling] projections for economic growth in the next several years. A shrinkage in GDP of 2.1 to 2.3 percent this year, a 0.5 percent contraction in GDP in 2016, and a return to 2.3 percent growth in 2017. In my view these numbers are highly unrealistic, and potentially, arguably fantastical. As Joseph Stiglitz has pointed out, this agreement is more likely to perpetuate the depression without end. And I see no reason to believe that in 2017 the country is going to experience 2.3 percent growth, but apparently that’s what the Economy Minister Stathakis now anticipates. You mentioned a number of the prior actions that are going to have to be taken. The one you highlighted, and I think it is the one that ought to be highlighted, is the establishment of an independent, sovereign, [wellspring] in Greece intended to raise 50 billion euros, three-quarters of which would be use to recapitalize banks first, and then to decrease debt. And then the remaining part, if anything, of the proceeds would go towards investing in the economy. As Costas Lapavitsas pointed out in his speech at the Democracy Rising conference a couple of weeks ago in Athens, it’s extremely unrealistic to expect given the pathetic performance of the privatization program today that anything near 50 billion euros is going to be generated by the sale of Greek state assets, particularly with the economy in shambles, which drastically reduces the value of many of these assets. And with the instability, which is going to be a great concern to potential acquirers of these assets. And what’s likely to happen is that the sale of these assets is not going to generate anywhere near that amount of money, so that there isn’t going to be any money available for investment. It’s basically all going to go towards recapitalizing the banks. Perhaps if you can get up above 25 billion euros, some portion of the debt will be paid down with the proceeds. The point I think that we ought to really bear in mind, there are a number of them, in assessing the importance of this deal, is that first of all there’s no agreement to date on debt relief. And if Greece does not get, as the IMF staff now plainly acknowledges, a dramatic writedown of its debt or equivalent measures, then its debt will remain unsustainable. And it almost certainly is going to default eventually, and that would precipitate in all probability an exit from the eurozone. So the very purpose of this deal would be defeated. Apparently there’s going to be discussion about debt relief in the weeks ahead. And the IMF has signaled, the leadership of the IMF, that if there is some debt relief in the weeks ahead agreed to, that it will join onto the deal, which is a precondition for Germany’s participation. However, the leadership of the IMF, as opposed to the staff of the IMF, who have been very clear about the necessity of a massive writedown, they have taken a much softer line. And they’ve sent out signals that they would be prepared to accept something like an extension of maturities and a reduction in interest rate. This is not something that is likely to resolve the debt sustainability problem for Greece. Because first of all, much of this debt already has lengthy maturities. I think the next round of maturities will occur 2022, 2023, so extending the maturities is not going to have any benefit to Greece for five or six years, and that’s an eternity for an economy that’s in a depression. The interest rates on the debt are already very low, generally speaking, and so there’s not much room to maneuver on interest rate reduction. What Greece really needs is a writedown of debt. It needs a massive writedown. And Germany has said very clearly that as long as Greece is in the eurozone they’re not going to agree to a writedown of Greek debt. And even the French finance minister several days ago said to the German media, and he’s supposed to be an ally of the Tsipras government, that he considered a debt writedown to be unnecessary. So there’s no reason to believe, in my view, that the country is going to receive the type and extent of debt relief it requires. I want to say a couple other important points about this deal. It lowers surplus targets, which I think is, as I’ve indicated, the government is likely to characterize as a victory. The reality is that since Syriza took power, in part because of the imposition of capital controls, the fiscal situation of the government has deteriorated dramatically. For example, tax revenues have plunged. And so while on the surface the primary surplus targets are lower than those everybody anticipated they would be, I think that simply a recognition of the fact that the fiscal position of the government has deteriorated dramatically, so that in real terms the level of austerity would be the same. The numbers, the targets have just been adjusted downward to reflect the new and more disastrous state of the Greek economy. The other thing I want to mention is there’s at this stage very little insight into this key question of this privatization fund. And one question I’ve had in my mind, I’ve not seen it discussed at the political level at all. And that is if you transfer these state assets to the control of the Troika, whether or not the headquarters of this new privatization plan are in Athens is, or in some other state, to me is secondary. It’s really who’s going to control the assets. Will the new manager of these assets being the Troika have the ability to prepare these assets for sale to the market in a way that will maximize the proceeds of the sale? If that’s in fact a power that the Troika will acquire through this deal, then one has to be very concerned about the possibility of layoffs. Because assets that are put up for sale, typically corporate assets that are put up for sale attract higher values if the workforces are quote-unquote rationalized shortly prior to the sale. And so if you have, for example, a corporation, a state-owned corporation which employs hundreds of thousands of people in Greece being put within the control of the Troika before it’s offered for sale to potential bidders, they’ll have an incentive potentially to lay off huge numbers of people in a country where there’s already an unemployment rate in excess of 25 percent. And there’s been a great lack of transparency about this fund. What’s that all going to be about, is that something that [potentially] happen after the establishment of this fund? And this remains to be seen, and unfortunately the Greek public is going to have very little time to digest what has actually been agreed to, and the politicians are going to have very little time to [inaud.]. PERIES: There’s another component about energy liberalization. What is that, and how will that be interpreted and implemented? LASCARIS: There is going to be apparently legislation put to parliament on Thursday of this week. And so you’re looking at a period of 48 hours for legislators and the public to digest and debate what these things mean. For example, the liberalization of the energy market. What does that mean? It could mean many things. And it is completely unrealistic to expect that within 48 hours people could digest the massive legislation which is undoubtedly going to be put to parliament very shortly and which will reveal all of these key details. And so this is really another sort of kick in the stomach to Greek democracy. There’s not going to be any meaningful debate on this massively important legislation. PERIES: This happened last time, where there was a very short window, as you said, of digesting and passing these sort of prior actions before they start releasing the money which they, in the last time around, managed to pass in parliament. Do you think the same thing will happen? And where is the Left Platform on this discussion? LASCARIS: Well, the leader of the Left Platform, Panayiotis Lafazanis, used to be the energy minister, came out today, I think the statement was made right after the broad strokes of this agreement were disclosed to the public, that the Left Platform will fight the bailout deal to the end. Now, they wanted to schedule, they sought to have scheduled a party conference in August before these negotiations were concluded. They were not successful, but they do have now, they’ve secured a commitment from the leadership for a party conference to be held in September, regrettably by which time much of this deal will have been implemented into law. If they’re true to their word then they will persist in opposing the deal. And at that stage, the government I think will be required as a matter of constitutional practice in Greece to call an election. And I think that the government at this stage has an interest in calling one as expeditiously as possible. Because frankly, time is not on the government’s side as people begin to feel the effects of this quite harsh austerity regime in an already-depressed economy. And as capital controls begin to take their toll on the economy, there’s no clear date by which those are going to be lifted. The government’s support amongst the electorate is undoubtedly going to decline. So the government will have an interest in bringing this matter to a head by means of an election as quickly as possible. The Left Platform will potentially, if they’re going to actually precipitate a rupture, and that’s one possible outcome, they would have need of some time to organize an alternative political force to contest the elections. And again, the government would have an interest in seeing that they’re done rapidly so that their new opponents do not have the opportunity to organize properly. PERIES: Dimitri, does the Left Platform have an exit strategy from Syriza in case a snap election is called? LASCARIS: I think that that’s unknown at this stage. The recent statements out of the leaders of the Left Platform have been to the effect that they don’t want to precipitate a rupture within Syriza, and they don’t want the government to fall. But at the same time, they’re declaring openly that they’re going to fight this bailout to the end. So it seems to me that they are going to have to, they’re going to be put to a choice. I see no realistic prospect of Tsipras changing course at this stage. And they’re going to have to be put to a choice quite possibly in September as to whether they are going to by some means exit from the party and form an alternative political force that is explicitly anti-eurozone. Whether they’ve formulated a plan for doing that is unclear. There clearly have been talks in Athens amongst various political actors, including but not limited to members of the Left Platform, about what this alternative political force might look like. But I don’t think there has been, at least publicly, there hasn’t been more than theoretical discussion about what that force might look like. One thing that everybody seems to be in agreement upon is that an election is likely to be precipitated in the near future. Whether there will be a break away from Syriza by the Left Platform remains to be seen. PERIES: Dimitri, thank you so much for joining us today while you’re actually on holiday. Much appreciated. LASCARIS: My pleasure. Take care, Sharmini. PERIES: And thank you for joining us on the Real News Network.
DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.