‘Grexident’ – Will Greece Fall off the Stage?

by | Apr 2, 2015

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Apologies to readers of a more sensitive disposition for what surely must rank as one of the most teeth-grinding puns of the last twelve months.


 

But ‘Grexident’ has been the word of the moment over the last two weeks, since Germany’s finance minister, Wolfgang Schäuble, told an Austrian broadcaster in mid-March that the lack of progress over Greek austerity was increasing the chances of an ‘accidental’ Greek exit from the euro.

Accidental? Let’s put it like this. The Greek authorities have been up to their armpits in difficult negotiations with Brussels and the ‘troika’ (the European Commission, the European Central Bank and the International Monetary Fund), over the levels of austerity that will be required to maintain Greece’s 2011 bailout. Or, for that matter, to negotiate a third round of finance when the existing package expires in June 2015.

The problem being mainly that Greece’s new premier, Alexis Tsipras, signed up in February to a package of measures that will get him lynched in his own streets if his finance minister Yanis Varoufakis goes back to Athens with very much less than a total climbdown from Brussels.

Something which he’s most unlikely to get. To quote Varoufakis: “We will succeed in living up to the expectations of the Greek society, the popular mandate and our oath to honour these fights and give popular sovereignty, independence and prosperity back to our country.”

Even European president Jean-Claude Juncker’s appeals for northern European (i.e. German) ‘solidarity’ with the errant southern flank of the euro zone seemed to be falling on deaf ears – unless you count a grudging nod from Germany’s Chancellor Angela Merkel. We have, then, an irresistible force meeting an immovable object, which of course is how you generate an explosion.

As we got into April, there seemed to be very little progress going on. And it seemed oddly apposite that the Greek government should have chosen April Fool’s Day to present yet another reform package that, on the face of it, could produce a further €6 bn of budgetary correction, in a desperate attempt to stage off what might have been a  default on 9th April. That’s the day when Greece is due to make a scheduled €450 mn payment to the International Monetary Fund – or not, as the case may be. Athens’s first attempt had been roundly rejected for being too vague; failure with the second attempt could yet jeopardise a €7.2bn instalment that ought to have been heading Greece’s way.

And the 1st April package? An audit of offshore bank transfers that ought to raise €875 mn, a national lottery which may produce another €600 mn, and €1.5 bn from privatisations. And what else? It’s a little hard to say, given that the government is simultaneously backtracking on various plans to cut state pensions. Hmmmmm/

An Old Grudge

Which is the sort of talk that’s been annoying Mr Schäuble recently. Basically, his response in mid-March had been as follows: “As the responsibility, the possibility to decide what happens only lies with Greece, and because we don’t exactly know what those in charge in Greece are doing, we can’t rule out [an accidental departure]”

Truthfully, of course, it would take a deliberate act of dis-union from the ECB in Frankfurt to activate any such an ejector seat, and there’s surely no reason to suppose that the explosive charges in the release mechanism haven’t been deactivated long ago. But if you’re looking for the reasons why the euro has slumped close to dollar parity during the last month, the Grexident factor wouldn’t be a bad place to start.

Taxing the Patience

Meanwhile, a little counter-intuitively, the first signs of a turnaround in the Greek economy seem to have been tentatively happening. Greece’s statistics service ELSTAT published an initial estimate for GDP growth during 2014 last year – which it reckons improved by 0.8%, rather better than the 0.6% that its own forecasters had been predicting.

But don’t hang out the bunting yet. Preliminary estimates showed that the Athens government missed its €1.4bn budget surplus target during the first two months, managing only €1.2 bn because of a painful shortfall in tax revenues. Tax revenues, the finance ministry said, totalled €7.3bn – around 14% below the targeted €8.5bn. So

Undercover Mission?

And that was what prompted Varoufakis’s pretty extraordinary plans for a new network of government-sponsored amateur tax snoopers, each of them wired for sound and video, to seek out Greece’s many millions of serial tax evaders.

Varoufakis confessed, in a leaked memo, that the backlog of tax arrears currently stood at €76bn (£55bn) – about £5,000 for everyone in the country – but that only €8bn of this was ever likely to be recoverable. Given, he said, that the state’s tax inspection service was demoralised and understaffed, it might be an option to recruit large numbers of hourly-paid “non-professional inspectors”, including tourists, to check up on his countrymen.

Tourists? Yes indeed, and many of them German, apparently. Berlin has already offered to send 500 tax inspectors to Athens if need be – but the massed hordes of German tourists who head south every summer would also provide excellent cover for the investigators.

Alas, as long as Britain’s climate remains coldly northern, alas, George Osborne can only dream of doing the same.

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