Greek Reforms: 70+30 = 50 on a good day

It’s anyone’s guess what will happen at the February 16 Eurogroup session, the weekend European press is filled with every possible scenario and even contains detailed sequenced listings of all of potential outcomes.  We congratulate the SYRIZA media machine and its European partners for rolling out yet another wave of editorials and demonstrations in support of current Greek positions.

But our interest is in the substance, not show.  Is the Eurogroup going to put an end to the rhetoric (not our words, but US Treasury Secretary Lew’s) and get down to the business of locking down Greece’s reform agenda and its financing, or is it going to let this float for another six months? And will PM Tsipras be allowed to slip out from under the prior commitments he rejects by simply renaming the new agreement as a New Greece-whatever development bridge program? We hope not.

We chose the title 70+30=50 because its evident the Greek side is trying to pull a fast one by claiming it can easily accept 70% of the Troika’s structural reforms and will replace the 30% it reject87-1s with 10 new measures it proposes (including elements of the OECD reform toolkit).  It will be a few days until we get the whole picture via communiques and leaks as to exactly what reform was traded for what concession, at what budgetary impact, and learn which sectors of Greek society have benefited by allying with SYRIZA for protection. But certainly the private sector will not come out near the top of the pile.

From what we have seen so far the 30% of the structural reforms the SYRIZA government rejects looks more like 50% or more of the previous reform program and certainly includes the essential competitiveness-enhancing reforms that Greece vitally needs. We are not so cynical as to suggest that the rejected 30% is the core of the reform program and the
acceptable 70% (remainder) are things most Greeks would agree on, since they are not seen as pain-inflicting “measures” by the Greek public. That means these are reforms that produce no job losses, no benefits cuts and no political costs, but sound important, like fighting corruption. SYRimages


But what we have seen of the SYRIZA “redlines” in these negotiations is totally unacceptable to free-market advocates and we urge the former Troika institutions to take whatever steps are needed to get the Greek side out of the clouds and back to Europe 2015.  Excluding privatization, public sector reform and downsizing, the health sector as well as labor market reform from the reforms required of Athens is essentially giving PM Tsipras a complete free hand to roll back much if not most of what little the Troika has accomplished.  This is equivalent to locking the Greek population in a room with a pack of hungry carnivores and telling them to divide up the few provisions the Eurozone will hand out.

While we see little harm in relaxing the budget deficit targets from the politically-unsustainable level of 4.5% of GDP next year, if the cash is available, the reform-minded Greeks that we work with sincerely hope the Eurozone does not make the concessions the Tsipras government is asking for.  Greece deserves better than to be hung out to dry in the face of a group of deeply anti-reform and anti-private sector ideologues, even if well dressed.


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