Why Greece is as sick as ever

Greece’s creditors continue to argue among themselves. Europe editor Tony Barber explains why the country’s agony is likely to persist. Greece is once again the focus of attention and concern, as the country’s creditors appear increasingly unable to agree among themselves, raising the prospect of a renewed crisis gripping the country.

With me to discuss this is Tony Barber, the FT’s Europe editor.

Tony, we seem to be back again where we’ve been so often before, with standoffs and threats. What’s happening? Why are we paralysed here in this point?

There are two issues. One is that the Eurozone partners of Greece don’t see eye-to-eye with the International Monetary Fund on the diagnosis of Greece’s condition. The IMF takes a more pessimistic view of where Greece is than the Eurozone creditors. And then the Greek government doesn’t agree with what creditors want to prescribe as the next course of treatment for Greece. So there’s a three-way standoff there.

And what’s happened recently? Because this whole face-off, or tension between the European side particularly and the IMF, and then also with Athens, we’ve had this before. Why has this not blown up in the last few weeks? Is it yet again something? Is there a looming deadline?

There is a deadline. It’s not that close at the moment, really. It’s in the big repayment of Greece’s debt that’s coming up is actually in July. But the fear of the creditors is that the European electoral calendar will block progress between late February and July. And that if an agreement on what happens next in Greece’s bailout programm isn’t agreed in the next 7 to 10 days or so, then it will be much harder to get agreement between late February and July, because there is an election in the Netherlands, then an election in France, and so on.

Personally, I think that it won’t go to the wire as it did in 2015, when the sense of crisis raised a realistic prospect of Greece actually leaving the eurozone. I think this time the signs are that the Europeans and the IMF will simply split the difference on where they stand, and try to move forward.

And you referenced it earlier, but just to make clear, you see the difference lies in the fact that the Europeans say, look, growth has returned to the Greek economy. They look at some other indicators. And the IMF is saying, no, that’s not really telling the full story. Some of these statistics–

So there are also a number of…

Not sure about, or they’re at least going to be subject to revision.

The Europeans place more emphasis on the fact that Greece has recently been able to run a primary budget surplus, that’s to say, excluding interest payments. And they seem to think that Greece will be able to maintain that budget surplus for a period of time long enough to ensure that the debt burden doesn’t get out of control.

The IMF, by contrast, says there is a repeated history of Greek governments giving into pressure for extra spending from clients and interest groups. They also point out that there are chronic weaknesses in aspects of the Greek public administration that have not been solved by 7 years of being in a rescue programme, such as tax collection, which actually has fallen quite steeply, despite attempts to improve tax collection systems.

How is this playing out politically within Greece? There has been some talk that if things really went wrong, they may face fresh elections.

Yes, another set of elections. Yes, indeed. That’s been a recourse of governments of center right, center left, and indeed the radical left Syriza, under Alexis Tsipras in 2015. I think there’s pressure within Syriza, the ruling party now, to return to being a kind of anti-system party, not to hold the reins of political responsibility for too long. They have been hit quite hard in terms of popularity by governing Greece for the last two years or so. They’re well behind the main center right opposition party, new democracy. They might feel it’s time to hand over.

Tony Barber, thank you very much.
Source: Financial Times