Tag: Euro

Ou! So now you care about Greek politics? – Well you should.

Nενικήκαμεν (We have won!) After a short but intense electoral period SYRIZA won a milestone victory. According to official results, ‘SYRIZA’ won 36.34% of the votes compared to 27.81% for the outgoing government coalition leader ‘New Democracy’, 6.28% for Golden Dawn, 6.05% for ‘To Potami’ party, 5.47% for the Communist party ‘KKE’, 4.75% for the right wing ‘Independent Greeks’ and 4.68% for the centre-left ‘PASOK’ party.

parties greece


According to the Greek electoral law, in an effort to ensure a stable government, the party to win first place in the general elections receives a fixed number of seats in the Parliament. This explains why ‘SYRIZA’ managed to gather 149 seats compared to 76 for ‘New Democracy’. Nonetheless, absolute majority would have required 151 seats, forcing Mr. Tsipras, the youngest Greek Prime Minister in recent Greek history,  to go on the hunt for a coalition partner.

As agreed this morning, SYRIZA will cooperate with the Independent Greeks, an anti-austerity offshoot of New Democracy that has been extremely critical of austerity policies. It is the second time in 30 years that Greece will be led by a right-left wing coalition, only this time the radical left is the leader. As expected popular sentiment against austerity won over the usual left-right ideological differences. It also raises questions on the Ministries that will be allocated to the Independent Greeks given it has held conservative views on social policies.

New Democracy and PASOK: Farewell to the old

Even before exit polls were announced ‘New Democracy’ officials came off as defeatist on Greek television. Over the past days, outgoing Prime Minister Antonis Samaras and his allies in the party had received criticism over the increase their right-wing rhetoric, when the majority of undecided voters identified with the centre. Today, while no one openly voices doubt over Samaras’ leadership of the party, it is likely that the liberals will begin discussing on the direction the party should take to become an efficient opposition force and not lose its appeal to its voters in order to avoid what happened to ‘PASOK’ (socialist party).

Also of note, for the first time in 93 years, there will not be a Papandreou in the Greek Parliament. Talking about one of Greece’s largest political dynasties, this is a big deal! Contrary to analysts’ expectations, Papandreou’s party, ‘KI.DI.SO’, did not manage to go beyond the 3 per cent threshold that is required to elect representatives. Going forward, the centre-left will have to change both its leadership to a younger more inspiring one and its agenda in order to re-claim the space owned by Tsipras in latest elections.

Golden Dawn: The far right becomes mainstream

With the decline of the centre-left also came the rise of the far-right. Golden Dawn scored 3rd and maintained a similar share of votes with the one won in the European elections. It is worrying to notice that despite voters having outlets to express their right-wing anti-austerity sentiment, such as the ‘Independent Greeks’, Golden Dawn’s scores show that being from the far-right and xenophobic has become relatively mainstream in Greece today. The challenge for SYRIZA? Address key issues, such as immigration in a productive way in order to prevent further shift to the extremes.

What’s coming up from now on?

Once sworn Prime Minister, Tsipras will have to put his priorities in order. While SYRIZA officials negotiate their position in the new government – it is rumoured that MEP Papadimoulis will lead the Ministry of Interior – Tsipras is to nominate a successor for Mr. Papoulias, the outgoing President, before the next Parliament Plenary on 5 February 2015. After all, this is the reason why elections were called in the first place. Latest rumours suggest that he will nominate a centre-right President in order to ensure the opposition’s support. Names discussed include Commissioner Avramopoulos and former Prime Minister Karamanlis.

tsipras dr house

All eyes on Brussels

Even though things happen to run smoothly in Athens all eyes have shifted to Brussels and Berlin. The elections’ results will likely dominate the discussions at today’s Eurogroup.

In Berlin, Angela Merkel indicated what everyone expected: Germany will cooperate with the new government only if agreements are honoured and the debt is repaid – a position which does not seem to fully acknowledge the meaning of yesterday’s vote. The Kanzlerin has no other choice. She is trying to balance a potential anti-Euro sentiment from her voters while acknowledging impact of the Greek vote other countries such as Spain or Portugal. Ms. Merkel will hope to find support across Europe to further prevent the ruins of her austerity politics crumbling down on her.

Looking West, Paris might be a first pillar of support .In Paris, François Hollande is also in a delicate position, seeking to strike a balance between, on the one hand, upholding France’s European commitments and preserving the Franco-German duo, and on the one hand, fighting the rise of the extreme-right fuelled by social disgruntlement and calming the rising voices within the left fringe of his own party.

Tsipras’ actions will have an impact on other Southern European countries as well. If he abides to the Troika’s requirements the shift in the European austerity paradigm will have merely been wishful thinking. Either decisions will also strongly impact the performance of parties such as Podemos in Spain, in light of the December 2015 general elections.

This leaves us to wonder whether Tsipras will come back on his word to re-negotiate Greece’s debt, thus creating a crisis within both his party and his coalition partner or will decline the Troika’s offer and lead Greece out of the Eurozone. This becomes even more pressing considering Greece may face a liquidity problem as soon as early February.

As we have predicted Tsipra’s decision to make a U-turn will be the beginning of both a crisis in his party and of political instability in Greece. We’ve only gone from the fights of the Iliad to the unchartered waters of the Odyssey and there’s quite some manoeuvring to do, before we’re safely ashore.

By Ilektra Tsakalidou, Claire Bravard, Joachim Wilcke, Lucie Martin & Martin Bresson

Leave a Comment January 26, 2015

Iceland in good company over economic squeeze

It looks very much as if Iceland’s obligation to recompense the UK and the Netherlands for reimbursing depositors following the collapse of Landsbanki in 2008 is headed for years of litigation in the EFTA Court – not good news for those hoping for Iceland’s early EU membership. The question is whether the two creditors will allow the issue to be parked while membership negotiations proceed to a happy ending.

The Reykjavik government had negotiated much less aggressive repayment terms following the 93 per cent rejection in last year’s referendum and these had been approved in the Althing by a two thirds majority. The €3.8bn repayment timetable was extended from 8 to 22 years, out to 2046, and the interest rate cut from 5.5 per cent to 3.5 for the UK and 3 per cent for the Netherlands. Yet voters still resented having to compensate for the deeds (or misdeeds) of private banks and have thrown out the package.

Enlargement talks are due to begin again in late June, but even if difficult negotiating issues like mackerel quotas and whaling can be resolved and the negotiations brought to a successful end, Icelanders will still be asked to approve EU entry in a referendum. An Icelandic “yes” is no foregone conclusion, despite the economic arguments.  Indeed, a sceptic might ask whether Ireland inside the eurozone is any better off than Iceland outside it, except that Iceland may find it more difficult to borrow on international markets until the new repayment schedule is agreed.

The people of Iceland are in good company in resenting the medicine which their leaders are forcing upon them. After its defeat in parliament, Portugal’s caretaker government is plunged into new talks with the European Commission, the ECB and the IMF as it applies for bail-out treatment under the European Financial Stability Facility.

This will mean tough new measures, such as more flexible employment laws, a further retreat from social support and a major privatisation programme, yet with no guarantee that an incoming government  following the June 5 elections would support the package.

The Portuguese bail-out faces a further obstacle:  the leader of the eurosceptic True Finns party has said that his party will vote against Finnish participation in a Portuguese bail-out following the Finnish general election on April 17, much to the consternation of Commissioner Olli Rehn, who fears that his home country could jeopardise the eurozone economic recovery programme.

The British government will also come under domestic pressure to minimise its contribution to the Portuguese bail-out package, and is playing down its potential liabilities, although it has a fundamental interest in a stable euro.  I see that – together with Sweden – Britain has politely declined the invitation to participate in the co-ordinating principles of the Euro Pact, thus opting out of any opportunity to influence policy.

It does strike me that this opt-out further weakens Britain’s influence over evolving financial services legislation, where the atmosphere is already poisoned by the sentiment that financial markets are to blame for all our troubles and by the feeling that even the pressures on the eurozone are caused by conspiring money markets rather than by economic reality.

However, despite the troubles of the “peripheral” trio, the economic climate does seem to be improving. The German economy continues to grow rapidly, boosting imports as well as exports, and Spain seems likely to weather Portugal’s bail-out crisis without any domino effect – Madrid was able to sell three-year government bonds at less than 4 per cent interest on Thursday and Spanish borrowing is at manageable levels. It is the unemployment level which is the biggest worry for Spain.

The euro continues to strengthen against the dollar, suggesting that market confidence is growing, albeit helped by the quarter point rise in interest rates. Maybe the markets are becoming convinced that the eurozone will indeed take all necessary measures to secure its future. The political will is unswerving. Sadly this is no guarantee of the economic recovery which is vital for the future stability of its weaker member states.


1 Comment April 11, 2011

Tough home truths in IMF report

It was evident from the beginning of the eurozone crisis that the only way to discipline recalcitrant member states in the face of enormous budget deficits was to involve the International Monetary Fund, an independent, external organization which was definitely not part of the family, a body which could lay down tough conditions for winning its support, and could pull the rug out if necessary.

So it was little surprise to see the forthright tone of the IMF team when they left Luxembourg on June 7, having completed their analysis of the situation. Their report makes quite a contrast to the gentle reassurances of the eurozone ministers at their meeting on the same day.

The IMF report doesn’t mince its words. It may be familiar language for failing economies in Latin America, but for the eurozone! Take a few phrases: “Policies need to move urgently from crisis management to fundamental reforms”,  “strengthen economic governance of EMU”  “longstanding problem of anaemic growth in the euro area must now be addressed”,  “the euro area fiscal framework needs to be substantially strengthened”,  “more ambitious changes are needed”. And so on, with detail. The fundamental theme is that European countries must transform their economies, slash government spending and drive for economic growth.

The eurozone ministers did formally launch the €440bn European Financial Stability Facility at their June 7 meeting, but that’s definitely “crisis management”. The EFSF has been established as a limited company under Luxembourg law and will work in conjunction with the IMF to guarantee support for eurozone members if their credit position should weaken.

The question still remains as to what the eurozone can do to strengthen its effectiveness and meet at least some of those IMF demands. An intriguing game of smoke and mirrors has been played since the Special Purpose Vehicle and the associated IMF support were announced on May 9, a game designed to convince the markets that Europe is getting a grip of its profound economic crisis. The reality is that everyone has a different idea of what needs to be done and what can be done in the longer term.

Economic government for the eurozone. That’s the catch phrase. President Van Rompuy has used it, French Economy Minister Christine Lagarde has used it and Chancellor Angela Merkel has almost used it – “economic governance” is the closest she has come (also a phrase used by the IMF). President Sarkozy has spoken of a Eurozone Council. But a closer look at how it would work reveals something like a beefed-up version of what already exists.

The argument that a European single currency can only survive if there exists a common economic policy, common fiscal policy and common budget policy may prove to be correct in the long run, but it is clear that this is not what Europe’s present leaders mean when they talk of economic government.

France wants a formal decision-making structure where heads of state and government agree on fiscal discipline and maybe impose sanctions on recalcitrant member countries. Germany in effect argues for a stronger commitment to the stability and growth pact (and has announced budget cuts of €30bn over the next four years to do its part). Luxembourg Prime Minister Jean-Claude Juncker, president of the eurozone group of countries, believes that  eurozone governments should vet each other’s budget plans. But nobody contemplates the transfer of fundamental tools of economic management to a supranational European policy-maker. Maybe the IMF is a different matter?

So what of the euro crisis? At least the decline of the euro is seen as a positive, making European goods more competitive and – perhaps – boosting domestic demand within the crucial German economy. What is also evident is an increased determination to cut government spending sooner rather than later, reflected in the G-20 meeting. And of course these are not challenges faced only by the eurozone; the UK’s new coalition government has a massive challenge ahead in reducing spending and boosting growth. A poisoned chalice indeed!


Leave a Comment June 8, 2010

Online polling finds new currency with the EU

Our own 2 Euro efforts

The European Commission communicated with the people today. In fact, it launched an online poll, asking us to vote on the design of a commemorate 2 EURO coin. The coin will be released on 1 January 2009 to mark the 10 year anniversary of the Euro.

I’ve never seen an online poll of this nature being launched by the Commission before and I can’t help but think that this could be a useful way to sell the EU concept to the average man-on-the-street. And at last a bit of direct democracy in action. Actually, couldn’t the same principle be used to decide the fine details of legislation? But then again, asking the public to choose the exact auctioning percentage allowance given to industry under an emissions trading scheme probably wouldn’t catch the public’s imagination.

Also is this a dangerous game by the Commission, given the new Lisbon Treaty provisions regarding citizen petitions? If a million people suggest one coin design, win or lose, surely the Commission will legally have to consider it.

Anyway, back to the poll and I’d like to make four points:

Firstly I’ve had to enter my details to vote even though a key democratic principle of voting is that it is anonymous. However, there is a trade-off. By registering my details, I get entered into a prize draw for a high-value set of euro collector coins. I wonder how high “high-value” is. The world’s most expensive coin – the ‘double gold eagle’ coin – was sold in the US in 2002 for almost £5 million. Who knows, in a 500 years, maybe this commemorative EURO coin will be worth the same.

Secondly, coin number 5 is clearly the best.

Thirdly, I’m surprised that UK citizens are allowed to vote. A pre-requisite for choosing the coin must be that you can actually use it in your country. Plus shouldn’t we expect a potential sabotage as UKIP members vote en masse for the coin number 4, clearly the least inspiring.

Fourthly, I’m a little bit disappointed that I can’t submit my own design. One EU step at a time I guess…

3 Comments January 31, 2008

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