The Greek Deal – A game changer or a mere name changer?

Followers of Re-Define’s recent publicly available work on Greece will know that: 1) we thought Syriza’s election was good news both for Greece and for the EU 2) there would be a lot of noise and bluster, but that a compromise would eventually result, 3) the risk was always negligible and that of an “accidental” exit was zero, despite numbers such as 75% risk of Grexit pulled out of what can only be thin air by various “experts”, 4) Syriza deserved to, and probably would get a chance to, prove its mettle. 

Mercifully, it appears that we have been right, at least so far. The Troika, as we knew it, is dead.

Now that a “deal” has been reached, what do we make of its terms? Is it, as many are saying, “total capitulation” by Greece? A mere “name changing, not game changing” exercise? Or, is it something more substantial? Most important, does it leave Greece and the Eurozone better off?

There is something to the accusation, as articulated by Manolis Glezos, a respected Syriza MEP best known for having torn down the swastika from the Acropolis in 1941, that all that has happened is that the new euphemism for the Troika is “institutions”. Syriza tried, but has failed so far, to get the OECD more deeply involved, particularly at the cost of the ECB and the European Commission. But more has changed than meets the eye. Syriza can only claim some of the credit for the changes.

Why a Grexit should (and would) be vetoed

The noise around Greece is getting cacophonous, as each side poses and postures. The skirmishes have been rather frivolous so far, symptomatic of the two sides sussing each other out. The serious discussion is set to begin today at the European Council, but it will take weeks, if not months, to reach substantial conclusions about the future of Greece and, consequently, the Eurozone and the European Union itself.

It may be too early to pick winners, but Greece has fought a good fight. Syriza and its youthful leader Tsipras have kept their cool under unprecedented pressure. He, together with his charismatic Finance Minister Varoufakis, have come out as passionate pro-Europeans and have made many, often sensible and responsible, concessions to European partners by moving centre. Unfortunately, the same cannot be said of these partners, given that Jeroen Dijsselbloem, the president of the Eurogroup and Wolfgang Schäuble, the German Finance Minister, have been bullying, bitter and often irresponsible with their comments. Fortunately, both are just supporting actors in the Greek drama.

Greece’s fate will not turn on technicalities, but it will be the outcome of a ‘great game’ that has now begun. The European Council of leaders and the United States will provide the political anchor with the Commission, the IMF, the OECD and the ECB being the main economic actors. NATO will bring in the security angle and Russia, though absent, will undoubtedly loom large in negotiations.

Syriza may be doing the Eurozone a big favour

The “radical leftish” government of Syriza in Greece is not so radical or indeed leftish anymore. The “Marxist” finance minister, who is refreshingly bright and charismatic, has shown no “Marxist” leanings thus far. While many others in the markets and commentariat were panicking over Syriza’s win, we urged calm and reassured the public that Syriza’s election was good for Europe and good for Greece. A few days in, and signs are that we were right.

Despite several unsubstantiated rumours and sometimes deliberate, attempts to discredit a popular new government, Syriza has done a fairly decent job despite having no previous experience of governing whatsoever. It has not stepped on any nuclear mines, nor done irreparable harm to either its domestic or international standing. Yes it has had a somewhat rocky start but that was to be expected in such turbulent times and stressed conditions.

Syriza has done the Eurozone a great service by finally forcing it to start a debate on a number of critical issues that Frau Merkel, dubbed by the Economist as the West’s “greatest ditherer”, has so far declined to discuss.

How financial policymakers are slowly taking on climate change

Note: You can Download the UNEP Inquiry report launched at the World Economic Forum in Davos from HERE
 
For most part, these diligent professionals - finance ministers, central bankers, regulators and investors do not consider climate change to fall within their job description and mandate. This remarkable compartmentalisation has been reinforced by the failure of climate activists to reach out to financial policymakers.

However, there are signs that things are changing and changing fast.

Mounting evidence of climate change and increasing estimates of how large a financial, economic and human development impact this will have is making it ever harder even for the most conservative central bankers so forswear responsibility.  Financial regulators have begun to seriously think through the financial impact of stranded assets. Finance ministries are waking up to the extensive cost of fossil fuel subsidies and the tremendous opportunity offered by carbon and other environmental taxes. Long-term investors such as sovereign wealth funds are waking up not just to the financial risks posed by exposure to fossil fuel investments, but also to the tremendous financial opportunities offered by renewables and energy efficiency.

Why Europe should celebrate Syriza's victory

The excessive austerity that was imposed on Greece as a condition for the bailout made the debt problem worse, not better, by shrinking Greek GDP by a quarter, even as Greece cut down essential services to finance the build up of a primary surplus. The bailout package was not just financially unsustainable, but also economically wrong-headed, politically tone-deaf and socially callous. It has turned what was an aspiring first world country with third world institutions into a third world country with third world institutions. It has led to enormous personal suffering, triggered the rise of neo-Nazi movements, lain waste to productive capacity and created a cohort of the unemployed and the unemployable - a lost generation. 

It has stretched Greece’s social fabric to a breaking point and perverted the democratic rights of citizens by vetoing their political choices. What is remarkable is not that Greeks have voted for Syriza, a new anti-establishment party that vows to get a better deal for Greek people, take on the powerful Greek oligarchy and stand up to Germany and the Eurozone. What is remarkable is that it took so long for them to do so. 

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