Never Enough, Greek Style

So, today we read in various news outlets that Greece has made its latest debt payments necessary for continuing not to default.  But the news stories, such as that in the NY Times, give them little credit for this and instead emphasize how much deep doo doo they are in and how they must kowtow to their creditors on a variety of things that the creditors are demanding they do.  Otherwise, as has accompanied every other payment and adjustment this year, we are told doom will appear come early June or late June or when the moon is in the Seventh House or when Varoufakis takes off his shirt in public and mkes naughty remarks about other finance ministers in Europe.

So, what are these demands that the mass media reporters pass on from the European VSPs as so important that Greece must kowtow and do them Or Else?  Details are not given, but they apparently involve pension cuts and labor market "reforms."  On the former, without doubt, cutting pensions reduces budgetary layouts, thus reducing fiscal pressures in the short run (although by leading to reduced spending by pensioneers down the road, this contributes to an economy-depressing austerity down the road that may make it harder to lower that debt/GDP ratio).  The details of the labor market reforms are not reported on, but let me say here that these do not have a direct effect on the budgetary pressure, and only may have some longer run effect, although, frankly, the scholarly studies on this topic are not nearly as clearcut as those demanding these changes think they are.

Something completely not mentioned in any of these stories that I have seen is that Greece has already engaged in exactly these kinds of policies, notably in 2012 in the wake of the crisis set off by the Greek government admitting that it had been misrepresenting the size of its budget deficit for many years.  The pension cuts exceeded $4 billion, and there were changes in labor market policies.  These were followed by substantial declines in Greek GDP, leading to this round of further demands of More of the Same, Never Enough.  The argument is that Greece is paying a higher percent of its GDP as pensions than any other euro member, but without noting that what it pays per pensioneer is well below the eurozone average.

Another thing not noted in the current stories is that part of Greece's ability to make this payment was not just due to scrabbling together funds from local governments and other odd and unsustainable sources as noted in the stories, but also due to an actual (and unpredicted by the troika VSPs) increase in tax collections.  Granted, these are still not enough to get through that June/July round without some further restructurings, but that is going to go on anyway and as always.  But no credit is given, even though the Greek government, including that awful tieless Varoufakis predicted they would.  This just goes to show how right those other fin ministers were to get annoyed by all his "lecturing."

This is clearly an ongoing negotiation.  Varoufakis and Tsirpas have said that indeed they will engage in further pension cuts and labor market changes, although whatever they are proposing apparently is Not Enough for the troika gang.  Recognizing that such changes are not what they were elected to do, Tsirpas has suggested a possible referendum on all this, if it comes to it.  German Finance Minister Wolfgang Schauble, who seems to have been most annoyed by the tieless and lecturing Varoufakis, has said, fine, let the Greek people decide if they are willing to do what "is necesary."

Let us be clear.  None of this is "necessary."  It is posturing as part of a negotiation where in fact the creditor side of things will also have to bend on their demands.  If they do not, they will regret the outcome, and not admitting that, while not good game playing, is not something that Very Serious People should pretend about.

Barkley Rosser