Article by Brian Hayes MEP that was published in the Irish Independent on 11th March 2015
Whatever the pros and cons of the recent deal reached between the Eurogroup of Finance Ministers and Syriza, the next four months will be abundant with ‘ifs’ and ‘buts’ about Greece’s short and long-term prospects. Last week went from the sublime to the ridiculous as the new government was considering wiring up eager citizens to go spying on the tax status of local shop keepers.
The problems keep mounting for the enthusiastic new Greek leader, Alexis Tsipras. Access to sufficient short-term funding is not guaranteed. Speculation is building about a third bailout for Greece. And now Mr Tsipras is starting to face opposition from within his own party.
What is clear is that those who argued that Greece should play a game of chicken with other eurozone countries have got it spectacularly wrong. Correctly, the new Greek government has decided to go down the successful route that Ireland followed. In fact, in its discussions with the EU, it is citing Ireland as an example. That is patient negotiation, as opposed to dropping bombs. I think people will take a cold, hard look at what has happened since the Syriza election victory. As its pre-election rhetoric becomes a dim memory, people in Ireland are waking up to the false promises of others. Electing populist parties changes nothing. In fact, it makes a bad situation worse.
EU member States and the Commission recognise the serious position of Greece and I believe that viable solutions will be on the table for the country. The European way is through solidarity, negotiations and a commitment to find solutions. There is genuine goodwill from all sides in this process.
But in any negotiation, you have to be realistic. Debt writedown is not on the table. Approximately 90pc of what the Greek government owes is sovereign debt, meaning that European taxpayers would have to foot the bill for a debt writedown.
There have been suggestions that the ECB could take on some of the debt. But this cannot happen, firstly because the ECB is not a bad bank and secondly because this is prohibited by the EU treaties.
Greek Finance Minister Yanis Varoufakis has said that he will present his detailed plans at this week’s Eurogroup meeting in Brussels. We will have to wait and see if his eagerness to come to the table early with proposals is a real attempt to be constructive.
The ECB Governing Council met last week and Greece was yet again a highly sensitive issue for discussion. Really, the only lifeline for Greek banks at the moment is the ECB’s Emergency Liquidity Assistance fund. ECB President Mario Draghi stressed the point that the ECB has doubled its lending to Greece from €50bn to €100bn in the last two months. So there is clear support coming from the institutions. Yet we all know that Emergency Liquidity Assistance could be turned off if Greece does not fully engage in a reform programme.
EU heads of state will then meet in Brussels on March 19, when further fleshing out of Greece’s position will be done. By this time, EU leaders will have to look very closely at Greece’s short-term funding position. Some have said that the country may run out of money at the end of March, and this is no exaggeration. Consider that Greece has to pay approximately €7.3bn worth of debts in March alone. It is hard to say where it will raise the funds to pay. Even before the election, taxpayers stopped paying their taxes. The Syriza government reported that in January the tax take was €1bn below target.
The key issue that we face over the next few months is how can we help the Greeks in a way that solves their problem. Ireland has shown through ongoing negotiation over the past few years that you can actually improve the situation for your taxpayers through agreements like the Promissory Note deal and the early IMF repayment plan. The total negotiation package since our bailout programme is estimated to have effectively returned €50bn to Irish taxpayers.
One thing on which I do agree with the new Greek government is that it is rightly going hard on the issue of tax compliance. There is a problem with many people and businesses paying taxes fairly in Greece. These kinds of structural changes would be much more beneficial for Greece than any debt writedown, particularly in the long-term.
Syriza does want to reform Greece in its own way and we have to respect the mandate it received from the Greek people. But it’s also important that Greece respects its commitments to its European partners and the international community. By sitting down at the table and hammering out an agreement in the European Council on February 20, Syriza has signalled that it is able to compromise in a constructive way. But the heavy lifting is yet to be done.