As the Greek Finance Minister and Greek Prime Minister continue their charm offensive through Europe, there is one key question: why would Greece’s lenders - and Germany in particular - offer a SYRIZA government more flexibility than it showed to the supposedly more cooperative government led by the conservative Antonis Samaras?
One answer may be that they will have little choice. Faced with increasing levels of international pressure over Greece’s current bailout program following the clear outcome of the Greek elections (with such heavyweights as the US and potentially France and Italy pushing for some form of renegotiation) the German government may be pushed into making concessions that it would prefer to avoid, agreeing to some form of plan like that laid out by the Greek Finance Minister, Yanis Varoufakis in London simply to avoid a more catastrophic scenario.
However it may also be true that in providing Alexis Tsipras’s government with a ‘win’ in its push to dial back the crippling austerity in the country, Germany may actually gain a more willing enforcer of certain key structural reforms in Greece.
Indeed as Yanis Varoufakis and Alexis Tsipras seek to drum up support for the Greek position, it is likely that a key part of their strategy will be to stress their government’s willingness to tackle deep-rooted problems untouched by previous administrations – most notably regarding tax evasion and cronyism in the Greek state. Their success in the negotiations will likely depend to a large degree on whether they can convince their European partners that they are serious and not making more empty promises.
In short the administration will stress that under its leadership, the political protection of the well-connected will finally end, and Greece will move towards becoming a country with a functional civil service and laws that are actually enforced for all. The question is whether anyone will believe them.
Sins of old
It is of course understandable for European leaders to be circumspect when it comes to Greek promises to combat phenomena such as tax evasion among the wealthy. After all this was a promise that has been made since the start of the crisis beginning with George Papandreou’s government.
However rather than overseeing a crackdown, that administration disgraced itself with its handling of the ‘Lagarde List’: the list of thousands of wealthy Greeks suspected of tax evasion that was passed to Greek authorities by the then French Finance Minister Christine Lagarde. Instead of passing the names onto the revenue service the then Finance Minister George Papaconstantinou ‘misplaced’ the list although not before apparently removing the names of several of his relatives (in a case for which Papaconstantinou is currently facing charges).
Subsequent administrations fared little better, effectively doing the minimum possible to be given grudging passing grades by the troika inspectors on the key issue of tax reform. Even today progress on investigating the individuals on the Lagarde List has been sluggish at best. In the face of poor tax collection at the top end, the middle and lower classes were hit with major tax hikes and austerity cuts to ensure that the numbers added up.
In public the government of Antonis Samaras – as most governments do – promised to end the injustices and reform the revenue service. Indeed a key requirement of the Memorandum was that Greece finally establish an independent revenue service free from political meddling.
Yet even in the face of the crisis, Memorandum agreement and troika inspectors, in private the government appears to have been unwilling to put the ways of the past behind it. The extent to which it continued to meddle in tax affairs, providing political cover to wealthy patrons, was indicated in a recent little-noticed interview given to the Telegraph by Haris Theocharis, the onetime ‘new broom’ of the supposedly reformed tax collection agency.
In the interview Theoharis reveals that he was beset by intense political pressure not to go after the well-connected, a factor which led to his resignation only 17 months into the job. “They wanted me to be lenient,” he told the Telegraph, “I resisted it up to a point but then I had to leave.”
Of Theocharis’s efforts, the Telegraph writes:
To rectify the idea that only “little people” pay up, the tax service… stepped up campaigns targeting big companies and wealthy individuals, armed with a law under which anyone suspected of dodging more than €10,000 in taxes can be put in jail pending charges.
But while that yielded a number of high-profile scalps, including former government ministers, Mr Theoharis said that the government of Antonis Samaras, the leader of the conservative New Democracy party, started pushing him to adopt what he diplomatically calls “a more populist stance”.
In practice, that meant going easy on politically sensitive targets such as friends and benefactors of the party. “It was a case of 'don’t do this, don’t do that’,” he said. Theocharis is now an MP with the ‘River party’ having won a seat in the recent elections.
Will SYRIZA fare any better?
The fact is that even as the coalition governments of PASOK and New Democracy promised to change their ways, the web of corruption (‘diaploki’ in Greek) with its nexus of power between the oligarchs, media and political parties appears to have remained largely unchanged throughout the crisis.
Indeed one of SYRIZA’s main draws leading up to the election for Greek voters was its promise to finally take on these vested interests in a meaningful way. More so than promises to raise the minimum wage or provide electricity to impoverished families, pledges to take on the oligarchs and vested interests routinely drew the loudest cheers at SYRIZA rallies. The party is perceived as being independent of the vested interests to which PASOK and New Democracy have long been beholden and therefore the only political force capable of actually cleaning up Greek politics and the cronyism rife throughout the machinery of the Greek state.
Of course such a task will be a Herculean one, but Varoufakis and Tsipras are adamant that they will root out corruption far more aggressively than their predecessors. They also stress that these are the key reforms that must be implemented for Greece to boost its competitiveness.
In a recent interview with Zeit Online Varoufakis had the following exchange with the magazine’s reporters:
Varoufakis: Germans have to understand that it doesn’t mean we’re turning away from the reform path if we give an additional €300 a year to a pensioner living on €300 a month. When we talk about reforms, we should talk about cartels, about rich Greeks who hardly pay any taxes. Why does a kilometer of freeway cost three times as much where we are as it does in Germany?
ZEIT ONLINE: Why?
Varoufakis: Because we’re dealing with a system of cronyism and corruption. That’s what we have to tackle. But, instead, we’re debating pharmacy opening times.
ZEIT ONLINE: Many governments have promised to do something to counter these problems. But little has happened. So why should people trust you?
Varoufakis: You need not trust us. But you should listen to us. Listen to what we have to say, and let us then discuss it with an open mind.
Similarly in light of his meeting tomorrow with the German Finance Minister, Varoufakis told the Telegraph, “I will tell Mr Schäuble that we may be a Left-wing riff-raff but he can count on our Syriza movement to clear away Greece’s cartels and oligarchies, and push through the deep reforms of the Greek state that governments before us refused to do.”
If Schauble and Merkel can be convinced of SYRIZA's willingness and ability to reform the machinery of the Greek state it may be a key factor in the various sides reaching a compromise over the Greek demand that austerity be eased.
However it should be noted that the Germans will likely demand other structural reforms that the SYRIZA-led government will find much less palatable, such as liberalizing labour laws and other changes anathema to many of the leftist party's MPs.
'Structural reforms in exchange for a debt restructuring' may seem a relatively simple recipe, but the devil is very much in the detail.
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