‘Grand Greek Paradox’
Last week was a good week for the country, said the Greek prime minister. And he was right. Greece went out to the free markets for the first time after a long period of exclusion and was able to sell a government bond attracting an impressive number of buyers, mainly from the U.K. The “exit” of the Greek economy was sufficiently hailed by a chorus of politicians, economists and the majority of Greek and European media. Greece managed to attract 3 billion euros with an interest rate of 4.95 percent by issuing a five year government bond. In spite of the fact that its credit rating remains in the category “junk,” the country made its first small step to the free markets breaking an important psychological barrier.
Greece’s fall from grace almost five years ago coincided with Eurozone’s start of its most serious crisis to date. Greece, for its fellow European partners, was shown for long time as the “bad example” for government mismanagement and corruption, while several European tabloids enjoyed a racist spree by portraying Greeks as the paradigm of the laziest and the most corrupt nation in Europe.
But there was another important reason which helped Greece’s rehabilitation. The visit of the German Chancellor to Athens took place a day after the Greek move to the markets. Merkel stayed in Athens only for a few hours, but it was enough to complete her important mission: to express her full support for Antonis Samaras’s coalition government and its program of reforms and austerity, one month before his crucial test in the battlefield of the local and European elections.
Merkel congratulated Greece for its painful efforts to put the economy right and Samaras in an interview yesterday to Kathimerini newspaper assured that “there is not going to be any more bailout agreements,” that Greece “step by step” is managing to get over the crisis “as long as we do not take a back step,” as long as “we do not allow the plans of those who wish Greece to remain stuck in misery, moaning and isolation.”
Even the strict president of the ECB, Mario Draghi, had some encouraging words to say, albeit with an ample dose of cautiousness: “The markets were positive towards this remarkable progress that took place in Greece,” he said, but he reminded everybody that the efforts for fiscal adjustment must continue as well as the reforms and the stability of the banking system, so that the return to the markets does not turn out to be an ephemeral event. He also added that at this particular period, the markets are very responsive to junk bonds globally.
But there is the other side of the coin. Economic analysts going against the general trend claim the only explanation for the change of heart by the market is due to a policy change by Germany towards Greece. Prof. Varoufakis claims that what he calls the “Grand Greek Paradox” i.e. that although Greece continues to be insolvent, the fact that its bond attracted such response from the markets, has to do with the decision of Berlin to keep Greece inside the euro and to declare “victory in the case of the Greek crisis between now and the May European Parliament Election.”
Whatever argument is the strongest, Samaras is facing a tough period between now and the end of May. The climate of optimism he is trying to instill is not reaching the suffering parts of the society, as it will not immediately offer a solution to their serious problems of decreasing living standards, deteriorating social conditions, and long term unemployment. Whether the message of the official leftist opposition Syriza reaches these parts of society is also debatable, as a high percentage of Greeks, almost 40 percent have not decided yet whom to support. Perhaps at the last moment they will go for the government or they may follow the general trend that is expected to prevail in the first pan-European polls since the Eurozone crisis. And that is to vote for parties who represent a deep skepticism over the future of the European project.