Greek Smoke and Mirrors

The fact that the sums don't really add up has not mattered much to voters, who seem to have bought Syriza's argument that everything would be rosy if only austerity were curtailed and Germans softened their stance.
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Syriza's win after yesterday's general elections, has turned the spotlight back on to Greece.

Syriza, a motley crew of left-wing hardliners, former socialist union members and anarchists, had softened its tone of late, at least judging from the statements of its charismatic leader, Alexis Tsipras.

Under the leadership of Antonis Samaras, a populist right-wing politician who had boycotted Troika intervention when he was in opposition, the liberal-conservative New Democracy (ND) focused its pre-election message on fear, refusing a debate with Tsipras, alienating centrists.

Syriza's promises of state largesse, including guaranteed income and tax reduction for the poor, struck a chord with an electorate exhausted by six years of recession and persistent unemployment.

The fact that the sums don't really add up has not mattered much to voters, who seem to have bought Syriza's argument that everything would be rosy if only austerity were curtailed and Germans softened their stance.

Syriza, like much of the international press, misses the point by claiming that austerity and Germany are holding Greece back. The problem isn't (only) that excessive short-term contraction, imposed by Greece's lenders to achieve significant surpluses to pay off the debt, has hampered growth prospects.

It's that the Greek economy just isn't competitive: European unification and the Euro helped countries such as Germany grow by selling exports to Greece and recycling their domestic savings into Greek credit through the European Banking System.

Another problem is that a bloated, extremely inefficient and rent-seeking Greek state cemented a restrictive market structure, protective of incumbents and special interests. On top of these structural issues, political uncertainty forestalled the investment that was sorely needed to address a long period of stagnation. And to cap it all off, tax evasion and preferential treatment of the powerful few is still a major issue.

Syriza, of course, breezed past these concerns, not least because it wants to grow the public sector. It is far easier to discuss debt dynamics, focus on austerity and demand greater social justice. Yet the real issue in Greece is how to improve an inefficient, interventionist and sometimes corrupt state. So far, Syriza has shown remarkably little appetite for reform.

When Kyriakos Mitsotakis, the energetic Administrative Redesign Minister, launched a programme to identify all public servants who had obtained their posts with fake degrees or qualifications, Syriza tried to forestall his initiative, demanding that those convicted of such forgeries should keep their pension benefits.

Syriza has strongly rejected efforts to evaluate public-sector employees, and had pledged to revoke the laws that have been passed, with difficulty, to streamline the government and reduce its bureaucratic impact on business.

The irony is that Samaras' government had a relatively poor record in this regard, especially after the European elections last summer. With the exception of Mitsotakis and a couple of his colleagues, the ND government did little to improve the state apparatus.

The first Permanent Secretary for Public Revenues, Mr Theocharis, was summarily sacked for being too independent; senior positions were given to party friends; and demands for real reform by the Troika were met by cat-and-mouse tactics. While the reorganization of tax services improved Greek fiscal health, and some reforms were implemented, under Troika pressure, most stalled -- often because they were undermined by old-school ND (or PASOK) politicians.

Yet more smoke and mirrors surround the future of the Greek oligarchs. Over the last few decades, new elite has arisen, built on the back of major government contracts, enjoying oligopolistic protection or supported by rampant tax and duty evasion. Its members own the majority of the independent press, TV and radio stations in Greece.

While Syriza has committed to curbing the oligarchs' power, its anti-investment, anti-foreigner stance will merely end up strengthening their hand, because it will leave them with an open field. If the worst comes to the worst and Greece exits the Euro, it is precisely these oligarchs who will benefit the most.

Over the last few days, political turbulence and the need to restructure the debt took centre stage. But what we should now be looking at are the very real structural issues that are still robbing the Greek people of the prosperity they would build for themselves.

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