27 January 2015

New Greek cabinet unveiled less than two days after the elections

Things are moving fast in Greece. Yesterday, less than 24 hours after the vote, SYRIZA clinched a coalition deal with the right-wing Independent Greeks and Alexis Tsipras was sworn in as new Prime Minister. Today, the new cabinet has been unveiled. As we noted in our response to the Greek election results, SYRIZA will be short on time and money. Therefore, it is to their benefit that they have been able to move things along quickly.

Academics secure key posts

Tsipras has handed several key posts to well-known academics. Greek economist Yanis Varoufakis is the new Finance Minister. Georgios Stathakis, who teaches Political Economy at the University of Crete, is the new Economy Minister. Nikos Kotzias, European Studies Professor at the University of Piraeus, is the new Foreign Minister.

All these academics have clear political links to SYRIZA. Yet, their appointment could also be seen as an attempt by Tsipras at reassuring his European partners by showing that he has picked the most competent, rather than the most loyal, for the key jobs. Proving that their theories can be applied to the current political and economic reality will be a tough test.

Some have criticised the choice of academics over those with more practical experience. Given the fairly rapid rise of SYRIZA, though, we would note that few within its ranks have any practical experience of governing. Also, in politics plenty of senior ministers approach new posts with little first-hand knowledge of their brief.

For obvious reasons, the appointment of Yanis Varoufakis as Finance Minister has drawn quite a bit of media attention. His description of EU-IMF bailout programmes as “fiscal waterboarding” has been doing the rounds. Varoufakis recently gave a comprehensive interview to Spanish daily El Mundo, where he provides a clear explanation of how Greece’s debt burden could be reduced.

Lengthy quote, but bear with us:

We owe our European partners €280bn. Fine: we will issue new bonds worth this amount, with exactly the same repayment schedule that we had agreed – but linked to nominal, not real, GDP growth. The IMF and the ECB claim that our nominal GDP will grow by 7% per year for the next 20 years. If this is the case, we will pay back the money they lent us. But if nominal GDP grows by between 5% and 7%, we will pay back a third of the money we committed to repay. And if [it grows] by less than 5%, we won’t pay anything back that year. In 2038, these bonds will expire. We will have repaid what we could. What we couldn’t repay, we wouldn’t. It is about making debt repayments conditional on progress in the real economy.

El Mundo: “Si Grecia no crece, un gobierno de SYRIZA no pagará la deuda” (21 January 2015)

In the same interview, Varoufakis also says that SYRIZA doesn’t want to make unilateral decisions and will be seeking an agreement with Greece’s creditors. Still, given the widespread opposition to a write-down of Greek debt, the 16 February meeting of Eurozone finance ministers will be well worth watching.

Relations with Russia: Another source of disagreement with EU partners?

As widely expected, Independent Greeks leader Panos Kammenos has been appointed new Defence Minister. It will be interesting to see how his views on Russia and China will fit with those of his European counterparts. Kammenos recently told a conference:

Our membership in NATO and the EU does not prevent us from maintaining close political, economic and cultural relations with other countries, especially those with which we have historical ties such as Russia and China […] The future of Greece would be better if a strategic orientation were taken to establish links with some of the most dynamic economies of the world, and to find thereby new sources of economic support. One of these countries, besides Russia, is China.

Panos Kammenos: Speech at the 30th Anniversary Conference of the Schiller Institute (October 2014)

More generally, EU-Russia relations could be a further source of disagreements between the new Greek government and its partners. Over the past year, Tsipras voiced his support for Russia and his concerns over the European approach to the Ukraine crisis. Two Greek officials told The Wall Street Journal that a strongly-worded statement on Russia issued by EU leaders earlier today did not have the consent of the new Greek Prime Minister. Not a promising start, and tensions may well increase should the moment come to decide on further EU sanctions against Moscow. This could further expose existing divisions among EU member states.

What should we expect from the new Greek government?

Coalition negotiations between SYRIZA and the Independent Greeks have been incredibly quick. According to Kathimerini, the Independent Greeks have agreed to back SYRIZA’s economic plans (the ‘Thessaloniki programme’ that we summarised here). In return, SYRIZA will hold off on issues that its coalition partner sees as controversial – such as the separation between the Orthodox Church and the State, and the agreement on a composite name for Macedonia.

The reported choice of Dimitris Avramopoulos, Greece’s current EU Commissioner, as the new government’s candidate for President is also a sign of wanting things to progress quickly. Being from New Democracy, the party of outgoing Prime Minister Antonis Samaras, he is unlikely to see much resistance from the opposition. Clearly, Tsipras seems willing to sacrifice the (largely ceremonial) post of President to ensure that the voting process does not hold up the work of parliament for too long. Plus, Tsipras would then get the chance to appoint the new Greek Commissioner that would replace Avramopoulos. Two birds with one stone.

Unsurprisingly, the new government will prioritise action on the economy. Reports suggest the first measure will be a bill to raise the minimum wage to €751 per month, followed by another one to facilitate the settlement of tax arrears.

We are still at very early stages, but one thing is certain: there will be no shortage of news coming out of Greece over the next few days and weeks, so keep watching this space.