Thursday 22 August 2019

Greek exit could damage Kenny's re-election plans

'Ireland, which went into an EU-IMF-ECB bailout five months after Greece back in 2010, is now in a place of relative safety – but our economic hopes are extremely fragile'
'Ireland, which went into an EU-IMF-ECB bailout five months after Greece back in 2010, is now in a place of relative safety – but our economic hopes are extremely fragile'
John Downing

John Downing

Schadenfreude is a posh term for a nasty sentiment: taking pleasure in another's woes.

A glance in the dictionary shows it is just a fusion of two German words: schaden, meaning harm; and freude, meaning joy. Always best avoided, it often lurks around calamity, feasting on the suspicion that the better-placed ones are struggling to mask their smugness.

It is not a great fit for Ireland looking in at Greece in recent months. "There but for the grace of God . . ." is among a series of more apposite aphorisms which spring to mind.

Most of us readily acknowledge that we are ill-placed to glory in other nation's woes. We continue to wish the splendid land of Greece and its people nothing but the best.

But, as we have noted, schadenfreude does have that lurking quality born of misery and suspicion.

Both Finance Minister Michael Noonan and Taoiseach Enda Kenny have been accused of schadenfreude over the past four months. The Taoiseach knows he must hone his best bedside manner as he travels to Brussels today for a eurozone leaders' summit expected to decide Greece's fate after months of messing about.

But the realpolitik is that this Government and the previous one were harshly criticised for not "playing hardball with the Troika". Now that Greece has tried to do this, all the way to the doors of calamity, the results speak for themselves.

Ireland, which went into an EU-IMF-ECB bailout five months after Greece back in 2010, is now in a place of relative safety. But our economic hopes are extremely fragile.

Time is running out for Greece. Athens has eight days to cobble together €1.5bn to satisfy the IMF and secure a deal struck five years ago, in the first of two international bailouts, to avert financial disaster.

Like Ireland, Greece was required to impose deep budget cuts and steep tax increases along with other reforms. Familiarly in the crosshairs were reductions in the government payroll, and making the country an easier place to do business.

In Greece's case there was a huge emphasis on tackling the scourge of tax evasion.

Many analysts now contend that the painful austerity measures caused the Greek economy to contract by 25pc in the intervening five years.

Prime Minister Alexis Tsipras was elected last January on the back of promises to scrap the bailout agreement unless Greece was given significant changes.

He wanted the latitude to invest in jobs in a country with the unemployment rate topping 25pc - or 40pc if you take youth unemployment.

Creditors continue to fear that any bending of the rules would encourage other bailout recipients, such as Portugal and Ireland, to up demands again for retrospective concessions among other things. But there is also huge domestic political pressure, especially in Germany, Netherlands and Finland, not to be seen to facilitate fecklessness. Greece has hovered on the verge of bankruptcy since the start of the year and only grace funding from the ECB has kept its banks open amid a huge flight of funds.

Athens struck a deal with European officials in February to extend its repayment programme for four months.

But it has failed to reach agreement on the economic reforms needed to release €7.2bn in remaining bailout funds and major differences remain about the measures needed to meet targets.

Trust, which was never strong between the sides, has broken down. Tsipras told his leftist Syriza party last week that the Troika wanted big pension cuts and big tax hikes on things like medicine and electricity.

The usually phlegmatic EU Commission President, Jean-Claude Juncker, testily said Greek officials must not misrepresent creditors' proposals to their people.

It is clear that a Greek exit from the eurozone is on the cards and the fallout is difficult to predict exactly.

But it would plunge global money markets into uncertainty about the future of the single currency, which in turn is a central part of the EU's unified economic powerhouse.

Recent steps to improve EU defences against market turmoil would be sorely tested.

Gloomier analysts cannot rule out domino effects if investors become more risk-averse toward other countries, including Ireland.

Other analysts offer a back-of-envelope calculation that a 1pc increase in lending to Ireland could eat up €2bn in a year. Put that beside another back-of-envelope figure - the €1.5bn or so this Government has earmarked for "voter goodies" as part of its re-election strategy.

Another opinion poll yesterday showed a dip in Fine Gael support, possibly linked to the controversies surrounding Siteserv and businessman Denis O'Brien.

It will remind Mr Kenny and his advisers that his re-election may be almost as fragile as Ireland's future economic hopes.

For the rest of us, the outcome of today's eurozone leaders' summit in Brussels is of much more fundamental importance as it carries implications for jobs and incomes now and into the future. As this Greek tragedy nears the endgame, there are a lot of big and small matters riding on the outcome - for everyone in Ireland and beyond.

Irish Independent

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