Greece: The Key Development over the Weekend

Published on April 27, 2015

The single most important new development on Greece over the weekend was not in the bitterly harsh, acrimonious tone of the “discussions” at the Eurogroup meeting in Riga on Friday between Greek Finance Minister Yanis Varoufakis and, well, everyone else. It was in the response back in Athens to the what have by now become repeated wake-up calls from Brussels, Frankfurt, and Berlin.

And that critical response was not in the very public shake up of the Greek negotiating team that has been the focus of all the news reports today. A slap on the wrist to Varoufakis and a nod to Deputy Prime Minister Yannis Dragasakis , while certainly welcome, had been long coming. Furthermore, despite rumors to the contrary, Varoufakis will probably keep his job – he remains very popular with the public, and on a more cynical level, serves as the ideal foil to Prime Minister Alexis Tsipras himself.

The single most important development was rather in the growing expectation, reported in a German paper but still unconfirmed,  that the Tsipras administration may indeed be ready to propose a compromise on among other things pension reforms, specifically on the very expensive and pervasive system of exemptions for early retirements, even while protecting the actual pension rates from foreign marauders.

Personnel shenanigans side, watch that space…

As we wrote in SGH 4/21/15, “Greece: Inching to that Deal”:

while it may seem a stretch to make such a call with no knowledge yet of what the terms of any actual labor or pension compromise may be, Tsipras and his allies in preparation have been astutely sprinkling their “red lines” with a healthy dose of “red herrings” in negotiations with the EU.

For example, on the politically charged and socially sensitive issue of pension reforms, Syriza has vowed to protect the population from the “deep pension cuts” they allege the IMF and creditors to be demanding, when in fact the focus of much of the attention of the creditors is as much on the numerous expensive early retirement exemptions written into the system as it is on the actual benefits levels per se.

And as we wrote in SGH 4/2/15, “Greece: Staving Default, Progress with the EU”:

On the pension reforms, the Tsipras administration adamantly refuses to raise the retirement age, but does appear ready to compromise on reforming the numerous and very expensive early retirement allowances provided in the Greek pension system. The refusal to hike the retirement age is, however, a political red herring, as it is the latter issue of early retirements that is seen to be most problematic, and the key focus of negotiations with the European Institutions.

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