Greece on edge: Coping with two crises at once - an interview with John Psaropoulos

John Psaropoulos

Demetri Papageorgiou’17, editor-in-chief of The Diplomacist, speaks with John Psaropoulos, freelance Athens-based journalist reporting for Al Jazeera and NPR, formerly of CNN International, about Greece’s handling of migration flows, the Greek debt crisis, and what this means for the European project in the near to long term.

During his stay at Cornell on November 18, 2015, John Psaropoulos gave a lecture as a part of the Einaudi Center’s Foreign Policy Distinguished Speaker Series.

The interview

Click here for an audio of the interview.

To begin, how is Greece coping with the world’s largest migration since World War 2? What state or EU resources does Greece have to deal with this massive influx of refugees and migrants?

Well there isn’t a precise accounting of what it’s costing Greece; the Prime Minister’s Office recently gave me a figure 480 Million Euros this year, which, I think is still a hazy figure. It’s an approximate tally of all the overtime the Greek Coast Guard and the Greek police are paying their people, the fuel the Greek Coast Guard is burning up in the east Aegean which runs into the tens of millions, plus all the investments they have to make in new camps, infrastructure, they are not able to keep up with the flow by any means but they still have to keep finding new spaces, now the strategy has shifted to finding existing empty structures instead of just building new camps. And there is the cost of feeding and checking them medically, because they have a lot of problems, they have been travelling and sleeping the open air for weeks or months. So there is a cost. The Greek authorities are struggling but coping. The Coast Guard is acting heroically, they are fishing people out of the water, they’re rescuing people and saving lives, the Greek police are doing their best, they have a lot of bureaucratic procedures to go through, including filing a staggering amount of paperwork in accordance with both Greek and European law. [The migrants] have to be fingerprinted and identified and shared across EU-wide databases, so that they can be tracked as they move across the borders. The Greek people have come around to trying to help as much as they can, even though many people are worried about what these migration flows mean for the country in the long term. But the general sense is that these people are unfortunate and they need assistance. A lot of people have been donating food, money clothing and medicines and Greek Doctors particularly through organizations such as Doctors of the World or Doctors without Borders and local organizations have been very very active, at the very forefront of developments, on the shores literally when the boats arrive there are doctors there, there are Greek volunteers there,  there are volunteers from other countries as well, they are helping people out of the boats, they are giving them high energy foods, reflective blankets, fresh clothing and particularly, they are looking out for the children because the worst story that has emerged out of this crisis is that so many children have died it’s principally children and women who drown when boats go down because they are stuck down in the hold for their protection and it’s the most difficult place to get out of if a boat capsizes, and people just don’t want to see those pictures anymore.

As the costs of processing and registering and fingerprinting these refugees mount and other EU member states close their borders or contemplate closing their borders how soon will Greece become a home for these migrants rather than just a transit point?

I don’t think that most of the Refugees and Migrants think of Greece as a home not yet anyway. A couple of years ago they were still uncertain about where they were going to go in Europe they vaguely knew that they wanted to go towards the Center and the North of Europe. Now, more of them have the fixed notion that they want to end up in either Germany or Sweden, or Italy or France perhaps, one of the big labor markets, because they want, of course, guaranteed human rights, but they also want a job market since they intend to stay at least for the foreseeable future and that may be one of the reasons why the surge of refugees has been so great this year, they might have just lost hope that this Syrian civil war will end anytime soon. Greece is a transit point for them at the moment, very very few people end up staying for long periods of time. I’m not sure if it’s because they are thinking of staying or because they simply haven’t found the means to move on but the fact is that if for any reason, other European countries decide to take in European refugees, it is easier for them to staunch the flow by closing their borders than it is for Greece which has a maritime border with Turkey which is where they are coming from, in Greece’s case it is going to be pretty much impossible to stop the flow. So the Greeks have the intellectual fear, the notional fear of being saddled with a destitute immigrant population but it is not what is at the forefront of people’s minds at the moment. It’s always there at the back of their minds but right now, people are thinking the situation for these refugees is desperate and they need assistance.

What’s the state of play in the Greek parliament? What is Prime Minister Tsipras’ stance on migration and integration? How does that hang with or not with what New Democracy says, what Golden Dawn says, even with what the Syriza’s coalition partner say, because they are right-wing

The independent Greeks are right-wing and it’s a marriage of convenience as even they admit, the ruling Syriza. No one is blaming the refugees for their plight, not even Golden Dawn. But Syriza has decided to try and throw the responsibility on to Europe’s shoulders as much as possible, and in a recent speech to parliament in October, Prime Minister Tsipras said he was embarrassed on Europe’s behalf, because of the lack of assistance to Greece and to Italy and to the migrants in general. He was very critical. The truth is Europe is struggling to produce a collective response that will unify all twenty-eight member states, and it’s not easy because the issue is dividing European member states, particularly, it is dividing Eastern Europe which doesn’t feel that it can handle any more of these refugees and has a very intense fear of permanent migrant populations and Western Europe which has more of a sense of noblesse oblige towards the unfortunate. Now that the Paris attacks have introduced the security question, regarding refugees, it is much more complicated. It is going to be even more difficult to generate a positive united response from European Union members. Britain is already trying to negotiate a different kind of membership in order to forestall a complete withdrawal from the European Union and that different kind of membership would involve suspending the fundamental freedom of movement of people across Continental European and UK borders. This is something that Europe has, in principle, agreed to discuss, but it is a very troubling exception within the EU if it takes place. There are all sorts of tendencies that the free movement of people is introducing, now under the pressure of the refugee crisis, it was there before, it was there with the economic migration from East to West, but it is now much more intense.

Have the latest terms of Greece’s bailout agreement with its European creditors has in any way affected its ability to deal with this influx of people?  In terms of resources or just the degree of latitude in their policy-making, what exactly do they have in terms of sanctioning expenditures, what do they have to run by Brussels?

Brussels has agreed to give the Greeks more money to contribute towards the hospitality budget, the infrastructure building, the policing, all of those monies have increased for 2015 and I think that that would have happened independently of the negotiations over the third bailout loan because this is European money that is given out for these purposes, there is an integration fund, there is an external borders and homeland security fund. These are federal European funds that are given out of the commission’s discretion. If there has been any interplay between the refugee question and Greece’s Euro Crisis, it is that the Greek’s have brought up the question of the refugees and the difficulties that they are facing in the Aegean as a possible counterweight to some of the possible harsher measures that the third bailout loan seeks to impose on Greece. They may hope that by playing along with European Union rules in guarding external borders, which the Greek authorities fully want to do, the Greek authorities may feel that there might be some sort of palliative, in the works for them with regards to austerity that is prescribed for the home front but that remains entirely theoretical. We haven’t seen any sort of explicit tit-for-tat, we haven’t seen any European official come out and say we’re going to offer Greece gentler measures in its public spending, we are going to allow a slightly higher deficit because we understand that Greece is spending half a billion Euros on the refugee question. That does weigh on Greece, the refugee flows are a strain on public spending, European money comes after Greek money has been spent and it doesn’t cover the full cost, so unfortunately it is still a European problem that Greece is paying disproportionately for.

Let’s switch gears and talk about the bailout, then the Eurozone crisis, Greece’s place in the crisis. Do you think the summer represented an inflection point or perhaps there was an inflection point before that that demonstrated that Greece’s place in the Eurozone was quite precarious? Subject to the whims of Germany and its allies, the hardline coalition so to speak

On July 5th, when Greece held its referendum, and asked people whether they wanted the specific austerity measures that were being suggested at the time by the Eurozone and 62 percent of Greek voters said no, that was a moment of crisis for the Eurozone and for the Greek government, because if the Greek Government followed that cue it would risk walking away from Eurozone membership. In the event, the government did an about turn, Syriza buckled and accepted austerity in order to keep Greece in the Eurozone, and the Greek position was perhaps untenable in terms of realpolitik because 75 percent of Greeks were polled as wanting to remain in the Eurozone, yet 62 percent voted against austerity which Eurozone creditors said was the only basis for Greece remaining in the Eurozone, so the Government decided to take the larger majority and that produced a fundamental change in Parliament, because up until then, you had pro-austerity parties in Parliament, and the fundamental anti-austerity majority on the street now you have an even greater pro-austerity majority in Parliament and still very much the same majority against austerity on the street. People are going with it for now. From the Greek point of view, the sense is that because it is a left-wing government it is more prone to launching tougher negotiations with creditors and fight for more concessions on each point, and while that may or may not be true it is convenient form the creditor’s point of view to have a left-wing government  precisely because they project that image and it may be easier for them to get things done, to pass austerity measures, than the conservatives would’ve because the conservatives would have had a harder time to have the leftists in opposition. The conservatives have already pitted themselves in favor of austerity and Eurozone membership so Syriza carrying out these reforms doesn’t face serious opposition from the conservatives. This is the fundamental change that happened over the summer. The left was coopted and how long will the left survive as an austerity party remains to be seen. Some people predict a rapid demise once people come to their senses, and feel the full force of the austerity measures, higher consumer tax, VAT levied at the end of the summer which will take full effect next year when the Tourism season begins again, a continuation of the property tax that Syriza had promised to abolish, continued recession, 1.3 percent forecast this year and next so therefore no light at the end of the tunnel with respect to job creation and investments and new wealth. That is a very dangerous mix for Syriza, it maybe that they manage to stay the course and if they don’t and Greece is forced into an early election before 2019, it’s anyone’s guess what sort of a parliament that would produce.

The three bailout agreements over the past five years have felt very much like kicking the can down the road, what do you think the long term solution is? Is there a long term solution? Does Greece have to leave the Eurozone?

Well, this is hotly debated at the moment because; Greece says that its biggest problem is the nominal debt burden which is about 320 Billion Euros. There are now two schools of thoughts on this, because the International Monetary Fund has been agreeing with the Greeks and since 2010 has been pushing Europe to agree to a nominal debt write-off, a face-value write-off in order to lighten the load, and also more recently in its July assessment of the Greek debt, the Debt Sustainability Analysis suggested that the Greeks be given as much as the rest of this century to repay their debt and interest which will include a lengthy 20 yr grace period,. The other school of thought is that expressed by the European Stability Mechanism, which was set up as a distress fund for the European states themselves and the ESM is now the principle lender to the Greeks, it has taken over much of the old debt and will take over more as time progresses. The ESM says, this is the wrong way of thinking about Greece, Greece managed to break into international money markets in 204 with this enormous debt burden and with a very reasonable interest rate and that proves that all lenders care about is whether Greece can service its debt in the foreseeable future. If Greece managed to sell 6-month bonds at 3.5-4 percent then that means that investors are quite happy with Greece’s viability for the next 6 months, that’s all that matters. So let’s ignore the intellectual knowledge of the fact that Greece has an enormous debt to face over the next however many decades. Let’s simply focus on whether Greece is viable for the foreseeable future, and Klaus Regling, the Chairman of the ESM who expresses this view, believes that that is how many markets are also thinking, they are thinking in terms of foreseeable future, and once Greece seems viable for the next 5 years then Greece will be able to sell 5-yr bonds, and hopefully as Greece normalizes, it will sell 10-yr bonds. But that could also turn out to be a can-kicking exercise, because at the end of the day, someone has to ask, how will Greece sustain its finances, further into the future, will that debt be ultimately unredeemable or will Greece carry it for a hundred years, and what potential market instability within Greece does that threaten. At some point somebody will ask the question, somebody will be bothered by the high debt burden. You can say that America and Japan also have a very high debt burden not as high as the Greek burden as a proportion of the GDP, but Japan and America are very export-oriented economies, they are very dynamic economies, and their viability isn’t seriously in doubt, Greece could collapse entirely, so for Greece the question of whether it can ultimately pay off its debt is an important one. The Greeks also have the additional point of view that they shouldn’t be harshly dealt with for having over-borrowed, because they have now balanced their budget, and they will soon, if they are given enough of a debt write-off, and a repayment extension, will soon even be able to have a budget surplus, that covers their debt-servicing cost, at the moment it’s a primary surplus, it means that Greek taxes cover Greek domestic spending, but if you make that surplus big enough then home-grown revenue could eventually also cover debt costs and the Greeks say that if you want us to achieve that, give us a very generous extension. Don’t ask us to pay the first two loans in 16 years, as foreseen, ask us to repay them decades longer, and if you give us a debt write-off in addition to that then you will be giving us a breathing space, a fiscal space as it is called to spend more money on stimulating the economy, and that surely is much fairer and in the spirit of the European prosperity and competitiveness that we all want than simply ignoring the nominal debt figure and pushing it down the road, focusing only on our ability to pay our way through the next six months two-three years. The Greeks want a solution, but that isn’t forthcoming from the European Union at the moment. Therefore these two opposed viewpoints, between the IMF and the ESM will simply remain as a matter of debate.

Lastly, what do you think this crisis says about Germany’s machinations for the European project? How do you think will the union, banking, fiscal and monetary, have to evolve in the near to long term?

It depends on whom you ask. The left-wing point of view in Greece is that Germany has manipulated Greek policies. And I admit that it’s very difficult to resist the idea that it has. For example, in May of 2014 when the ruling conservatives, lost the European Parliament elections to Syriza and it began to appear that they may not survive into 2015 the German Government could’ve offered them concessions because their behavior was extremely compliant and Antonis Samaras, the Prime Minister had tried very hard to put through many of the reforms in the second bailout, he had managed to balance the budget with Yannis Stournaras, the Finance Minister, they had produced a primary surplus and relations with Angela Merkel, personally were very good, but it seems that Angela Merkel was prevailed upon not to offer Samaras concessions that might help him stay in power such as an extension of the debt maturity, the repayment period because, and this is my opinion, the Germans calculated that Syriza would win in January of this year, that Syriza would force an election by refusing bipartisan support to the conservatives over the question of re-electing the President of electing a new President, constitutionally if you don’t get the 2/3rds majority in Parliament, three times, that triggers an election and I think the Germans believed Syriza would force that to come to power because the poll figures were in their favor and they wanted to have leverage over the next government which would be a left-wing government. So I think, they kept the sweeteners back but they still haven’t given them out. So, what can you say, I think, the Germans have manipulated Greek politicians in order to keep Greece compliant and within the Eurozone, but I think this year we’ve also seen a growing lobby around Wolfgang Schäuble, the Finance Minister that is in favor of throwing Greece out, or letting Greece simply abdicate from Eurozone membership because it’s thought, I think by some people, that letting the Greeks go will come across to international markets as a cleansing of the European Union, of the cancer that is within it, which is another way of saying a lot of people want Greece to be blamed for the Eurozone’s problems and hope that Spain and Portugal and Ireland who are the other countries with liquidity problems on International money Markets, with problems of trust in other words, they will then be galvanized by this Greek exit, into behaving even more compliantly and therefore will become fiscally tighter, and that will encourage money markets to trust them even more to pursue fiscal discipline and suddenly the whole borrowing capability of the Eurozone will rise like a balloon once the weight of Greece is dropped. This is a view that some people in Germany support, I think it is a bit fanciful because the borrowing rates across the European Union are still quite spread out, and this is the fantasy of wishing to see Eurozone borrowing rates converge, so that money markets give you the coherence that the architecture of the Eurozone didn’t. 

Thank you.