It seems that the new Greek government is rapidly wearing out its welcome:
Italian Prime Minister Matteo Renzi hailed Tsipras as bringing a “message of hope, not just fear”. Yet within days, Varoufakis angered Rome’s socialist leaders by saying: “Let’s face it, Italy’s debt situation is unsustainable.”
Italian Finance Minister Pier Carlo Padoan said the remarks were “out of place”.
In other bailed-out countries, sympathy for Syriza was mostly confined to the far left, while some mainstream politicians saw Tsipras’s success as a threat to themselves.
One Portuguese minister said privately that the center-right government would not be able to face voters later this year if Greece were given a “discount” on painful pension, wage and labor reforms that Lisbon had made under its EU/IMF program.
Prime Minister Pedro Passos Coelho called Syriza’s election platform “a children’s fairytale” while Tsipras accused Lisbon and Madrid of leading an “axis” bent on sabotaging its bailout negotiations, which both denied.
Presenting his Socialist party’s economic program in April, Portuguese opposition leader Antonio Costas distanced himself from Syriza, promising to meet all European commitments on the budget deficit and debt.
PODEMOS TONES DOWN
In Spain, radical left Podemos, whose pony-tailed leader Pablo Iglesias described Syriza as a “mirror” in January, has quietly stepped back from utopian campaign promises after seeing Tsipras struggle with the constraints of government.
The upstart party trumpeted Greek plans to end austerity and give free electricity and food to the needy but has now dropped a pledge to default on state debt and said a promised universal salary will be paid only when public accounts permit.
Interviewed by Reuters in March, Iglesias acknowledged that Greece’s difficult negotiations with its creditors showed there was limited scope to change economic policy in Europe.
In the Baltic states, which stoically undertook eye-watering austerity after the 2008 financial crisis, anchored by a single-minded determination to join the euro, there is even less sympathy for Greece and its leaders.
Lithuanian Finance Minister Rimantas Sadzius said Greek threats to default or restructure its debts to the euro zone posed a political problem in his country, where the minimum wage is half and the average pension one-quarter that in Greece.
“If the support money is spent without proper care to return it to the European Stability Mechanism, there will be serious questions raised about differences in living standards, and why a country has a significantly lower minimum wage than a country which it has to support,” he told Reuters.
Latvia too opposes any concessions to Greece on reform, with a spokesman for Finance Minister Janis Reirs saying “there has to be the same, equal attitude towards Greece as there has been to other (bailed-out) countries”.
It’s hard to argue with the Lithuanian perspective. And as for Podemos, perhaps the fact that Spain is the fastest growing economy in Europe, whereas Greece has just slid into a double-dip recession, might have made them a tad reluctant to continue referring to themselves as a “mirror” of Syriza.
Back in the USA, readers were informed about these events in very different ways by the two top econ bloggers. Here’s Paul Krugman on February 27th:
Last week, after much drama, the new Greek government reached a deal with its creditors. . . . Greece came out of the negotiations pretty well, although the big fights are still to come. And by doing O.K., Greece has done the rest of Europe a favor.
And here’s Tyler Cowen, from a few days earlier:
I do not assume Syriza — whom I have called The Not Very Serious People — have a coherent bargaining strategy at all. I take this point from a broader reading of history, where I see that quite often leaders in critical positions simply do not know what they are doing. By no means is that always the case, but it is more often the case than narrative-imposing journalism encourages us to perceive.
Let’s see, who am I going to trust next time on complex international negotiations about which I’m not well informed? Negotiations like the TPP. Don’t rush me, let me think about it . . .
PS. This is an interesting rumor:
Meanwhile, some 6,000 miles from Athens, a banknote printing company called Fortress Paper in Vancouver, Canada, has seen its shares climb 67 percent this month on speculation it has a contract with the Greek government to turn on its printing presses if the country decides it needs a new currency.
PPS. Off topic, I’m beginning to see negative RGDP forecasts for Q1 (revision.) And today the Atlanta Fed lowered their 2nd quarter GDPnow forecast to 0.7%. I still think a “recession” is unlikely, but the probability is increasing. Of course there’s almost no chance of an actual recession, the scare quotes refer to the fact that many people wrongly assume that two negative quarters are a recession.