Ersatz Left and Forgotten Dreams

kammenos

What is the point of a left government without left governance?

Lets reflect for a moment what the left was about and what it was supposed to bring to Greece beyond the economic.

The left represents openness, it represents social progress, liberaltion, equality. Greece is a deeply regressive state. The church dominates education, gay rights are ignored in practice, family life is deeply patriarchal, religious and ethnic minorities are ‘tolerated’ at best.

The left of Mr Tsipras had opportunities on all these areas. We need a revision of the constitution to formally separate church and state, we need religious education (the bastion of propaganda and prejuduice) excluded from the school curriculum. We need the compassion of the left to counter nationalism and fanaticism.

Syriza in its frankenstein collaboration with far right ANEL has no interest in any of this. Syriza embraces the church, keeps education religiously defined, exempts the church from capital controls.

Syriza organises junta like feasts and national pride events wasting millions in parades and military stunts.

Syriza ignores the plight of refugees, playing along with a far-right exclusionary agenda, failing to confront the inaction and inactivity of the EU on the ONE issue it could occupy the moral high ground. Alas, it is Mrs Merkel that has become the champion of humanity in Europe.

What a betrayal of the values of the left.

Mr Tsipras is content to play Papandreou without the money, or the charisma. He is an ersatz Papandreou that replicates the worst of the ‘establishment’ practices he supposedly opposes. He gets jobs for his supporters (see FinMin cleaners being given court jobs). His ministers proclaim to work for their voters (less than 2/5 of the vote in an election where almost half the population abstained). Mr Tsipras ignores corruption and glosses over allegations touching Syriza members and government ministers, while at the same time interfering with independent authorities. Mr Tsipras is content to legislate using emergency processes, something he decried while in opposition.

And you know what the laughable thing behind all this is? The ‘Best Government of All Time’ is not even meeting the milestones of Bailout 3, which makes it very likely that no further payments will be made, re-opening the credit crunch- deflationary vortex that swallowed the country this summer.

Failure, lies, betrayal, “Defteri Fora Aristera”

λαγος

@iGlinavos

#ThisIsACoup Portugal edition

good-vs-evil

What is going on in Portugal?

Portugal held an election on 4.10.15 with the following results

– PàF (right-wing government coalition): 38.6% (107 MPs)
– PS (Socialist Party): 32.4% (86 MPs)
– BE (Left Bloc): 10,2% (19 MPs)
– CDU (Communist Party): 8,3% (17 MPs)
– PAN (People Animals and Nature): 1,4% (1 MP)

The President has instructed the incumbent Passos Coelho to form a minority government, rather than offering the chance to a left parliamentary majority to govern.

According to the WSJ, Mr. Cavaco Silva, a conservative politician, rebuffed the leftist bid. In a televised speech, he criticized the pro-European Socialists for seeking an agreement with far-left parties that question European Union fiscal restraints, oppose Portugal’s membership in the North Atlantic Treaty Organization and are willing to take Portugal out of the eurozone.

“After undertaking a demanding bailout, which required sacrifices from the Portuguese, it is my duty to do everything I can to make sure that wrong signals aren’t sent to financial institutions, investors and markets, which would put into question the confidence and credibility the country has been recovering with great effort,” the president said.

Mr. Cavaco Silva said a leftist government wouldn’t guarantee the country’s “stability, durability and credibility.”

“Never in 40 years of democracy have the governments in Portugal relied on the support of anti-European political forces,” he said.

Is this a coup? The #ThisIsACoup hastag was used aplenty in Greece after Mr Tsipras decided to sign Bailout 3 ignoring the results of his own referendum, which supposedly empowered him to bring a worse deal than the one the Greek people had rejected.

I do not know enough about Portuguese politics to answer my own question, but I do know that knee-jerk reactions and crying wolf usually fails to help in situations such as this. I am an old hand in complaining about technocracy and neoliberal domination (see this piece I wrote for the TNI), but let us pause for a second and consider the following: At what point should a country’s institutions resist a seemingly democratic mandate.

Surely it is beyond the pale to deny the right to form a government to a leftist coalition that commands a Parliamentary majority. The Portuguese president claims that such a coalition has intent that is antithetical to the interests of the country.

Maybe it does, but who is to judge what is in the interests of the country? Surely the people who vote are the best judges of that? Sure, of course, but what if the Parliamentary majority in question was not composed of leftists but of Nazis?

If in Greece, Golden Dawn was to join a governing coalition, should the President refuse them the command to form a government? If in France Marine Le Pen were to win, could the Constitutional Council deny her the Presidency as her programme is antithetical to the values of the Republic?

Political theory aside, what would you do, how would you feel if any of the above were to happen?

@iGlinavos

Education, education, education and VAT

Nikos Filis is the minister of education. He is famous for responding to suggestions that VAT ought to be increased in pasta by asking 'who eats pasta anyway?'

Nikos Filis is the minister of education. He is famous for responding to suggestions that VAT ought to be increased for pasta by asking ‘who eats pasta anyway?’

In my previous post I discussed the insanity of having varied rates of tax for similar products and services and complicate this with a series of exemptions based on geography. The ‘best government of all time’ has built on this ‘success’ by adding another layer of tax increases in its usual unorthodox way, this time on education.

Before the September election, the ‘First Time Left’ government of Mr Tsipras announced the inclusion of education services in the VAT regime with a charge of 23%. VAT, on education, at 23%, think about it for a second.

What counts as private education in Greece? Due to the deficiencies of the public sector everyone, and I mean EVERYONE has to subsidise their kids education by paying for private add-ons. People pay for private tutors to help with math and grammar, pay for private schools for English and French, pay for tutors and/or after school classes to prepare for the university entrance exam. You have to, if you do  not, your kid will not know any foreign languages and will be accepted to study at the fish breeding academy in Igoumenitsa. Those with money also pay for piano lessons and ballet.

Parents with slightly higher incomes, or unlucky to be far from an operational public school have to pay for a private school so they avoid all the add-ons. People who do not live next to the grandparents have to pay for a lot of after school activities to allow them to finish work before picking up their kids.

This is the rich class which Mr Tsipras wanted to tax. This is the group of the population that does not vote for Syriza as a Minister said this week. Nice, considering that Tsipras himself sends his kids to a private school. Nice also considering that once a party is elected in power it usually pretends to represent the whole country, not just its voters.

Lets break this down for clarity. If you are playing 10 Euros per hour for your kid to study English in a Greek private establishment for say 4 hours a week (40 Euros) for 35 weeks in the year ( 1400 Euro). This is an additional 322 Euros in the year. In these conditions, this is not easy to bear. The ‘private establishment’ is usually a tiny ‘school’ run by a couple of people in a flat, with classes of 10-15 kids. Hardly capitalist excess.

This proposed increase was not mandated by the evil Troika, it was a gimmick by Tsipras right before the election to show how tough he will be on the ‘rich’. After the uproared that ensued, he promised to abolish this measure (that he brought himself).

The Greeks, impressed as they were by Tsipras honesty they granted him the government of ‘Defteri Fora Aristera’. Here is the result. VAT is being introduced in education at 23% initially, with the hope that countervailing measures will be found to allow the introduction of a multi-layered rate system.

In what is being lauded by the government as a great success (to come), VAT will be imposed on education services, as follows:

0% for kindergartens and nurseries

6% for foreign language schools, ‘frontistirio’ (tuition centers), dancing schools, music schools etc and vocational schools (IEK)

13% for private schools of primary and secondary education.

If the government ‘achieves’ this, guess what will happen next. Education providers will either mis-report their status to benefit from a lower rate, or will re-classify, or will keep receiving money under the table (as usually happened), or will go out of business as parents who cannot afford the higher rates pull their kids out.

Another win against the rich, another win for tax evasion and muddle. As Mr Filis said, why are we discussing about these peanuts?

For comparison see below for the education VAT regime in the UK.

No VAT for schools, higher or further education where tuition is being provided for a charge. Any ‘closely related’ goods or services provided are also exempt.

No VAT for private tuition which is provided by a sole proprietor or partner.

No VAT for tuition in English as a foreign language (EFL) which is supplied by a recognised commercial provider.

No VAT for vocational training which is provided for a charge.

Good luck to the next generation of Greek workers.

sxoleio

@iGlinavos

<updated 10.11.2015>

Stupidity is the gift that keeps on giving

I have been rather absent from the blog, at least on the topic of Greece since the election. This has been due to desperation. I had argued against voting for Syriza again, fearing that their disastrous 7 months in power would be followed by more where they to be re-elected.

Now, about a month in, we have good evidence that the cluelessness, incompetence and politicking that characterized Tsipra’s first term continues unabated. Let us pick two examples (there are plenty, but anyway), the church-state relationship and VAT increases.

wpid-img_20151014_213001.jpg

One would expect a government of the ‘left’ headed by (supposedly, and trips to Athos aside) an atheist (Tsipras) to have a healthy attitude towards the church. Syriza had promised to distance the state from the church (in education primarily) and many were hoping that the rich Greek church would be made to participate in the fiscal consolidation taking place, sharing with the rest of the population.

Alas, this was not meant to be. After a very brief argument about making the religion class optional at school, Syriza folded. All remains as is. I am particularly incensed by this as I have been on the receiving end of this ‘education’. My ‘religion’ class at the lyceum (final 3 years of obligatory education, ages 15-18) was taught by a priest. A scrawny little excuse for a man. He explained to us at length -over years- how masturbation leads to eternal damnation, how the Jews are conspiring against Greece, how homosexuality is a crime against God and other such pleasant (yet extremely commonplace) edicts of Orthodoxy. The religion class at the Greek school should not be made optional, it should be eradicated. People that want to send their kids to be indoctrinated into hate propaganda can go to Sunday school.

The proud government of the left rounded its ‘assault’ on the Church today by exempting them from capital controls. Bravo!

Moving on to VAT increases. Mr Tsipras, with the wholehearted help of the Troika, has succeeded in creating (but he negotiated for 17 hours straight!) the worlds stupidest tax system. We know (I can offer the literature if you wish) that in countries with severe tax collection problems, the best strategy is a flat tax rate set at low levels. The rationale behind this is that if you cannot collect taxes anyway, there is no point trying to increase rates. A low level tax, without loopholes and gimmicks, creates a predictable, easy to monitor and implement system. Coupled with strict fines for violations, this can gradually create a culture of compliance. If the burden of compliance is low, and the cost of evasion high, larger numbers of taxpayers actually turn up and pay their taxes. Sounds outlandish? Poland tried it in the 1990s and it worked.

What Greece is doing is the exact opposite. The tax system is an utter mess, with incredible levels of over taxation. As tax evasion is rife and ensures that self-reported incomes are not taxable, the entire burden of taxation falls on assets one cannot hide (ENFIA property tax) and indirect taxation, like VAT. The VAT regime especially is such a mess, the Troika and everyone in the Greek government should have died of shame. Not only are there multiple rates of tax on similar items (pork vs beef sandwiches will be differently taxed, whether hot or cold also differently taxed, whether bought on an Aegean or Ionian island also differently taxed), they are also variably taxed depending on where bought, or where consumption/use is intended to take place. The latter stupidity was enhanced after the cancellation of VAT exemptions for some(!) islands in the Aegean.

This is illogical, impractical, and useless. Amongst all of this, the government is looking for ‘countervailing’ measures to correct some ‘injustices’ of the bailout agreement.

As people said on twitter, those ‘countervailing measures’ of today are the equivalent of the ‘money exists’ pronouncement of Yorgos Papandreou in 2009. Fantasy from a group of incompetents. But worry not, as Michelogiannakis said (Syriza MP), the people should not complain, as they knew what they were voting for.

Indeed.

wpid-img_20150915_090958.jpg

@iGlinavos

Laiki strikes again. Second PSI challenge faces Greece at ICSID

laiki

It seems one cannot live without lawyers. As anxiety over the legality of the Greek Private Sector Involvement (PSI) deal was abating, Cyprus Popular Bank (Laiki) filed an investment arbitration claim at the International Centre for the Settlement of Investment Disputes (ICSID) against Greece, claiming billions of euros in compensation for losses suffered in the 2012 Greek bond haircut. Laiki is a known enthusiast for Investor State Dispute Settlement (ISDS) and is involved in another action against Greece, this time for the provision (or lack thereof) of Emergency Liquidity Assistance (ELA) to its Greek subsidiaries during the events of 2012 that led to the resolution of Cyprus’ two biggest banks.

The PSI deal, forming the core of this action, has been a key component of the Greek Bailouts and is equally blamed and celebrated for moving the burden of any potential sovereign default from private hands onto public coffers. The PSI deal worked by offering to swap in early 2012 Greek bonds with new ones of a lesser value, a reduction of 53.5%. Why would anyone, however, voluntarily agree to accept such a significant haircut? Bondholders were offered this choice after Greece enacted retrospective legislation inserting what are known as Collective Action Clauses (CACs) in the bond contracts. Such clauses provide that if the majority of bondholders in any given bond issue vote in favour of accepting the offer, then all bondholders are obligated to participate. CACs in other words make bonds similar to shares in corporations: if the majority of shareholders vote for a resolution, an objecting minority cannot block it. A significant number of bondholders roped into this deal through the operation of CACs sought legal redress arguing that their investments had been forcefully expropriated.

One group protesting the PSI haircut consisted of 7000 small-holders, who joined a class suit against Greece arguing expropriation under the Greek Constitution and violations of Human Rights provisions under the European Convention of Human Rights. These arguments were tested in the Greek Council of State in March 2013. The court found for the Greek government arguing that losses were due to the activation of CACs, not by the state act that retrospectively inserted the CACs and found no violations of Article 1 of the Protocol to the ECHR.

A second challenge to the PSI came at ICSID from a Slovakian bank. Poštová Banka and it Cypriot subsidiary Istrokapital argued that, under the Greece-Slovak Republic and the Cyprus-Greece bilateral investment treaties, they were entitled to compensation for losses they suffered due to the PSI, amounting roughly to half the invested amount of €504m. The Poštová claim was the first challenge under Bilateral Investment Treaties (BITs) and is similar to the new case brought on behalf of Laiki. The objective of an investment treaty, Poštová argued, was for the signatories to create favourable conditions for investments. As the Treaty offered standards of protection and a mechanism for dispute resolution when those standards were violated, ICSID was the appropriate forum to discuss any claims arising out of PSI. BITs are aimed at encouraging foreign investment and for that reason make a series of binding promises to investors. They may, as a result, offer a more varied menu of options to someone wishing to sue, than mere reliance on domestic constitutional and human rights provisions. ISDS clauses in BITs have faced criticism for offering a parallel legal system that exists beyond the reach of domestic courts. Concerns has been especially pronounced in the context of the Transatlantic Trade and Investment Partnership (TTIP) negotiations. Greece prevailed at ICSID as the Tribunal found that for a variety of technical reasons it did not have jurisdiction to hear the Poštová claim. This finding ended the process without an examination of the substantive claims.

Is the Greek PSI deal in danger after this latest challenge? The short answer is yes. It is unlikely that the advisors of Laiki would have brought a claim if they thought that their client will have the same difficulty on jurisdictional grounds that led to failure in Poštová. While Greece won two challenges on the PSI, one in domestic courts and one in ICSID, the Argentine precedent is not a good omen. The Abaclat case, where a number of Italian bondholders sued Argentina, is illustrative of the sort of action that is becoming more common in the Greek context. While the case is still pending, we have a decision on jurisdiction accepting that the claim comes within BIT provisions and can proceed for consideration on the substantive grounds. Is this the sort of answer one should expect in the new case against Greece? Poštová lost on jurisdiction because of the exact wording of the BIT it was relying on. Investors from one of the other states Greece holds BITs with may have better luck. Bondholder BIT arbitrations remain a danger for Greece.

@iGlinavos