Quick summary of Andreas Papandreou. He was the son of Greek Prime Minster George Papandreou. He was the founder of Greece’s socialist PASOK party that dominated Greek politics from 1981 until last year. He was Prime Minister of Greece from 1981-1989 and 1990-1993. The stuff currently going on in Greece is largely his fault. When he and his party took over, they expanded and corrupted the civil service (and started a dynamic where all of his successors – regardless of ruling party – did more of the same) and expanded the welfare state while leaving a broken tax system. Some of these trends predated Papandreou, but he accelerated them and every Greek government since Papandreou has been dedicated to managing the state of affairs that Papandreou brought into existence. He was a “socialist” but the “conservatives” of New Democracy managed the Papandreou-created clientist and welfare state (though Papandreou more expanded than invented those in Greece) and tried to make it work for those clients that chose to associate themselves with the nominally conservative party. Each successor also hoped that the unsustainable system would crash on someone else’s watch.
Some people have compared Alexis Tsipras ( the leader of the radical-left SYRIZA party) to Papandreou. They both led leftist parties that displaced the previous main left-of-center party. Papandreou and PASOK displaced the moderate Center Union party and SYRIZA displaced (possibly only for the moment) Papandreou’s PASOK. Both Papandreou and Tsipras ran on big promises. But when Papandreou took power in 1981, things turned out okay – for a while. When Papandreou first formed PASOK in 1974, he was against Greek membership in NATO and the European Economic Community (the predecessor organization of today’s European Union.) When Papandreou won his first national election in 1981, he abandoned those positions. Papandreou still took crowd-pleasing swipes at the US, but he focused policy on expanding the clientist and welfare states while staying within the American defense umbrella and the European common market. Papandreou was, among other things, a power-seeker with a well calibrated sense of how much he could push allied governments.
So what does this have to do with Tsipras? Tsipras is running on a platform of repudiating Greece’s loan agreement with its creditors, refusing to pay interest on the outstanding debt, and still demanding the future loan installments (though more as aid than as loans.) All of this is to pay for new social spending in the bankrupt country even as Tsipras promises and increase in the minimum wage and to end privatization of government-owned enterprises and stop civil service layoffs. Tsipras has suggested he will get the money by threatening a global financial meltdown if he doesn’t get his own way.
So what are we to learn of Tsipras from the example of Andreas Papandreou? One possible lesson is that the Greek demagogue will give way to pragmatism when the demagoguery threatens his grip on power. It is possible Tsipras will evolve in the same way. Maybe his promises and threats are just a way to get some votes during the election and a slightly better deal from Germany in debt negotiations. Maybe a Prime Minister Tsipras will back off before he produces a point-of-no-return crisis. I don’t know, but there are reasons to not be confident that Tsipras will rise to the occasion. For all of his many faults, Andreas Papandreou in 1981 was a much more impressive figure than Alexis Tsipras in 2012. Here are some differences:
1. Papandreou was a professional economist who had held multiple academic and government posts. He must have known he was building a rotten and unsustainable state apparatus. He also knew that his expansion of benefits and government jobs to supporters were vote-getters and that someone else would get stuck with the bill. Ironically that someone else turned out to be Andreas’ son Prime Minister George Papandreou (yeah, same name as Andreas’ Prime Minister father.) Tsipras is a civil engineer and no doubt he knows math, but his real career is fringe political activist. He is a sit-in guy. He has never had to pay a country’s bills or show how he could do so. It is anybody’s guess what Tsipras will do if the EU and IMF call his bluff. Tsipras probably doesn’t know either.
2. Prior to becoming Prime Minister, Andreas Papandreou had some experience of political responsibility. He had been a senior advisor to his Prime Minister father. Papandreou intimately knew what it meant to run a government and he knew it from the inside. Tsipras had been the leader of a marginal, extremist party until last month. Not only does Tsipras have no executive experience, he has never served in either the majority or main opposition in the Greek parliament.
3. Papandreou had faced serious political hardship. He had seen his country occupied by the Nazis. Andreas Papandreou saw his Prime Minster father overthrown and arrested by Greek military officers. Andreas was arrested himself. Tsipras’ experience is the precise opposite of Papandreou’s. In reaction to rule by the military, post-dictatorship Greece was very tolerant of sit-ins, occupations of public buildings, disruptions of transportation networks and even riots (as long as no one was killed – Greek riots had a choreographed quality to them) by leftist activists. Tsipras has only known indulgence.
Andreas Papandreou was an immensely selfish and destructive man, but also a man of significant experience and (self-interested) pragmatism. Alexis Tsipras is no Andreas Papandreou. Greece needs a better class of demagogue. Hopefully Tsipras’ party won’t finish first in tomorrow’s Greek election. It matters.
June 16th, 2012 | 11:25 am
If Tsipras loses, is he likely to quietly retire?
June 16th, 2012 | 1:20 pm
Just heard on the radio that the Greek and Spanish stock markets did really well this past quarter? Go figure.
June 16th, 2012 | 3:30 pm
Kate, even if SYRIZA finishes second, they will still get somewhere between 4X and 6X the vote they got before Tsipras led the party.
Robert, I know there was a run up in the Greek stock market on rumours that the conservatives had a norrow lead in polls that could not be published because of Greek law. I dunno. Greek polls are usually pretty good. They use large samples of a smallish electorate. But rumours about polls that can’t be published are usually worthless propaganda put out by the parties and associated journalists.
June 17th, 2012 | 9:50 am
You have got to be kidding me Pete. The runnup in the stock market is largely due to expectations that Syriza will prevail, and form a pro-greek interest coalition. A situation where Greece can renegotiate its debt, increase its spending and cut its taxes (while drastically increasing compliance!) means more Euro’s floating around in Greek businesses. It is a neo-Keynesian bull market as all bull markets more or less are, that is an expectation that Greek firms will have more future revenue (denominated in euro’s), thus justifying a higher current P/E ratio. This is only possible in a situation where there is “free/consumer” Euro’s floating around in the greek economy. An outlook that is highly unlikely under the budgetary restrictions forced upon Greece for the bennefit of the Germans (but which due to French bank exposure, is no longer so good for the French).
Not just a slightly better deal with Germany and the IMF but also new default provisions on Greek bonds. Essentially Greece isn’t looking to get out of its debt, it just wants to pay much less interest on it. It can do this by insureing that Greek Debt will always be as good as money.
You see it is the 21st century, and no one pays taxes in cash, it is almost always some form of check. This means that the bank is more or less the agent for the tax payer who is the principal. This also means that a bank could hold as much greek debt as it wanted to, and so long as it had customers/clients/agents who had to pay taxes to the greek government, it could ensure that all this debt was as good as cash.
Bank Agricole (Actually French, but lets say it is a Greek Branch)…
Greek Citizen Checking Account: 20k Euro
Greek Citizen taxbill: 10k Euro
Bank Agricole: 30k Euro + 10k Greek Bonds
Greek Citizen writes a check to Greek Gov for payment of taxes in the amount of 10k Euro.
Resolution:
Greek Citizen Checking Account: 10k Euro
Greek Citizen taxbill: O
Bank Agricole: 30K euro.
Now tell me Pete, why shouldn’t bank Agricole be willing to take that 30K Euro, and buy greek bonds? Especially if the Greek bonds are trading at such a premium to the German ones…. 28% interest vs. 1.3% for the German debt?
Aren’t you scared to hold Greek Debt? (well the market currently is, and that is why interest rates are so high)…
But technically if you were a bank under the new default provisions, where greek debt was as good as cash for the purposes of paying taxes, wouldn’t you be scared not to hold greek debt?
New default provisions for greek bonds, would instantly create a bull market in greek debt, which would work to destroy the premium for German Exceptionalism. In fact arguably there would be less risk with Greek debt. You are actually just betting on having clients/bank customers who will need to pay Greek taxes.
No more “bailouts” negotiated by a bunch of bureaucrats. .resulting in strange “haircuts” and hysteria designed to pump VIX and volatility.
So Greece can solve all of this by changing its default procedures on its bonds. It will also reject all previous budgetary restrictions imposed upon it by Brussels. In order to further prop up its bond price it should drastically increase the size and efficiency of its “white collar” crime bureaucracy (agencies akin to the IRS and Secret Service.)
No reason Greece shouldn’t be paying under 3% interest on its debt, all it has to do is restructure its bonds and work on the tax evasion.
June 17th, 2012 | 11:18 am
[...] swept … And now we know the truth â the PASOK government failed in the same way …The Sociopath and the Man-ChildFirst Things (blog)Europe faces 'make or break' moment: Greek ex-PMChannel News AsiaGreek [...]
June 17th, 2012 | 7:02 pm
The runnup in the stock market is largely due to expectations that Syriza will prevail, and form a pro-greek interest coalition.” The news reports from the people who participated in the run up indicate that the reverse was true. They were responding to rumoured polls that the “conservatives” would win.
“A situation where Greece can renegotiate its debt, increase its spending and cut its taxes (while drastically increasing compliance!) means more Euro’s floating around in Greek businesses. It is a neo-Keynesian bull market as all bull markets more or less are, that is an expectation that Greek firms will have more future revenue (denominated in euro’s), thus justifying a higher current P/E ratio.” That was change that not even the Greek electorate, in its most delusional moment, did not believe in. They concluded (I think correctly) that any such attempt to buff the creditors would lead to a return to the drachma (a policy I would be for actually – along with other policy changes.)
“No reason Greece shouldn’t be paying under 3% interest on its debt, all it has to do is restructure its bonds and work on the tax evasion.”
Well Greece still isn’t running a primary surplus so any future lenders to Greece would have to take into account Greece’s recent history of default on privately held debt (a more than 70% haircut), Greece’s broken tax collection system (and if you think that’s quickly fixed…), damaged political culture and an incoming government that, despite being the best we can realistically hope for, will still be fragile along several dimensions. Good luck with that.
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