As the government of Prime Minister Antonis Samaras awaits with anticipation or trepidation – pending on your perspective of the matter – the return of the troika to Greece, finger pointing at unacceptable pressures from the international creditors abound. Equally, the blame game is gaining pace in Athens, with a lively debate about which political party, individual politician or piece of structural reform obligation is responsible for this endless conundrum.
While the timetable for the troika’s return is getting ever more condensed, the outcome of its regular evaluation is critical for the decisions and developments that are to follow in the course of 2015. What used to be a quarterly monitoring process of reform compliance benchmarks is increasingly being extended in terms of the time required to bring such deliberations to a conclusion.
Suffice to add that the definition of a successful conclusion is a matter of intense interpretation by all stakeholders concerned in Athens, Washington, Brussels and Frankfurt. As has become the established roadmap of such evaluations for Greece during the past year, hard-fought compromises are essential, extensively revised timetables are necessary and controversial issues of substance are postponed into future compliance obligations.
All the while this exchange is taking place in Athens via an avalanche of emails, frequent telephone hotlines and video conferencing. One wonders why face-to-face interaction is being delayed until the last possible moment? Is waiting for the troika to arrive a matter of chemistry? Or are the differences of opinion on key policy matters so deep that they cannot be resolved at present by sitting down with the international creditors in a room in the finance ministry?
If this is indeed the last evaluation drama unfolding before us prior to the conclusion of the European part of the second macroeconomic adjustment programme, then one can speculate how the day after will look like? Put otherwise, once the current memorandum expires, the amount of highly sensitive policy issues that will remain on the negotiating agenda – for example, Greece’s debt dynamics, the reprivatisation process of the four systemic banks and the external monitoring of budgetary policy – are no less contentious and far-reaching in their potential consequences.
While waiting for the troika to return to Athens, other observers outside Greece have started to lose patience and are drawing their own conclusions. One key indicator is international bond market reactions to this impasse. Much attention is being given to the consistent rise in the yield for the Greek ten-year bond. Mid-week it stood at 8.34 percent. Back in June of this year, the yield stood at 5.6 percent. The refinancing objectives of the Greek government in 2015 at such elevated yields are a non-starter.
More worryingly however, is the constant increase in the yield for Greece’s three- and five-year bonds. In particular, yields on the three-year debt are within striking distance of its ten-year peer. In early September the yield stood at 3.36 percent, subsequently climbing to over 7.4 percent in mid-October and reaching 7.25 percent on 18 November. This is a remarkable development for such short-term sovereign debt and a statement of increased market concern about the state of affairs in Greece’s political economy.
Equally, when compared to Greece’s southern and northern periphery peers – Ireland, Spain, Portugal and Italy – the return on their respective three-year bonds is in fact moving in the opposite direction, either declining or stagnating at a low level. More specifically, Portugal’s yield on the short end of the bond market is currently 1.16 percent; that’s a difference of over six percentage points vis-à-vis Greece’s yield on its three-year bond!
The pricing of political and economic risk factors accumulating in Athens is reflected in these yields. Will they decline if and when the wait for Godot, i.e. the troika, is over? One would hope so, but there is no guarantee of such a development. Once the international creditors have finally returned, the complex process of shaping a narrative on the agreement of the evaluation will continue on site.
Based on recent evidence, we can expect further recriminations, threats of eminent departure and urgent conference calls of the negotiators with the troika’s institutional leaders in Brussels, Frankfurt and Washington, with Berlin looming in the background. Meanwhile others are waiting to receive notification about the endgame, with the date of 8 December fast approaching when the next and last 2014 meeting of the Eurogroup of finance ministers is scheduled to take place.
The waiting game thus goes on, with new participants coming on board. The patience of various stakeholders involved in the process is being tested to its limits. But at the end of the day, even if a much-needed compromise emerges between the Greek authorities and its international creditors, the fact remains that yet another evaluation round has underlined the profound limitations of conducting policy compliance through the instrument of a memorandum of understanding.
The troika is not Godot. Vladimir and Estragon do not resemble members of the Greek government. But the absurdity of the situation prevailing in Greece does resemble Beckett’s absurdist play.
*Jens Bastian is an independent economic consultant and investment analyst for southeast Europe. From 2011 to 2013 he was a member of the European Commission Task Force for Greece in Athens. He is a regular contributor to The Agora section of Macropolis. Follow Jens on Twitter: @Jens_Bastian