Greece: The Battle between the Realos and Fundis

In the 1980s and 1990, there was a split in the Green Party in Germany. The fundis were very  principled and doctrinaire.  The realos were more interested in sharing power to shape policy.  For them, unlike the fundis, political expediency need not be a crime. 

Arguably all significant political movements have a similar split.  In any event, this split seems to be hobbling Syriza, which faces an arduous task in any event. 

A little more than a third of Syriza opposed the agreement struck at the end of last month that Prime Minster Tsipras negotiated.   There has been practically no progress since then.  Instead, there has been bickering over symbols, like where meetings should be held and what to call the official creditors.  The fundis are represented by Finance Minister Varoufakis, a self-declared erratic Marxist,  

Though charismatic, Varoufakis seems to be more interested shock politics and symbols than actual concrete results.  He has made several miscalculations.  He thought the other peripheral countries, debtors in their own right, would support Greece.  They have not, and moreover, Spain and Portugal have taken quite critical stands.  He thought the ECB would capitulate, but it hasn't.  He overplayed his hand with leaks and antagonistic comments.  Varoufakis has bluffed with a weak hand.  Just after Greece made a 300 mln euro payment to the IMF at the end of last week, Varoufakis seemed to threaten (in an interview in Italy's Il Corriere della Sera) to default to the IMF.

Reports suggest the realos, including Prime Minister Tspiras are trying to rein in Varoufakis.  They want him to talk less and do more.  But Varoufakis is a symbol himself of the fundis,and he does speak for a significant part of the coalition.   Yet he has wasted valuable time, during which the economic and financial conditions have deteriorated.   Much economic and financial progress seen in the middle of quarters of last year has all but dissipated.  Capital flight has drained deposits at the banks, leaving them with fewer deposits than in 2010-2011. 

A poll over the weekend in the Efimerida Ton Syntakton newspaper showed a marked decline in those with a positive opinion of the government.  It has fallen from 83.6% to 64%.  While most governments would be envious of such support, it suggests that it is not just the official creditors and other members of the euro area that are increasingly exasperated by the government, but its public support is beginning to erode.  

The latest reform proposals, delivered at the end of last week, were different from the proposals from February 20th rather than further developing them.  According to press reports, some EU officials dismissed the latest proposals as "amateurish".   It follows sending wrong documents and contradictory signals.  This is not the same as inexperienced, which is a given and forgivable.    

Greece has painfully little room to maneuver as the official creditor demands are onerous.  The official creditors have cut off the assistance funds to Greece since the middle of last year, long before Syriza's electoral victory.  Yet even with a tight leash and limited degrees of freedom, the internal fight between the realos and the fundis has left Greece with less.

New technical discussions will start on Wednesday in Brussels.  For largely symbolic reasons, Greece has resisted a visit by the official creditors to Athens.  This has caused a delay and deepened the sense exasperation.    Greece has a T-bill auction this week that will largely offset a maturing issue.  It has a roughly another 300 mln euro payment due to the IMF by the end of the week. 

Greece: The Battle between the Realos and Fundis Greece:  The Battle between the Realos and Fundis Reviewed by Marc Chandler on March 09, 2015 Rating: 5
Powered by Blogger.