August 21, 2015 - SEP Scientific Council member Francesco Saraceno was interviewed by RaiNews24 regarding the agreement struck between Athens and the European Commission. Below is rough translation.
Rai: The European Commission has stated that they are not concerned with the new political turn in Greece. In your opinion, is there not a risk that the reforms agreed upon by PM Alexis Tsipras and international creditors could come to halt?
No, I don’t thinks so. I think that Tsipras played this card for domestic political reasons. We know that he was able to push through the current reforms with the help of his opposition, and, going forward, he needs to create a more cohesive government. In this context, an election would make sense, but we will see.
At the European level, I don’t think this election will bring matters to a stop. The terms of the loan to Greece is conditional upon reforms. The money will arrive only if the reforms move forward.
Rai: What changes are there with regard to the Greek debt burden? The IMF has always emphasized the need for political stability in this country.
I don’t think there will be instability. The worst case scenario is that Tsipras won’t win a majority, which means he will have to form a coalition government. Let’s not forget that this is the de facto state of the Greek government at this time. He had passed the packet of reforms without the vote of Syriza dissidents, and with the support of his opposition.
It is true that the requirements Greece must fulfill are very difficult. Tsipras has openly said that he does not agree with some of them, and that he had been forced to accept the agreement. However, accepting the terms does mean that he will receive the funds he needs to put in place the policies he had supported back in January. We will have to see.
Of course, that’s the worst-case scenario. The best-case scenario is that Tsipras will have a more cohesive government at his back after the election.
Rai: What do you think will happen in Greece in the next six months?
Well, give me a glass ball.
I think that in the next 5-6 months, there will be very tough negotiations with Europe. This has been a loss for Tsipras, but it could possibly give him the possibility to find a long-term solution. Three years from now, in 2018, we will judge the effect. The macroeconomic data at this time is contradictory. The latest data on growth has been much more positive than in the past, but Greece is nonetheless in an extremely weak position. Tsipras’ assignment is very arduous, and you have asked a question too difficult to answer.
Rai: Today, the markets reacted a bit to this crisis. The market in Athens closed with a 2.49 decrease, and the European markets fell as well. Is there a risk of a “black period” in Europe?
Here we are also seeing the effects of the uncertainty in China and the lack of clarity in the United States regarding whether or not the FED will raise its rates. It’s obvious that all this adds to the uncertainty in the markets, but they are short-term impacts. I’m hesitant to follow the markets day by day instead of watching for long-term trends. In a sense, I am surprised by the way the market has reacted. Tsipras’ move could end up giving him a greater mandate than before.
- The complete interview (in Italian) is available from RaiNews24.