Greece: Negotiations hit crisis point, solidarity vital

Greek Prime Minister Alexis Tsipras.

Will Greece's SYRIZA-led government reach a last-minute deal with its creditors, the European Union (EU), European Central Bank (ECB) and International Monetary Fund (IMF) - the “Troika” - to release the last €7.2 billion owed to the country under Greece's second bail-out agreement?

If so, would any such agreement be accepted by a majority of Greeks in a national referendum? And even if it were, would SYRIZA’s Left Platform accept the deal, or would Left Platform MPs vote against it, effectively splitting the radical-left party and putting Prime Minister Alexis Tsipras's government at risk?

Looking at the Greek government’s desperate shortage of cash, it seems inevitable it will have no choice but to sign an agreement with its creditors that - whatever its window-dressing — keeps Greece locked in a trend of under-investment and low growth. This would continue the austerity that has shrunk the economy by over a quarter since 2008.

Creditors hold the cards

All the economic cards are in the hands of the country’s creditors. The ECB controls the credit tap to the private Greek banks through its Emergency Liquidity Assistance (ELA) facility. It sets the ceiling on how much short-term debt (“t-bills”) the Greek government can issue and limits the total value of Greek public debt that it is willing to accept as collateral for loans to Greek financial institutions.

As negotiations drag on, uncertainty saps business and consumer confidence and starts to undermine the tax take. This is despite the government’s successful efforts in stemming tax evasion by the rich.

On May 20, SYRIZA parliamentary spokesperson Nikos Filis announced that “now is the moment that negotiations are coming to a head ... If there is no deal by [the June 5 repayment date of €297.9 million to the IMF] that will address the current funding problem, they won't get any money.”

Filis said the government would ensure it had money to pay pensions and wages before servicing debt repayments to the IMF. Its last IMF repayment, of €744.9 million, was only made on May 12 after nearly emptying Greece’s own IMF holding account.

In a letter to IMF managing director Christine Lagarde, Tsipras had warned the payment would not be made without a lifting of the ECB ceiling on Greece’s short-term borrowing. These amounts are trifling compared to the €3.4 billion and €3.6 billion in repayments to the ECB that fall due in July and August.

Yet the SYRIZA-led government is determined not to capitulate. A nine-hour “war cabinet” on May 10 ended with SYRIZA declaring the government would not cross the “red lines” on which it was elected on January 25. These include restoring collective labour contracts and the minimum wage, protection from mass lay-offs, no further cuts to wages, pensions and social security, and no “fire-sale” privatisations. said on May 10: “Syriza officials say they may trigger the biggest sovereign default deliberately if pushed too far, concluding that it is a better outcome than national humiliation and the betrayal of their electoral vows to the Greek people.”

The article quoted economist and SYRIZA MP Costas Lapavitzas as saying. “If it comes to the crunch, Greece must default and go its way. There is no point raiding pension funds to buy time. We just exhaust ourselves for no purpose.

“We went up and down Greece in the elections urging the voters to throw out the old government. The question now is whether we mean what we say, and whether we have the courage of our convictions.”

SYRIZA critics

At a May 19 SYRIZA leadership meeting, Tsipras was criticised for the government’s decision to raid municipal funds to meet debt repayments. The criticism extended beyond the minority Left Platform, being echoed, for one, by the parliamentary speaker Zoe Constantopoulou.

A May 18 statement by the Left Platform and other critics said: “Our only choice is a rupture with the creditors — suspending loan repayments, imposing measures to restrict free movement of capital, putting banks under state control, taxing capital and the wealthy to finance measures to support ordinary people … and even a break with the euro.”

Against this background, Tsipras attended the May 21-22 summit of EU leaders in the Latvian capital, Riga. He was expected to make clear the Greek negotiating team had done all that could be expected of it.

It was now the turn of the Eurogroup (of Eurozone finance ministers) to finally accept, in the words of the May 14 SYRIZA secretariat statement, that the Greek government could not be expected to cross “its red lines, which are also the red lines of the Greek people”.

That stance can only sharpen tensions among and within European governments over “what to do” about Greece.

Those most opposed to further concessions to Greece, led by German finance minister Wolfgang Schauble and president of Germany's central bank, Bundesbank, Jens Weidmann, support a “Cyprus solution”. Like the 2013 EU ultimatum that forced a bank rescue package on Cyrpus funded by a “haircut” of depositors, Schauble and Weidmann support a “final offer” on pension and labour market “reform”.

The Greek government would then have to cave in or face the loss of ECB liquidity to the Greek banking system. Sooner or later, this would lead to Greece's forced departure from the Eurozone.

Weidmann even opposes Greek banks accessing emergency liquidity assistance while talks are ongoing. Schauble, probably encouraged by recent polls showing declining support in Greece for SYRIZA’s negotiating stance, is prepared to consider a referendum on an EU “final offer”. He judges that most would want to stay in the euro even if it meant crossing SYRIZA’s red lines.

No doubt Schauble’s dream is for SYRIZA to split and either stay in government as an obedient follower of EU policy or become the opposition — as happened with the once-ruling AKEL party in Cyprus.

As well as Finland and Slovakia, this stance is most strongly supported by Portugal, Ireland and Spain. Their governments have implemented similar austerity packages and now face elections in which they risk being wiped out by rising left forces - Podemos in Spain and Sinn Fein in Ireland.

A Juncker plan?

Leading opposition to the hardliners is European Commission president Jean-Claude Juncker. He fears the impact on EU credibility if Greece is forced out of the Eurozone, and is mindful of Greece's strategically key position just south of the Balkans and close to the Middle East.

Juncker's tactic is to offer SYRIZA just enough to sell to the Greek people. If that provokes a split within SYRIZA, so much the better. On May 18, Greek daily To Vima reported that it had seen a proposal from Juncker to the Greek government aimed at breaking the stand-off between Athens and its creditors.

Apparently done behind the backs of the ECB and the IMF, the proposal would release €5 billion in aid to Athens. In exchange, the Greek government would have to agree to a shorter list of “reforms” than that demanded by the Eurogroup and the hardliners.

There is a faint air of desperation about such an offer — denied by the European Commission to be a “Juncker Plan”. In the end it is the Eurogroup, ECB and IMF, and not the EU, that will decide where the money comes from for any future loans to Greece.

But it would be premature to rule out a transitional deal between Greece and the EU, which puts off a Greek default in the short term in exchange for a Greek promise to tackle “reforms” later in the year.

This is because a Greek default now, with unforeseen consequences for an EU of which Greece would still be a member and with the Ukraine crisis still running, could overwhelm the EU’s capacity of “governance”.

Chancellor Angela Merkel is reported to share Juncker’s concerns, and is preparing to contain the anti-Greek right wing of her party in case an agreement has to be put through the German parliament. There are also signs from within the German government of deepening differences between Schauble and Merkel.

On May 20, deputy finance minister Thomas Steffen, in what sounded like a criticism of Schauble, said: “Should we seriously go and prescribe in detail what the Greeks are allowed to spend and what revenue they can have? I say no. It’s the rough framework that has to be clear.”

Solidarity needed

Critical times are approaching for Greece. Solidarity is needed to show that the EU campaign to crush or tame SYRIZA will have a political cost.

Announcing a June 16-20 week of action to support Greece, SYRIZA Central Committee secretary Tassos Koronakis said: “Greek people’s patience and goodwill is not to be mistaken as willingness to succumb to unprecedented blackmail. European democracy is not to be asphyxiated.

“SYRIZA appeals to all progressive and democratic social and political actors who acknowledge that Greece’s fight is not limited within its national borders, but constitutes a fight for democracy and social justice in Europe.

“In these critical moments, we are calling for acts of social and political solidarity, ranging from rallies and awareness campaigns across Europe, to institutional initiatives in local, regional and national parliaments and personal or collective statements of support to the efforts of Greece to swing the European paradigm from disastrous austerity to a new model for sustainable growth.”

Such solidarity is needed beyond Europe too.

[Dick Nichols is Green Left Weekly’s European correspondent, based in Barcelona.]

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