Greece: Referendum on cards if EU deal not reached

Greek PM Alexis Tsipras has stressed that cuts to pensions, raising consumption tax rates on the islands and ending collective b

In a three-hour appearance on private TV channel Star TV on April 27, Greek Prime Minister Alexis Tsipras spoke extensively about the challenges confronting the anti-austerity government led by the Coalition of the Radical Left (SYRIZA).

The program began with a grilling of Tsipras by interviewer Niko Katsinikolao and ended with questions from a 50-strong audience.

A lot of questions reflected growing concern that talks with the country’s creditors — mainly the “Troika” of the European Union (EU), European Central Bank (ECB) and International Monetary Fund (IMF) — were stalled.

A recent Greek poll showed 45.5% agreed with the government's negotiating strategy (down from 72% in February), but 39.5% say the strategy is wrong (up from 28% in February).

Tsipras’s appearance came after an April 24 meeting of eurozone finance ministers (the “Eurogroup”) in the Latvian capital Riga. The talks failed to make headway in negotiating an agreement over terms for releasing some of the €7.2 billion earmarked for Greece under the second Troika “bail-out” package.

This deadlock has remained since the February 20 agreement between the Eurogroup and the SYRIZA-led government, which gave Greece four months to produce “reforms” acceptable to its creditors.

Without a deal by the next Eurogroup meeting, set for May 11, Greece could default on two repayments to the IMF totalling €947 million, due the next day. Even if it manages these payments, economic commentators say there is little hope of its June and July obligations being met.

To help meet its payment obligations, the government has already been forced to call on councils and universities to shift their deposits in private banks to the Bank of Greece.

The changes being demanded by Greece’s creditors include privatisations, raising the consumption tax rate on Greece's islands to match the mainland rate, cuts in public service pensions and labour market “reforms” that would make mass sackings easier and undermine collective bargaining.

In the April 27 interview, Tsipras stressed that cuts to pensions, raising consumption tax rates on the islands and ending collective bargaining were red lines the SYRIZA government would not cross.

Tsipras said, “I think that by May 9 we will have an agreement”, but raised the prospect of serious conflict with the EU if talks failed.

He committed to not signing any agreement that would “repeat the vicious circle of austerity, misery and pillage” imposed by the two Troika memoranda signed by previous administrations, saying: “I don’t do somersaults.”

Tsipras flagged a referendum on Greece's eurozone membership should no new deal be struck, saying: “If the solution falls outside our mandate [to stay in the euro], I will not have the right to violate it. The solution to which we will come will have to be approved by the Greek people.”

This statement sparked an immediate response from Eurogroup chair and Dutch finance minister Jeroen Dijsselbloem, who said that “it would create great political uncertainty”.

The Riga set-up

The tactics of Greece’s creditors were on clear display before the April 24 Riga Eurogroup meeting. They were to make not the slightest concession but demand impossible concessions from the Greek delegation itself, then blame it for the resulting stalemate and use the Brussels-based media to spin the failure as the Greeks’ fault.

In the run-up to Riga, IMF managing director Christine Lagarde ruled out any repayment delay on IMF loans and ECB board member Benoit Coeure explain to readers of the anti-SYRIZA Greek daily Ekatemerin that default “would impair the ability of banks to provide credit, which would be detrimental to the Greek people in general”.

Next, euro-area finance ministry officials “who asked not to be identified” expressed doubts whether progress in negotiations would be enough to unlock funds. Greece’s refusal to privatise state assets, reform its pension system and deregulate the labour market were the main stumbling blocs.

German finance minister Wolfgang Schaeuble then told everyone not to hope for anything from the meeting and advised journalists to go sightseeing.

Afterwards, anonymous “senior officials familiar with the negotiations” were unleashed on anti-SYRIZA media, especially in Greece. The German Frankfurter Allgemeine Zeitung was told that Greek finance minister Yanis Varoufakis’s behaviour was reminiscent of a “taxi driver”, as he kept asking where the money due to Greece was.

Varoufakis was denounced as “a time-waster, amateur and gambler” according to “colleagues”. In reality, the Greek delegation simply refused to make the capitulation demanded of them.

Varoufakis showed what he thought of the whole charade by not attending the customary Eurogroup dinner and tweeting: “FDR, 1936: ‘They are unanimous in their hate for me; and I welcome their hatred.’ A quotation close to my heart (and reality) these days.”

After Greece's negotiating team returned to Athens empty-handed, its restructure was announced. Varoufakis was shifted from the lead negotiating position, which has been taken by Greek minister for international economic affairs Euclides Tsakalotos.

The move was widely misinterpreted by the financial media as a demotion of Varoufakis. In fact, it was aimed at neutralising the Eurogroup phoney complaint that Varoufakis’s personality was worsening the already difficult talks.

A Greek government statement confirmed “confidence in minister of finance Yanis Varoufakis who was at the centre of regular attacks by the international press … he always acts within the context of the collective decisions and the executive government bodies.”

Another negotiating path?

The Eurogroup's insistence on complete Greek surrender would suggest that an agreement between the EU and Greece is impossible. So why did Tsipras suggest one could be reached by May 9?

The answer lies in conflicting assessments among EU elites of the likely impact of a forced “Grexit” on European politics and economy, and on the degree to which some sort of compromise with Athens is needed.

The entire EU establishment agrees that “the SYRIZA contagion” must be contained. In the words of SYRIZA central committee member Yanis Albanis: “The money Greece needs (a few billions) is a drop in the ocean of the European economy.

“The Greek state budget has got a stable primary surplus while the new Greek government is managing state finances prudently.

“The issue is deeply political. The forces of conservatism that dominate Europe, want to politically crush Tsipras and SYRIZA so that they can nip an alternative political paradigm/model of pan-European appeal, in the bud.

“They are attacking SYRIZA in order to finish/end/stop/kill Podemos and Sinn Fein.”

But how best to proceed? The Eurogroup finance ministers take the view that there is nothing to be lost from taking a hard line with Athens.

They judge that since 2012, when the prospect of a Greek exit from the eurozone raised fears of a euro collapse, Greek debt has been shifted out of the private banking system and enough financial firewalls put in place to stop contagion from a new Greek crisis.

Their conclusion is that the gangrenous Greek limb can be amputated without any major damaging side-effects.

But other players are not convinced. ECB head Mario Draghi said “now we are better prepared than in 2012, 2011 and 2010”, but “we are certainly drifting into uncharted waters if the crisis deepens, but it is too early to make any assumptions about this”.

US Treasury Secretary Jack Lew said in early April that “no one should think they could predict the consequences of a Greek exit from the euro. It would not be a good thing in a world economy just recovering from a deep recession to have that kind of uncertainty introduced.”

As for European Commission president Jean-Claude Juncker, he believes a Grexit would lead to an “irreparable loss of global prestige for the whole EU”.

These differences have created a possible parallel path of negotiations for Greece. Tsipras has talked about another interim deal to follow the February 20 agreement to German prime minister Angela Merkel, as well as Draghi, Lagarde and Juncker.

Its likely form, which would relax the Eurogroup demand for a full program of “reforms” before any funding was released, would be for Greece to implement the least contentious measures demanded by the creditors, but not labour market or pension reform.

One of these measures, according to an April 30 radio interview with Varoufakis, would be to temporarily keep the hated property tax, for which the government has yet to find a replacement. However, it would be repealed as soon as a final deal was reached.

Greek media reports say other concessions being discussed by the Greek cabinet are: postponement of the planned changes in labour law to June or later; taking measures to limit early retirement; cutting higher extra pensions; imposing a special luxury tax on accommodation in the tourism sector instead of raining consumption tax on the islands; and using part of the proceeds from privatisations to pay foreign debt and finance the pension system.

At the same time, an April 29 statement by the Greek finance ministry reaffirmed the government “red lines”, including the sales tax on islands, pension and labour market reforms, and asset sales.

On the prospect of no agreement, recent article by British Daily Telegraph economics commentator Ambrose Evans-Prichard said: “Tsipras told his own inner circle privately before his election in January that if pushed to the wall by the EU creditor powers, he would tell them ‘to do their worst’, bringing the whole temple crashing down on their heads.

“Everything he has done since suggests that he may just mean it.”

[Dick Nichols is Green Left Weekly’s European correspondent, based in Barcelona. An updated, expanded version of this article will soon be available at Links International Journal of Socialist Renewal.]

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