For a while in late May, it looked as if negotiations over terms for releasing the last €7.2 billion owed to Greece under its second bailout package with the “Troika” of the European Union, European Central Bank and International Monetary Fund might have some chance of success.
The commentary from the SYRIZA-led Greek government's negotiators and from its creditors was of “fruitful discussions” and “meaningful progress”. Greek government spokespeople even spoke of reaching an agreement “within a week or two”, at the latest by the June 18 meeting of the eurozone finance ministers.
But that note of guarded optimism went up in smoke on June 3 when Greece’s creditors handed Greek Prime Minister Alexis Tsipras their latest set of demands. These had been worked out after an informal summit of EU president Jean-Claude Juncker, ECB president Mario Draghi, IMF managing director Christine Lagarde, and French and German leaders Francois Hollande and Angela Merkel.
The demands set targets for a Greek primary surplus — before repayment of interest on public debt — that would require ongoing austerity. They included eliminating sales tax exemption on the Greek islands, cutting spending on pensions by €1.8 billion (1% of GDP), a proposed “consultative process” on labour reform and an accelerated privatisation program.
Achieving its primary surplus targets for 2015, 2016 and 2017 would require an impossible annual growth rate of 5%.
The creditors’ document overturned the partial convergence achieved at talks between Greece and the so-called “Brussels group” of lower-level representatives of the EU Commission, ECB, IMF and European Stability Mechanism. These had begun after the February 20 bridging agreement reached between Greece and its creditors.
It also resolved differences within the Troika over tactics towards the SYRIZA-led government and its proposals, which had been presented to creditors on June 1. Before the meeting, the IMF had been more favourable to restructuring the Greek debt than its Troika partners.
In a June 9 interview with German daily Tagesspiegel, Greek finance minister Yanis Varoufakis described the Troika's June 3 package as “a return to the starting position as if the negotiations had never happened. This is a proposal you make when you don’t want an agreement.”
Tsipras said: “I could never have imagined that they would submit a scheme that would completely ignore all the common ground that we covered in the Brussels group. That our effort for an honest and complete solution should be perceived as a sign of weakness.”
The Troika institutions re-affirmed their intransigent line because of the Greek economy's growing stagnation, even as SYRIZA maintains its popularity in Greek polls.
Their judgment is that the Tsipras administration will have to capitulate sooner or later, given the continuing flood of deposits from Greek banks, the bleeding of the state’s coffers and the declining business investment sucking the economy back into recession.
The ball, as European ministers have been chanting in chorus since June 3, is now in SYRIZA’s court. Time and patience is running out.
On June 10, Donald Tusk, the president of the European Council of prime ministers, said: “We need decisions, not negotiations, now … there’s no time for gambling. The day is coming, I’m afraid, when someone says the game is over.”
At the G7 summit in Germany on June 7 and 8, US president Barack Obama added his voice to the chorus of advice for SYRIZA to “take tough political decisions”.
On June 9, when presented with some updated positions by Greek negotiators, “unnamed EU commission officials” sneered to a German reporter that “it is like when you order a dish at a Chinese restaurant — and then only get a fortune cookie”.
On June 11, as if to reinforce the message that Greece faces a final ultimatum, the IMF negotiating team left Brussels.
The creditors' stance makes the real stakes clear — taming or destroying the one government in Europe that is opposed to austerity and has a political vision of Europe opposed to its business and political elites.
It does not matter that the Troika's proposals will drive Greece even deeper into recession and make debt repayment impossible: the Greeks must learn who’s boss.
As SYRIZA MP Costas Lavapitsas wrote in the Guardian: “It is quite apparent that the eurozone creditors have no intention of offering SYRIZA a deal that would allow it to claim even a smidgeon of victory.”
The creditors’ offensive also reflects their judgment that now is the time to “crack” the SYRIZA-led administration, while it has no friends in government in Europe and while the political price of such an operation is still wearable.
This window of opportunity will probably only last until the November Spanish national elections. These will most likely replace the ruling conservative People’s Party government with either a radical coalition with a similar outlook to SYRIZA or a social democratic administration vulnerable to pressure from its left.
This explains why proposals by Greece’s creditors have been structured in such a way as to make it impossible for the Greek government to agree to them. This is despite all Troika spokespersons insisting they want to keep Greece in the eurozone.
The structure also allows important “players” from the creditor side to appear conciliatory or reasonable on this or that particular issue — unlike those Greek hotheads.
For example, two vital issues for the Greeks are debt restructuring and an investment program to revive growth and create jobs.
The Greek government's debt restructuring plan would shift Greece’s €27 billion debt with the ECB to the European Stability Mechanism, lengthening its maturity and thereby make Greek financial institutions eligible for cheaper credit under ECB “quantitative easing”.
The investment program would be funded by the European Investment Bank. Varoufakis said “until we discuss these two options, all bets are off from us, we will not agree on anything”.
Neither of these issues are even mentioned in the creditors’ June 3 proposal. But Benoit Coeure, ECB executive board member, commented in a June 10 interview that “this question is not taboo, as the Greek debt has already been restructured for private banks … Should more be done? The answer will depend on the final terms of the agreement between the creditors and the Greek authorities.”
This is the stock answer to all Greek proposals: everything can be discussed once there is surrender on the basics of “reforms” — that is, the type of austerity measures SYRIZA was elected to oppose.
Inevitably, the offensive of the Greece’s creditor institutions has been accompanied by a storm of spin to paint Greece as the guilty party. The lead role in this has fallen to Juncker, who likes to portray himself as the Greeks’ friend in Europe.
However, at a June 9 meeting of EU commissioners, he reportedly said that Tsipras had backed away from a verbal agreement on primary surplus targets and that Athens “had lost the European Commission. They failed to see that the best friend of the small and medium-sized member states is the European Commission.”
The reaction in Greece, and within SYRIZA, to the creditors’ proposal was explosive.
On June 5, Athens daily Ta Nea,/i> led with the deadline “Death Toll Required for an Agreement”. SYRIZA deputy-speaker Alexis Mitropoulos commented: “[Juncker] took on the dirty work and conveyed the most vulgar, most murderous, toughest plan when everyone hoped that the deal was closing.
“And that at a time when we were finally moving towards an agreement we all want because we rule out a rift leading to tragedy.”
Comment in the Greek media focused most on a proposed cut in a supplementary payment to the poorest pensioners and a 10% hike in the consumption tax on electricity.
Within SYRIZA, the reaction seems certain to strengthen the position of those opposed to any further payments to the creditors. This position, most strongly pushed by the Left Platform, was narrowly lost 75-95 at the last meeting of the SYRIZA central committee. The same meeting voted 90-70 against considering leaving the eurozone.
On June 5, Tsipras denounced the Troika document in the Greek parliament, saying “the plan presented by the creditors cannot be the basis of an agreement”.
But what if, as seems likely, no improvement in the Troika offer is forthcoming? The alternatives are capitulation or confrontation.
The path of confrontation would make a default on debt repayments unavoidable, which would challenge the ECB to turn off credit to the Greek banking system. Is the EU establishment really prepared for that outcome?
The establishment plan may have all the time been, in the words of commentator John Weeks, to “force the Greek government to withdraw in circumstances that allow the Troika to deny culpability [and] to drain the Greek government of money until it must accept what the prime minister called ‘absurd’ demands or choose an increasingly costly exit from the eurozone”.
But the question remains whether Merkel, Hollande, Juncker and co properly judged the reaction of the Greek people — and their supporters in the rest of Europe — to such a scenario.
[Dick Nichols is Green Left Weekly’s European correspondent, based in Barcelona. A longer version of this article will soon appear at Links International Journal of Socialist Renewal.]