Greece wins deal, breathing space, but made to pay high cost

February 27, 2015
German finance minister Wolfgang Schäuble looks on as Greece finance minister Yanis Varoufakis speaks.

Greece’s new SYRIZA government submitted its list of proposed economic reforms to the Eurogroup (the finance ministers of eurozone nations) on February 23 as a precondition for its international creditors to approve a four-month loan extension. The deal was signed on February 20.

With Greece’s existing loan arrangement expiring on February 28 and bankruptcy looming, a last-minute deal was finally agreed after three weeks of intense negotiations. The talks had been characterised by daily — sometimes hourly — twists and turns, claims and counterclaims, leaks and threats.

SYRIZA was elected on January 25 on a wave of hope and rejection of the crippling austerity measures imposed on Greece in return for economic “bail-out” programs by the “Troika” — the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Union (EU). The deal represents a significant compromise on its election platform.

Any discussion of debt write-offs, “hair-cuts” or renegotiation has been postponed until the next round of negotiations. Funds earmarked for bank recapitalisation will have to be used for that purpose, rather than redirected towards meeting Greece’s desperate social needs.

Greece no longer has to accept the unilateral diktats of the Troika and is able to negotiate with each body separately. But the new funding still comes with conditions. These include oversight by those same bodies, now referred to as “the institutions”, and restrictions on how the money can be used.

The SYRIZA government is required to refrain from any “rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions”.

Although less than specific, this restriction includes any privatisations already completed, as well as those now underway. Depending on interpretation, this may also impact on measures promised by SYRIZA to improve social welfare, such as raising the minimum wage and restoring collective bargaining rights.

Qualified success

On the other hand, the agreement also includes measures that will improve SYRIZA’s ability to fund solutions to the unfolding humanitarian crisis in Greece.

To gather funds, the government is able to crack down on corruption, tax avoidance, tax immunity (Greece’s powerful shipping owners, for instance, currently pay no tax) and smuggling.

Such measures target the vested interests of Greece’s powerful oligarchy — something previous governments deliberately avoided — and strengthen the revenue-raising capacity of the Greek state.

This approach has already achieved success, with a reported €500 million already raised. It still remains to be seen if enough revenue can be raised to address social needs while repaying Greece’s short-term debts — several billion euros are due for payment in the coming months.

The SYRIZA government has described the agreement as a qualified success. Greek Finance Minister Yanis Varoufakis described it as “a small step in the right direction”.

Varoufakis said that Greece is now the “co-author” of its own fate, no longer the victim of “autopilot austerity” where it meekly takes economic and policy directives from its creditors.

In a marathon 10-hour session on February 25, Greek Prime Minister Alexis Tsipras advocated the deal to his fellow SYRIZA MPs as a small but tangible win.

Acknowledging the restrictive conditions in the interim agreement, Tsipras said that while it is an extension of pre-existing loan arrangements, it is not a continuation of the Memorandum of Understanding that accompanied the previous tranche of loans.

Tsipras said the new deal frees up the government from unrealistic primary surplus targets and “asphyxiating” policies of austerity. While “things remain difficult”, the prime minister said the conditions replace the previous government’s measures with targets based on SYRIZA’s “Thessaloniki program”, which it took into January’s election.


SYRIZA’s leaders have faced severe internal criticism over the deal, however. It has mostly come from members of the party’s Left Platform, who consider the deal a near-capitulation to Greece’s creditors on the questions of debt and austerity. About 30 of SYRIZA’s 149 MPs, and four government ministers, belong to the Left Platform.

On February 22, Greek wartime resistance hero and SYRIZA MEP Manolis Glezos also condemned the deal for failing to implement SYRIZA’s platform, and accused Tsipras of “renaming meat as fish” for defending it. He also declared “I apologise to the Greek people for having assisted this illusion.”

A Left Platform leader and member of SYRIZA’s central committee, Stathis Kouvelakis, said SYRIZA had carried out a major retreat caused by a “mistaken strategy”. He said the deal showed it was impossible to break with austerity and Greece’s debt burden “within the existing European framework”.

On February 25, Greek energy minister and Left Platform supporter Panagiotis Lafazanis said the privatisation of Greece’s main energy company and energy grid operator would not go ahead, a statement that appears at odds with the deal’s conditions.

The SYRIZA government has emphasised that its promised social measures will go ahead. In a CNN interview on February 23, Varoufakis insisted “there will be no pension cuts, there will be no increases to Value-Added Tax, there will be a series of poverty-alleviation moves.

“Every single election campaign pledge that we’ve made will be incorporated in a way that is consistent with this new fresh dialogue.”

Varoufakis denied that Greece had capitulated, saying: “We could have ended the stalemate between us and our partners simply by signing on the dotted lines of documents that were presented to me and getting the next dose. We didn’t do it.”

Varoufakis conceded that Greece was forced into significant compromises, admitting on February 20 that he was asking Europe to meet Greece “not half-way, but one-fifth of the way”.

In the event, that was a lot more than powerful forces in Europe wanted to give them.

SYRIZA was elected with a mandate to end austerity, resolve the country’s social crisis and rebuild the Greek economy. The humanitarian crisis caused by austerity has led to a widespread drop in living standards, with about one in four people unemployed (60% of youth) and an average 20% cut in wages for those in work.

Contempt for democracy

The negotiation process, therefore, exposed the open contempt for democracy that lies at the heart of the European Union and the financial interests that it represents.

Even before negotiations began, European Commission president Jean-Claude Juncker made it clear that the wishes of the Greek people were irrelevant to the powers-that-be, saying: “There can be no democratic choice against the European treaties.”

German finance minister Wolfgang Schäuble echoed the sentiment, declaring: “Elections change nothing. There are rules.”

Schäuble took this uncompromising stance into negotiations, using Germany's dominance within the Eurogroup to demand Greece’s total and unconditional capitulation.

Gabi Zimmer, president of the United European Left/Nordic Green Left (GUE/NGL) — the European Parliament grouping for left-wing MEPs that includes SYRIZA — said: “The Eurogroup’s intransigent attitude towards Greece is not only unreasonable, it is not suited to the current situation in the country.”

If Greece was hoping for support from other countries suffering from austerity, however, it was disappointed. Spain, Ireland, Portugal and Finland — all facing rising political challenges to their pro-austerity governments — sided firmly with Germany, as did France and Italy, leaving Greece isolated.

Meanwhile, Greece was faced with possible bankruptcy. A run on the banks led to an estimated €3 billion withdrawn in the week before February 20, on top of a further €12 billion withdrawn in January.

In the final days before the agreement, the ECB was preparing for a possible “Grexit” — a Greek exit from the eurozone, and therefore the EU.

Varoufakis had already ruled out a voluntary Grexit on the basis of the economic damage it would cause and the boost it would give to the neo-Nazi party Golden Dawn, already the third largest party in the Greek parliament.

A series of compromise drafts were rejected by Schäuble, who accused the Greeks of trying to present a “Trojan horse”. The claim was echoed in an increasingly nationalistic German media, which blames “lazy Greeks”, rather than a predatory and poorly regulated banking system, for the crisis.

However, SYRIZA won exactly what Schäuble insisted so strenuously it would not get — a short-term loan extension, with a degree of control over spending to alleviate the worst elements of austerity.

Ongoing struggle

Differences about the exact nature of the agreement appear to be emerging already.

On the one hand, the Greek government has presented the interim arrangement as a break from the Memorandum and its austerity policies.

On the other hand, the Eurogroup seems to view the agreement as a continuation of the Memorandum — and its conditions. According to Schäuble, “only when we see they have fulfilled this will any money be paid. Not a single euro will be paid out before that.”

After the deal was struck, Schäuble exulted that “the Greeks certainly will have a difficult time explaining the deal to their voters”.

For its part, the IMF is concerned about the lack of “clear assurances that the [Greek] Government intends to undertake the reforms envisaged in the Memorandum on Economic and Financial Policies”.

Even if the list of reforms is accepted by the Eurozone parliaments, the institutions have until the end of April to “refine” it. Key elements may yet be rejected.

This would be highly problematic for Greece. After submitting the list of reforms, Varoufakis pointed out that there was no alternative: “If they reject them, we’re finished.”

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