Tsipras in the Hellenic Parliament, July 11, 2015. Demotix/Wassilis AswestopolousThe outline of a deal has been reached after
a marathon 22-hour session between Greece and the European Union. To call it a
negotiation would be deceptive; it was Alexis Tsipras subjected to a
browbeating until he acceded to even more stringent conditions than those that
were previously offered to him in June. Such was the coin in which his appeal
to demokratia was repaid.
– The Greek government will have 48 hours to
draft a comprehensive set of reform proposals, dictated from Brussels and
including tax increases , pension reform, the works; submit them to Parliament
and have them approved. This will re-establish “trust” according to Eurogroup
Chairman Jeroen Djisselbloem, though obviously not the trust of the Greek
people in European institutions. That is not a concern, obviously;
– At that point, the European
Commission will go back to the national parliaments with a recommendation to
vote in favor of a new bail-out for the Hellenic Republic, including bridge
financing from the European Stability Mechanism. The ECB may also extend the
ELA coverage for Greek banks, though not before the reform bill has been
enacted;
– On top of the
reforms, Greece must also hand-over 50 billion euros worth of “valuable
state-owned assets” to a fund that will then monetize (i.e. privatize) these
assets in order to repay outstanding debt. After that, half the fund will be
used to recapitalize the Greek banking system while the other half will be used
to invest in the Greek economy. The only concession to Mr. Tsipras is that the
fund will be located in Greece, rather than in Luxembourg as initially
suggested.
Today, Mr. Tsipras returns to Athens like
Edvard Beneş returned to Prague in 1938; humiliated, presented with a fait
accompli and forced to capitulate. Greece will not be partitioned, but its
economic sovereignty has been terminated by diktat nonetheless. The
creditors achieved their principal goals:
– The political elites had sought the humiliation of Alexis Tsipras and
Syriza in order to “sterilize” the growing power of the European left in
rejection of austerity. It remains to be seen if Alexis Tsipras will be forced
out of power or whether he will have to purge the more hardline elements of his
party and come to terms with New Democracy to form a voting coalition, but it
seems certain that current, fragile, shape of Syriza cannot withstand the
conditions that have been imposed;
– The economic elites had also sought the privatization of state-owned
assets (SOA’s), whether these were profitable or not. That was never a
criteria; in fact, the more profitable the asset, the greater the desire to get
their hands on it;
The humiliation in Brussels exposed the
fault lines within the European “Union” and the existence of different visions
of the European project: “two-speeds” for Europe, even if only
politically. The Dutch, Finns, Baltic States all seemed willing to see Greece
depart for her failure to abide by the fiscal austerity demanded of her.
Meanwhile, France and Italy were keen on a political settlement even at the
price of relaxing the stringent conditions; certainly, both states would be
happy to relax their own fiscal targets some more.
The IMF, speaking this time with the voice
of the United States, also urged a deal on relatively lenient terms. Germany
still served to bridge the gap between the two sides, but it is questionable
how long Angela Merkel will be able to maintain such a balancing act when
Alternative für Deutschland is clamoring “enough is enough” from the German
right and winning votes. Since their founding in 2012, they have grown quickly
enough to be a cause for concern for the center right CDU:
–
In 2014, AfD won 9.7% of the vote in Saxony, 10.7% in
Thuringian and 12.2% in Brandenburg[1];
–
In 2015, AfD won 6.1% of the vote in the Hamburg state
election and 5.5% in Bremen[2].
Given the impressive and rapid growth of
anti-euro, anti-mainstream parties in Italy, Spain, France, the United Kingdom
and – of course – Greece, Angela Merkel is rightly concerned with not giving
populist politics too much scope in Germany. She has had to tread a very fine
line between saving the Euro and saving CDU; which may be the same thing.
Greece is not yet settled: there is a non-zero
probability of the Greek parliament rejecting the terms of the “deal”. That
would lead to almost immediate Grexodus, because the Greek banks are out of
cash and the bank holiday cannot be extended much longer; so it is unlikely to
happen.
There is a slightly higher probability of
the government collapsing if the Syriza left defects and New Democracy refuses
to back Tsipras’ faction; but that would also lead to Grexodus, so it too is
unlikely. It seems most likely that Greek resistance peaked during the referendum
but has burnt itself out: there is nothing left but abject resignation.
This only kicks the can down the road again,
at most for the three years of the new bailout term, but perhaps sooner. The
economic situation in Greece is not going to improve under the terms of the
agreement even if a Greek government implements reforms ruthlessly and the
public debt remains unpayable under any scenario. If the people of Greece
picked Syriza in their despair after 5 years of suffering, who are they likely to
pick in 3 more years of suffering and hopelessness? Someone more “radical” than
Syriza, like Golden Dawn? Good luck negotiating with them.
Before then, Europe will face an even bigger
test in the 2017 French national elections. Marine Le Pen and her Eurosceptic
National Front continue to trail Nicolas Sarkozy, but the French are not happy
with “le joué d’Allemagne”[3] and the secondary place French interests have
been perceived to play in resolving the Euro crisis, rightly or wrongly. As the
French economy continues to sputter, it is a message that will continue to
resonate with the electorate and contrast with Sarkozy’s well-known “cozy”
relationship with Merkel. The high possibility of more terrorism striking
France before the election will keep the issue of immigration at boiling point,
which will also play to one of Ms. Le Pen’s strengths[4]. Should Mrs. Le Pen actually win control of the
Fifth Republic, it would be a cataclysmic end to the Euro.
From beginning to end, the narrative has
been about a failure to implement reforms. The Troika has used that stick over
and over again to castigate Greece and the Syriza government; and there is
truth in that accusation.
Unmentioned is the failure of Europe to
implement the necessary reforms: there have been efforts ongoing since 2010;
but patchy and reactive. Some of dubious legality, though no one has pushed
that line of inquiry too hard; knowing that pulling on that string might make
the whole rotten fabric unravel. Europe desperately needs a constitutional reform,
but there is no appetite for it since French and Dutch voters torpedoed the
European Constitution in 2005. Imagine if the US states had rejected the
Constitution and opted to keep the Articles of Confederation; Europe remains in
this embryonic, weak and unstable state.
If Alexis Tsipras survives the domestic
backlash over the next few days, he can still make something of his
Administration. People forget that Syriza was elected on a dual mandate: both
to fight against austerity imposed from abroad, and to fight against
corruption, impunity and oligarchy at home.
The second part of that mandate still calls
for action and a vigorous anti-corruption campaign may pay both political and
financial dividends for Greece. The fiscal burden will be more equitably
divided and greater legal and government transparency will improve the
investment climate and encourage more long-term investment. But Tsipras must
first survive and then be able to swallow pride and humiliation in order to
focus on what can be achieved for his country, rather than on what he would
have liked to have achieved. That is not an easy transition for anyone, but
whatever future Greece might have now depends on courageous citizens rising
above their circumstances.
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