1 Jun 2015

Greece: a clod of earth worth saving?

When prime ministers write articles they tend to be, like Tony Blair’s old speeches, full of soundbites designed to obfuscate meaning. But Alexis Tsipras is fighting for his political future.


Last week the Greeks thought they were tacitly offered a deal whereby, in return for some further concessions on austerity, they would get a much bigger long-term debt restructuring: a single deal placing common conditions on both the urgent and the long-term lending conditions. But they now fear that offer is unravelling.

The radical left government now faces being offered simply another extension of negotiations over the summer months, during which its banks will be drained of even more deposits and its weary population will lose faith some more.

So Tsipras has penned in the pages of Le Monde a detailed status update on the technical talks in Brussels between that hold the key to Greece avoiding default on Friday. Plus some Hemingway thrown in.

On the achievement front Tsipras claims: getting a lower fiscal surplus target – and hence reduced austerity; changing the tax structure to hit the better off harder; fast tracking more than 100 high-profile corruption cases and forcing the perpetually loss-making private TV networks to front up some money for their licenses.

On the concession front, the main u-turn is on privatisation. There are a whole series of “structural reforms” – like a proper tax collecting regime, and an independent fiscal monitor – where Syriza’s programme coincides with that of the lenders, but privatisation did not.

The key passage is Mr Tsipras’ claim that the tax and spending changes Syriza wants “will increase revenues, and will do so without having recessionary effects since they do not further reduce active demand or place more burdens on the low and middle social strata”.

Basically the Greek government believes there can be non-austerity fiscal discipline and the lenders do not. And that is why Greece remains, for all the emollience in Tsipras article, on a collision course with its lenders.

And here is where Tsipras’ article gets interesting. He accuses that faction among the lenders that is blocking progress – implicitly the German finance minstry and its hardline allies on the ECB – of wanting to create a “two-speed Europe”:  “where the ‘core’ will set tough rules regarding austerity and adaptation and will appoint a ‘super’ Finance Minister of the EZ with unlimited power, and with the ability to even reject budgets of sovereign states that are not aligned with the doctrines of extreme neoliberalism. For those countries that refuse to bow to the new authority, the solution will be simple: Harsh punishment. Mandatory austerity. And even worse, more restrictions on the movement of capital, disciplinary sanctions, fines and even a parallel currency”.

I believe this passage to represent a major change in the thinking of Tsipras and his circle in the prime minister’s office in Athens. And a change borne of experience.

Those close to the negotiations believe they have heard this “two tier” euro design spelled out by German counterparts – along with acknowledgement that the only function of Greece within such a project is as the perpetual whipping boy, to scare everybody else.

What Tsipras wants, and needs, from this week’s negotiation, is a deal that breaks the logjam at home.

If he concedes on the so called “red line” issues of pensions and labour market reforms, then the only way he could sell a deal to his own party is to achieve two big wins: a long-term debt restructure, moving most of Greek debt into the never-never years of the mid-century on minimal interest rates; and some form of mini-Marshall Plan for Greece, involving fiscal stimulus from the European Commission’s structural funds.

The issue then this week is not whether Greek negotiators will tick another box on the checklist of EU technicians in Brussels. It is whether the EU’s political leaders have the will to help Tsipras make a final tactical compromise in order to hand him a long-term debt structuring deal he can sell as a victory.

Inside Syriza it is no longer just the hard left faction that is pushing against the deal; a centre-left group of 53 influential and long-standing Syriza MPs is now fighting vigorously to avoid compromise.

Meanwhile, Finance Minister Yanis Varoufakis took to Twitter on Sunday to warn “rumours of my resignation are premature”.

Greek journalists close to the infighting believe Varoufakis is under pressure from a more moderate wing in Syriza, including ex-Pasok members who moved towards Syriza while in opposition: they want a deal at almost any cost – and in many cases the motivation is to protect long-cherished social programmes that would be impossible in the case of default or Grexit.

If so, the way to read Tsipras’ article is to see it sticking firmly to the negotiating position identified with Varoufakis: an implicit preparedness to default, and a willingness to put the blame on the changed forces within the Eurogroup, about which Syriza was over-optimistic.

There’ll be phone calls flying in the next 48 hours – but the Greek threat to withhold payment to the IMF on Friday is real. Its ministers know they have depleted the public sector’s cash reserves to dangerous levels to avoid default so far. There may be a technical get-out clause that allows Greece to wrap its four repayment dates to the IMF this month into one, but the IMF’s own assessment is correct: Greece can’t pay.

So we’re in yet another nail-biting week. In a final flourish Tsipras advised the EU leaders to read Hemingway’s novel, For Whom the Bell Tolls. As it’s about a vicious civil war and the collapse of democracy in Europe in the 1930s, I think we all get the drift.

But he could just as easily have quoted John Donne, from whom the phrase is taken: “If a Clod bee washed away by the Sea, Europe is the lesse, as well as if a Promontorie were.”  We’ll know, I estimate within seven days, whether the Germans think Greece a promontory worth saving.

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