1 Jul 2015

Greece crisis: upper middle class vs rural pensioners

Last night’s ‘Yes’ campaign demo was big – I would say maybe a quarter bigger than the ‘No’ demo of Monday, and with a much more angry atmosphere.

A senior conservative politician said to me: “This is amazing – these are people who never protest”… and they were right.

I’d say, even to a greater extent than before, the social makeup of last night’s crowd was upper middle class. And though they have differrentially positive coverage on the Greek media, the worry for the ‘Yes’ campaign has to be that, as a movement, it is not breaking out to the wider sections of society.

A poll conducted by ProRata for the (Syriza friendly) “Efimerida ton Syntakton” newspaper shows the “No” vote ahead with 54 per cent and the “yes” vote at 33 per cent. The rest remain undecided.

The same poll conducted on Sunday had the ‘No’ vote ahead with 57 per cent, the ‘Yes’ vote getting 30 per cent.

I have no idea whether these polls are right, but bear in mind that when it comes to a plebiscite – Greece is not Athens. As with the Scottish referendum, what seems like the majority in the big cities – and in Athens it feels like there is momentum for ‘Yes’ – can look differently once the votes of millions of over-55s in small towns add up.

Deal ‘still possible’

Last night Greece failed to pay the IMF €1.5bn and is technically in arrears, though not default. The IMF is considering an emergency request for an extension.

As regards the rest of yesterday’s newsflow it is now irrelevant. The request for a €29bn two-year loan from the ESM, plus the request for an extension, were the Greek government frantically trying to stay in the old bailout programme, because they sensed a deal was becoming possible.

The most important developments at the official level are that Greece has asked for a third bailout –  a two-year plan of €30bn worth of funding and tough terms. The Greeks say they will come to the Eurogroup today with a list of measures the government promises to implement, based on creditors proposals.

The differences remain, according to Deputy Prime Minister Yanis Dragasakis, labour reform and pensions. And of course the debt restructure that has been the sticking point all along.

This means – despite the fact that Greece is technically out of its bailout and will need a new memorandum – a deal is still possible before Sunday’s referendum.

Single currency ‘fiction’

I’ve never believed the referendum was designed as an in-out choice over the euro, as the various euro politicians and officials have tried to portray it. It was Tsipras trying to strengthen his own hand – and to concentrate the minds of people on the streets and in his party who were revelling in the idea of a confrontation with lenders.

If the new deal is accepted – and for Syriza the main thing will be to defend wages and pensions – I think there’s a possibility the Greek government will then recommend a ‘Yes’ vote.

However for at least 30 per cent of Greek society the past few weeks have hardened the conviction that they should leave the Euro. Paradoxically, a ‘Yes’ vote recommended by Tsipras would simultaneously close off the Grexit route and obviate the need to create a pro-Euro coalition with the centrist parties.

If Eurogroup ministers reach a decision that Greece can implement the programme and is eligible for it, the third bailout will have to be ratified in parliaments across the Eurozone. Once this happens, a second round of negotiations on specific details will take place and then the detailed memorandum needs to be ratified by parliaments of the zone a second time.

And that will be an interesting moment – because in all other bailouts since 2010 democratic vetoes have either been limited or not used. If Greece accepts a tough third bailout and then it fails in the other parliaments, then the fiction of the single currency will be dead. It will be revealed as a negotiable currency union between 19 parliaments.

Meanwhile the damaging effects of the bank run and the bank controls are being felt. There is reportedly a total freeze in tax receipts. Also many companies have told their employees they won’t be getting paid. Others placed workers on temporary leave. It is not clear to me how much of this is an employers’ strike against the government by the right-supporting business fraternity and how much of it is economic necessity – since multinationals have been advised, and are attempting, to go on trading normally.

The biggest worry is the banking system. Everything depends on the ECB meeting in Frankfurt today: a decision to devalue Greek bank collateral would turn the bank liquidity crisis into a true issue of solvency. While Cyprus responded to such a moment by confiscating some deposits above €100,000 this would not work in Greece, because there’s been five years of deposit outflow.

The banks would have to be nationalised, wiping out the shareholders – and if there’s one kind of government that would do so with gusto it’s one where the finance ministers are Marxists.

We’ll be bringing you updates throughout the day – and a video blog – so stay tuned.

Follow @paulmasonnews on Twitter.