15 Jun 2015

Greek eurozone crisis: is time running out for Syriza?

The Greek crisis ramped up a gear last night when, at the start of supposed “last chance” talks in Brussels, EU negotiators told the Greek delegation that “negotiations were over” and that they had no mandate to offer anything new.


The Greeks had prepared a new submission, accepting demands to close four-fifths of the so-called fiscal gap with direct new tax measures, and asking the EU and IMF to sign off austerity measures amounting 0.6 per cent of GDP to be achieved by anti-corruption measures.

This was rejected and the Greeks left the talks 45 minutes after they went in, triggering an intense final phase of the crisis. In Greece, according to my sources, there is now acceptance within a pro-compromise wing of Syriza’s leadership that even if they wanted to try and force through a surrender deal, it would not pass either the party or in parliament. And as the days go by, with one ultimatum after another from lenders, the voices within Syriza urging a “deal at any cost” have grown weaker.

Yesterday the IMF’s chief economist, Olivier Blanchard, went publicly further than the fund has gone in these negotiations in spelling out that to achieve the current austerity targets set by the EU – 1 per cent this year and 1.75 per cent next year – it will need Greek debt to be rescheduled so that it matures later and its interest rates fall. Any further deterioration in the Greek economy, and any higher austerity target, he said, would need the debts to be partly written off. This is a milder version of what Syriza’s finance minister Yanis Varoufakis has been saying since he took office – and what the EU cannot accept.

There are three possible outcomes to this week. One, a last-minute deal in Brussels. But it would have to be more favourable to the Greeks than the ultimatum presented last week, and would have to include both debt relief and a large dollop of structural funding aid from the commission, or Tsipras cannot sell it. The second is, no deal on Thursday night and the Greeks signal their intention to default on the IMF and ECB debt coming due this summer. That would probably – but not automatically – trigger the ECB pulling all its support from the Greek banking sector, and need capital controls imposed inside Greece.

The third is a nine-month delay, with the IMF/ECB paying themselves their own debts, which would suit both Angela Merkel and François Hollande but would be presented in Greece as a victory for Syriza. It’s hard not to conclude that default is getting more likely with every breakdown of talks. Not a hard and vindictive default demanded by the far left within Syriza, with pre-emptive bank nationalisations and border closures, but a default that throws the ball back into the court of Greece’s lenders, who would stand to lose €320bn.

Do they then force Greece out of the euro, and take action to collapse its banks, or do they save both the country and the banks with a debt restructuring offer? Though a default will unleash temporary chaos in the financial markets, few understand what it would do inside Greece. Up to now Syriza’s dominant narrative has been: Greece versus the world. It’s a narrative that fits comfortably into the ideology of Greek left, including the old social democratic party Pasok.

But there is another narrative inside both Syriza and Greek society that the six months of confrontation have suppressed: class against class. You get a reflection of it on the Twittersphere. But to fully understand it you have to speak to Syriza members, and that vast array of people to the left of them who always mistrusted the party. They’ve had to bite their tongues for six months, watching all the action happen in the corridors of power, or in Brussels. That’s not their element. What’s coming, many of them believe, is their element.

They believe the entire negotiating strategy of the ex-troika has been aimed at achieving “regime change” – just as Merkel and Nicolas Sarkozy got rid of George Papandreou and Silvio Berlusconi in 2011. But regime change has to involve domestic conflict as well as international pressure, and those I speak to in the organising networks of Syriza and the grassroots beyond it. They now have quite a strong appetite for domestic conflict – above all, against the “oligarchs” much of Syriza’s election rhetoric focused on.

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