27 Jun 2015

Tsipras goes for referendum on 5 July

Greek PM Alexis Tsipras has just called a referendum on 5 July. This after spending most of the week locked in discussions with creditors, in which no deal emerged. Here’s a quick recap — and why its likely Greece will vote no.

1 – Last Sunday the Greek cabinet agreed the biggest ever compromise with lenders over short-term fiscal targets. Instead of trying to split the difference between 1bn and 2bn in 2015 they agreed to do 2bn austerity and more the next year. Their aim was to force the lenders to throw in debt relief, without which a short term budget deal is meaningless. Their argument to their own base was: this is redistributive austerity.

2 – On Monday, even as their own supporters reeled at the climbdown, President Hollande got behind the now €8bn austerity plan. But it quicly became clear the IMF would not sign it off. As I blogged, it was economically illiterate of the EU to agree to a massive tax hike in a depressed country, and so the IMF nixed it.

3- From midweek onwards the IMF tried to reinsert minor details that would make it less redistributive — which the Greek government could not deliver. Even the Greek centre, called to Brussels to be moulded into an unelected government of national unity, expressed concern over it.

4- By yesterday, what proved the clincher, the Greek side were saying: after all this, we get to the latest documents and we’re prepared to consider agreeing it with the institutions if they can give us something on debt relief — and then the Eurogroup signalled the deal was “too soft” and the voters of Finland, Germany etc would not accept it.

5- So Tsipras has called the referendum on the Troika offer. This is the masterstroke he has been waiting to play. The question will be: will you sign up to the economically illiterate, forever indebted plan offered by the IMF/EU or give us a democratic mandate to resist it, even if they crash our banks. Whaterver you make of this logic sitting outside Greece, it is primed to deliver the no camp a victory.

6 – Even the word no has meaning. Oxi is a big act of resistance in Greece going back to the Italian occupation. Ne is not such a powerful word.

7 – Tsipras also had to deal with the social democratic wing of Syriza who wanted to sign a deal and stay in power at any cost. He has effectively put them back into a box: they were offered nothing to sell by the Troika in the end — the institutional deal was not backed by the Eurogroup.

8 – Where now? The ECB cannot pull ELA unless Greece is out of the programme. They will likely extend the programme to 5 July, but some will push to end it Monday. The Greek right on twitter is even now trying to spark a bank run.

9 – So the question is: does the referendum take place in an atmosphere of calm and democratic functioning, or is there chaos outside parliament enough for people to panic and vote Yes, even if there are enough mainstream parties prepared to vote yes?

10 – If Greece votes no to a quasi-Troika deal, the north European electorate are staring at the loss of €320bn taxpayers money, and the ECB will be seen as non-credible, and the IMF will have lost the biggest amount of money in its history.

11 – If the ECB pulls ELA early, I have no doubt Greece will immediately default on €27bn SMP bonds issued under Greek law.

12 -It may come down to: who has the biggest social power on the streets — the Greek left, inclduing the KKE, Syriza, the unions etc — or the right. Which is what Greek history has always tried not to ask since 1974.

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22 reader comments

  1. David Lennon says:

    Thanks Paul for a clear exposition of the situation. Always good to read you to clear my mind from the fog of other media reporting

  2. David Baker says:

    Thanks. But what is ELA?

  3. greg says:

    Wrong dichotomy is applied in the article. It is not a right vs left matter on how to proceed.
    Rather, it is the pro-EU centre vs the anti-EU extreme right AND left.

  4. richard says:

    Paul. You portray this as a left versus right confrontation in your article. But Golden Dawn has clearly come out in favor of Oxi/No. So maybe the ideological basis is a little less clear cut and simple than your article implies. As to your comment that “the right” is inciting a bank run, I would just say that the situation is risky enough that no “incitement” is required.

  5. Philip Edwards says:

    I hope the Greek people have the collective good sense and courage to tell the IMF/ECB gang to shove their “austerity” (read: robbery) up their proto fascist jaxies.

    I hope they default and leave the European protection racket and rebuild their own economy to suit their own society. Stuff the transnational banker oligarchs and their media puppets and apologists.

    But I suspect the referendum will be as sabotaged and thieved as much as any Yank election. There are plenty of precedents.

  6. Leo Regan says:

    Varoufakis has failed in hisgame strategy. Tsipras has failed completely to negotiate with either the institutions or the other European leaders. The Greek people know that the devil of the euro is far, far better than the bottomless depth of floating the drachma again. The government has effectively handed its authority to a popular, snap decision. Either the control of the budget is in the hands of the institutions, as there is no government capable of effective authority, or complete financial meltdown will ensue with consequences for decades. Will a Yes be enough to stabilize the situation for a few years? Not at all. But no one will expel Greece if it complies effectively with its control by the institutions.

  7. Jamie Carstairs says:

    Thank you. I found this very insightful. Most of the press reporting has been so buried in the details that it has lacked the overview that you provide.

    From your report, it seems Syriza would accept some fiscal austerity if it would get debt relief onto the table; the EU is against debt relief and wants more austerity; and the IMF thinks the fiscal austerity is too tough. Syriza seems to be negotiating with two parties with diametrically opposed views.

    The mystery to me is why on earth the IMF is participating in a programme it clearly (and correctly) considers doomed to failure?

  8. Felicity says:

    The Troika seems to be behaving like the worst of our payday loansharks. For a nation of around 11 million, it seems vindictive to expect further austerity so that books can be balanced in Brussels. It’s response will certainly affect how I vote in the UK Referendum. Surely they would have known/guessed that previous loans were unserviceable? That Greece was in no position then to join the Euro? Now somehow it’s up to the ordinary citizens to carry the can.

  9. Tawse57 says:

    Fascinating – so is this going to crash the European markets? Take down loads of banks?

    Is this a Blackadderesque ‘Huge crisis’ for the global economy?

  10. John Derbyshire says:

    Or will elements of the security forces cooperate in a coup d’etat?

  11. susan galea says:

    I’d be grateful if someone could tell me what ” ELA” is… Presumably it is something like a European Lending Agreement? Why do people use acronyms and not cater for people who are not totally focused on this issue, but are interested enough to try to understand the bare bones? Aaarrgh…

    Actually, this whole presentation is far too spare for me, and I would have appreciated some more explanation.

  12. Thom Hampshire says:

    Paul – elections in Greece are difficult to organise given its topography. Lawyers, stationery (legally printed envelopes etc) need to be sent to all of the voting stations days ahead of time. People don’t always vote where they live, but where they are registered, often in a village or an island and travel time is allowed by employers and the state. There is surely no way the Greek government can logistically organise a referendum in a week. It may be Tsipras’s master stroke but it can’t be done…or can it?

  13. ed says:

    I am surprised that Greece cant up the retirement age. In Holland it was 65 and we upped it till 67 ‘because of Greece’ in Greece it is 55 and they offer to bring it till 65 in 2035. Why the F@ck do I need to work longer while the Greeks bud out at 55 on my taxmoney.
    I admire that Tsipras is looking out for his people but I am sick and tired paying for it. I would welcome it if they left the euro. In the end the Euro only will get stronger because of that. I would hope for the end of the euro in total and if possible the end of the EU

  14. derek says:

    Greek people have to choose between disaster and catastrophe, I don’t envy them the choice. But as Stiglitz points out, this will likely mean that the Eurozone will have to admit it will not do ‘whatever it takes’, and that some members are expendable. Maybe there are speculators out there grown fat on QE USA, QE UK and QE EU that will take a gamble on who’s next for the chop.
    But strange though it seems, referendum No vote, or even default, doesn’t make Greece vanish. It’s still in the EU and for the moment, the eurozone. To misquote Gerry Adams: “We haven’t gone away you know.”
    Meanwhile the voters in the UK, Ireland, Spain and Italy look on appalled. We now know what Schauble’s solidarity means. Maybe it’s not too late for a quick check to see where the exits are.

  15. Tatiana Andreadou says:

    The Germans have destroyed Europe twice with two World Wars, and they are doing it again a third time, with an economic this time war. Because it is a war for the people in Grrece. People are selling family properties for peanuts, for paying these incredible taxes, and for having food on their table, as it was happening during the german occupation. I am 66, I remember well the junta,being one of the students that were resisting it at that time, I have seen a lot in my life, but something like this, I have never seen. What keeps this society still alive, is the very strong family ties, families stick together to survive, even three families may live with one pension. Many people feel they have already lost so much, that they have nothing more to loose and therefore, they are not afraid to vote no.

  16. Barry Langford says:

    The last few days have exposed one inescapable truth: that the Eurozone “project” is first and last a political, not an economic, one; and that the politics in question are neo-liberal, There-Is-No-Alternative hard right dogma. The (UK) left’s traditional hostility to the EU ebbed in the 1980s and 1990s when the presence of social-democratic figures like Jacques Delors made the EU seem like a redoubt of sorts against the worst excesses of Thatcherism (the Working Time Directive, etc.). But that era is now long past. The troika’s brutal, pitiless insistence on maximal austerity cannot be accounted for on any rational grounds. It is, as Paul Mason and many others have repeatedly explained, the economics of the madhouse. What is motivating this is the determination to enforce an exemplary lesson to any other European electorate who might have the temerity to elect a progressive government, that their democratic choice will have only one outcome: humiliation and destitution.

    Greece’s Calvary is become contemporary Europe’s Spanish Civil War. Once again a progressive government in an impoverished nation faces a concerted assault by the forces of international reaction. The weapons may be bonds and bailouts rather than warplanes and bombs, but their toll can be reckoned nonetheless in human misery and ruined lives. And yet again – for the third time in a century – the European continent is savaged by Berlin’s endless lust for hegemony. The strutting Gauleiters Merkel and Schauble – enthusiastically abetted by their IMF collaborator Lagarde – have freedom and democracy squarely in their sights. And in 2015 there is of course no workers’ state to come the beleaguered state’s aid. But however fearful the consequences, the Greeks must vote No on July 5. In so doing they will fire the first salvo in a war against austerity that cannot end until the dictators of Berlin and Brussels and their insane, inhuman dogmas are overthrown – by whatever means necessary.

  17. David Heath says:

    So many undefined terms and abbreviations I couldn’t follow the discussion:
    redistributive austerity

    It’s not just financiers who are interested in the situation with Greece – help the rest of us by spelling out in full before using the abbreviation please.

  18. Colin roberts says:

    Paul – keep telling us about this. Most news sources are unilluminating.

  19. C Nezis says:

    Nice to see that Mr. Mason has not hesitated one bit before bombarding us with Syria propaganda regarding the how the Greek right is trying to engineer a bank run. Could he explain how it was that the Telegraph on their live blog Friday night began running pictures of Greeks lining up at cash machines just moments after the referendum announcement. On all accounts it looks pretty spontaneous.

    And then there is http://www.iefimerida.gr/news/214143/apisteyto-ypoyrgoi-kai-voyleytes-toy-syriza-sprohnontai-sto-atm-tis-voylis-gia-na

    Syriza ministers and MPs queuing up at Parliaments cash machines to participate in the right wing engineered bank run.

    And please Mr Mason do explain how it was that the cash machines in parliament were continually being replenished with cash whereas they ran dry (Reuters is reporting that one third of atms are empty) in working class areas. I suppose Orwell had a point in that some of us are more equal than others.

  20. Izzie says:

    Thanks for this. A clear and objective presentation. I would like to see Paul’s reaction to DSK’s mea culpa in which he calls for a ‘radically different’ approach to negotiations.


  21. sim says:

    for an interesting historical perspective on a single currency in operation see Richard Roberts article on Austria-Hungary for historyandpolicy.org (KCL and UoC)- its going to take more than a Greek default to derail the ECB.
    The surprise is the continued Greek romance with passionate orators who promise everything and deliver nothing. After Tsipras promised change in order to gain power the citizens will again be kept in the dark about the consequences of a default. Single issue politics like this is faux democracy, it is really an engineered vote of confidence.
    The Armani left has of course had ample time to off shore its money anyway so it will be chilled pino all round rather than hemlock when it finally unravels.

  22. Marcia says:

    Collaborating to co-create a new humane and environmentally sustainable wweconomy is overdue. We are all similarly unique co-creating our shared so called reality, enhancing our senses and transforming our experiences.
    We can change all to suit all as we will.
    Solidarity to Greece, the World is ready for economic equality, ecological balance and humane peace now
    Kind regards

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