Greece: Syriza wins loan extension, but with strings attached

Alexis Tsipras celebrating SYRIZA's victory, January 25

On February 23, Greece’s new left-wing SYRIZA government submitted its list of proposed economic reforms to its international creditors as a precondition for the approval of a four-month loan extension tentatively agreed to on February 20.

With Greece’s existing loan arrangement expiring on 28 February and bankruptcy looming, a last minute deal was finally agreed after three weeks of intense negotiations that were characterised by daily – sometimes hourly – twists and turns, claims and counterclaims, leaks and threats.

For SYRIZA, elected on January 25 on a wave of hope and a fierce rejection of the crippling austerity measures that have been imposed on Greece in return for economic “bail-out” programs by the “Troika” – the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Union (EU) – the new arrangement represents a significant compromise.

Any discussion of debt write-offs, “hair-cuts” or renegotiation has been postponed until the next round of negotiations at least, and funds earmarked for bank recapitalisation will have to be used for that purpose, rather than redirected towards meeting Greece’s desperate social need.

Greece no longer has to accept the unilateral diktats of the Troika and is able instead to negotiate with each body separately. But the new funding comes with conditions, including close oversight by those same bodies, now referred to as “the institutions”, and restrictions on how the money can be utilised.

Importantly, the SYRIZA government has been required to refrain from any “rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.”

While less than specific, this restriction likely includes any privatisations already completed, as well as those currently underway (although Greek law allows the government to change the terms of sale). 

Depending on the "assessment" of the institutions, this may also impact on measures promised by SYRIZA to improve social welfare, such as raising the minimum wage and the restoration of collective bargaining and other workplace rights. 


A qualified success?

On the other hand, the agreement also includes measures that will improve SYRIZA’s ability to fund solutions to the unfolding humanitarian crisis in Greece. 

As a condition of receiving external funding, the government will be required to crack down on corruption, tax avoidance, tax immunity (Greece's powerful shipping owners, for instance, currently pay no tax) and smuggling.

These measures essentially target the vested interests of the Greece’s powerful oligarchy — something previous governments deliberately avoided — and strengthen the revenue-raising capacity of the Greek state.

Greek Finance Minister, Yanis Varoufakis

While a reported €500 million has already been raised in this regard, it remains to be seen if enough revenue can be raised to both address social needs and repay Greece’s short-term debts, with several billion euros due for payment in the next few months.

Despite the conditions and concessions, the SYRIZA government has described the agreement as a qualified success. Greek Finance Minister Yanis Varoufakis called the deal “a small step in the right direction”.

Varoufakis asserted that Greece is the now “co-author” of its own fate, no longer the victim of “autopilot austerity” where it meekly takes economic and policy directives from its creditors.

In a marathon eleven-hour session on February 25, Greek Prime Minister Alexis Tsipras recommended the deal to his fellow SYRIZA MPs as a small but tangible victory. 

Acknowledging the restrictive conditions on the interim loan agreement, Tsipras argued that while it is an extension of pre-existing loan arrangements, it is not a continuation of the Memorandum of Understanding that accompanied the previous tranche of loans and was the main instrument of imposing austerity on Greece.

Tsipras also argued that the new deal frees up the Greek government from unrealistic primary surplus targets and “asphyxiating” policies of austerity. While “things remain difficult”, Tsipras said the conditions constitute a replacement of the previous government’s measures with targets based on SYRIZA’s “Thessaloniki program”, which it took into January’s election.

Left criticism

The SYRIZA leadership has faced severe internal criticism over the deal, however. This has come mostly from members of the party's Left Platform, although concern has spread more widely, including to John Milios, one of Tsipras's closest economic advisers. 

WWII Resistance hero and SYRIZA MEP Manolis Glezos

About 30 of SYRIZA's 149 MPs – including several government ministers – belong to the Left Platform, who consider the deal a near-capitulation to Greece’s creditors on the questions of debt and austerity. 

On February 22, Greek wartime resistance hero and SYRIZA MEP Manolis Glezos also fiercely condemned the deal for failing to conforming with SYRIZA’s platform, and accused Tsipras of “renaming meat as fish” for defending it. He also declared “I apologise to the Greek people for having assisted this illusion.”

Left Platform leader and member of SYRIZA's Central Committee, Stathis Kouvelakis, criticised the deal as a major retreat caused by the party leadership's “mistaken strategy”. He argued that the deal showed it was impossible to break with austerity and Greece's debt burden "within the existing European framework.”

On February 25, Greek Energy Minister and Left Platform member Panagiotis Lafazanis criticised the agreement's language as that of Greece's creditors, not its government. He also declared that the privatisations of Greece’s main energy company and energy grid operator would not go ahead, a statement that appears to be at odds with the deal conditions.

The SYRIZA government has emphasised that its promised social measures will go ahead regardless. In a CNN interview on February 23, Varoufakis promised “there will be no pension cuts, there will be no increases to Value-Added Tax, there will be a series of poverty-alleviation moves.”

“Every single pre-election campaign pledge that we’ve made will be incorporated in a way that is consistent with this new fresh dialogue,” Varoufakis insisted.

Varoufakis denied that Greece had capitulated, saying “We could have ended the stalemate between us and our partners simply by signing on the dotted lines of documents that were presented to me and getting the next dose. We didn’t do it because ... we want to get rid of the addiction.”

Varoufakis conceded that Greece had been forced to make significant compromises, however. admitting on February 20 that he was asking Europe to meet Greece "not half-way but one-fifth of the way." 

In the event, even that was a lot more than powerful forces in Europe wanted to give them.

While SYRIZA was elected with an overwhelming mandate to end austerity, resolve the country’s social crisis and rebuild the Greek economy. The humanitarian crisis cased by austerity has led to a widespread drop in living standards, with around one in four people (and sixty percent of youth) unemployed and an average twenty percent cut in wages for those still in work. 

Contempt for democracy

The negotiation process, therefore, exposed the open contempt for democracy that lies at the heart of the European Union and the financial interests that it represents. 

German Finance Minister Wolfgang Schäuble

Even before negotiations began, European Commission president Jean-Claude Juncker made it clear that the wishes of the Greek people were irrelevant to the powers-that-be, stating: “There can be no democratic choice against the European treaties.”

German finance minister Wolfgang Schäuble echoed the sentiment, declaring: "Elections change nothing. There are rules". 

Schäuble took this uncompromising position into negotiations, using Germany's dominance within the Eurogroup to demand Greece's total and unconditional capitulation.

On February 21, Gabi Zimmer, president of the United European Left/Nordic Green Left (GUE/NGL) – the European Parliament grouping for left-wing MEPs that includes SYRIZA – said: "The Eurogroup's intransigent attitude towards Greece is not only unreasonable, it is not suited to the current situation in the country.”

If Greece was hoping for the support of other countries suffering the excesses of austerity, however, it was to be disappointed. Spain, Ireland, Portugal and Finland, for example – all facing rising political challenges to their pro-austerity governments – sided firmly with Germany, as did France and Italy, leaving Greece isolated.

Meanwhile, Greece was facing possible bankruptcy, as a run on the banks saw an estimated €3 billion withdrawn in the week of February 20, on top of a further €12 billion already withdrawn in January.

Grexit - end of the Euro?

In the final days before the agreement, the ECB was openly preparing for the possibility of a “Grexit” – a Greek exit from the Euro zone, and therefore the EU. 

Varoufakis had already ruled out a voluntary Grexit on the basis of the economic damage this would cause and the boost it would give to the Nazi party Golden Dawn, already the third largest party in the Greek parliament.

A series of compromise drafts were rejected by Schäuble, who accused the Greeks of trying to present a “Trojan horse”. The claim was echoed in an increasingly nationalistic German media, which continues to blame “lazy Greeks”, rather that a predatory and poorly regulated banking system, for the crisis.

In spite of this intransigence, SYRIZA won precisely what Schäuble insisted so strenuously it would not get – a short-term loan extension, with a limited degree of control over spending to alleviate the worst elements of austerity – apparently after a last minute intervention by German Chancellor Angela Merkel. 

Ongoing struggle

Differences about the exact nature of the agreement – and how much control it imposes – appear to be emerging already, however. 

On the one hand, the Greek government has presented the interim arrangement as a break from the Memorandum and its austerity policies. It presents the deal as heralding a new period of equal partnership between Greece and Europe, and as the cautious beginning of an economic and social recovery.

On the other hand, the Eurogroup seems to view the agreement as a continuation of the Memorandum - and its conditions. According to Schäuble, “only when we see they have fulfilled [the Memorandum conditions] will any money be paid. Not a single euro will be paid out before that.”

Credit: Irish Times

After the deal was struck, Schäuble exulted that “the Greeks certainly will have a difficult time explaining the deal to their voters”, and he has recommended it to the German Bundestag as a “continuation” of the existing program.

For its part, the IMF has expressed concerned about what it considers the lack of “clear assurances that the [Greek] Government intends to undertake the reforms envisaged in the Memorandum on Economic and Financial Policies." 

Even if the list of reforms is accepted by the Eurozone parliaments, the "institutions" have until the end of April to “refine” it, and key elements may yet be rejected. 

This could be highly problematic for Greece and the SYRIZA government. After submitting the list of reforms, Varoufakis pointed out that there was no alternative plan: “if they reject them, we’re finished”. 

In Greece, therefore, the crisis remains unresolved, and the economic dysfunction currently dominant in Europe means that – six years after the financial crash – the EU economy is still mired in stagnation and damaging "austerity" policies.  

With rising poverty in Germany, house foreclosures accelerating in Ireland, and political challenges to austerity mounting in Spain and elsewhere, the battle for a "social Europe" is far from over, or guaranteed. 


And now for something completely different: