Athens—Anyone who feels let down by anti-austerity Syriza’s apparent U-turn only three weeks after winning the Greek general elections might agree with German finance minister Wolfgang Schäuble’s withering statement: “The Greek government will certainly have difficulty explaining this to its voters.”
Desperate. to gain access to four-month bridge financing—principally, support from the European Central Bank—and so avoid expulsion from the eurozone, Alexis Tsipras has been forced to sign on to policies that he had denounced fiercely while in opposition.
However, Schäuble is wrong about Greek public opinion. Support for Syriza’s negotiations was at 80 percent after the deal. Despite the party’s ambitious electoral program and campaign rhetoric, most voters’ expectations were extremely low; the electorate was acutely aware of how policy options are restricted by Greece’s presence in the eurozone and yet was still unconvinced that leaving is feasible. On two separate occasions last week, Syriza voters—a trainee chef who attended a pro-government demonstration in Syntagma Square, and a souvlaki bar owner on the island of Symie—summed up their thoughts with exactly the same comment: “We have zero. We do not want ten; we want two or three.”
Did Finance Minister Yanis Varoufakis extract a two or a three from Greece’s creditors in last week’s tense negotiations? That depends on whether you think the vaguely defined extension program finally approved by the eurozone’s surplus nations can give Syriza time to prepare for the next stage of the battle, while at the same time redistributing the social cost of the crisis and making a tax-shy Greek elite pay its share. On this, there are opinions for all tastes. John Cassidy of The New Yorker blasted Tsipras for cutting a deal too early. Jamie Galbraith, Varoufakis’s colleague at the University of Texas, replied that in fact it was the German authorities who had blinked and that the deal makes no dramatic concessions to the pro-austerity camp. A group of left Syriza MPs—led by veteran resistance fighter Manolis Glezos and University of London economist Costas Lapavitsas—broke ranks and criticized Tsipras for caving in. But others defended the deal. “There’s not much detail, and that gives us room to move,” said George Katrougalos, minister for public administration.
Tsipras has certainly diluted huge areas of his election pledges. A minimum-wage increase from 560 to 751 euros will be postponed at least until September, and the commitment to reintroduce collective-bargaining agreements has been replaced by an ambiguous commitment to a “smart approach to wage bargaining.” The measures submitted by Greece to the Eurogroup do not exclude pension cuts. Companies privatized under the previous government will not be re-nationalized, and some new sales of state assets, such as Piraeus port to the Chinese multinational Cosco, are to go ahead.
Nor is it clear from the letter sent by Varoufakis to the Eurogroup how Syriza will finance its pledge to relieve the situation of thousands of Greek homes with no electricity and food shortages. At the same time, he has agreed not to adopt unilateral measures that threaten the fiscal targets. “How will any progressive change proceed in the country, when the ‘institutions’ will be exercising a harsh monitoring and will forbid unilateral moves?” wrote Lapavitsas.
A good question. The answer for the moment is that the cost of progressive measures will have to be offset by others, such as a clampdown on elite tax evasion or cuts in bureaucracy. Varoufakis notes in the letter to the EU that more than half of spending in the public administration is on neither wages nor pensions. The wording of the program also seems cleverly designed to allow the original Syriza manifesto to enter by the back door. On privatization, the leader of Syriza’s militant faction, Energy Minister Panagiotis Lafazanis, has already suggested he will persist with measures to halt privatization of the state power company.
Syriza has won time for homeowners threatened with foreclosure and postponement of tax payments for those in arrears. Crucially, the draconian target for the fiscal primary surplus has been loosened below the 3 percent target for 2015. The actual figure will be the true test of Varoufakis’s negotiating skills. Even the reinstatement of 3,500 public-sector workers, mainly cleaners, municipal police and school janitors, will go ahead, with costs recovered elsewhere. “This is not a matter for our lenders, since we will recover the cost elsewhere,” said Katrougalos. “We are not doing a volte-face,” he insisted in an interview. What seems of importance to many Greek citizens is that, however watered-down the election program, at least Syriza is drawing up its own plan, whereas other governments simply rubber-stamped troika polices. “Tsipras’s new deal redesigned the rules so that it seems more respectful for Greeks. In my opinion, it is very important for the people’s morale,” said an adviser to one of the Syriza ministers. While some thirty Syriza MPs say they have misgivings, there is no sign of mass dissension in the Syriza parliamentary group.
Perhaps the best indication of whether the deal is a U-turn or not can be found in the response of the IMF and the ECB. “In quite a few areas, including perhaps the most important ones, the [Greek] letter is not conveying clear assurances,” said IMF managing director Christine Lagarde in a letter. The ECB also appeared unconvinced. Both are concerned that the Greek government is not making clear-enough commitments to cut pensions, raise value-added taxes and privatize. Would a total surrender by Syriza have elicited such doubts from the two multilateral lenders?
Tsipras will hope that the deal opens the way to a fast economic recovery. There is some chance of this, thanks to pent-up growth potential in the Greek economy after a devastating depression that has destroyed nearly a quarter of GDP and an attack of nerves before and after the Syriza victory that led to deposit flight and stopped the fledgling recovery in its tracks. “Any deal will boost the economy, because all investors need is some degree of certainty to gain confidence,“ said Panagiotis Kapopoulos, an economist at Alpha Bank in Athens.
A recovery in growth and employment would help maintain Syriza’s support and strengthen the government’s position when the next round of crucial negotiations on Greek debt comes up after the four-month extension. Varoufakis’s proposal for perpetual bonds and growth-related payback will be fiercely opposed. “Tsipras’s priority was to gain three or four months,” says Stuart Holland, a veteran left economist and former adviser to French politician Jacques Delors. Holland co-wrote with Varoufakis the so-called “modest proposal,” laying out the strategy for a Keynesian new deal in the eurozone. “He has managed that,” Holland added. “The next three to four months’ agenda is to transform the European and potentially global agenda.… the crisis in Greece may prove the fractal moment that enables it.”