Nathan Bolton examines the implications of the deal made in the Greek debt negotiations
A deal has been made. But the deal made is sufficient to allow commentary to rage for days, perhaps even longer. Does this represent a full capitulation by the Greeks, a capitulation by the Germans, or simply a ‘kicking of the can further down the road’, as is so often the case when it concerns matters of the European Union? How the deal is perceived will also depend on one’s own particular position on the deal and this economic war, whether one is supportive of Syriza’s attempt to bend the institutions from within, whether one is a proponent of Grexit in either its debtor led or creditor led forms, or whether one wanted to see the full capitulation of the Greeks (see Wolfgang Schauble).
Since the beginning of the week a position has been arrived at by the mainstream European press, bar a few exceptions, that Greece has made or will make significant compromises on its electoral promises in this deal. I am certainly no expert on the debt negotiations and will not pretend to be, but in the interest of clarity, I want to present the deal as is and present some headlines from Syriza’s pre-election Thessaloniki programme to clarify whether or not this ‘sell-out’ is real or an apparition.
Before beginning, it is worth mentioning the context that I think is most important, more important than the ‘reformist nature’ of Syriza and the affect this may have had on their bargaining position. The European Union has a fundamental fissure, an economic, power and political disparity between its core and its periphery, a fissure that is there by design. Without understanding this disparity, it is impossible to understand a number of things: the pressure on Greece as a member of the peripheral states, why Syriza sees its salvation as within the European Union, but paradoxically equally why some in the Greek left, including within Syriza, see Grexit as the only solution. This distinction on the question of the European Union transcends not only the reformist/revolutionary categorisation, but even that of right and left.
Before presenting the deal, it’s important present the programme that Syriza was elected upon, the so-called ‘Thessaloniki Programme’, as it is this programme from which we will have to judge whether Syriza has back-tracked, made concessions or caved in entirely as the days, weeks and months unfold. The Thessaloniki Programme is based on four pillars:
- Confronting the humanitarian crisis
- Restarting the economy and promoting tax justice
- National plan to regain employment
- Transforming the political system to deepen democracy
It also set out a number of goals to restore sovereignty and dignity to the Greek people which included measures such as ‘excluding public investment from the Stability and Growth Pact’ (Government deficit limits of 3% of GDP and debt of 60% of GDP), that any agreed debt would be paid off financed by growth, not budget surpluses, and the repayment of the forced Nazi occupation loan.
Costas Lapavitsas writes in the Guardian that the headlines Syriza took into the elections were twofold: One, a substantial write off of the Greek debt as part of a wider European debt conference, two, lifting austerity by aiming for balance budgets “not from primary surpluses, which deprive society of income”. In addition, Lapavitsas confirms Syriza, “will reconnect families to the electricity network, provide food relief and shelter the homeless. It will take immediate action to reduce unemployment through public programmes. It is committed to lowering the enormous tax burden and to boosting public investment in an effort to accelerate growth.” Even before the election it was noted by some commentators that despite the epithet “far-left” so often attributed to Syriza, these policies were not radical, let alone revolutionary, but were offering a path away from the policies of the Memoranda. However as has been widely reported, Syriza repeated its intention to remain in the monetary union and avoid political unilateral decisions. It saw its salvation occurring within the EU, so not only saving itself but the political ideal of European integration with it.
As I have already argued, the weakness of the peripheral states as independent economic units as well as the lack of political leverage these states have against the core has to be at the front of our minds when looking at the current deal. Syriza’s intention to remain within the monetary union also arguably deprives it of the weapon really puts the frighteners on the European core. Would Merkel want to be remembered as the Chancellor who tore apart the European dream?
So, on Wednesday the European Central Bank (ECB) issued Greece with additional emergency liquidity for Greek banks. Since the election, with the fears of the Government refusing to comply with the wishes of the European core, or even a full default, up to 25 billion euros has been withdrawn by depositors in the form of cash or electronic transfers to banks in the United Kingdom and Switzerland. The emergency liquidity granted would only have seen Greek banks through to next Tuesday. It is at this point that Yanis Varoufakis, the Greek Finance Minister sent a letter requesting an extension of its loan agreement which was summarily rejected by the Germans. Again, it is in this context that a deal was made on Friday: A possible run on the banks and the fear that the rest of the Euro group would coalesce around the German position.
Syriza repeatedly promised a break from the old parties, that the Memorandum would not stand and that new, mutually beneficial, agreements, would be sought. The central aims of the Thessaloniki agreement were: 1) a substantial write off of the Greek debt as part of a wider European debt conference, 2) lifting austerity by aiming for balance budgets and 3) restoring Greek sovereignty by casting off the dreaded Troika.
On these three points, 1) has to be chalked up as a loss, 2) arguably as a draw and 3) certainly as another loss. Paul Mason suggests that “Greek finance minister Yanis Varoufakis has snatched a ‘narrow away defeat’ from a potential knockout – from the cup and the league combined.” He’s probably right. The positive here, if you can call it that, is the terminology of the deal as a “bridge” to any future agreement (post-June). This means two things: This may be a transition phase towards a new arrangement, one which could be closer to something that looks like Syriza policy (with a lot of ‘cans’, ‘coulds’ and ‘might be’s’) and that German opposition to anything other than continued unmitigated austerity may no longer be viable.
The draw in relation to enforced surpluses is that the deal again didn’t go entirely the German’s way. This gives the Greek government some room to run lower surpluses in order to finance some of the policies to reverse austerity measures. But it also keeps the wording that Varoufakis placed in his aborted letter to Dijsselbloem, which stated that Greece will not pursue policies “that would negatively impact fiscal targets, economic recovery or fiscal stability” with the dreaded addition of the phrase “as assessed by the institutions”. Here point three of restoring Greek sovereignty is paramount. Whilst Varoufakis may contest that there will be joint agreements on the government’s policies as to whether they violate this clause, in the context of the core/periphery antagonism it is obvious where the power to abort or approve these decisions lies. This may be the battleground going ahead.
The continued and devastating pressure of the European core on Greece, the spectre of a run on the banks and the fear of a forced outright capitulation led by the Germans certainly made Varoufakis and the rest of the government budge. Could it have been any other way? I don’t know. Syriza were never going to advocate Grexit, and have taken steps at every juncture to reassure the institutions that this wasn’t an option for them. Whether or not this deprived them of a powerful weapon, or a star striker, to continue Paul Mason’s football analogy, will be the subject of incessant discussion going forward.
So was this a capitulation? On this I would have to say no. The compromise came from the intense pressure placed upon the most devastated eurozone state, the fact that banks were on the precipice and that Syriza is simply not ready to exit – the Greek people don’t want it either as things stand. Anger will spill out as a result of this compromise and should be directed in one direction, toward Germany and the core states of the European Union who have tried to cynically force a democratically elected government into collapse. This is not the time to direct fire at Syriza but at the brutal, undemocratic barbarism of the EU. The compromise has kicked the can down the road for another four months, but there will be flashpoints along the way as the European Union issues its diktats to Greece grappling with undoing five years of brutal austerity.
Lastly on the question of Grexit, I have to agree that without a doubt, as is outlined by a number of economists, and academics, including elected members of Syriza like Lapavitsas, the only route to end austerity is outside the European institutions. Whether the Greek people begin to warm to such a position will depend on their reading of the last few days. Was this a sell-out by their government, or was the naked coercive force of the German-led EU trying to crush the popular will? In that contest I know which side I’m on.