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Greece: Referendum on the cards if EU deal not reached

Part 1.

For more analysis and discussion on SYRIZA's struggle against austerity, click HERE

By Dick Nichols

May 4, 2015 – Links International Journal of Socialist Renewal -- On April 27, in a three-hour appearance on private TV channel Star TV, Greek prime minister Alexis Tsipras spoke extensively about the challenges confronting the government led by SYRIZA, the Coalition of the Radical Left.

The program, beginning with a grilling of Tsipras by interviewer Niko Katsinikolao and ending with questions from a 50-strong audience, is available above and below with simultaneous English translation.

A lot of the questions reflected growing concern that negotiations with the country’s creditors—mainly the European Union (EU), European Central Bank (ECB) and International Monetary Fund (IMF), the “Troika”—were stalled.

An April 21 University of Macedonia poll for Skai TV showed 45.5% agreeing with the government's negotiating strategy (down from 72% in February), but 39.5% saying the negotiating strategy is mistaken (up from 28% in February).

Part 2.

A Kapa Research poll published in the April 26 edition of To Vima, found that 71.9% want an agreement with Greece’s creditors, against 23.2% opposed to any compromise. According to 72.9%, Greece must stay in the eurozone, while 20.3% said the country should return to the drachma. A strong majority, 68.8%, were opposed to a Greek euro exit.

Tsipras’s appearance came after the April 24 meeting of Eurozone finance ministers (the “Eurogroup”) in Latvian capital Riga. The talks failed to make any headway in negotiating an agreement over the terms for releasing some of the €7.2 billion earmarked for Greece under the second Troika “bail-out” package.

At 36.9%, SYRIZA still held a comfortable lead on voting intention over the conservative opposition New Democracy, on 21.7%.

The deadlock has been going on since the February 20 agreement reached between the Eurogroup and the SYRIZA-led government, which gave Greece four months in which to produce “reforms” acceptable to its creditors.

Without a deal by the next Eurogroup meeting, set for May 11, Greece could default on two repayments to the IMF totaling €947 million, due by May 12. Even if it manages these payments, economic commentators say there is little hope of its June and July obligations being met.

To help meet pending payments the government has already been forced to call on local councils and universities to shift their deposits in private banks to the Bank of Greece, provoking strong protests and legal appeals.

The Union of Greek Municipalities has decided to turn to the Council of State, the country’s supreme administrative court, to cancel the legislative act incorporating the measure. Mayors from across the country are preparing for mass protests and it is expected, according to Ekatemirini, that the Hellenic Federation of Local Government Employees will support them.

Towards a referendum?

The changes being demanded by Greece’s creditors include privatisations, equalisation of the consumption tax rate applying on the Greek islands to the mainland rate, reductions in public service pensions and labour market “reforms” that would make mass sackings easier and undermine collective bargaining.

In his April 27 interview, Tsipras stressed that cuts to pensions, an increase in consumption tax rates on the islands and the end of collective bargaining were red lines that the SYRIZA government would not cross.

Tsipras also said, “I think that by May 9 we will have an agreement”, but raised the prospect of serious conflict with the EU if talks failed. He committed to not signing any agreement that would “repeat the vicious circle of austerity, misery and pillage” imposed by the two Troika memoranda signed by previous administrations, saying “I don’t do somersaults”.

Tsipras flagged a referendum on Greece's Eurozone membership should no new deal be struck, saying: “If the solution falls outside our mandate [to stay in the euro], I will not have the right to violate it, so the solution to which we will come will have to be approved by the Greek people.”

This statement sparked an immediate response from Eurogroup chairperson and Dutch finance minister Jeroen Dijsselbloem, who said that “it would create great political uncertainty”.

The Riga set-up

The tactics of Greece’s creditors were on clear display before the April 24 Riga meeting of the Eurogroup. They were to make not the slightest concession but demand an impossible retreat from the Greek delegation itself, then blame it for the resulting stalemate and use the Brussels-based media to spin the failure as the Greeks’ fault.

In the run-up to Riga IMF managing director Christine Lagarde ruled out any repayment delay on IMF loans and ECB board member Benoît Cœuré explained to readers of the Greek daily Ekaterimini, in general hostile to SYRIZA, that default “would impair the ability of banks to provide credit, which would be detrimental to the Greek people in general”.

Next, euro-area finance ministry officials “who asked not to be identified” expressed doubts whether progress in negotiations would be enough to unlock funds. Greece’s refusal to privatise state assets, “reform” its pension system and deregulate the labour market were the main stumbling blocs.

German finance minister Wolfgang Schäuble told everyone not to hope for anything from the meeting and advised journalists to go sightseeing.

Afterwards, anonymous “senior officials familiar with the negotiations” were unleashed on anti-SYRIZA media (especially in Greece). The Frankfurter Allgemeine Zeitung was told that Greek finance minister Yanis Varoufakis’s behaviour was reminiscent of a “taxi driver”, as he kept asking where the money due to Greece was. Varoufakis was denounced as “a time-waster, amateur and gambler” according to “colleagues”. In reality, the Greek delegation simply refused to make the capitulation demanded of them.

Back in Greece, former New Democracy foreign minister Dora Bakoyannis called for Varoufakis’s head, saying that he was a “drag” on the talks and that “the best thing he can do is to resign”.

From Spain, where the conservative People’s Party administration prays daily for the collapse of the SYRIZA-led government, Prime Minister Mariano Rajoy said political instability and the situation within Greece are potential “enemies” of an economic recovery.

Varoufakis showed what he thought of this orchestrated charade by not attending the customary Eurogroup dinner and tweeting: “FDR, 1936: ‘They are unanimous in their hate for me; and I welcome their hatred.’ A quotation close to my heart (and reality) these days.”[i]

After the Greek negotiating team returned to Athens empty handed, it was decided to restructure it by shifting Varoufakis from the lead negotiating position, which has been taken by Euclid Tsakalotos, the minister for international economic affairs (and author of Crucible of Resistance: Greece, the Eurozone and the World Economic Crisis).

The move was generally misinterpreted by the financial media as a demotion of Varoufakis, but it was actually aimed at neutralising the Eurogroup’s phony complaint that his just-tell-it-as-it-is personality was exacerbating the already difficult negotiations.

At the same time as this “Varoufakis excuse” was removed, a Greek government statement confirmed “the confidence in minister of finance Yanis Varoufakis who was at the centre of regular attacks by the international press … he always acts within the context of the collective decisions and the executive government bodies.”

In an April 28 interview with German daily Die Zeit Varoufakis said: “I’m still responsible for the talks with the Eurogroup. I'm supported by various government members, not least by good friend Euclid Tsakalotos. The fact that some media are portraying as if he is replacing me in the talks is just another proof of how low journalistic standards have sunk.”

Another negotiating path?

The insistence of the Eurogroup on complete Greek surrender would seem to suggest that agreement between the EU and Greece is impossible. So why did Alexis Tsipras tell his TV audience agreement could be reached by May 9?

The answer lies in the conflicting assessments within the EU elites as to the likely impact of a forced “Grexit” on European politics and econonomy, and on the degree to which some sort of compromise agreement with Athens is tactically necessary.

Of course, the entire EU establishment agrees that the SYRIZA contagion has to be contained. In the words of SYRIZA central committee member Yanis Albanis (on the web site Analyse Greece):

“The money Greece needs (a few billions) is a drop in the ocean of European economy. The Greek state budget has got a stable primary surplus while the new Greek government is managing state finances prudently. The issue is deeply political. The forces of conservatism that dominate Europe, want to politically crush Tsipras and SYRIZA so that they can nip an alternative political paradigm/model of pan-European appeal, in the bud. They are attacking SYRIZA in order to finish/end/stop/kill Podemos and Sinn Fein.”

(This, incidentally, is why the “appeal to reason” of numerous commentators supporting a renegotiation of the Greek debt burden, such as Nobel prize winner Paul Krugman and Financial Times lead economics commentator Martin Wolf, keeps hitting the brick wall of the SYRIZA est delenda brigade—those who understand that the survival of the Tsipras government will be a beacon for the millions aspiring to a European home different from the present iron cage of neoliberalism. What we are seeing is not a “default of statesmanship” [Wolf], but a war to the death over social and economic models.)

But how best to proceed? The prevailing opinion within the Eurogroup is that there’s nothing to be lost from taking a hard line with Athens. The judgement is that since 2012, when the possibility of Greek exit from the eurozone raised the spectre of euro collapse, Greek debt has been shifted out of the private banking system and enough financial firewalls been put in place to prevent contagion from a new crisis.

This reflects the judgement of “the market”. For example, according to financial information company Markit, reported in Ekaterimini, Greek five-year credit default swaps have recently traded as high as 2,600 basis points, implying a default probability of just under 90%. That compares with 8.8% for Spain, 11.5% for Italy and 13.5% for Portugal, indicating that “contagion” from Greece appears limited.

In 2012, by contrast, the threat of a Greek exit from the eurozone pushed default probabilities in other indebted “peripheral” countries to between 40% and 60%.

Moreover, supporters of the present Eurogroup line know that they have an enormously powerful weapon in their hands—economic blackmail. Every time the SYRIZA government fails to be “reasonable” with its creditors, yields on Greek public debt increase, the Athens stock exchange crashes, the outflow of funds from Greek banks grows (domestic deposits hit a 10-year low in March), business confidence declines and the payment conditions of increasingly nervous suppliers are tightened.

To date the cumulative impact has been that growth is likely to fall again after a 0.6% growth in 2014 (generated by increased tourism and a 1.6% increase of private consumption), employment is falling and the government’s primary budget surplus (before payment of debt on interest) has disappeared.

The reason is the drastic impact on tax collection. In SYRIZA’s first three months state borrowing of cash from domestic sources exceeded the projected level for the entire year.

Add to all that the downgrades of Greek debt by international ratings agencies and the permanent reminder that the fate of Greece’s private banks lies in the hands of the ECB with its Emergency Liquidity Assistance (ELA) pipeline, and the confidence of the prevailing Eurogroup consensus that they can crack the SYRIZA-led government without any major damaging side effects is understandable.

Doubts at the top

But other players, with a broader view of the battlefield, are not convinced that Europe can withstand the collateral damage of a Grexit. ECB head Mario Draghi himself has conceded that “now we are better prepared than in 2012, 2011 and 2010”, while adding that “we are certainly drifting into uncharted waters if the crisis deepens, but it is too early to make any assumptions about this.”

Jack Lew, US Treasury secretary, stated in early April that “no one should think they could predict the consequences of a Greek exit from the euro. It would not be a good thing in a world economy just recovering from a deep recession to have that kind of uncertainty introduced.”

As for Jean-Claude Juncker, the European Commission president, he believes that Grexit would lead to an “irreparable loss of global prestige for the whole EU”.

These differences have created a possible parallel path of negotiations for Greece, with Tsipras talking directly about another interim deal to follow on the February 20 agreement to Germany’s Prime Minister Angela Merkel, as well as Draghi, Lagarde and Juncker.

Its likely form, which would relax the Eurogroup demand for a full program of “reforms” before any funding was released, would be for Greece to implement the least contentious measures demanded by the creditors, but not labour market or pension reform.

One of these measures, according to an April 30 radio interview with Varoufakis, would be the temporary maintenance of the hated property tax, for which the government has yet to find a replacement. However, this tax would be repealed as soon as a final deal was reached.

According to Greek media reports, other concessions being discussed by the Greek cabinet are postponment of the planned changes in labour law to June or later; taking measures to limit early retirement; reducing higher additional pensions; imposing a special luxury tax on accommodation in the tourism sector instead of increasing consumption tax on the islands; and using part of the proceeds from privatisations for the payment of foreign debt and the financing of the pension system.

At the same time, an April 29 statement by the Greek finance ministry reaffirmed that that the government “retains red lines” in the negotiations, including sales tax on islands, pension and labour market reforms and asset sales.

And what if no agreement can be reached? A recent article by UK Daily Telegraph economics commentator Ambrose Evans-Prichard concludes: “Tsipras told his own inner circle privately before his election in January that if pushed to the wall by the EU creditor powers, he would tell them ‘to do their worst’, bringing the whole temple crashing down on their heads. Everything he has done since suggests that he may just mean it.”

Resisting the siege

The SYRIZA-led government is under a brutal siege, from the Troika institutions, but also from what Tsipras has called “the Troika within”—the conglomerate of financial, economic and media interests whose hegemony is threatened by a government committed to carrying out the mandate won on January 25, 2015.

On May 3, Ekaterimini reported that “the heads of the four major Greek banks said that the agreement with the partners is an absolute must if Greece were to confirm its European choice, remove the disastrous uncertainty and set the economy on the path of growth. The four CEOs – Leonidas Frangiadakis of the National Bank, Dimitrios Mandzounis of Alpha Bank, Antimos Tomopoulos of Piraeus Bank and Fokion Karavias of Eurobank – emphatically stated that the current situation cannot be perpetuated. “They emphasised the vital need for immediate wrap up of negotiations through an agreement, which will benefit the country and ensure its European development. It will lay the foundation of a sustained period of growth.”

Against such pressure SYRIZA faces an enormous challenge in defending an extending its own bases of support, which, it should not be forgotten, was only 36.4% of the voting population on January 25. Within its own voting base SYRIZA has also to confront the differences between those who have literally nothing left to lose and those who still have something and so are potentially more vulnerable to blackmail from the establishment and its media.

As far as the stalled Greece-EU negotiations are concerned, the reply from the SYRIZA side will be the rapid adoption in law of all the measures on which it has been able to reach agreement with the Eurogroup, in this way putting the political spotlight on those “red line” issues on which the Eurogroup has been demanding capitulation.

Effectively, the Greek government is saying: Let the European powers try to convince Greek and European public opinion that they are in the right on pensions, labour rights, privatisation of energy and increasing consumption tax. Let them now argue that it is the Greek side that is deliberately dragging its feet in the negotiations.

An immediate goal is to increase the pressure on the social democratic parties in government elsewhere in Europe. Do Matteo Renzi, François Hollande and company really want to be seen as fellow executioners, along with the ECB and the German government, of a democratically elected European government?

Supporting the worst off

In the narrow space in which it has room to move the SYRIZA government has enacted or will move to enact measures covering aid to the poorest, including rescheduling tax repayments for families in economic difficulty and the introduction of free or subsidised health coverage for 2 million uninsured Greeks and migrants living in Greece legally.

A ministerial decision that would allow those who until now were denied coverage because they lacked the necessary social security credit points to obtain health booklets has already been published online. The move comes in the wake of the scrapping of a 5 euro fee for visits to public hospitals.

According to the proposal, there will be no income criteria for those who want to apply for the booklets. People from other European Union countries living in Greece will also be able to obtain them, as will all children under the age of 18 and pregnant woman, regardless of whether they have residence permits, so long as they do not have private health insurance.

Those issued with booklets will have access to medical examinations, medicines, hospital treatment and ambulance services, as well as dental and maternity care.

At the same time, the emergency humanitarian program, adopted by the Greek parliament in the face of EU opposition in March, started in mid-April and received over 8000 applications on its first day of operation alone.

On April 19, the government also presented its bill for the reopening of the Greek public broadcaster, ERT, closed in 2013 as part of Troika-imposed budget cuts. The broadcaster will initially be funded by a monthly fee of 3 euros.

Tax offensive

On the taxation front, Greece will temporarily suspend the repeal of the hated property tax until a final agreement is reached with the EU. One of SYRIZA’s pledges before the elections, the government has not found a tax to replace it, and will be forced to keep it for 2015.

At the same time, on islands with a population more than 3000, all transactions over €70 euros will be done by credit or debit card in order to tackle tax evasion. In commenting on the measure, finance minister Varoufakis said that it was scandalous that islands such as Mykonos and Santorini had experienced record tourist arrivals in 2014 but that revenues from consumption tax were very low.

The government has also reached an agreement with Swiss financial authorities that will allow it to offer an incentive of reduced tax for Greeks who declare their accounts in Switzerland. Greeks have sent billions of euros abroad since the debt crisis exploded in 2010, fearing that the country would crash out of the eurozone. A large portion of the money is in Swiss banks.

Under the planned law, the deposits will be taxed at a rate of only 15 to 20%, an incentive for those who have sent money abroad but have not reported it as income to Greek tax authorities. Depositors who evade reporting income held in Switzerland will face a 46% tax rate and 46% in penalties if caught.

The SYRIZA government has also claimed its first scalp in its campaign against the tax evasion of the rich, when a warrant was issued for the arrest of infrastructure oligarch Leonidas Bobolas.

Also on the income side, the SYRIZA administration is moving to accelerate an agreement with Russia covering the construction of a gas pipeline that will pass through northern Greece. If and when completed, the pipeline will supply 47 billion cubic metres of natural gas to Europe a year. There is a provisional agreement that Greece will receive a €5 billion deposit from Russia once construction is under way.

Breaking with the past

From its very first day, when Alexis Tsipras laid a wreath on the Athens memorial commemorating the sacrifice of 200 Greek resistance fighters killed by the Nazis in World War II, the SYRIZA-led government has been determined to show that it embodies a new era in Greek political life.

Important moments in this process were the formation of the parliamentary commissions to investigate how much of Greece’s massive public debt burden is noxious as well as the reparations owed to Greece from the devastation and pillage of the country arising from the Nazi occupation (calculated at €287.7 billion).

On May 1, the Germany’s president Joachim Gauck, breaking with the German government consensus of denying any validity to the Greek claim, said: “We are not only people who are living in this day and age but we're also the descendants of those who left behind a trail of destruction in Europe during World War II—in Greece, among other places, where we shamefully knew little about it for so long. It's the right thing to do for a history-conscious country like ours to consider what possibilities there might be for reparations."

On April 29, Greek parliamentary speaker Zoe Constantopoulou announced that she intends to reopen investigations into two high-profile corruption cases. She issued an order for the transparency committee to re-examine the cases of the Siemens bribe scandal (where Greek defence officials are alleged to have taken bribes in order to grant the German firm submarine contracts) and the “Lagarde list” of suspected Greek tax evaders, passed on to the Greek government by Christine Lagarde when she was French finance minister (2010) and never acted on.

Conclusion

The SYRIZA-led government is in a struggle for its life against enormously powerful enemies. It is doing all that it can to implement the mandate on which it was elected on January 25, 2015, and the fact that popular support for it is holding up in the face of enormous pressure is a tribute to this commitment.

On February 15, when the new government was involved in difficult negotiations with its creditors for the bridging loan that was finally agreed on February 20, more than 200 demonstrations of solidarity with Greece took place, across Europe and elsewhere.

A repeat of that effort, on an even bigger scale, will in all probability soon be needed.

[Dick Nichols is Green Left Weekly and Links International Journal of Socialist Renewal’s European correspondent, based in Barcelona. A shorter, earlier version of this article first appeared in Green Left Weekly.]

Note

[i] For Varoufakis’s criticism of the method of the Eurogroup, see http://yanisvaroufakis.eu/2015/04/24/a-new-deal-for-greece-a-project-syndicate-op-ed/

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