Greece-Troika negotiations: last turns of the screw?

Two years after its closure by the previous right-wing government, Greek public broadcaster ERT was back on air on the morning of June 11, 2015. 

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

By Dick Nichols

June 15, 2015 – Links International Journal of Socialist Renewal -- For a while in late May, it looked as if the negotiations over the terms for releasing the last €7.2 billion owed Greece under its second bailout package with the European Union, European Central Bank and International Monetary Fund (the “Troika”) just might have some chance of success.

The commentary from the negotiating team of the SYRIZA-led Greek government was of “fruitful discussions” and “meaningful progress”. Greek government spokespeople were even talking of reaching an agreement “within a week or two”, at the latest by June 18, date of the next meeting of the Eurogroup of Eurozone finance ministers.

On May 27, Greece's deputy foreign minister Euclid Tsakalatos said: “The [two sides] will never converge completely but the general impression is that they are converging.”

But that note of guarded optimism went up in smoke on June 3, when Greece’s creditors handed Prime Minister Alexis Tsipras their latest set of demands, worked out following a June 1 informal summit of EU president Jean-Claude Juncker, ECB president Mario Draghi, IMF managing director Christine Lagarde and French and German leaders François Hollande and Angela Merkel.

The proposal set targets for the Greek government budget primary surplus (before repayment of interest on public debt) that would require ongoing austerity. It envisaged limiting sales tax exemption in the Greek islands, cutting spending on pensions by €1.8 billion (1% of GDP), a “consultative process” on labour market reform and an accelerated privatisation program.

Yet achieving its primary surplus targets for 2015, 2016 and 2017 would require an annual growth rate of 5% by the Greek economy—impossible under the austerity package proposed. Acceptance of the proposal would therefore mean continuing stagnation and social decay for Greece, the very opposite of the program on which SYRIZA was elected on January 25, 2015.

The creditors’ document simply overturned the partial convergence achieved at negotiations between the Greek side and the so-called “Brussels group” of lower-level representatives of the EU Commission, ECB, IMF and European Stability Mechanism (ESM, the EU’s financial stability fund). These had begun after the February 20 bridging agreement reached between Greece and its creditors.

It also resolved intra-Troika differences over tactics towards the SYRIZA-led government and Greece’s most recent proposal, presented to the creditor institutions on May 31. Before the meeting, the IMF had been more favourable to restructuring the Greek debt than its Troika partners.

In a June 9 interview with German daily Tagesspiegel, Greece's finance minister Yanis Varoufakis described the June 3 package as “a return to the starting position as if the negotiations had never happened. This is a proposal you make when you don’t want an agreement.”

Tsipras commented: “I could never have imagined that they would submit a scheme that would completely ignore all the common ground that we covered in the Brussels group. That our effort for an honest and complete solution should be perceived as a sign of weakness.”

The underlying fight

The Troika institutions re-affirmed their intransigent line because of the growing stagnation of the Greek economy, even as the SYRIZA-led government maintains its popularity in the polls. Their judgement is that the Tsipras administration will have to capitulate sooner or later—given the continuing flood of deposits from Greek banks, the bleeding of the state’s coffers and the decline in business investment that has sucked the economy back into recession.

The ball, as European ministers have been chanting in unison since June 3, is now in SYRIZA’s court. Time and patience is running out. Donald Tusk, the president of the European Council of prime ministers said on June 10: “We need decisions, not negotiations, now … there’s no more space for gambling, there’s no time for gambling. The day is coming, I’m afraid, when someone says the game is over.”

At the G7 summit, US President Barack Obama added his voice to the chorus of advice for SYRIZA to “take tough political decisions”.

On June 9, when presented with some updated positions by the Greek negotiators, “unnamed EU commission officials” sneered to a reporter from German public television ZDF that “it is like when you order a dish at a Chinese restaurant—and then only get a fortune cookie.” On June 11, as if to reinforce the message that Greece now faces a final ultimatum, the IMF negotiating team left Brussels.

The stance of the creditors makes clear, if it were ever in doubt, what the real stakes in the negotiations have always been—taming or destroying the one government in Europe that is opposed to austerity and has a political vision of Europe opposed to that of its business and political elites.

It does not matter that these proposals will drive Greece even deeper into recession and make debt repayment impossible (as even IMF European department head Poul Thomsen has conceded)—the Greeks must be made to understand who’s boss.

In the words of SYRIZA MP and economist Costas Lavapitsas (in the June 9 Guardian): “It is quite apparent that the Eurozone creditors have no intention of offering SYRIZA a deal that would allow it to claim even a smidgeon of victory.”

In a June 13 comment piece for Al-Jazeera, Mark Weisbrot, co-director of the Centre for Economic and Policy Research in Washington, spelled out the goal of Troika policy towards Greece’s radical government:

It’s all about regime change. One senior Greek official involved in the negotiations referred to it as a ‘slow-motion coup d’état’. And those who were paying attention could see this from the beginning. Just 10 days after Syriza was elected ... the European Central Bank cut off its main line of credit to Greece and then capped the amount that Greek banks could lend to the government. All the hype and brinkmanship destabilise the economy, and some of this is an intentional effect of European authorities’ statements and threats.

The unannounced objective is to undermine political support for the Syriza government until it falls and get a new regime that is preferable to the European partners and the U.S. This is the only strategy that makes sense, from their point of view. They will try to give Greece enough oxygen to avoid default and exit, which they really don’t want, but not enough for an economic recovery, which they also don’t want.

That this stance has nothing at all to do with supposedly objective economic criteria was brought home on June 12, when, in relation to Ukrainian government threats to default on its debt, an IMF communiqué stated: "The IMF, in general, encourages voluntary pre-emptive agreements in debt restructurings, but in the event that a negotiated settlement with private creditors is not reached and the country determines that it cannot service its debt, the Fund can lend to Ukraine consistent with its Lending-into-Arrears Policy.”

The timing of the creditors’ offensive also reflects their judgement that this is the most favourable moment to try to ”crack” the SYRIZA-led administration—while it has no friends in government in Europe and while the political price of such an operation is still wearable.

This window of opportunity will probably only last until the November national elections in Spain, which will most likely replace the ruling conservative People’s Party government either with a radical coalition or with a social-democratic administration vulnerable to pressure from its left.

It also reflects the reality that during the last three months of negotiations the Greek side has gradually been advancing in the battle for hearts and minds, especially as a result of the public interventions of finance minister Yanis Varoufakis and the appeals to the European public of Alexis Tsipras himself, most recently in a May 31 Le Monde article.

To keep alive the negotiations—and the battle for public opinion—the Greek government has made concessions it really didn’t want to make. In Varoufakis’s words to Tagesspiegel: “We offered them primary surpluses I don’t believe in. Just to come closer to their positions. We offered them an increase of the VAT, which will be problematic for us. They were gestures of good will, that we are genuinely interested in reaching an agreement. I will try to remain optimistic until the last moment, but it is clear that the other side has to come to the party now.”

Financial Times commentator Wolfgang Munchau made this analysis of the Greek concessions on primary surplus targets on June 7: “... the numbers do not add up. The fiscal adjustments are milder than what is needed to achieve a primary surplus to 3.5%, a demand made by the creditors with which Mr Tsipras says he agrees.”

The spin

This context explains why the June 3 proposals of Greece’s creditors have been put together in such a way as to make it impossible for the Greek government to agree to them, even as all Troika spokespersons chorus that they want to keep Greece in the Eurozone.

The structure of the proposal also allows important “players” from the creditor side to appear conciliatory or reasonable on this or that specific issue.

For example, two vital issues for the Greeks are debt restructuring and an investment program to revive the economy and create jobs. Their proposed debt restructuring plan would shift Greece’s €27 billion debt with the ECB to the ESM, lengthening its maturity and making Greek financial institutions eligible for cheaper credit under ECB “quantitative easing”.

The investment program would be funded by the European Investment Bank. According to Varoufakis, “until we discuss these two options, all bets are off from us, we will not agree on anything”.

Neither of these issues are even mentioned in the creditors’ June 3 proposal, but Benoit Coeure, ECB executive board member, commented in a June 10 interview in French Catholic daily La Croix that “this question is not taboo, as the Greek debt has already been restructured for private banks….Should more be done? The answer will depend on the final terms of the agreement between the creditors and the Greek authorities.”

Such is the stock Troika answer to all Greek proposals and suggestions: everything can be discussed once there is surrender on the basics of “reforms”. As Varoufakis commented in a June 8 speech in Berlin on his suggestion to the Troika institutions that agreed reforms should be implemented straight away while negotiations continued:

The answer I received was unequivocal: "No! You must not pass anything through parliament until and unless the complete review of the Greek Program is successfully completed. Any such legislation will be considered to be unilateral action and will jeopardise your relation with the institutions."

Inevitably, the offensive of the Greece’s creditor institutions has been accompanied by a storm of spin in which the Greek victim is painted as the guilty party. The lead role in this game has fallen to Juncker, who liked to portray himself as the Greeks’ special friend in the Troika institutions.

However, at a June 9 meeting of EU commissioners he was reported as saying that Tsipras had backed away from a verbal agreement on primary surplus targets and that Athens “had lost the European Commission. They failed to see that the best friend of the small and medium-sized member states is the European Commission.”

At the same time, reinforcing the lie that the deadlock in negotiations is due to irrational Greek stubbornness, the social-democrat European Parliament speaker Martin Schultz told a popular German television chat show that “he is getting tired of Greece”, while Guy Verhofstadt, the president of the Alliance of Liberals and Democrats for Europe tweeted: “Keep Calm and Reform Greece.”

The necessary myths

As Greece’s creditors intensify their offensive against SYRIZA, they necessarily have to thicken the smokescreen of myths about Greece to cover up their aggression.

"If the Greek government can't accept the fact that there are no easy solutions and that the difficult decisions just must be made, it is alone. We can't help Greece if Greece doesn't want to help itself," Jeroen Dijsselbloem, the Dutch finance minister and chair of the Eurogroup of eurozone finance ministers, told Finnish daily Helsingin Sanomat on June 11.

In the last week, a media campaign led by gutter press like the German rag Bild has emerged in the eurozone surplus countries, targeted against sending any more “good” Northern European money after “bad” in loans to Greece.

On June 7, French progressive web site Mediapart produced a “little guide against media bullshit” on Greece. It demolished a number of myths that are at the heart of this campaign.

  • The European taxpayer would have to pay for forgiven Greek debt? No, at most the European taxpayer would forego the interest payment made by Greece on this debt, around €15 a year per person in France’s case.
  • All debts must be repaid? No, excessive public debt has been restructured in many cases in Europe (Germany 1953, Poland 1991, Iceland 2011, Ireland 2103).
  • Greece has a bloated and inefficient public service, which needs radical surgery before any new loans can be approved? No, while the Greek public sector needs modernising—as SYRIZA recognises—public servants account for only 8% of total employment, as opposed to 11% in Germany and 23% in France.
  • The Greeks have already received €320 billion in loans? No, 77% of these “loans to Greeks” went to recapitalising Greek banks and paying private creditors.
  • Greece must agree to continue with Troika-imposed “reforms”—they are the only way to modernise the ramshackle Greek economy? No, in the words of a June 5 open letter to the Financial Times signed, among others, by Nobel Prize winner Joseph Stiglitz, former Italian prime minister Massimo D’Alema and Thomas Picketty, author of Capital in the 21st Century, “austerity is undermining SYRIZA’s key reforms, on which EU leaders should surely have been collaborating with the Greek government: most notably to overcome tax evasion and corruption.”
  • Austerity is tough, but it ends up working? Austerity has not only produced catastrophic social crisis in southern Europe and Ireland, it has also has not even achieved its goal of reducing public debt, which for the Eurozone has gone from 65% of GDP in 2008 to 94%, at the end of 2014.
  • In signing its February 20 agreement with its creditors Greece actually accepted troika conditions? No, SYRIZA only agreed to postpone the introduction of some of its policies in exchange for continuing negotiations, including over the size of the Greek government’s primary surpluses.

Greek reaction

The reaction in Greece, and within SYRIZA, to the creditors’ proposal was explosive. On June 5, Athens daily Ta Nea led with the deadline “Death Toll Required for an Agreement”, while SYRIZA deputy-speaker Alexis Mitropoulos commented:

(Juncker) took on the dirty work and conveyed the most vulgar, most murderous, toughest plan when everyone hoped that the deal was closing. And that at a time when we were finally moving towards an agreement we all want because we rule out a rift leading to tragedy.

Comment in the Greek media focused most on a proposed cut in a supplementary payment to the poorest pensioners and a 10% hike in consumption tax on electricity.

Even the conservative Greek financial press, in general hostile to SYRIZA, could recognise the validity of its debt-restructuring proposal. Financial web site Macropolis commented on June 11: “The scheme is fully compliant with [EU] treaties and the institutions regulations…The IMF has not only already accepted such an early repayment arrangement for Ireland and Portugal but managing director Christine Lagarde actually public praised Portugal. ‘It is with great joy that we consent to payment in advance, which shows that Portugal is doing much better,’ she said.”

Within SYRIZA, the reaction seems certain to strengthen the position of those opposed to any further payments to the creditors, a position that was narrowly lost 75-95 at the last meeting of the SYRIZA central committee. A motion proposing consideration of leaving the Eurozone was only lost 70-90..

On June 5, Tsipras denounced the June 3 Troika document in the Greek parliament, saying “the plan presented by the creditors cannot be the basis of an agreement”. The Greek government had already decided to roll over a payment of €300 million owed the IMF until late June, when it will, theoretically, be bundled with other repayments to the institution.

On June 13, defence minister and leader of junior government partner Independent Greeks party Panos Kammenos said on Mega TV that Greece “is no longer able to pay interest and repayments without receiving a single penny in return”. If there is no agreement by June 18 "we will not repay the IMF and the European Union. We will only pay our obligations inside the country", he added.

But what if, as seems highly likely, no improvement in the Troika offer is forthcoming? The alternatives are capitulation or confrontation. In the latter case, a default on debt repayments, which would challenge the ECB to turn off credit to the Greek banking system, would be unavoidable. Is the EU establishment really prepared for that outcome?

Their plan may have all the time been, in the words of commentator John Weeks, to “force the Greek government to withdraw in circumstances that allow the Troika to deny culpability [and] to drain the Greek government of money until it must accept what the prime minister called ‘absurd’ demands or choose an increasingly costly exist from the Eurozone”.

However, have Merkel, Hollande, Juncker and co. properly reckoned the reaction of the Greek people—and their supporters in the rest of Europe— to such a scenario? Have they properly calculated the impact on the financial markets and the euro, the centrepiece of the German-dominated European imperialist project?

International solidarity critical

In this high-risk game, a critical element needs to be strengthened—active solidarity with the Greek government. While there have been a number of appeals from important economists and intellectuals to see reason—including the June 5 open letter to the Financial Times—these alone will not force SYRIZA’s enemies to retreat.

Critical will be increasing the political cost to other European governments of continued support to the Troika-led stance. The June 20-26 week of solidarity with Greece will be a very important first step in raising the level of solidarity with Greece in Europe, and making it a factor governments ignore at their peril.

In the Spanish state, the week will see the main organisations of the left come together in support of the embattled Mediterranean sister country. Those participating will include Podemos, the United Left (IU), the Workers Commissions (CC.OO, the principal trade union confederation) and the Matches for Dignity.

The main solidarity action of the week, to be held in Madrid on June 27, will be coordinated with similar actions in Athens, Rome and Berlin, and linked up via videoconference.

In a June 13 interview with Spanish progressive web newspaper Cuartopoder interview, Miguel Urban, a Podemos deputy in the European Parliament, stressed that, despite the immense difficulties it faces, the SYRIZA-led Greek government “has restored the dignity of a people and any Greek you talk to says that”.

Urban also stressed the importance of the plan of emergency citizen support introduced by SYRIZA, working so all Greeks have access to water, electricity and gas. He added: “We would like to see Spain work around the question of human rights in the way the Greek minister for immigration is doing it, when faced with one of the biggest humanitarian crises in Europe, with 50,000 refugees crossing the border from Libya, Lebanon and Turkey since the beginning of the year. They are doing it with hardly any resources, organising thousands of volunteers to look after all those refugees.”

Urban added that people in the Spanish state had to defend the SYRIZA-led government as “our own”. [The ruling elites] "know that united we are stronger, that’s why it is important to support Greece and implement active international solidarity.”

For Margot Ferré, coordinator of international solidarity for IU, “supporting the Greeks is simply supporting ourselves. We have to support a government that is fighting the policies that have generated so much suffering for all of us”.

The week of international solidarity will lead up to the declaration, on July 2, of the results of the investigations of the Greek Debt Truth Commission, set up by the Greek Parliament. The declaration will be take place in a conference sponsored by the United Nations, in which the featured speakers will be Zoe Konstantopulou, the speaker of the Greek Parliament, Eric Toussaint, spokesperson of the international network of Committees for the Abolition of Third World Debt and Diego Borja, former finance minister and former central bank governor of Ecuador.

The decisions of the commission will open an important new battlefront in the ongoing struggle against capitalist austerity in Europe.

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