SYRIZA's debt deal: breathing space or capitulation? Three assessments

20 varoufakis2 r w Greece gets its deal.. But if the details wrong were finished
Greece's finance minister Yanis Varoufakis.

February 23, 2015 -- Links International Journal of Socialist Renewal --  The interim deal between European authorities and the SYRIZA government of Greece has caused controversy on the left, with accusations of "capitulation", sell out" and worse from some sections. Below are three assessments from the left that offer a more sober analysis.

Greece gets its deal... but if the detail’s wrong ‘we’re finished’

By Paul Mason

February 20, 2015 -- Channel 4 --- The eurozone and International Monetary Fund (IMF) have done a deal with Greece, extending its bailout for four months in return for a commitment to run all policy measures with significant economic impact past the lenders. The second part of the deal has to be done on February 23, by Greece submitting a list of proposed measures.

In football terms Greek finance minister Yanis Varoufakis has snatched an “narrow away defeat” from a potential knockout – from the cup and the league combined.

Here’s why. The draft does not give Germany everything it wanted. It allows Greece to vary its fiscal target this year – meaning it can run a lower surplus, as yet unspecified. In addition, according to Varoufakis, there is “creative ambiguity” about the surpluses Greece is required to run beyond this year.

Second it maintains the words Varoufakis proposed on February 19: that Greece will not rollback old measures or unilateral policies “that would negatively impact fiscal targets, economic recovery or fiscal stability” – however with the addition of the words “as assessed by the institutions”. This clarifies who gets to decide whether the revised Greek program threatens these things.

By February 23 Greece has to submit a list of measures, in order to get the money to recapitalise its banks, and roll over its loans. Varoufakis spun this at a press conference as something that would be assessed jointly – so effectively the power game between Germany, Greece and everybody in between now continues, but with the IMF – whose methodologies are considerably less doctrinaire than the European Central Bank (ECB) on what Syriza proposes to do – in the loop.

In addition, the word “bridge” appears in the agreement. Eurogroup president Jeroen Dijsselbloem indicated that it would be a bridge to any future arrangement – and in that sense, the German opposition to any signal of the possibility of a transition phase was overcome.

Positives for Greece

Here’s why I think Varoufakis has achieved something. In the hours before the deal the Greek media reported deposit flight had significantly increased. So it was not the ECB threatening Greece with capital controls but the Greek central bank and finance ministry knowing they would have to limit ATM withdrawals as early as February 24.

With that hard deadline clear Greek negotiators feared the position they signed up to tonight would be chipped away by their opponents to nothing – i.e. towards the German position. So by signing early, they – they believe – have removed the ticking-clock issue, and if the ECB – as Varoufakis expects – makes positive announcements on restoring normal credit lines to the Greek banks, the banks are safe.

He said in the press conference the banks would remain open “Tuesday, Wednesday and ad infinitum”.

A nightmare scenario for Greece was that, if they imposed ATM limits on February 24, the EU/IMF could then drag their feet, Cyprus style, forcing total capitulation.

The true substance of what’s been agreed will only be decided as the IMF/EU and ECB say yay or nay to each of the Greek measures. The German finance minister, and indeed the German “tone of voice”, was not present at the final announcement of the deal. So it remains to be seen what the German lawmaker’s response is.

Syriza’s left

Varoufakis was visibly relieved. He has – we think – averted a bank run and total surrender, but only by beating a retreat from what Syriza promised in the aftermath of the election.

Syriza’s left will criticise this – and they will criticise the conduct of Varoufakis and his team who seemed to have very few bullets left in the clip by this evening. But because Varoufakis can sell this as “better than it could have been” I would expect there to be relief, and the anger focused on Germany, on the Greek streets this holiday weekend.

Asked what happens if the IMF/EU do not agree the list Syriza presents on February 23, Varoufakis said, disarmingly, “then we are finished”. But if it can be agreed, there is a massive amount Syriza can do on policies not tied to its fiscal limits, and four months only takes us to the end of June, which has always been “riot season” in the Greek crisis.

The strategic crisis is not over. But the damage to trust and solidarity, with one nation – Germany – being seen to attempt to force another’s electorate into total surrender – is real.

I asked Dijsselbloem in the press conference: “What do you say to the Greek people, whose democracy you’ve just trashed.” He replied that he did not think that was a very objective question. We’ll have to agree to differ.

Greek bailout extension deal a 'significant retreat' by the European authorities

By Mark Weisbrot

February  20, 2015 -- Center for Economic and Policy Research -- A deal reached between the Greek government and European authorities represents a “significant retreat” by the so-called troika and shows that their austerity program, which has failed miserably, is no longer politically enforceable.

Greek government officials reached a deal with European authorities earlier today to allow bailout funds to be extended to Greece for another four months. As the Guardian and other media outlets have reported, the new Greek government agreed to submit a list of reforms to the European authorities on February 23.  But the agreement gives Greece fiscal flexibility, lowering previous fiscal surplus constraints. Bloomberg cited a Greek official as saying that tax increases and cuts to pensions were not part of the agreement. The accord forestalls the immediate threat of Greece being forced out of the eurozone through a loss of support from the European Central Bank (ECB).

European officials had a gun to the head of the Greek government, and they just pulled it away – at least for now. This is a significant retreat and shows that their austerity program, which has failed miserably, is no longer politically enforceable. The Greek election has been shown to be a turning point for Europe.

European officials’ had threatened to collapse the Greek financial system by cutting off needed credit.  On February 4, the ECB announced that Greek government bonds could no longer be used as collateral for the least expensive loans from the ECB. Greece was still eligible for Emergency Liquidity Assistance, but last week European officials indicated that this too would be cut off if Greece did not agree to continue implementing the terms of previous governments’ agreements.

Today’s agreement will allow the new Greek government some fiscal space to increase employment and economic growth, and undo some of the damage of years of troika-induced depression. That is the most important thing.  The details of what to do about the debt can be worked out later.

The agreement allows for a smaller primary surplus in 2015, and indicates that Greece will not be held to the large primary surpluses (more than 4 per cent of GDP for years, according to the IMF Fifth Review), that European officials wanted to hold the government to. This relaxing of fiscal policy is most important to allow for the recovery that Greece needs.

The next few months will be important, since the confrontation between the new Greek government and the European authorities is the first time since the Great Recession that voters have successfully been able to challenge the troika’s previously unaccountable power. Their policies have been widely unpopular in Europe, but this is the first government that is really forcing them to change.

European finance ministers will review the deal next week, and the German parliament still must approve it before it can be considered final. Now the ball will be in the European authorities’ court. They’ll have to be the ones who say that what Greece is doing isn’t enough, and they’re increasingly going to appear unreasonable, not just to the Greeks but to the world.

For more information, see CEPR's work on Greece here.

Greek debt negotiation: does this constitute a sell out?

By Nathan Bolton

February 21, 2015 -- RS21 -- 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.

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 program that Syriza was elected upon, the so-called "Thessaloniki Programme", as it is this program 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:

  1. Confronting the humanitarian crisis
  2. Restarting the economy and promoting tax justice
  3. National plan to regain employment
  4. 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 Germany's Angela Merkel want to be remembered as the chancellor who tore apart the European dream?

So, on February 18 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 February 24 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 February 20: 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 (see first article) 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. While 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 was 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 that 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.