Creditors take control of Greece

Alan Thornett

We have seen the total humiliation of the people of Greece. After 17 hours of talks over Sunday night the IMF and EU elites have inflicted a comprehensive and humiliating defeat on the Greek Government. It was a brutal exercise in extreme duress described by one senior EU official – with some justification – as ‘mental water boarding’.

If Tsipras had expected that the big No vote in the referendum on July 5th would be, in itself, enough to wring concessions from the elites, that was a massive miscalculation.

EU hardliners—led by Germany—threatened to expel Greece from the Eurozone within days unless it accepted draconian new austerity measures far worse than those rejected by a 61% vote in the referendum on Sunday July 5th. The Greek delegation was told that if they refused to sign on the dotted line the banks would remain closed and the Greek economy, along with Greek society, would collapse in chaos.

The EU elites had been deeply shocked by the referendum result, but their response was brutal and quick. Wolfgang Schauble said that the vote made no difference—that concessions to Greece were ‘out of the question’. Merkel said that the old ‘offer’ (the one rejected in the referendum) was no longer on the table and that new terms—which Greece should now bring to the negotiating table—would have to be more severe than in the past.

On Tuesday Varoufakis resigned as finance minister, ostensibly to open the way for negotiations since, it was said, he was loathed by the creditors: i.e. the Troika—the IMF, European Commission and the European Central Bank. It appears that he left when he realised that Tsipras was not prepared to act on the basis of the referendum mandate.

On Thursday Tsipras proposed a highly controversial new austerity package to the Eurogroup—the Eurozone finance ministers—in return (it was hoped) for a new bailout package and moves towards debt reduction or relief. It included VAT increases, public sector wage cuts, pension changes (including the phasing out of the special supplements for the poorest pensioners and a rise in the retirement age), and increased privatisation including ports and airports and energy supply. These proposals were already worse than those rejected in the referendum.

This was a remarkable climb down. Only days earlier Tsipras had hinted at the massive rally, on the Friday evening before the referendum, an event that undoubtedly strengthened the No vote, that his Government would resign if the vote went for Yes—since he was not prepared to introduce austerity. “There are plenty prepared to do that” he said, “but it will not be me”.

The new package was endorsed at an emergency session of Greek Parliament by 251 votes out of 300 on a free vote The vote, however, relied on the opposition parties since only 145 of the 162 Syriza and Independent Greeks (the ANEL—the junior and conservative partner in the coalition government) MPs voted in favour—which is six short of a majority. Although the Left Platform supported Tsipras, 17 Syriza MPs either abstained or voted No.

Zoe Kostantopoulou the President of the Parliament abstained as did 7 Left Platform MPs including its two most prominent ministers. Varoufakis was absent. Costas Lapavitsas and Stathis Leoutsakos, a member of the political secretariat of Syriza abstained. Two members of the Red Network (revolutionary socialist and Trotskyist tradition) voted No and 4 MPs of the KOE (Communist Organization of Greece, Maoist tradition) were absent. 15 members of the Syriza Left Platform voted yes to prevent the government falling but issued a statement saying that they would not support austerity measures when they came back to the Greek parliament. (Stathis Kouvelakis explains the debates inside the Left Platform here: )

The response of the EU hardliners to the package was that whilst it might be acceptable as a starting point for discussion, it had to go a lot further. There were divisions, however. Whilst Hollande and the French government was supportive Merkel and the German government was totally opposed to it. Schauble not only rejected the proposals as the basis for a new long-term loan but argued that Greece should be expelled from the Eurozone for at least five years to bring them into line.

The package was eventually accepted by the Greek delegation under extreme duress—with a gun to the head as Varoufakis has said. It is totally draconian. According to Varoufakis it is the worst such settlement since the Treaty of Versailles after WW1 when the victorious powers imposed massive reparations against the defeated German state.

It contained not only the austerity concessions proposed by the Greek government itself but the most stringent conditions for implementation. The Greek Parliament would not only have to endorse the package but vote through (legislate) its key austerity measures within three days.

Representatives of the Troika would be based in Athens to supervise the introduction of the package. They will have a direct say in all legislation affecting the economy and will vet it before it goes to parliament. At the same time the Greek government is required to reverse all previous legislation adopted since it was elected to office that had not been agreed by the creditors at the time—a remarkable requirement.

Even more humiliating are the conditions regarding privatisation. Under the agreement the government is required to identify €50b of public assets (if they can find such assets) for privatisation. They will be sold off by the Troika and the proceeds paid into an off shore account controlled by the creditors. According to the leader of the Independent Greeks this is a form of gunboat diplomacy, of expropriation by force, which he will not accept or support.

Despite all this none of the demands Tsipras made in terms of debt relief have been met. There is no debt cancellation or reduction, and no debt restructuring—only the vaguest of promises for a future discussion about it. This despite the fact that it is patently obvious that Greece will never be able to pay it—a reality now recognised by the IMF, which is now saying that this package will drive the debt up to around 200% of GDP.

All this goes beyond humiliation. This is a massive attack on democracy and means that the Greek government has surrendered the right to run the country. It is in effect a country under occupation.

It is the collective punishment of the people of Greece for daring to challenge the austerity agenda and in particular for daring to vote against it in a popular vote in the referendum. The EU is saying loud and clear ‘if you stay in the Euro you play by our rules’. They are saying that democracy means nothing and neoliberalism is the only acceptable political framework. Any EU country that opposes the neoliberal policies of austerity will be brought to its knees in the same way as with Greece.

Not that the EU elites or their European project are emerging from this confrontation unscathed—far from it. They are seriously damaged. In battering down Greece they have not only displayed the real nature of relationships within the EU and the Eurozone between the strong and the weak but they have also done long term reputational damage to economic integration and the project itself.

They have demonstrated that major players in the EU are prepared to resort to expulsion as a weapon irrespective of the damage it does to the project itself. It is an issue that will arise every time the EU or the Eurozone enters a crisis. It will certainly arise when the next crisis arises in Greece, which will clearly not be very long.

In fact the central plank of the EU elites throughout all this is that there were only two options available to Greece. It must accept new and even more severe terms or be expelled from the Eurozone within days. The result of Grexit, they said, would be financial collapse and social implosion on a scale not seen in Greece in modern times.

The Achilles heel of the Syriza leadership throughout all this has been its attitude towards the EU and the Eurozone—more precisely the contradiction between its opposition to austerity and its determination to stay within the Euro. This has meant that there has been no preparation, from the 2012 elections where Syriza came a close second, of public opinion for the scenario of a straight choice between surrender and leaving the Euro. There has been no plan B. There has been no plan B since they were elected in January and no plan B since they became a contender for government 2012.

From a long held policy of no sacrifice for the Euro (which at least points towards a plan B) Tsipras now says that it is a national duty (or a strategic objective) to stay inside the Eurozone. This is a big problem. By arguing that there is no solution (or life even) outside the Euro, the Syriza government made itself totally vulnerable to the troika and the EU elites.

It would have been wrong and counterproductive for Syriza to have adopted exit as a point of policy, given the strong support for Eurozone membership which still exists amongst the population. But to say that there is no alternative to the Euro is to say Syriza must always be at the mercy of the EU elites as long as they are prepared to play the exit threat card—which is for the indefinite future. As Varoufakis says in an article in the Guardian it is the weapon of choice of the EU elites.

There was a disparate need for the threat of expulsion to have been anticipated and for Syriza and for discussion as to a response. There was a need to discuss the true nature of the EU and the Eurozone and alternatives to it with its supporters. Instead the mantra was that it is not an issue. As it was the initiative was left to the media and the right wing to set the agenda on this. No sacrifice for the Euro was never made an active point of policy that had to be prepared for.

A discussion around the debt and around refusing to pay the illegitimate and illegal debt would have been another way of arriving at the point of no sacrifice for the Euro.

It is true that Grexit and the creation from scratch of a completely new currency is not an easy option. But it is a better option that remaining trapped in the Eurozone with endless threats of expulsion and chaos and the level of misery now being demanded. Larry Elliot in Tuesday’s Guardian describes the Eurozone as a debtor’s prison. Exit would allow the country to free itself from the current constraints and chart a new course forward.

The Greek Government has only ever had one serious bargaining chip, which was to say throw us out if you dare. This played to a huge weakness of the elites in that Grexit would do serious damage, even existential damage to the Eurozone and even to the European project itself.

Nor has Tsipras been prepared to contemplate the nationalisation of the banks, even at a time when the banks were being used, under instructions form the ECB, to strangle both the economy and the government he leads. Again there had never been any discussion about this as a possibility which made it all more difficult when the banks became a weapon in the hands of the Troika.

There are still major obstacles to the final ratification of this deal, of course. First it has to go to the Greek Parliament very shortly where there is no guarantee of adoption. It is highly contentious amongst Syriza MPs and will in any case have to rely on the votes of opposition parties.

It also faces huge obstacles in the form of national parliament votes in Germany, Estonia, and Slovakia, which could all baulk at the extra €86bn offered to Greece in loans under the terms of the bailout.

Finally of course it has to be said that if it is adopted it will have no more chance of success than the previous two bailout—probably less. These are all the same policies that had failed over the past five years and will inevitably fail again. As Larry Elliot say in the Guardian: “Greece is in a hole the rest of the eurozone will hand it a spade and tell it to keep digging”.

The task for the left is to build opposition to the deal inside and outside Greece, to build on the 62% of the vote won in the referendum, much of its support coming from young people, and to challenge the implementation of the austerity package at every level. There has been a strike called for Wednesday, when the parliament considers the deal.

The movement must be built both politically, inside and beyond Syriza, and within the trade union and working class movement, especially among the Greek youth whose future is under so much threat.

Across the whole of Europe and beyond, we must continue to support for those affected by the austerity measures, stepping up our practical solidarity with the people of Greece while building a political and solidarity movement to challenge the EU elites and resist their vicious attacks on the working class in Greece and across Europe.

July 15th 2015

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