This is an old post that I thought had been lost forever when the WPC site suffered a catastrophic loss several months ago. Fortunately, the Wayback Machine came to the rescue!
When we last left the unfolding Greek drama, it was a day before the referendum. I was a doubting Thomas who thought fear would lead a majority of the Greek voters to accept the deal. I was wrong, and I was elated to be so. I thought the vote signaled a necessary inflection point and that we’d see things head in a better direction.
The elation which followed the vote was short-lived. I mistakenly believed this would bring Europe back to the table with an offer of modest debt relief, as well as extensions for that which remained. Instead, Greece’s interlocutors responded to the vote in a fercious manner. They lashed out in the manner of authoritarian parents who were dealing with unruly progeny. Not only would Greece not have their existing punishment curtailed, they would also be taught a lesson by having their mouth washed out with soap, along with a severe paddling. (No one likes this any less than they do, but you have to ensure that their siblings don’t get any ideas.)
Yanis Varoufakis, Greece’s finance minister, stepped down in the wake of the vote citing pressure from those across the negotiating table as the impetus for his departure. This worried me as he has seemed both the intellectual and emotional force on the Greek side. I’ve come to trust his thinking, as well as his word, so I hoped that he was sacrificing his seat at the table as a necessary concession (his counterparts seem to truly despise him) which had to be made to gain a better deal for the Greeks.
My hopes were misplaced. Varoufakis claims that Tsipras “didn’t have what it took, sentimentally, emotionally, at that moment, to carry that no vote to Europe and use it as a weapon.” As such, Greece is now going back to the altar with a deal which has largely been derided for being worse than that which its people turned down in the referendum. Not only have their debts not been trimmed, they were forced to put a raft of the country’s assets ($50,000,000,000 worth) in escrow, which the Germans would have liked to have handed off to a third party to manage. Fortunately, Tsipras was able to avoid that last stipulation, but with no haircut on offer, nor a commitment to extending payments, I don’t see where this is anything but accelerated fleecing. Assuming the deal is accepted, we’ll soon see if I’m reading that wrong.
The ball is now back in the court of the Greeks. They have to vote on whether to accept the “package” (think Unabomber rather than Christmas) that’s on offer. Along with accepting the treatment terms, they’re being “asked” to repeal the reforms the Syriza government had enacted in their short tenure as a condition for the “relief” package.
This is not a drill. The troika is attempting to become Greece’s de facto legislators. This maneuver transcends the ongoing financial ruin, and leaps fully into subjugation. Don’t think so? Then why would Tsipras claim that, “Greece will fight to return to growth and to reclaim its lost sovereignty.”
(The sound you hear now is that of a large, highly-inflated balloon , slowly releasing it’s air via a tiny pinhole. We’re almost to the part where it shifts from a high-pitched whistle as the air starts to rush out and the whole thing collapses in on itself.)
Where does this lead?
In the short run, the obvious question is whether Tsipras can pull together enough votes to pass the measures on offer. This will be no mean feat, nor will it be worthy of praise if it’s achieved. I hope that enough of Syriza’s members will break ranks to scuttle the deal. (Is it breaking ranks if you do what you were elected to do?) This would either lead to further negotiation, or a hastened Grexit. Either seems preferable to the current terms of surrender.
In the wake of the referendum’s triumph, it seems that Tsipras has folded like a cheap suit. Whether he thinks he’s being pragmatic, or he’s actively being a coward, the result is the same. I saw someone posit that he was hoping that the referendum would fail, thus absolving him of the decision and its effects. It seems plausible, but it would certainly be a disappointment. Stathis Kouvelakis believesthat Tsipras was caught off guard by the bank closures, which shifted his expected mandate into a pyrrhic victory. Setting those possibilities aside, I’ll note that if there was ever a shred of doubt in his mind about following through on the Grexit, he should not have called for the referendum.
Greece’s future prospects
Paul Mason noted on Twitter that the IMF debt sustainability update finds that a deal “cannot work without (a) partial debt write-off.” And as Frances Coppola points out, a new IMF report that was released on Monday claims that, “The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date.” Yet the IMF’s leadership continues to go along with a proposal which avoids exactly that which its own research claims to be critical to success.
What are the broader implications?
Paul Krugman suggests that this is yet another plan that will fail by design, and Yanis Varoufakis thinks that, “The project of European integration has, indeed, been fatally wounded over the past few days.” It’s an idea that’s hard to argue with. And Tim Worstalladds that, “wars have started over less than this.”
It’s funny (not haha) that he should say that. Golden Dawn continues to wait in the wings as the troika continues to try to force the Greek populace into their clutches. Greek military spending has historically been among the highest, as a percent of GDP, in the European Union. How badly does Europe want to poke that bear?
Gareth Harding cites Monday as “the day democracy died in the country that invented it and the day the European Union took a decisive step towards self-destruction.” Let’s hope he’s wrong, But I can’t stop thinking of that old line by Santayana. You know, the one that warns us about those who forget the past. I can’t recall what the warning was, but I’m sure it’s nothing.
Anyways, Happy Bastille Day.
As Yves Smith reports, the IMF may not be able to support the current deal, and given the timing of the announcement, it may be trying to scuttle the upcoming Greek votes.
Here’s the cover page of the IMF report cited in Smith’s post. Words are not minced.
This post was originally published on July 14, 2015.