In this special guest post for Left Flank, PANAGIOTIS SOTIRIS forensically dissects the SYRIZA government’s agreement with the Eurogroup — not to lead people to despair but to focus the question on the political and economic limits of the Eurozone that SYRIZA has accepted, and to argue the basis for a policy of rupture with those institutions.
Eurogroup statement: the capitulation
The statement of the Eurogroup on 20 February, which was accepted by the Greek government, marked a significant retreat for SYRIZA in respect of its pre-election promises and the ‘red lines’ it had set at the beginning of this negotiation. In fact, one might say that, at least in what concerned this stage of the negotiation, the Greek government was forced to capitulate.
The new agreement for an extension of the loan agreement in the framework of the ‘existing arrangement’ (the term used in the statement instead of ‘program’) means that in fact we are still within the frameworks of the ‘commitments’ undertaken as part of the infamous ‘Memoranda of Understanding’ that accompanied the loan agreements. This is evident in the references to ‘successful completion of the review on the basis of the conditions in the current arrangement, making best use of the given flexibility which will be considered jointly with the Greek authorities and the institutions’.
The key words are ‘review’, which refers to the constant supervision and pressure for ‘reforms’ that has been the norm for the past five years, and ‘institutions’, which is the euphemism that replaces references to the ‘Troika’. One should not forget that Greece got loan agreements in return not just for fiscal measures but also for reforms (privatisations, labour deregulation, pension system reform, etc). Each instalment of the loan agreements has been conditional upon the successful introduction and implementation of these reforms.
The Greek government insists that it will present its own version of reforms, focusing upon tackling corruption and tax evasion and making the public sector more efficient. However, in the end the ‘institutions’ (the Troika) will decide upon whether these reforms are acceptable: ‘institutions will provide a first view whether this is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review’ on Monday 23 February (the initial list was delivered on the Tuesday; see below) and then this ‘list will be further specified and then agreed with the institutions by the end of April.’ This review process is significant, because it will determine whether Greece will get much needed funding: ‘Only approval of the conclusion of the review of the extended arrangement by the institutions in turn will allow for any disbursement of the outstanding tranche of the current EFSF programme and the transfer of the 2014 SMP profits [profits from Greek bonds held by the ECB]. Both are again subject to approval by the Eurogroup.’
Even the much-needed buffer funds for the banking system that the Greek government wanted to use are being held by the EFSF (European Financial Stability Facility) ‘can only be used for bank recapitalisation and resolution costs’.
The Eurogroup statement includes areas where the Greek government intends on deep structural reforms (‘to tackle corruption and tax evasion, and improving the efficiency of the public sector’), but it also includes a reference to the Greek government undertaking to ‘make best use of the continued provision of technical assistance.’ Now, ‘technical assistance’ until now used to mean Troika technocrats attempting to impose their own version of neoliberal reforms.
Regarding the question of debt, the Greek government reiterated its ‘unequivocal commitment to honour their financial obligations to all their creditors fully and timely.’ This is a significant step back from SYRIZA’s pre-election promise for a debt restructuring that would drastically reduce the debt burden. However, it must be noted that the main negotiation regarding the Greek debt has yet to begin. In fact the 4-month extension of the ‘loan arrangement’ was given in order to facilitate this negotiation.
Regarding fiscal surpluses, the Greek government committed itself to ‘to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement. The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.’ Now the Greek government has insisted that the absence of a reference to a specific primary surplus, such as the staggering 4.5 percent accepted as a target by the Samaras government, is a significant improvement. However, the very acceptance of fiscal surpluses suggests a politics of austerity, even ‘with a human face’. Each 1 percent of fiscal surplus means €1.8 billion less for jobs, education, health and public investment.
However, the most important commitment the Greek authorities have undertaken is to actually have their policy choices constantly monitored, reviewed and negotiated with the ‘institutions’: ‘The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.’ One should bear in mind that some of SYRIZA’s major election promises were exactly ‘unilateral’ actions that would lead to the rollback of Troika-dictated measures, such as the legislation that practically abolished collective bargaining. The fact the positive or negative impact of such measures will be ‘assessed’ by the ‘institutions’ seems indeed like a variation on the disciplinary supervision practiced by target, even in the sense of a constant negotiation.
Varoufakis letter: more concessions in the detail
On Tuesday 24 February the Greek Finance Minister, Yanis Varoufakis sent an official letter with the Greek government’s list of reforms. This long list made the important political concessions made at the Eurogroup meeting even more obvious. The list was accepted by the Eurogroup.
The list reiterates the Greek government’s commitment to fight tax evasion and corruption. However, the phrasing of the list and the pressure from the institutions for increased tax revenue makes it uncertain whether the Greek government will stick to its promise to abrogate a highly unpopular (and unjust) property tax and to avoid eliminating the reduced VAT status of Greek islands. It also includes a commitment to a reform of the pension system and to ‘consolidate pension funds’, along with measures to fight an ‘excessive rate of early retirements’ (in fact most early retirements have already been phased out, along with ‘incentives’ to stay longer in employment.
Regarding public sector pay and hiring it refers, rather opaquely, to reforming ‘the public sector wage grid with a view to decompressing the wage distribution through productivity gains and appropriate recruitment policies without reducing the current wage floors but safeguarding that the public sector’s wage bill will not increase’, a phrase that suggests that there will be no pay rises and no extra hiring, despite the fact that important sectors, such as health and education, remain understaffed.
Concerning the problem of private debt the commitment of the Greek government is towards ‘dealing with non-performing loans in a manner that considers fully the banks’ capitalisation (taking into account the adopted Code of Conduct for Banks), the functioning of the judiciary system, the state of the real estate market, social justice issues, and any adverse impact on the government’s fiscal position.’ It is obvious that this does not offer any room for the creation of a special purpose intermediary public banking institution that will deal with non-performing loans and reduce the burden both upon the banking system and upon households and small businesses.
At the same time SYRIZA is being forced to water down its pre-election promise for an indefinite extension of the postponement of all main residential auctions, which has so far prevented mass foreclosures, since in the letter there is only a modest reference to the collaboration ‘with the banks’ management and the institutions to avoid, in the forthcoming period, auctions of the main residence of households below a certain income threshold’.
Regarding privatisations, the Greek government commits itself to ‘not to roll back privatisations that have been completed. Where the tender process has been launched the government will respect the process, according to the law.’ Moreover, privatisations that have not been launched yet will be reviewed but only ‘with a view to improving the terms’. That is, the logic of using public assets as a means to finance the debt and the deficits of social security will not be reversed.
In terms of labour rights and the need to raise the minimum wage and reinstate the collective bargaining process, the letter makes importance concessions to the neoliberal logic of flexibility, and to the need to make competitiveness the determining factor. This is far from the pre-election promise of a return of the minimum wage to its pre-Troika level and for a full return of the system of collective bargaining, mediation and arbitrage: ‘Phasing in a new “smart” approach to collective wage bargaining that balances the need for flexibility with fairness. This includes the ambition to streamline and over time raise minimum wages in a manner that safeguards competiveness and employment prospects. The scope and timing of changes to the minimum wage will be made in consultation with social partners and the European and international institutions, including the ILO, and take full account of advice from a new independent body on whether changes in wages are in line with productivity developments and competitiveness.’
Finally, the letter does include all the immediate measures needed to fight the humanitarian crisis, albeit with the obligatory reference that the Greek government will ‘ensure that its fight against the humanitarian crisis has no negative fiscal effect.’
The case for rupture from the Eurozone
The Greek government and the leadership of SYRIZA insist that this is a deal that offers them some necessary time and ‘breathing space’ to prepare for the main part of the negotiation and at the same time permits them to proceed with some of their pre-election commitments especially those that refer to the humanitarian crisis. They point to the fact that the ECB was ready to shut off the Greek banking system from its liquidity assistance mechanism something which would have created a major banking crisis, with ATMs offering only limited amount of cash, etc., which would only have made things even worse. They also point to the fact that the electorate did not vote for the exit from the Eurozone but for a firmer stand in negotiations within it.
However, it is obvious that there are many problems with this deal, both in the sense of an abandonment of important promises (and demands of the movement) and in the sense of being forced to accept important measures from the neoliberal ‘toolkit’. At the same time this deals points to a continuation of austerity and restricted public spending in a period that only a massive increase in public spending can reverse recession and mass unemployment.
Perhaps the SYRIZA leadership is right to suggest that this is the best deal they could get. Indeed it is the best deal you can get if you decide to negotiate within the strict monetary, financial and institutional limits of the Eurozone with all its potential for open blackmail, based upon the dependency for constant liquidity injections for the banking sector. But in the sense of the aspirations of society, this is a bad deal, a deal that is distant from SYRIZA’s pre-election commitments.
It is also a negative starting point for the main part of the negotiation. The main problem is not the delay in fulfilling one promise or another. The problem is that the Greek government has accepted the logic of constant review and supervision from the ‘institutions’ and the need to negotiate every policy choice with them and to accept aspects of the dominant neoliberal logic in return for the extension of the loan agreement, or a potential new agreement after the end of the 4-month negotiating period.
It is true that SYRIZA won the election on a ‘no to austerity — yes to euro’ pre-electoral pledge. But what if it is impossible to exit the vicious circle of austerity, recession and unemployment within the Eurozone? What if the ‘normal’ logic of the current architecture of the EU is exactly the king of punitive disciplinary supervision imposed upon Greece? What if the cost of avoiding a ‘Grexit’ is the constant social haemorrhage of the ‘loan agreements’ and their ‘commitments’?
The weeks before the Eurogroup agreement witnessed an impressive return of street politics in Greece, partly as support for a government that seemed to defy the leading forces of the EU, and partly as protest to what they experienced as disrespect for popular sovereignty. It means that important aspects of the re-politicisation and radicalisation that emerged in 2010-12 remain in place. It offers a favourable ground to re-open the debate on how to achieve an exit from austerity and offer people the alternative to decide between either an indefinite prolongation of austerity and increased unemployment, even in a slightly milder form, and an exit from the euro which, despite initial temporary problems, in the long run will actually reverse the current social disaster and open up the way for truly progressive solutions.
The leadership of SYRIZA argued in favour of a ‘no rupture — no submission’ tactic. However, after the first phase of the negotiation we know that the alternative is indeed either rupture or humiliating submission. The limits of ‘left-wing Europeanism’ are already evident.
The 4-month negotiation period should not be spent on a futile attempt for a ‘better deal’ with the EU and the IMF, a ‘deal’ that would include yet another round of painful concessions and lead to even more demoralisation of the subaltern classes. It should be used for the preparation, in all aspects, for the necessary rupture with the debt burden and the Euro, as the starting point for putting into practice an alternative narrative for Greek society based upon the confidence in the potential of the collective effort, creativity and ingenuity of a people in struggle. The currents of the Left in Greece that — one way or another — have insisted on a strategy of rupture, must stand up to this challenge, coordinate forces, present an alternative and do everything that is not necessary in order not to miss a window of historical opportunity that is still open.