Note kindly translated by Anne-Marie de Grazia
The proposals submitted by Alexis Tsipras and his government in the night of Thursday to Friday provoked stupefaction. They take up largely, but not totally, the proposals formulated by the Eurogroup on June 26th. They are broadly perceived in international opinion as a « capitulation » of the Tsipras government. The very positive reaction of financial markets on Friday morning are an important signal.
We also know that they have been in part drafted with the help of French civil servants, even if the French Ministry of Finances is denying this. These proposals are the result of an intense pressure work on Greece as well as on Germany on the part of the United States. France has, in this instance, deliberately chosen the camp of the United States against the one of Germany. The French government was not necessarily wrong to choose to confront Germany on this matter. But it chose to go this road for essentially ideological reasons. In fact, what M. François Hollande is seeking above all, is to « save the Euro ». There is a risk that he’ll see very soon the prize he will have paid for this, for a result that will probably last only a few months. The proposals in question, should they come to be adopted, will solve nothing.
Les terms of the Greek proposal
These proposals are close to the ones of the Eurogroup. But one can notice some differences with the text of June 26th, particularly in the will to protect the most fragile sectors of Greek society: keeping VAT at 7% for basic necessities, exemptions for the poorest islands, holding up until 2019 the aid system for the lowest pensions. From this point of view, indeed, the Greek government did not yield. Also, the government has included in the plan measures of fighting against tax fraud and corruption which figured in Syriza’s initial program. But it must be granted that, on the rest, it did largely align itself with the demands of the Eurogroup. Should one talk of a capitulation, as some do? The answer is less simple than it seems.
Indeed, the Greek government is insisting on three points: the reprofiling of the debt (beginning in 2022) resulting in postponing it into the future in such a way as to render it viable; access to 53 billion over three years, and the unlocking of an investment plan, called « Juncker plan. » But this « plan » mostly includes sums already foreseen – but not paid out – by the European Union in the form of structural funds. Especially, the Greek government insists on a constraining commitment to the opening of negotiations on the debt no later than October. Yet, we must remember that this was precisely one of the items which had been refused by the Eurogroup, leading to a rupture in negotiations and to the decision of Alexis Tsipras to call for a referendum.
In fact, the proposals transmitted by the Greek government, if they constitute undeniably a step forward in the direction of the creditors, are maintaining part of the demands formulated previously. This is why it is still too early to speak of a capitulation. One possible interpretation of these proposals is that their function is to put Germany, and the other countries which favor an expulsion of Greece from the Eurozone, “up against it.” We know that the United States, worried about the consequences of a « Grexit » onto the Eurozone, put all their weight onto the scales in order to bring Mrs Merkel to make important concessions. Should Germany show intransigence, it will carry the responsibility of the « Grexit ». Should it decide to give in, and it will no longer be able to refuse Portugal, Spain, even Italy, what it has conceded to Greece. One may then judge that this plan is a new demonstration of Alexis Tsipras’ innate tactical sense. But these proposals also present a serious problem for the Greek government.
The Greek government’s dilemma
The problem confronting today the Greek government is double-faced: political and economic. Politically, doing as if the referendum had not taken place, as if the “no” had not broadly, and even massively, obtained the majority, will not be possible without considerable political damage. The recently resigned Minister of Finances, Mr Yannis Varoufakis, has criticized some aspects of these proposals. At a deeper level, the proposals cannot help but troubling not only the Syriza militants, and especially those of the left of the party, but also, beyond them, the mass of the voters which had mobilized in order to support the government and Alexis Tsipras. The latter is taking the risk of provoking an immense disappointment. Which would in fact leave him defenceless in face of the various parliamentary and extra-parliamentary manoeuvring which one can imagine his political adversaries will not be depriving themselves of engaging in. And the will of the European institutions to provoke a change of government has not changed, as was crudely stated by the President of the European Parliament, the social-democrat Martin Schulz. On Thursday, Jean-Claude Juncker was welcoming the leaders of New Democracy (centre-right) and To Potami (centre-left). Deprived of a broad support in the population, having heavily disappointed the left wing of his party, which represents more than 40% of Syriza, Tsipras will now be very vulnerable. At the very least, he will have broken the logic of popular mobilization which had manifested itself at the occasion of the referendum of July 5th and during the campaign. We must remember that the results of the referendum have shown a mobilization going far beyond the electorates of Syriza and the ANEL, the two government parties. This will of course have consequences. If the deputies of the left of Syriza will most probably vote in favor of these proposals in Parliament, it remains obvious that the extremes, the KKE (Neo-Stalinist communists) and the Extreme-Right party «Golden Dawn » will profit from the disappointment which will be raised by these proposals.
Beyond, the question of the viability of the Greek economy remains on the table, for the proposals bring no solution to the basic problem. Granted that the question of viability will exist in terms less immediately dramatic than it is today, should an agreement be reached. The liquidities crisis will be stemmed without having to have recourse to the drastic measures which have been evoked here in the past days. Banks, again supplied by the ECB, will be able to operate again. But nothing will be resolved. Olivier Blanchard, former chief-economist of the International Monetary Fund, signals that the very negative prognostications made by his organization are probably below the truth of the situation. After five years of austerity which have bled it white, the Greek economy has a desperate need to breathe. This could have been done by the way of investments, of a lessening of the tax pressure, in short, by less austerity. This is not the road being taken. It could also have gone through an exit, not an expulsion, out of the Eurozone which, allowing the Greek economy to depreciate its currency by -20% to -25%, would have given it back its competitiveness. From all evidence, neither the one nor the other will be done. So that one must ask oneself questions about the conditions of the application of the proposals submitted by Greece to its creditors. Even if admitting that an agreement will be found, the deterioration of the economic situation induced by the actions of the European Central Bank, qualified by Mr Varoufakis as « terrorist », and coming after five years of austerity, risk to render these proposals obsolete within months. A fall in the VAT receipts is to be expected. A new negotiation will become necessary. In this sense, the proposals do not settle anything.
Euro means austerity
We must then ask ourselves about the deeper meaning of these proposals. If they are tactically defensible, they most probably represent an error in strategy. Alexis Tsipras declared on Friday morning, before the parliamentary group of Syriza, that he had not received a mandate from the Greek people to get out of the Euro. This fact can be debated, especially after the crushing victory of the “no” at the referendum. It is clear that this had not been the initial intention of the government, and did not correspond to the program on which it had been elected. But one may think that confronted with the alternative of refusing austerity or refusing the Euro, the Greek population may be in rapid evolution. In fact, one is witnessing a radicalisation in the popular positions, or at least such had been observed until these proposals were made. The days ahead will show if this radicalisation is continuing or if it has been broken by the action of the government. But one thing is to be clear. Euro means austerity. If you want to break with austerity you need to break with the euro.
In reality, what is more and more perceptible, and this is the analysis defended on the left wing of Syriza by an economist such as Costas Lapavitsas, is that the very framework of the Euro imposes policies of austerity. If Tsipras ever sincerely believed that he could change this, he must recognize now that he has failed. Austerity will remain the policy of the Eurozone. There will be no “other Euro,” and this lesson applies also to those who, in France, are defending such baloney. So that one must clearly posit the problem of an exit from the Euro, concerning Greece as well as many other countries.