Greece finally reached a deal with the country’s creditors in the eurozone on Tuesday afternoon after a month of intense negotiations. But the International Monetary Fund and the European Central Bank, the other two organizations making up the troika of lenders squeezing Greece, expressed doubts about its viability.
To understand the deal’s ambiguous reception, consider what it includes and how it arrived at this point.
Syriza came to power a month ago on a platform of ending austerity and renegotiating Greece’s debt, which stands at more than 170 percent of its GDP. Even before the new government was sworn in, however, it had to engage in negotiations over the extension of Greece’s bailout program. The previous government of Prime Minister Antonis Samaras opted to extend the previous deal for two months instead of the proposed six by the troika. This was a clear attempt to cause trouble for the next government, since he anticipated losing the Jan. 25 elections to Syriza.
It was a cynical calculation: An inexperienced government would crumble under the weight of Germany’s refusal to accept that austerity has decimated the Greek economy. The new regime, voted into office by promising to end austerity, would be discredited. Officials from Samaras’ New Democracy party called this scenario the left-wing parenthesis — the hope that Syriza would fall apart after taking the reins, then New Democracy leaders could return to power.
So instead of a new deal, as it would have preferred, Syriza could negotiate only a four-month extension, with the negotiations for a new bailout deal coming in April. The country’s new Finance Minister Yanis Varoufakis traveled across Europe and met with his counterparts in other countries, attempting to put forward a rational solution to the Greek problem and, more crucially, to win allies. But as it turned out, despite sympathy from countries such as Italy and France, no one appeared willing to oppose Germany.
This became obvious when the Eurogroup met in Brussels and Varoufakis was given the cold shoulder. Though France’s representative in the European Commision, Pierre Moscovici, appeared sympathetic to Greece, he will act as a bridge but nothing more. Spain, Portugal and the other docile pupils of austerity spurned their Greek counterparts entirely. For them, it is of utmost importance to pretend that there is no alternative to the harsh austerity they’re implementing in their countries. After all, elections are approaching in Spain and Portugal, Spain’s Podemos is leading in the polls, and chunks of society are in open revolt over violations of human rights, dismantling of employment laws and general disruptions in social cohesion.
Varoufakis nevertheless made his plea. His very moderate proposal was outright rejected by Germany last week. It was only on Friday that a deal was reached, at which point things got even more complicated. Both sides claimed victory: Varoufakis proudly announced that this was the end of austerity for Greece, while the German Finance Minister Wolfgang Schaeuble wondered out loud “how the Greek government is going to sell this to its people.”
Both can’t be right, so what happened?
On Friday an agreement was reached that would come to a deal, depending on a list of conditions to be submitted by the Greek government on Feb. 23. The overarching principle: Greece could decide how to hit the fiscal targets established by the country’s creditors, with a lowering of the primary budgetary surplus target from 4.5 percent of GDP to 1.5 percent.
This development essentially ends the era of terms dictated from abroad and the troika’s representatives arriving in Greece to oversee the implementation — such hegemonic behavior was creating tension in the various ministries. But it hardly marks the end of austerity.
However, the position that Greece lost in these negotiations, adopted by many in the international media, is absurd. In the measures submitted by Varoufakis and approved on Tuesday by the Eurogroup, Greece won significant concessions.
And he did so under immense pressure. In the days leading up to the Brussels negotiations, as much as 1 billion euros was leaving Greek banks every day. While support for Syriza’s negating tactics had strong popular support — 75 percent of Greeks approved the government’s approach — almost 20 billion euros left the banking system within a month.
Without a new lifeline, there was no way to recapitalize the banks, and the financial system would shut down probably by mid-March. Syriza came in with a mandate to end austerity, but forced bankruptcy and exiting the eurozone was not part of it. Varoufakis said so much on Tuesday, when he made clear that he “was tasked with coming to an agreement, not a break.”
Still, the fiscal leeway allowed by the lower surpluses the country needs to achieve is important because it leaves room for the government to correct some of the injustices imposed on the lower and middle classes in the last five years. For instance, Syriza is looking to make access to free health care universal. Not only is this essential to alleviate Greece’s humanitarian crisis — something that has been acknowledged for the first time in an official document by Europe — but is also an essential market reform: self-employed people are currently paying exorbitant prices for the privilege.
With the overhaul of the tax code and possibly the most aggressive crackdown on corruption that Greece (and potentially Europe) has ever seen, Syriza hopes to get as much as 8 billion euros, which would allow its government to further fund its plans. It lost on two big fronts: debt relief and the rehiring of thousands of public sector workers who were made redundant by previous governments. But it’s clear that many voters expected as much.
Critics of Syriza — some inside the party, such as World War II resistance hero Manolis Glezos — say tht it capitulated and brought a third memorandum on Greece, that austerity is still there and that debt relief is not forthcoming. But this deal looks less like a peace treaty and more like the financial equivalent of the Molotov-Ribbentrop Pact, an agreement that will only postpone inevitable hostilities.
In the next four months, Syriza has the opportunity to show what it can do in government, even if its hands are somewhat tied. It can take the fight to Greek oligarchs whom the public blames for taking advantage of the crisis to consolidate their power over the state.
But it will also get the opportunity to show the limits of what Greece can achieve inside the eurozone. If the current deal is the best possible outcome for Greece, Syriza has the political capital to ask the people if it’s enough or if they want to try something else. Things here are not straightforward either. Support for the euro is high in Greece, from 68 to 76 percent, as measured in the past two weeks. But in an end-of-year Gallup poll, 52 percent of Greeks said that if they were given the choice now, they would want a national currency; 11 percent said they could accept either.
This presents both Syriza and the eurozone with a choice. It’s clear by now that what Germany and its allies have in mind for the euro is not necessarily in the best interests of Southern European countries. The idea of the good euro is losing support in political circles in Greece beyond the radical left wing of Syriza. With a looming confrontation, yesterday’s agreement represents nothing more than a pact of nonaggression between two sides that will buy time before they cross swords. Whether Europe can make it worthwhile for Greece and the European south to stick with the euro remains to be seen.