The Greeks deserved better than this

By: Nick Malkoutzis published at http://www.macropolis.gr
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Photo by Harry van VersendaalPhoto by Harry van Versendaal
For some time it appeared that Greek Prime Minister Alexis Tsipras, or at least some of the people advising him, felt Greece had something to gain from being in a take-it-or-leave-it situation with lenders as the pressure would be on the other side. Right now, with the uncertainty of a referendum looming, perhaps it doesn’t seem such a good position to be in.

The theory that the lenders would back down at the last minute, giving Tsipras a deal that would be better than the one he could get by agreeing terms early on in his premiership, has not worked. On Wednesday the institutions (led by the International Monetary Fund) rejected more than half of nearly 8 billion euros in measures that Tsipras had proposed on Monday and replaced them with ones he had turned down a few weeks earlier.

The proposals Tsipras submitted on Monday were the latest in a series of steps that his government took to move closer to creditors’ positions in the hope of sealing a deal. The argument that Athens has not been willing to “play by the rules” or to make sacrifices in return for further bailout funding has had no basis over the last couple of months as it slowly conceded ground on a whole range of issues, albeit while trying to minimise the impact on politically sensitive areas such as pensions.

There can be an argument over the impact of the measures Tsipras proposed, which relied almost exclusively on tax rises. The IMF, and perhaps other lenders, felt that these measures would be too recessionary. At the same time, though, they had spent the previous months insisting that there is “flexibility built into the Greek programme” and that Tsipras could replace some measures with alternatives. However, the institutions repeatedly rejected Greek proposals for savings from administrative measures and the much-vaunted structural reforms that the troika implored previous governments to implement. This was the result of a serial lack of trust, built up over the last few years, SYRIZA’s amateur approach and intransigence on the other side of the table. In the end it seems the Greek prime minister was free to pick any measures he wanted, just as long as they were the lenders’ ones.

The abruptness in the way the lenders whipped away Tsipras’s last-ditch proposals, threw them in the bin and replaced them with a new document splattered with red font prompted many in Greece, including critics of the government, to wonder whether this was an attempt by lenders to bring down SYRIZA and its coalition partner Independent Greeks. The document, which tracked all the changes made, seemed an attempt to show Tsipras who is in charge. It smacked of payback for the numerous verbal pot-shots that Tsipras and Finance Minister Yanis Varoufakis have taken at lenders over the last few months, as well as the time wasted at the start of this government’s reign.

The Greek side has to take the responsibility for creating this bad blood and failing to capitalise on whatever goodwill there was when SYRIZA came to power. There is a fine line between pushing back against the lenders, which drew strong public support, and appearing obdurate, even aggressive, with the institutions and countries that are your only hope of preventing a default and potentially destructive exit from the euro. Too often SYRIZA approached its dialogue with creditors as it would a street protest, with raised voices and facile slogans. It is no surprise that the other side met its new interlocutors with scepticism and exasperation.

However, lenders cannot be left out in the process of assessing who should carry the can for the serial failure of the last few months. Too many finance ministers, leaders and unnamed “European officials” have been willing to take SYRIZA on in verbal sparring, often trying to show that they have better put-downs or even making statements that undermined the stability of the Greek banking system. On a practical level, though, the most disruptive tactic from the lenders’ side has been to systematically herd this government back towards terms that the previous coalition failed to agree to. The institutions spoke of flexibility but only showed a limited amount of it in their approach.

Apart from lowering primary surplus targets (which is offset by the return of recession since late last year) and an uneasy stand-off on labour market reform, there is not much else to show in terms of concessions. And, for whatever compromises have been made, the lenders have come back with new and politically suicidal demands such as increasing VAT on hotels to 23 percent.

Underpinning all this, though, is the denial from the European side to consider any debt relief, which would not only ease the economic pressure on Greece but also provide Greeks with a clear target to work towards. The refusal to consider debt sustainability is also a refusal to consider political and social sustainability.

The deal that is currently on the table would mean substantial pension cuts and tax hikes, on top of what has been implemented over the last few years. This is not only very far from what SYRIZA pledged before the January elections, it is also some distance from what voters thought was realistic to expect from this government. SYRIZA may have cultivated false hopes during its election campaign but not all its voters expected it to be able to implement most of them. The truth is that a lot of Greeks were just fed up with New Democracy and PASOK and the diet of austerity measures they had served up since 2010, without being able to make people feel that the country was turning the corner,

If Tsipras brought back the lenders’ proposals, it is unlikely his government would survive. A new round of austerity and political instability would have been the best Greeks could have hoped to come out of their near-impossible situation. Now, Tsipras has thrown the question back to voters by calling for a referendum. It could be seen as a moment of catharsis, to put to bed once and forever any illusions about the terms of staying in the euro. It could also be seen as a reckless move, coming at the end of fraught negotiations and with the extension to Greece’s programme running out before the plebiscite takes place.

What’s certain, though, is that it is yet another moment during this crisis when decision-makers (both Greek and European) have shifted the burden caused by their own failings to the Greek people, who have put up with the economic collapse and tough fiscal measures over the last few years but deserved much better – from all sides.

*Follow Nick on Twitter: @NickMalkoutzis

– See more at: http://www.macropolis.gr/?i=portal.en.the-agora.2660#sthash.Iq5ULaRm.12XlOFmL.dpuf

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