Monday 20 May 2019

All's changed, changed utterly in Syriza aftershock

Yanis Varoufakis unnerved Europe's political elite but his legacy will ultimately be some level of debt relief

Outgoing Greek Finance minister Yanis Varoufakis leaves on his motorcycle with his wife Danai after his resignation at the ministry of Finance in downtown Athens this week
Outgoing Greek Finance minister Yanis Varoufakis leaves on his motorcycle with his wife Danai after his resignation at the ministry of Finance in downtown Athens this week

Liz O'Donnell

It has been a long-running saga but this week edged us closer to the finale of the Greek financial crisis. The country's banks and the economy have been on life support thanks to emergency funding capped at €88.6 billion from the ECB. But missing the deadline for repayment of the IMF loan plunged the country into potential bankruptcy and exit of the eurozone, a calamitous scenario which persists if the terms of a third bailout cannot be agreed tomorrow.

Earlier intensive negotiations with Greece's international creditors to agree structural and tax reforms were close to a deal when prime minister Tsipras made the political call that he could not sell any deal which involved more reforms and additional taxes to his electorate.

His unexpected calling of a referendum to put the bailout package directly to the people caught everyone off guard. But he needed political cover before signing up to more imposed hardship, which he could not with integrity support. By advocating a no vote, he was confident that voters would give him a mandate to hang tough in future negotiations. His novel political moves have wrong-footed the eurozone governments. The possibility of a Grexit has constantly been described as "uncharted waters"; it was unforeseen that a member could leave the eurozone. But Syriza's unorthodox negotiating style too is an unknown quantity.

Regardless of ideology, one has to marvel at the assuredness and at times recklessness of the Syriza government. It has, however, tapped into the historic resistance and resilience of a Greek people battered and bruised from deprivations and which is needed to comply with the debt servicing and fiscal adjustments.

All bailouts require such conditionality, but the reality is that the austerity imposed is no longer bearable from the perspective of Greek society. I was reminded of our own Finance Minister, Michael Noonan, quoting Yeats when signalling an easing of our own budgetary adjustments two years ago - "Too long a sacrifice can make a stone of the heart," he said.

One in four Greeks is unemployed. Youth unemployment is at 55pc. Thousands of people have lost their jobs, homes, hope and dignity. Whole families are depending on the pensions of the elderly. Those over two years out of work have no access to public health services. There are critical medicine shortages. Many are living on handouts from charities and church organised food parcels. Was it surprising that when the question was put to them to accept more of the same, the answer would be a resounding no, or 'oxi'?

Perhaps the biggest irony about Ireland observing all of this over the last few weeks, is that while that drama is played out in real time with all the accompanying chaos, we are viewing our own banking and bailout debacle with the benefit of hindsight, by way of the Banking Inquiry.

We of all EU countries can identify with the fluidity and uncertainty of unfolding events such as the Greeks are experiencing right now. In particular, we can vouch for the dilemmas and struggles of politicians and officials to make coherent and rational decisions. The evidence of former taoiseach Brian Cowen this week to the Banking Inquiry was compelling in its demonstration of the fallibility of political decisions made under pressure and with limited options.

Much criticism has been levelled at the Syriza government as it lurched from crisis to crisis, missing deadlines at each turn. It has been very much a battle of ideologies, with the main eurozone governments laying down the law according to their rules, making demands on the Greeks for pension reform, tax hikes and cutbacks as preconditions for a further bailout.

Not all of the tensions as between the creditor countries and Greece are of substance. Style is also a feature. Yanis Varoufakis, Syriza's flamboyant and media-savvy former finance minister was a particular source of frustration to eurozone leaders. Like-minded centrist governments are not often tasked to counter the arguments of the hard left when articulated so intelligently and with such aplomb. As an academic, Varoufakis was well versed and sure-footed in his arguments. Wearing his lack of politician's pragmatism as a badge of honour, his informality was unsettling to the eurozone political establishment. But he attracted admirers outside of the EU institutional bubble.

It's difficult to know whether there was a cunning strategy at play by Syriza or whether it was more a case of ad-hoc floundering. But few can deny that Janis Varoufakis played the proverbial 'blinder' at a critical time in the negotiations pre-referendum. His ideological doggedness and supreme self confidence in facing down the eurozone establishment was more than a memorable piece of theatre. By upending protocols and challenging norms, he has refreshed the diplomacy of the European Union. By virtue of his uncompromising advocacy, he persuaded the electorate that a better deal would be forthcoming if Greeks held their nerve and rejected the creditor's demands.

The IMF statement on the eve of the poll that the Greek debt was unsustainable and needed debt relief was a significant boost to the No vote. And even conservative analysts and eurozone sources are now privately conceding that some measure of debt restructuring, re-profiling or whatever euphemisms are devised for debt relief (short of haircut) will be forthcoming as part of the solution.

With Greek banks closed for a second weekend and virtually empty of cash, it is the final throw of the dice. But like all the best political compromises, there will be parity of pain and parity of gain for each side. It was heartening to learn that French diplomats were helping the Greeks with drafting fresh proposals. A third bailout which is 'owned' by Greeks, as distinct from imposed, may save Greece for another while but if the governance, tax and pension issues are not delivered this time, Europe will be throwing good money after bad.

For political allies of Syriza, like Podemus in Spain and Sinn Fein and the far left here in Ireland, it has been akin to an anti-establishment carnival; viewed as a sea change in European politics in their favour. Time will tell. It is arguable that compared to Greece, Ireland was overly compliant or even foolish in being 'bounced' into a bailout by the Troika. Could a more assertive or better prepared government have done a better deal for us?

But no one should envy the trepidations of ordinary Greek citizens waiting outside banks for their €60 cash withdrawal this weekend unsure of what lies ahead.

Irish Independent

Today's news headlines, directly to your inbox every morning.

Don't Miss