The bohemian Left in Europe is as untrustworthy as the GOP “Right” in America when it comes to taking a tough, principled stand. As I have repeatedly predicted that it would do (here and here), the government of Prime Minister Alexis Tsipras has caved in to EU creditors.
The package he accepted after a marathon negotiating session in Brussels on Monday morning is actually more stringent, and less likely to take Greece out of her nosedive recession, than the one that was on offer when he won the general election six months ago – an election which he won pledging resistance to the German-led demands for more austerity. The referendum eight days ago, at which a resounding majority of Greeks said “no” to the IMF-ECB-EU conditions for a bailout, now appears to have been a cynical exercise in demagoguery.
Tsipras has totally capitulated on his earlier “red lines,” including value-added tax discounts for Greek islands in danger of depopulation and a drastic increase in the state pension age. “We are confronted with crucial decisions,” he said feebly. “We got a mandate to bring a better deal than the ultimatum that the Eurogroup gave us, but certainly not given a mandate [sic!] to take Greece out of the eurozone.” According to a London-based financial analyst, the proposals suggested by Tsipras were confusing “yet what we have seen is a giant step closer towards the creditors prior proposal which was subsequently rejected, ironically by Tsipras.”
“The advantages far outweigh the disadvantages,” a somber Angela Merkel declared, and the Bundestag will undoubtedly endorse her triumph in the forthcoming debate. “The country which we help,” she said without even naming Greece, “has shown a willingness and readiness to carry out reforms.” To keep Greek banks and economy afloat, just, some 82 billion euros ($90bn) will be made available, but there is no mention whatsoever of reducing the debt burden (an anathema in Berlin), extending maturity dates on existing Greek debts, or reprogramming them at current ECB interest rates for a fixed term.
This kind of “help” guarantees continuing agony. The Greeks had lived above their means before 2010, cooking the books and borrowing wantonly, but the lenders were equally irresponsible – their calculus was comparable somewhat to the millions of unviable mortgages all leading American banks had granted before 2008. In both cases the banks are protected. In America the taxpayers footed the bill. In Europe, however, Greece is still expected to stay the course, although repayment is a mathematical impossibility.
As part of Greece’s commitments, Frau Merkel added, a fund will be created to use the proceeds from selling off assets owned by the Greek government to help pay down the country’s debt “to the tune of” €50 billion. In other words, almost two-thirds of the “bailout” will be covered from Greece’s dwindling state-owned resources. It is an even bet that German-led consortiums will be happy to take advantage of the fire-sale of the port of Piraeus and all the rest.
As if to add insult to injury, Greece will be additionally required to seek “assistance” from the IMF, and to accept its continuous monitoring of the Greek government’s observance of the EU-dictated bailout terms. Tsipras had previously rejected an ongoing IMF role, rightly pointing out that its medicine is regularly resulting in worse outcomes than the condition it was meant to cure. In macroeconomic terms IMF’s assistance can be compared to the “fraternal assistance” extended by Leonid Brezhnev’s USSR and the rest of the “socialist camp” to Czechoslovakia in August 1968.
Why did Tsipras capitulate, when he had a clear national mandate to seek a better deal? “We gave a tough battle for six months and fought until the end in order to achieve the best we could, a deal that would allow Greece to stand on its feet,” he announced. “We faced hard decisions, tough dilemmas,” he said, and added, significantly, that the Greek authorities finally “assumed the responsibility of averting the extremist ambitions of the most conservative circles in Europe.”
So here’s the devil. Having won a general election last February and a referendum on July 4 on the pledge to defend his beleaguered county’s existential interests, Tsipras the Che Guevara afficionado has decided that saving the EU liberal-Stalinist postmodern project from “the most conservative circles in Europe” (i.e. UKIP, Marie Le Pen, Strache, Vlaamse Belang et al) has to take precedence, after all. Shame on him.