The Greek people could not have been much clearer in their rejection of austerity: a national referendum delivered a decisive ‘No’ vote and austerity conditions put forward by creditors were irrefutably rejected.
Agree or disagree, this was their choice. And in a fair and freely democratic arrangement, new negotiations should have delivered a less stringent range of creditor conditions alongside debt restructuring – or otherwise an exit from the European single currency altogether.
Instead, put together in desperate talks over the weekend, the new deal is equally austere and perhaps even more deplorable. The acceptance of Alexis Tsipras is a telling indictment of the Greek negotiating position. The European project is an economic and political trap for Greece: Grexit is politically unpalatable and the near-term economic pain is inescapable, stay or go.
The new proposals are both undemocratic and humiliating, not to mention threatening to deepen the economic depression in Greece.
The deal will be comprised of €86 billion from the European Stability Mechanism (ESM) and the International Monetary Fund (IMF), €35 billion European Union funding, and a €12 billion bridging loan to pay down European Central Bank debt.
Conditions for receiving this funding include increased taxation, cuts to government pensions, and a substantial privatisation package expected to raise €50 billion. This privatisation cash will be overseen by an internationally-controlled trust because the creditors do not trust the Greek government to adhere to the austerity conditions – a candid admission of how hostile relations have become.
Germany, France and its partners have sound reasons to enforce these conditions. Ultimately they believe that with these reforms in place they stand a better chance of being repaid, as well as avoiding the disruption that would come with a Grexit. Prior to this deal, Greece had received two bailout packages totalling €240 billion. The creditors cannot afford another episode.
Except that’s the problem.
The pace of austerity does not have democratic support from the Greek people. This inevitably risks political unrest and instability down the line. Moreover, monetary union is inflexible to Greek needs. The country is a small cog in a much larger economic machine, where the powerhouses – Germany and France – come first. And then there are the fundamental issues at the heart of the European project: universal treatment for idiosyncratic countries.
Ultimately, then, there will be further summits, further negotiations and further unnecessary hardship for the people of Greece.
But perhaps there is silver lining for Greece – and for Eurosceptics.
The negotiations have exposed cracks in an increasingly fragile institution. This was no more apparent than in the differences between the German and French negotiation stances. The Germans, long fed up with bearing the largest burden in bailout packages, flirted with the idea of a temporary Grexit for five years, before then returning Greece to the Euro. This was quietened as the French pushed for European solidarity and continued integration. Clear differences in position will not dissipate over night.
Another positive sign is the prevailing unanimity of disapproval for the handling of this crisis by both the Left and the Right. On the Left, the growth of support for anti-austerity parties suggests Greece may be a forerunner for more serious political and economic disagreement across other heavily indebted European countries. On the Right, Eurosceptics are using the Greek experience to highlight abject failures in the economic fundamentals as well as raising questions of democracy and national sovereignty.
The Greek experience could therefore provide much needed impetus for change. Of course, many will argue that this has appeared the case for the last few years, and the European project has remained intact. But there is a sense that this time it is different.
For all the talk of unemployment, growth and debt over the last few years, it all seemed a little impersonal and a little matter of fact. The last few weeks, however, have cast light on the personal tribulations that come with severe economic depression. And the EU’s handling of these struggles has appeared insensitive and at times callous.
Continued criticism on all sides is likely to drive a swing in support from EU membership to exit. With a referendum on the horizon in Britain, this may make things very interesting indeed come 2016.
Info Angle. 