Approval given for austerity package despite many government members voting against bill amid violent Athens protests.
Athens, Greece – As details of Greece’s new deal with creditors emerged earlier this week, many Greeks felt that they had “handed the keys to the country over to the Germans,” as radio journalist Yiorgos Trangas summarised.
Yet by early Thursday, July 16, the deal with its accompanying new austerity measures had been passed in a stormy session of parliament by a majority of 229 deputies in the 300-seat legislature, stretching across five parties in both the ruling coalition and the opposition.
The passage of the bill unlocks the process of approval for an 86bn euro ($94bn) third financial aid package for Greece, but has crippled the ruling left-wing Syriza party with 39 defections – almost a third of its members of parliament – leaving the party deeply divided.
“We have an anti-austerity majority for the ‘good’ and ‘innocent’ bills and a majority which bears the national responsibility for the ‘difficult’ ones,” Venizelos said.
Scheauble hadn't intended to humiliate Greece. Greece humiliated herself by being totally unreliable and irresponsible.
Even Prime Minister Alexis Tsipras, who negotiated the deal in a marathon, 17-hour session in Brussels, was uncharacteristically apologetic.
“I’m not going to tell the Greek people that I shall come bearing a success story,” he said in a nationally-televised interview on Tuesday.
“This policy is not helpful to us, but we shall do what we can. People need to understand the alternatives. We reached the end. One alternative was what I did … the second was disorderly default and the third was consensual exodus from the euro,” said Tsipras.
Tsipras has said he was “blackmailed” into accepting the deal. This stance has raised serious questions about whether Syriza intends to implement the bill.
“We need the prime minister to tell us if his government will undertake the responsibility of this bill and the execution of all that it contains,” Venizelos said.
Tsipras did, in fact, bring home something defensible.
Greece is being offered 86bn euros ($94bn) to finance the government for three years. For the first time, its creditors – the European Commission, European Central Bank and International Monetary Fund(IMF) – recognise that the spending cuts they are asking for will trigger a recession, so they are offering 35bn euros ($38bn) for development to offset the ill effects.
Tsipras is also bringing home a promise to start a discussion on the sustainability of the Greek debt in the autumn. Creditors had promised to do this in 2012, but never did.
“Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far,” warned the IMF in a report on the Greek debt published on Tuesday.
It calls on Greece’s European creditors to offer Greece a 30-year “grace period” before asking it to start repaying the principal on its 321bn euro ($351bn) debt. Greece should then be given at least 40 years to repay it, the IMF has said.
Hardliners say the deal should be rejected because of austerity provisions Syriza had promised never to succumb to.
For instance, Greece has been told to extract another 1.8bn euros ($1.97bn) a year from the economy through VAT (or consumer tax). Tsakalotos said he would achieve this by more efficient collection and by extending VAT to private education.
Panayotis Lafazanis, leader of Syriza’s Left Platform, disagrees.
“The changes to VAT mean the Greek people will pay an extra 2.4bn euro ($2.6bn) a year … while 850mn euros ($929mn) a year will be lost from main pensions as people are asked for larger co-payments to national health,” Lafazanis said.
Deputy Finance Minister Nadia Valavani, responsible for tax collection, resigned on grounds of principle. In a letter she wrote on Monday, while talks were ongoing, but made public on Wednesday, she called the measures “stillborn”.
Like many Greeks, Valavani believes that Germany’s goal was “the complete humiliation of the government and the country”.
“Scheauble hadn’t intended to humiliate Greece,” said psychologist Alexandros Ioannidis. “Greece humiliated herself by being totally unreliable and irresponsible.”
He believes Tsipras’ five month-long negotiations were “a way of hiding his total unpreparedness and improvisation.”
Like many Greeks, particularly educated urban, middle class professionals, Ioannidis is furious with Syriza for toppling the previous conservative government, which had managed to produce two balanced budgets and primary surpluses, and was selling debt successfully on money markets for the first time in four years.
Ioannidis believes Syriza’s problem is not political but psychological.
“The well-known Greek tendency of always blaming others for one’s grave faults is simply unforgivable, and in psychiatric terms is simply paranoid,” Ioannidis said.
Accelerated political decrepitude
Tsipras is now in danger of being abandoned by key constituencies.
His rise to power has been partly backed by the public sector, the country’s largest, best-paid and best-organised workforce, which still enjoys lifelong tenure.
At one billion euros a month, it is also the government’s second-biggest expense after pension subsidies, absorbing a fifth of the budget.
Even though he made good on a promise to hire back 9,000 state employees sacked by the previous government, Tsipras has now suffered two, one-day strikes by ADEDY, the state workers’ federal union.
The union has managed to make preservation of its privileges synonymous with standing up to Germany, which Tsipras’ left-wingers support.
“There is a prevailing theoretical difference between those who believe that all disagreements can be solved through the European legal framework, and those who believe that the legal framework is a new colonialism under the leadership of Germany,” said Yannis Schizas, leader of the Radical Ecologists, one of Syriza’s leftist components whose support Tsipras has lost.
“These colonial forces want to reduce the southern states, and especially Greece, into the status of a second class country,” Schizas said. By and large, Syriza’s left wing sees a return to the drachma as a return to sovereignty.
Like Lafazanis, Schizas predicts an unimplementable law. “There will be resistance on each individual measure,” he said. “Second, there will be an invisible economy … More tax evasion and more black economy – that will be the result.”
Ioannidis thinks that is nonsense.
“Of course the new deal can only be implemented with enormous difficulty,” he said.
“But Scheauble is only partly to blame. The main responsibility is due to the incapacity of the Greek political elite of the last five or six years, but also to the extreme immaturity of the Greek people, who did not understand that the fake prosperity they enjoyed would come to an end eventually, which it did,” Ioannidis said.
“And now they want it back, at whatever cost.”