Oh what a difference a month can make.
Antonis Samaras, leader of the center-right New Democracy (Νέα Δημοκρατία), has been moving toward a “renegotiation” position for some time, but his latest comments about a potential renegotiation of Greece’s bailout terms today vary astonishingly little from what Alexis Tsipras, leader of the leftist SYRIZA, the Coalition of the Radical Left (Συνασπισμός Ριζοσπαστικής Αριστεράς), has been arguing all along:
Overhauling Greece’s debt deal, known as the memorandum, was also at the top of his party’s agenda, he said. “We will change the memorandum, the relentless recession cannot go on.”
He indicated that European leaders were open to renegotiating Greece’s debt deal. “Europe is changing, Greece has a chance for a fair negotiation within this climate of change,” he said.
Samaras said ND had set two conditions for joining other parties in a coalition government: securing Greece’s position in the eurozone and modifying the memorandum.
It’s a staggering evolution by Samaras, even since May. Regardless of whether SYRIZA wins on June 17, it has cleared moved the terms of Greece’s national debate.
Meanwhile, read Tsipras’s op-ed in The Financial Times from yesterday — he sounds much more like Samaras than the marching-in-the-streets radical of the first election campaign (indeed, the idea of Tsipras writing an op-ed in The Financial Times back in April would itself have been risible). It’s clear that, with even-or-so odds of becoming Greece’s next prime minister, Tsipras is looking to project an image of sober competence:
The systemic fiscal problems of Greece are, in large part, a problem of low public revenues. Myriad tax concessions and exemptions granted to special interests by previous administrations, along with a low effective tax rate on personal income as well as capital, explain much of the problem. So too does the highly ineffective method of tax collection.
Not to be left behind, former financial minister Evangelos Venizelos, the leader of the center-left PASOK (Panhellenic Socialist Movement – Πανελλήνιο Σοσιαλιστικό Κίνημα) that governed Greece from 2009 until last November, but which now polls a distant third, said earlier this week that he advocates revising the terms of Greece’s debt deal “as long as Greece has a comprehensive plan, social consensus, political unity and is willing and capable to push through wide-ranging reforms.”
All three parties are emphatic in their desire that Greece should remain in the eurozone, although Samaras has argued that SYRIZA’s election would endanger that. With Greeks ominously withdrawing deposits with greater intensity since the May vote, though, it’s not clear that any government could be able to stop a solvency crisis in the future and the European Union allows Greece literally to run out of euros.
PASOK and ND, which governed in coalition after PASOK’s government fell last November, had been seen as the “pro-bailout” parties, while SYRIZA is the largest of a group of parties — ranging from the right-wing Independent Greeks to the anti-austerity Democratic Left, from the far-left KKE, Greece’s communist party to the neo-fascist Golden Dawn — that have been primarily defined as the “anti-bailout” parties.
But that distinction, so central to understanding the May election result, is breaking down on the eve of the June elections. Although the election of François Hollande as president of France ushered in a new pro-growth, anti-austerity politics in Europe, it was last weekend’s Spanish bailout — whereby Spain will receive €100 billion from the European Central Bank to recapitalize its banks — has swung the door wide open.
In the middle of the ‘Spailout’ negotiations last weekend, Spanish prime minister Mariano Rajoy urged his finance minister to stand firm against EU demands, texting him: “Spain is not Uganda.” Indeed, Spain received the funds with surprisingly few conditions, as EU leaders have largely approve of Spain’s budget cuts and its fiscal responsibility both during Spain’s boom and during its current bust.
Greece, however, is not Spain. Greece’s exit from the eurozone may or may not launch a continent-wide crisis, but the exit of Spain — the eurozone’s fourth-largest economy — surely would, giving Spain quite a bit more leverage with the EU. Greece’s economy is not only smaller, but also subject to more corruption, in greater need of reform and less dynamic.
Nonetheless, there’s a new consensus that Greece, in its fourth year of recession, cannot achieve GDP growth anytime soon as a member of the eurozone with such harsh budget cuts: without the ability to loosen its own monetary policy, Greece has no option but to undergo a grueling ‘internal devaluation’ to lower labor costs and thereby make its economy more competitive. But a negative feedback loop has resulted from Greece’s budget cuts: austerity has depressed economic demand, which in turn has lowered Greek revenues, making Greek’s fiscal deficit even worse, necessitating both further budget cuts and additional bailouts from the ‘troika’ of the European Central Bank, the European Commission and the International Monetary Fund.
Even EU and German leaders seem willing to ease up on the demands of the second bailout’s conditions, which have veered off-track this summer anyway in the absence of a Greek government. In a bit of an EU stick-and-carrot routine, the pro-growth Hollande has called on Greece to stick to its commitments, promising pro-growth measures soon across the eurozone, while German finance minister Wolfgang Schaeuble has acknowledged the pain of austerity on ordinary Greeks.
All of which makes Greece’s choice on Sunday more narrow than they might have thought:
- Elect an ostensibly ‘pro-bailout’ government headed by the two traditional Greek parties of the past four decades on whose watch Greece has degenerated, but which have co-opted the spirit of SYRIZA’s demand that Greece’s bailout be renegotiated.
- Elect an ostensibly ‘anti-bailout’ government headed by a brash, young outsider whose demands for renegotiating Greece’s bailout will have to be nuanced so as not to spook Greece out of the eurozone altogether.
No matter what happens on May 17, it seems assured that the EU and Greece will renegotiate Greece’s path forward.
It also seems far from certain that any government can assure that Greece will also remain in the eurozone.