Can Europe Make It?

Greece and the eurogroup: capitulation or breaching austerity's dam?

George Papandreou cancelling his referendum was a capitulation. Tsipras and Varoufakis achieving new space and flexibility and four months to achieve a genuinely new approach was quite an achievement.

Kirsty Hughes
26 February 2015
Greeks rally in support of their new government's negotiating stance.

Greeks rally in support of their new government's negotiating stance. Giannis Papanikos/Demotix. All rights reserved.As eurozone parliaments vote on the Greek reform deal agreed by finance ministers earlier this week, there is much debate as to whether, and what, Greece won or lost.

Did the new Greek government really destroy the trust of their eurozone counterparts, only to then capitulate on a deal, showing austerity still rules? Rather, is there now some hope for those impoverished or unemployed or otherwise hurt by the enforced austerity of the euro-crisis years? Is there more hope too for democracy across Europe? Or has Greek democracy once more been trampled under foot by eurozone finance ministers, the IMF and the ECB?

Who blinked first?

What came out of the eurozone finance ministers deliberations was, quite simply, a compromise deal between Greece and the other 18 eurozone member states. While media pundits brushed up on their understanding of game theory, the days leading up to this deal looked in fact like a classic bargaining approach from the Greek side which would be familiar to any trade union leader: you put your maximum case (with relevant threats – of strikes or work-to-rule etc.), the other side puts theirs, and unless one side is totally weak you compromise somewhere in between – where exactly in between depending both on your bargaining strength and your bargaining skill.

That Yanis Varoufakis, as Greece's finance minister, with the intervention and backing of Alexis Tsipras, Greece's Prime  Minister got some significant compromises for Greece, while not achieving everything Syriza first asked for, is a considerable achievement – since Greece's strength compared to 18 other eurozone member countries is hardly considerable. Indeed, since the global economic crisis broke in 2007, followed by the intense eurozone crisis from 2010, the power in the eurozone group has been held by creditor member states and institutions – notably Germany but also Finland, Austria and others –  together with the European Central Bank (ECB), and the IMF. Greece, Portugal, Ireland and Cyprus have been dictated to throughout these years by the troika of the EU/European Commission, ECB and IMF.

Some of this one-way quasi-colonial rule has been only too public – not least the humiliation of former Greek Prime Minister, George Papandreou, forced by Angela Merkel followed swiftly by then French President Nikolas Sarkozy to withdraw a promised referendum at the end of 2011.

Real change or papering over a climbdown?

Some analysts rushed to argue that Greece had lost, any changes agreed being purely cosmetic – such as now referring to the troika as 'the institutions' (see for example Reuters' analysis). Others, some in great detail, showed just how hard a battle had been fought and the space and concessions that had been opened up as a result (see Norbert Haering's excellent overview).

Greece did indeed compromise. The bailout has been extended for four months with a continuation of many, indeed most, of the reforms in the bailout programme.

But Greece also secured a number of things. Greece now has space to negotiate and argue for a lower primary budget surplus – the eurozone ministers allow this to be discussed, no longer just imposed at 3-4.5% (increasing, as was the plan, from this year to next). Varoufakis and Tsipras have a fresh chance to argue for the 1.5% they have said makes more sense.

Greece got a recognition of the fact that it is agreeing this four month deal as a 'bridge' to a new deal – one where the Greek government has been clear it will negotiate for a major debt-restructuring to allow debt payments linked to growth, and policies that will promote growth. How successful Tsipras and Varoufakis will be in that negotiation over the next four months is the key question - but that will be the moment to judge whether the Syriza government  has delivered on its promises.

Greece achieved a compromise on privatisation – agreeing to continue with ones currently under way but allowing it space to reflect on future privatisations. This is not small beer, it is a significant crack in the eurozone's (and the wider neoliberal) ideological attachment to privatisation which has been at notably high levels across southern Europe in recent years as a direct result of troika imposed policies.

Greece also got agreement that it will spend more on its internal humanitarian crisis – on medical care, on the poor and unemployed – though with money saved from elsewhere. There is, of course, no acknowledgement in the finance ministers' statement that the troika measures caused this humanitarian crisis; but that the eurozone is belatedly, even at the margins, admitting that the humanitarian crisis, the tearing apart of Greece's social fabric, needs to be tackled, and with funds, is another important crack in the austerity dam.

There are many other examples and details. Greece, again significantly, got to put its own new list of reforms forward – accepted by the European Commission, the ECB and IMF (with some grumbling from the latter's boss, Christine Lagarde), a list then accepted by eurozone finance ministers.

In essence, in a few short weeks, the new Syriza government has taken Greece from being a passive recipient and implementer of, in many cases deeply destructive, austerity policies to being a country that has regained some – albeit not a full – say in its reforms, in its approach to its country's social, economic, political and humanitarian crisis, and in its future management of its debt.

It is very hard to see how this can be summarised as failure, capitulation or a rapid U-turn. George Papandreou cancelling his referendum was a capitulation. Tsipras and Varoufakis achieving new space and flexibility and four months to achieve a genuinely new approach was quite an achievement.

It was never likely that the new Greek government could overthrow the entire neoliberal economic ideology that has driven the eurozone's approach to its crisis in the last five years and more in the space of a few weeks – but that it has made some first dents in it is clear. In one striking comment, in an interview with the Irish Times this week, Varoufakis explained that the eurogroup finance ministers were not even used to discussing macro-economics in their meetings: "One of the great ironies of the eurogroup is that there is no macroeconomic discussion. It’s all rules-based, as if the rules are God-given and as if the rules can go against the rules of macroeconomics.. I insisted on talking macroeconomics.”

Trust – broken by whom?

Amidst the intense bargaining of the last weeks, tough words have been spoken on all sides. Accusations of an imminent breach of trust came in particular from the chair of the eurogroup finance ministers, Jeroen Dijsselbloem, who talked of the final agreement produced being the start of "rebuilding trust", while German finance minister, Wolfgang Schaeuble's unconcealed anger at Yanis Varoufakis' ‘Trojan horse’ approach added further sparks and heat to the discussion. These accusations seem to be in part to do with Greece's statements on its debt obligations but also to do with the way finance minister Varoufakis has often taken the debates onto the public stage – including through his first whirlwind tour of EU capitals.

Yet without such a shaking up of the terms of the debate, it is indeed hard to see how the new Greek government could have achieved the compromises it did. If there had only been behind-the-scene negotiations in the eurozone finance ministers' group, discussions would have followed the well-worn tracks of the last several years.

The part-public nature of the debate made it more political, more geopolitical (with the US putting pressure on both sides to come to a compromise – the US surely not needing to see any more political and economic instability in the eastern Mediterranean), and more transformatory.

But the trust question surely goes much wider than that. Where is political trust in the EU, if democratic elections do not produce policy change? And what has happened to trust in European ideals and goals of peace, prosperity and solidarity in an EU, where youth unemployment is over 50% across large swathes of southern Europe? It is surely one of the most shocking elements of the euro crisis, that the EU's leaders have looked with such equanimity on the destruction of hope for so many of the EU's younger generations.

The fact that any accusations of the Greek government breach of trust came from the other eurozone finance ministers rather suggests how little challenge this powerful group has faced in recent years – either from fellow politicians or from the international and European media – in terms of their handling of the crisis, and their betrayal of central European ideals through their equanimity in face of such socially, politically and economically destructive levels of youth (and adult) unemployment.

Where next?

The extended four-month bailout for Greece, and the accompanying reforms' deal that must now be implemented, is just the first stage in what will be a long and tough set of arguments and negotiations.

What Tsipras and Varoufakis have achieved is not only a short if vital breathing space but crucially the start of a challenge to austerity in Greece and across the EU. The challenges for the next stage are much bigger: producing an agreement that allows genuinely growth-oriented policies, including allowing, pace Keynes, demand to grow, and policies that tackle not worsen inequality and poverty, will require more than just the levels of bargaining skill shown by Greece so far.

But in exacting some compromise out of the EU eurogroup, the new Greek government in the shortest of time, has created some hope and some revitalisation of democracy in and beyond Greece's borders, at a moment when it has never been needed more.

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