Greece: SYRIZA 2.0? Split looms as third memorandum passes

By Dick Nichols, Barcelona

Legislation enabling the implementation of the memorandum, covering 35 “prior actions” required of the government, was adopted by the Greek parliament on August 14, with 64 MPs voting against. Of SYRIZA’s 149 MPs, 32 voted no to the deal—including Left Platform leader Panagiotis Lafazanis, parliament speaker Zoe Constantopoulou and former finance minister YanisVaroufakis—and 11 abstained, with one MP absent.

Wouldn’t majority Greek public opinion feel, as SYRIZA’s own internal critics in its Left Platform do, that in yielding to the European establishment prime minister Alexis Tsipras and finance minister Euclid Tsakalotos also betrayed the Greek people’s 61.3% vote against austerity at the July 5 referendum?

Not if the most recent opinion polls are anything to go by. The July 24 Bridging Europe poll had support for SYRIZA at 41.2% (up from the 36.3% it won at the January 25, 2015, election). The July 24 Metron Analysis poll reported the same result, while the July 18 Palmos poll had support for the radical left coalition at 42.5%. All three polls showed support for the conservative opposition New Democracy (ND) falling to the low twenties (down by between 4.7% and 6.3%).

Under the Greek electoral system, which awards 50 extra seats to the party winning the most votes, SYRIZA would win an absolute majority in the 300-seat parliament and be able to govern alone. It presently governs in coalition with the right-nationalist Independent Greeks (ANEL).

Support for Alexis Tsipras as prime minister stands at around 60%. In a July 15 Kapa Research poll, published on the To Vima web site, the popularity rating of the Greek prime minister registered 59%, followed by 28% for Varoufakis; 68.1% felt Tsipras was the best candidate for prime minister.

The poll also said that the third memorandum agreed on July 12 had 51.5% support from those interviewed, while 72% considered it “necessary” and 70.1% felt that it should he passed by the Greek parliament.

Relief?

What explains the steady, even rising, support for SYRIZA and Tsipras in a country whose economy has again fallen into recession, whose banking system has been deliberately strangled by the European Central Bank and whose government was elected to oppose—not reproduce—austerity?

An immediate source could be relief that an end may be in sight to the financial strangulation and capital controls that have been in place since June 29. These have speeded the return to recession and, according to the August 10 Kathimerini, were largely responsible for job losses of more than 16,000 in July alone.

However, support may spring most of all from the feeling that in half a year of warfare with the “Troika” (ECB, European Commission and International Monetary Fund) the Tsipras government has done everything humanly possible to force an acceptable deal from the powers-that-be. The final result may be very bad, but it is broadly felt to be the best that any Greek politician or party could have got.

According to the July 14 New York Times: “Many Greeks seem to have no trouble separating their distaste for the deal from their feelings for Mr. Tsipras. Analysts say he would easily win re-election even now, with many Greeks seeing him as a man who gave everything he had to make things better, even if he did not succeed.”

What’s more, with SYRIZA and not Greece’s corrupt old parties running government, a broad sentiment presently seems to exist that there is some chance that the new memorandum will be implemented—to the best of SYRIZA’s ability within the constraints it operates in—in a way that puts the concerns of average Greeks ahead of the rich, particularly the oligarchs.

Tsipras’s message on Greek public TV a day after returning from defeat in Brussels was: “We’ll ensure the burden is distributed with social justice. This time, those who got away in the past will shoulder the burden.” He added that Greece needs “radical reforms that benefit society and not the oligarchs who led us here”.

At the same time, over the past half year it has become increasingly clear to the still-large majority of Greeks who want their country to remain in the Eurozone that unconditional opposition to austerity must—given the present balance of political forces in Europe—lead to “Grexit”.

While the Eurozone is run according to the moralising “debts-must-be-paid” criteria of German finance minister Wolfgang Schaüble and the conservative majority of Eurozone member-states, an isolated rebellious country pledged to fight austerity will sooner or later be expelled from the euro club.

In this context, the alternative policy of SYRIZA’s Left Platform—outright rejection of the bailout—is associated with “Grexit” and a return to the drachma. This impression was strengthened by an August 3 report in the daily To Vima, which claimed that Lafanzanis had called for Tsipras to accept an offer from Schaüble for a controlled Grexit. The report claimed that the prime minister had rejected this course on the grounds that SYRIZA had no mandate for it.

In sharp contrast with the present mood of support for the Tsipras government, within SYRIZA itself rank-and-file feeling runs against its volte-face over the memorandum. In July the 109 out of 201 vote of its Central Committee against the deal was paralleled by 60% rejection of the deal by the radical left coalition's two main regional committees, covering Athens and Thessaloniki.

Immediate points of conflict

As the detailed content of the memorandum becomes more widely known and begins to be applied, it is very hard to see how the SYRIZA-led government can maintain its present level of support and Tsipras his level of popularity.

Most crucially, it is impossible to see how the ruling coalition will avoid conflict with important sections of its own social base, originally won over between 2010 and 2014 by its opposition to the pro-austerity governments of the Panhellenic Socialist Movement (PASOK) and ND.

Confrontation looks inevitable over SYRIZA’s previous “red-line” issues, such as pensions, sales tax, privatisations and labour rights. The 35 “prior actions” adopted on August 14 include the immediate privatisation of regional airports, the ports of Thessaloniki and Piraeus, and the electrical power grid operator ADMIE.

Other points of potential conflict abound. One will surely be proposed measures to liquidate non-performing loans (including mortgages), which at the end of 2014 were a huge 34.3% of all loans, and with a face value of €95 billion. Any move to a “more efficient” eviction system would seem certain to provoke deep resistance—maybe bringing about a Greek version of Spain’s Mortgage Victims Platform (PAH).

This scenario seems also likely because the memorandum does not envisage the creation of a public toxic asset management company (“bad bank)”, where non-performing loans could be parked and gradually resolved according to the capacity to pay off debtors. The Troika proposes instead an accelerated process of eviction and business liquidation via “adopting appropriate legal instruments to establish specialised chambers both for household and corporate insolvency cases”.

Another sector within which SYRIZA won more recent support—small farmers (12.5% of the population)--now faces the removal of its fuel subsidies. Moreover, a hated tax that SYRIZA had previously pledged to remove, the Consolidated Tax on Property Ownership (ENFIA in its Greek acronym), will remain. It falls on anyone owning property, independent of their present income, including around 2 million unemployed or inactive people.

According to Varoufakis in a detailed August 17 annotation of the memorandum:

Further points of conflict

These cuts will arrive after a year during which the price of food has already risen 13%, because of sales tax hikes. In the category of pain to come later are cuts to existing pensions (in addition to immediate restrictions on early retirement) and the removal of sales-tax concessions on the Greek islands (not demanded, by the way, of islands belonging to other EU member states, such as the Canaries or islands in the Baltic Sea).

SYRIZA’s popular and successful 100-instalment plan for the payment of unpaid back taxes, which allowed poorer families and small businesses to gradually tackle their tax arrears, will be discarded, while present limits on how much back tax can extracted from tax debtors will be removed.

One of the most important areas of attack will be on labour rights (“advancing labour market flexibility”). Varoufakis comments:

The recent death from sheer exhaustion of young Ukrainian hotel worker on the island of Zakynthos—due to 12-13 hour days with no time off--dramatises the plight of Greece's most exploited workers. Nonetheless, also in the cross-hairs of the Troika are existing “restrictions” on collective dismissal as well as rights to industrial action and collective bargaining.

General memorandum approach

The most important general feature of the 29-page memorandum document is its obsessive detailing of tasks and commandments for the Greek government: the goal is to reduce as much as possible the “wriggle room” available to Athens. At the same time, the release of loan funds will depend strictly on the government’s compliance, quarter by quarter, with memorandum targets and “conditionalities”.

The main assumption of the memorandum’s approach is that if the Greeks are given any chance to misbehave, they will. Indeed, before the German government finally expressed its support for the memorandum text, it was floating the idea that the bailout sum should be subdivided into smaller amounts, with their payment made conditional on meeting even more stringent, more frequently occurring, deadlines.

The Athens government has been made to surrender basic powers in key areas of economic and social policy making to Greece’s creditors. For Varoufakis, “Greek sovereignty is suspended as long as the nation is in debt bondage” and “the Troika considers all legislation to be subject to its approval”.

The European Union's recently rebellious south-eastern colony is to be policed by the “Quadroika” (or “Quartet”), the hated Troika institutions plus the European Stability Mechanism (EMS), the European Union’s bail-out fund.

(The IMF is still considering whether it can, under its own guidelines, participate in the bailout of a country whose debt, by its own calculations, is unsustainable. However, with the SYRIZA-led government now committed to the memorandum, discussion of debt relief for a humiliated Greece now becomes thinkable.)

The key agencies created or remodelled to conduct the memorandum's economic administration will be under Quartet control. These are the Bank of Greece, the Hellenic Financial Stability Fund (HFSF), the statistical agency ELSTAT, the General Secretariat of Public Revenues and the Hellenic Republic Asset Development Fund (HRADF). All are to be “independent” (of accountability to the Greek parliament and state).

The memorandum program will also sideline the Greek legal system where necessary. It states that the Greek government will “monitor fiscal risks, including court rulings, and will take offsetting measures as needed to meet fiscal targets”. That is, successful legal and constitutional appeals against memorandum measures—as has happened in Portugal—will be neutralised before they happen. In addition, powers to sideline the potentially troublesome Hellenic Court of Auditors have been included in the document.

Particularly telling (and sickening) is the memorandum’s plan for Troika overlordship of the Greek banking sector. With the country suffocating under capital controls imposed as a result of a Troika-induced bank run and the Greek banks fighting for survival under their pile of bad debt, the Troika has taken over powers giving it direct control of banking sector rescue.

The memorandum document says: “No unilateral fiscal or other policy actions will be taken by the [Greek] authorities. All measures, legislative or otherwise, taken during the programme period, which may have an impact on banks’ operations, solvency, liquidity or asset quality should be taken in close consultation [with the Troika].”

At the same time, “The Government will not intervene in the management, decision-making and commercial operations of banks, which will continue to operate strictly in accordance with market principles”.

The recapitalisation of the banks will also involve attracting “international strategic investment to the banks and return[ing] them to private ownership in the medium term”, doubtless by handing over bank shares, €40 billion of which are currently owned by the Greek state, “to private speculators at a fraction of the price taxpayers paid” (notes Varoufakis).

To reduce parliamentary oversight of this process, it will be entrusted to Troika-controlled institutions, sidelining the Greek ministry of finance. They, along with the banks, will therefore be in charge of the restructuring of entire sections of the Greek economy. If this turns out to be the case, it is hard to see how the Greek oligarchy will, as promised by Tsipras, be paying its fair share of the memorandum bill.

An example of the kind of concessions the government feels compelled to make to the oligarchy came on Auigust 1, when economics minister Giorgos Stathakis told the Union of Greek Shipowners that “the preservation and strengthening of the fleet under the Greek flag and of the shipping companies in Greece is a priority ... it is an essential prerequisite enabling the Greek commercial fleet to keep occupying a top place in the industry.”

The statement was interpreted by the industry as an undertaking not to make the shipping tycoons pay tax, to avoid which most shipping companies had taken out provisional registration of their fleets in Cyprus.

Privatisation

The memorandum says: “A new independent fund (the ‘Fund [HRADF]’) will be established and have in its possession valuable Greek assets. The overarching objective of the Fund is to manage valuable Greek assets; and to protect, create and ultimately maximise their value which it will monetise through privatisations and other means.”

This last arrangement will compel Greece to maximise the commercial value of its family silver and then, if this value cannot be realised in any other way, sell it with the “compensation” that it can keep an eighth of the proceeds. Varoufakis’s critique is at its strongest here.

Taken together, these measures, including business-friendly deregulation, must help Greek and foreign big capital consolidate its position as against that of small business and the family firm. Varoufakis calls the memorandum's regulation agenda:

As for the admittedly necessary better regulation of Greek land, the way this is envisaged in the memorandum is,

However, Stathis Gourgouris, the director of the Institute for Comparative Literature and Society at Colombia University, has a more positive view of the HRADF fund. In a Real News interview in early August he said:

The struggle over Greece's public assets will be the acid test of how much wriggle room the government can create within the straitjacket of the memorandum.

Positives?

What positive aspects are there to the memorandum, if any?

The document talks about many “goods”: job creation and guaranteed employment, development of agricultural cooperatives by the young unemployed, a guaranteed minimum income, universal health care coverage, a “genuine social safety net”, a “modern state and public administration”, a “genuine growth strategy” and a “war on corruption”.

However, by contrast with its sadistically precise austerity measures, what plans and with what funding such progressive projects are to be introduced is not specified. The one precise “good” the document specifies is a tax on TV advertising (already introduced by SYRIZA to the howls of the Greek media barons). Given the draconian restrictions on public spending imposed under the bail out, it is hard to avoid the suspicion that funding on such programs, if implemented, will largely derived from cuts to other programs.

As for the “war on corruption”, Yaroufakis notes that the most successful weapon in the SYRIZA government's own anti-corruption fight was the ministry of finance's Financial and Economic Crimes Unit (SDOE in its Greek acronym), which is to be disbanded. According to the former finance minister:

Varoufakis's assessment of the likelihood of a serious war on corruption under the memorandum is stark:

Getting any positive aspects of the memorandum implemented costlessly (or at low cost) will be a struggle, for Greece's social movements, which will have to pressure the SYRIZA government to stand up to the Troika as much as it can.

The possibility of such struggle was canvassed, with considerable caution, by Gourgouris:

The problem, of course, is whether “this European Union business” can ever be considered “settled” when the “Quartet” will be policing every last move of the Greek government.

Recovery?

How will this recipe of increased austerity then create growth? A short briefing note from the ministry of finance, citing the memorandum 's lower targets for primary budget surplus (before interest repayments), claims that “there will be a mild fiscal adjustment, which will allow the economy to grow”. It claims that “the current agreement reduces fiscal surpluses for the next three years by 11% of GDP [compared to the second memorandum], helping to avoid €20 billion in new austerity measures. As a result there will be no new austerity measures in the forthcoming period.”

Yet the Troika program still involves a “fiscal adjustment” of up to 5% of Greek GDP, when the economy is expected to slump by at least 2.3% this year and 1.3% next year. It may even be worse. In July, the index of manufacturers' purchases (of inputs to production) suffered its biggest ever slump. Moreover, achieving the target of a 0.25% primary deficit for 2015 will require the SYRIZA-led government to increase cuts and/or raise taxes immediately.

According to Jonathon Loynes of Capital Economics, cited on The Guardian web site, “recent survey evidence suggests the economic impact of capital controls has been catastrophic, leading to a collapse in economic activity to levels way below those seen even when the economy was contracting at annual rates of 9% in 2010-11”. Greek government estimates put the cost of the controls at between €1.75 billion and €3.1 billion a week.

Economist Peter Doyle, a former IMF senior manager, commented: “As far as I can tell, all they have done is adjust the headline primary surplus targets for the weakness in the economy that is already there, and they have done no more than that.”

Costas Lapavitsas, economist, SYRIZA MP and supporter of Grexit, commented:

Yarouvakis put his finger on the ministry of finance's wishful thinking in these words:

Little wonder Varoufakis told BBC Radio 1 on August 12:

For the NIESR too, the primary surplus targets imposed by the memorandum could become self-defeating, especially as its study suggests that sales tax increases are likely to hit the economy more than estimated to date. According to researcher Jack Meaning: “In order to meet these targets, the Greek government will have to take demand out of an already depressed economy.”

Conclusion

Does this memorandum, the basic goal of which was to destroy the SYRIZA-led government as an anti-austerity force, then have no chance of success? It surely says a lot that finance minister Tsakalotos sounded only conditional optimism when announcing it:

Yet, with the best will in the world Greece's “economic actors” that matter—capitalists with funds to invest—require three conditions to be met before they think about risking their money (Greece's investment to GDP ratio is presently 12%, fourth lowest of the 124 countries ranked in World Bank statistics).

These conditions are: a foreseeable increase in final demand, a restablilised banking system able to extend credit; and political and social stability. Fulfilling two of these conditions is possible, if still unlikely, while fulfilling all three is next to inconceivable.

The easiest demand to fulfil is the recapitalising of the Greek banking system. What the ECB has deliberately sabotaged it can readily unsabotage, especially if it makes Greece eligible for the funds available under its quantitative easing program.

The biggest contribution to restoring demand would come from a massive public debt cut, estimated at involving 30% of Greek GDP by a recent IMF study, and 100% by a recent National Institute of Economic and Social Research document (Greek public debt to GDP presently stands at 176% and is anticipated by the IMF to reach 200% in the absence of any restructuring).

Some spokespeople of the German government, which wants the IMF to participate in the Greek memorandum, are now no longer simply repeating the Wolfgang Schaüble line that debt relief in the EU is “unlawful”. However, the thought that Angela Merkel and co., having fed their electorate a diet of lies about lazy Greeks sponging off the hard-working German taxpayers, can turn into convinced champions of Greek debt relief is hard to envisage.

The most difficult hurdle for the capitalist class is that of guaranteeing social stability, and of preventing the anti-austerity 60% from the July 5 referendum from finding organised political expression in a force that continues to embody SYRIZA's original message.

SYRIZA 2.0?

The signs are not good for the powers-that-be. While it remains to be seen what resources the Greek government can bring to bear against the humanitarian emergency and to soften the impact of specific cuts, the economic, social (and political) crisis is so deep and pervasive that the creation of a SYRIZA 2.0 could readily see it seriously challenged.

It should not be forgotten that by the end of 2016 the Greek economy will be 30% smaller than at its 2007 peak, and 7% smaller than when it joined the euro in 2001.

In this context, an August 12 Eurozine article (“The Brussels diktat”) by Étienne Balibar, Sandro Mezzadra and Otto Wolf outlines what is necessary for the SYRIZA government to survive and retain a progressive role:

On August 13, Left Platform leader Lafazanis publicly called for the creation of a movement to satisfy “the people’s desire for democracy and social justice”. According to the statement, called “No to the new bailout – A call for struggle and popular mobilisation throughout the country”, Lafazanis and 11 other signatories want to promote the “political and social formation of a broad, Panhellenic movement” and “the creation of struggle committees against the new bail-out, austerity and the county’s tutelage”.

Whatever the final timing, and whether the Left Platform and other left forces take part in SYRIZA's forthcoming special September conference, the momentum towards split presently looks unstoppable.

The Left Platform's alternative to acceptance of the memorandum is to reaffirm the program on which SYRIZA won the January 25 election, and advancing measures necessary to make it possible, chiefly bank nationalisation, capital controls and preparedness to exit the euro.

If it becomes the core of a new anti-austerity force at the early election, which seems increasingly certain, then the Greek people will have a clear choice that was not there at the last (January) poll: either inside the euro and accepting austerity even while fighting to reduce it, or outside the euro but with all the unforeseeable costs of Grexit.

Lafazanis’s call chimes in with the mood in important parts of the Greek working class, such as the Piraeus waterside workers. According to an August 11 Real News interview with Giorgos Gogos, SYRIZA central committee member and union organiser in Piraeus: “We’re going to start organising ourselves to fight against these measures [port privatisation]. It’s very strange because a left party’s in power … it’s very contradictory. But the goal remains the same—these measures should not be implemented.”

The challenge before the anti-austerity currents within and outside SYRIZA is enormous. The greater and more unified the force they can build, the greater the pressure they can exercise on those many SYRIZA members still caught between hatred of the memorandum and loyalty to the SYRIZA leadership.

The greater, too, will be the ongoing crisis in Europe, including of the Eurozone. The June 12 acceptance of the memorandum by the SYRIZA-led government showed that, after six months of struggle on a European scale, the forces of austerity and neoliberalism are still much stronger than those fighting for a different Europe of social rights and democracy.

However, this defeat is not the end of the war, and the ongoing struggle in Greece will continue to have a huge impact on the continent-wide fight.

[Dick Nichols is Green Left Weekly’s and Links International Journal of Socialist Renewal’s European correspondent, based in Barcelona. An earlier, shorter version of this article has appeared in Green Left Weekly.]