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29/09/2016

Tsipras faces Syriza revolt

Euro & Finance

Tsipras faces Syriza revolt

Alexis Tsipras on 13 July [The Council]

Greece’s leftwing Prime Minister Alexis Tsipras faces a showdown with rebels in his own party on Tuesday (14 July), furious at his capitulation to German demands for one of the most sweeping austerity packages ever demanded of a eurozone government.

Just hours after a deal that saw Greece surrender much of its sovereignty to outside supervision in return for agreeing to talks on an €86 billion bailout, doubts were already emerging about whether Tsipras would be able to hold his government together.

The terms imposed by international lenders led by Germany in all-night talks at an emergency summit obliged Tsipras to abandon promises of ending austerity.

Instead, the Greek premier must pass legislation to cut pensions, increase VAT, clamp down on collective bargaining agreements, and put in place quasi-automatic spending constraints. In addition, he must set €50 billion of public sector assets aside to be sold off under the supervision of foreign lenders and get the whole package through parliament by tomorrow (15 July).

>>Read: Eurozone reaches ‘laborious’ tentative deal on Greece

Tsipras himself, elected five months ago to end five years of suffocating austerity, said he had “fought a tough battle” and “averted the plan for financial strangulation”.

But to get the accord through parliament by Wednesday’s deadline, he will have to rely on votes from pro-European opposition parties, raising big questions over the future of his government and opening the prospect of snap elections.

Leftwing rebels in the ruling Syriza party, and his junior coalition partner, the right-wing Independent Greeks party, indicated they would not tear up election pledges that brought them to power in January.

A meeting of the Syriza parliamentary group on Tuesday morning could see Energy Minister Panagiotis Lafazanis and Deputy Labour Minister Dimistris Stratoulis sacked over their opposition to the bailout.

Lafazanis, who leads the radical left faction in Syriza party, made it clear that he and his like-minded far-left colleagues would not vote for the deal on Wednesday.

He also urged today (14 July) Tsipras to “return” the deal back to the EU partners who treated Greece like being “their colony”.

“This deal is unacceptable […] The so-called partners and first of all the German establishment, treated our country as being their colony”, he said, adding that they were “brutal blackmailers”.

Nikos Chountis, a former MEP and current alternate foreign minister for European affairs, resigned yesterday (13 July) from his post saying it was impossible for him to vote in favour of such a deal.

“Now we need to make a plan to exit from the eurozone,” Syriza MP Costas Lapavitsas told The Guardian.

Syriza has 149 seats out of 300 in the Greek parliament, while its junior coalition partner Independent Greeks party 13. The main opposition center-right New Democracy has 76 MPs, centrist Potami and far-right Golden Dawn 17, Communists (KKE) 15 and the Pan-Hellenic Socialist Movement (Pasok) 13.

Syriza MPs who are expected to vote against the austerity measures may reach 40, while the leader of Independent Greeks, Panos Kammenos, said yesterday that he opposed the Eurozone deal without making clear though if he and his MPs would vote for or against it.

KKE and Golden Dawn are expected to vote against it and in favour of the deal are the Potami, Pasok and New Democracy.

Varoufakis exposes Tsipras

The former finance minister, Yanis Varoufakis, called the new EU deal both “catastrophic” and “untenable”.

“This has nothing to do with economics. It has nothing to do with putting Greeceback on the rails towards recovery,” he told ABC, Australia’s public broadcaster. “This is a new Versailles treaty that is haunting Europe again, and the prime minister [Alexis Tsipras] knows it. He knows he’s damned if he does and he’s damned if he doesn’t.”

Varoufakis also revealed yesterday that even before the referendum and after Tsipras’s order, a “Grexit emergency team” was formed in order to prepare the country take the necessary measures in case EU partners pushed Athens out of the Eurozone. 

“We should be ready to face an emergency in case Wolfgang Schäuble pushed forward his Grexit plan”, he noted.

Toward a ‘special purpose’ government?

The loss of the majority in the Greek parliament may force the Greek premier to form a ‘special purpose’ government.

Stavors Theodorakis, leader of Potami, has already announced he would not participate in it but he would suggest specific persons who could deliver in these difficult circumstances for the country.

Pasok is also positive to a special purpose government as well as New Democracy. The latter won’t participate either in such a government, but said it would ask for the participation of widely accepted people.

On the other hand, Independent Greeks would not feel comfortable with a special purpose government.

“We will not accept to participate in a supposedly special purpose government with those partners who were giving everything [to EU partners] when the prime minister was negotiating”, Kammenos stressed.

There may also be a battle over parliament speaker Zoe Constantinopoulou, an uncompromising leftwinger who also defied Tsipras over the bailout and who could create serious procedural obstacles for the package.

The Greek daily Kathimerini believes Tsipras will pass the bills in parliament and would continue with a minority government supported by the centre-right New Democracy, the centrist Potami and the Socialist PASOK, rather than expanding the current cabinet.

Conditional agreement

If the summit on Greece’s third bailout had failed, Athens would have been staring into an economic abyss with its banks on the brink of collapse and the prospect of having to print a parallel currency and exit the euro.

Instead it won conditional agreement to receive a possible third bailout of €86 billion over three years, provided its European partners are satisfied that the conditions are met.

“The agreement was laborious, but it has been concluded. There is no Grexit,” European Commission President Jean-Claude Juncker told a news conference after 17 hours of bargaining.

He dismissed suggestions that Tsipras had been humiliated even though the summit statement insisted repeatedly that Greece must now subject much of its public policy to prior agreement by bailout monitors.

“In this compromise, there are no winners and no losers,” Juncker said. “I don’t think the Greek people have been humiliated, nor that the other Europeans have lost face. It is a typical European arrangement.”

>>Watch: Juncker: ‘I don’t think the Greek people have been humiliated’

Eurozone finance ministers told officials to prepare options for bridge financing arrangements during talks on a bailout and a decision is expected by Wednesday.

Athens must meet a tight timetable for enacting unpopular reforms of value added tax, pensions, budget cuts, bankruptcy rules and an EU banking law that could be used to make big depositors take losses.

German Chancellor Angela Merkel said she could recommend “with full confidence” that the Bundestag authorise the opening of loan negotiations once the Greek parliament has approved the entire programme and passed the first laws.

The Bundestag is due to vote on Greece on Friday.

Merkel’s allies defended the deal, with her chief of staff, Peter Altmaier, saying Europe had won and Germany “was part of the solution – from the beginning until the end!”

But in Greece, relief was mixed with anger at Germany. “Listen, it is some sort of victory, but it is a pyrrhic victory because the measures are very strict,” said Marianna, 73.

Background

Eurozone leaders reached an agreement on a programme to save Greece from bankruptcy after 17-hour talks on 13 July.

>> Read: Eurozone reaches ‘laborious’ tentative deal on Greece

If approved, this will be the third rescue programme for Greece in five years. It will be managed by the European Stability Mechanism (ESM), the eurozone permanent crisis resolution fund that was initially set up five years ago in an effort to save Athens from bankruptcy.

Here is a look at what Greece must do:

  • Request continued support from the International Monetary Fund after its current IMF program expires in early 2016.
  • Streamline consumer tax and broaden the tax base to increase revenue. Laws on this are due by Wednesday.
  • Multiple reforms to the pension system to make it financially viable. Initial reforms are due by Wednesday, others by October.
  • Safeguard the independence of the country's statistics agency.
  • Introduce laws by Wednesday that would ensure "quasi-automatic spending cuts" if the government misses its budget surplus targets.
  • Overhaul the civil justice system by July 22 to make it more efficient and reduce costs.
  • Carry out product market reforms that include allowing stores to open on Sundays, broadening sales periods, opening up pharmacy ownership, reforming the bakeries and milk market and opening up closed and protected professions, including ferry transport.
  • Privatize the electricity transmission network operator unless alternative measures with the same effect can be found.
  • Overhaul the labour market. This includes reviewing collective bargaining, industrial action and collective dismissal regulations.
  • Tackle banks' non-performing loans and strengthen bank governance.
  • Significantly increase the privatization program, transferring 50 billion euros worth of Greek assets to an independent fund, based in Greece, to carry out the privatizations.
  • Modernize, strengthen and reduce the costs of Greek administration, with a first proposal to be provided by 20 July.
  • Allow members of the three institutions overseeing Greece’s reforms - the European Central Bank, IMF and European Commission, previously known as the 'troika" - to return to Athens. The government must consult with the institutions on all relevant draft legislation before submitting it to public consultation or to parliament.
  • Re-examine, with a view to amend, legislation passed in the last six months that is deemed to have backtracked on previous bailout commitments.

Timeline

  • 13 July: Eurogroup meeting
  • By 15 July: Greek Parliament expected to vote on the new "conditions" imposed by Greece's international creditors in return for the bailout plan
  • 17 July: German Bundestag expected to vote on teh third bailout package for Greece
  • By 22 July: Greece expected to approve a major overhaul of the country's civil justice system and transpose the EU Bank Recovery and Resolution Directive (BRRD) into national law

Further Reading