Berlin turns Greece into debt colony

Syriza’s humiliating capitulation has lessons for us all, says Eddie Ford - principally the need for united organisation on a European scale

Greece’s future within the euro zone still hangs in the balance. After a gruelling 17-hour session, Alexis Tsipras in the early hours of July 13 agreed to a new bailout programme worth €86 billion. Naturally, Berlin and its close allies (such as the Finnish and Slovakian governments) were the torturers, with the victims being the Greek people.

At the time of writing, Syriza is showing all the signs of fragmentation. Thirty of its MPs are pledged to vote against the deal and half the central committee have signed a joint statement condemning it. The expectation is that Tsipras will win the vote - but with the support of New Democracy, To Potami, Pasok, etc. And, then form a new government, perhaps a government of national salvation?

The bailout plan signed up to by Tsipras represents a humiliating capitulation to the demands of the European leaders. Indeed, the terms are far more draconian than the plan which the Syriza leader was supposedly urging the Greek people to reject in the July 5 referendum - which they did, of course, even if a remarkable 39% actually voted for austerity. Then again, as we all now know, on June 30 - the day on which the second bailout programme officially expired - Tsipras had written to the institutions accepting nearly all of the demands that only a few days earlier had been “humiliation” and “extortion”.1 You were going to get austerity whether you voted ‘oxi’ or not.

According to the Greek prime minister, the new plan is a “bad deal”. Yet, he insisted, it was the best available option, given that a “disorderly default” would have not only led to the total collapse of the banking system, but forced Athens to print a “drastically devalued” currency - a pensioner with €800 would find themselves with 800 drachmas instead, which “would only last him three days and not a month”. On that, Tsipras is surely right.

In an hour-long TV interview, the Syriza leader declared that he is “fully” accepting responsibility for “signing a text that I do not believe in, but am obliged to implement”. The three-year programme includes a fresh wave of vicious austerity policies, including increases in VAT, public-sector wage cuts, less generous pensions, further ‘liberalisation’ of the economy, ‘reforming’ labour market practices with new rules on industrial action and collective dismissals, privatising the docks, and so on. Another part of the deal talks about “quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets”. Despite strong objections from Tsipras, Berlin was adamant that the new programme would be closely monitored by the International Monetary Fund - another humiliation.

Furthermore, there will be a new fund to manage the sale of the country’s state-owned assets - run by the Greek government, but ‘supervised’ by the “relevant European institutions”. This fund at some point in the misty future will supposedly generate €50 billion in cash from asset sales, to be used for various purposes: half for repaying money borrowed from the euro zone to recapitalise Greek banks; a quarter for “investments”; and a quarter for “reducing” the government’s debt burden. Originally Berlin wanted the fund to be located in Luxembourg and run by the Institute for Growth, which is owned by the German bank KfW - whose current chairman happens to be a certain Wolfgang Schäuble, the German finance minister. But the ensuing uproar scuppered that proposal.

Tsipras has even agreed to “re-examine with a view to amending” measures his government has already taken this year - ie, introduce measures that will help to ‘build trust’ with the creditors.2 Does this mean that the famous Athens cleaners, who were rehired after protesting their dismissals, will be sacked once more? One thing that does seem certain is that pensioners will be hit especially hard. The Greek state is belatedly implementing pension cuts that were passed by previous governments, but which could not be acted upon due to severe staff shortages. Now that the backlog is beginning to be sorted out, pensions that were ‘overpaid’ in the interim are being reclaimed in large monthly debits - with the elderly now facing further cuts on top of that, thanks to the bailout deal agreed this week. A double whammy.


Naturally, Athens will not get hold of the money until the deal has been ratified not only by the Greek parliament, but also by several national parliaments - an outcome which is far from certain. For example, the rightwing populist Finns Party, or True Fins - the second largest in parliament - has threatened to bring down the government over the issue.3 The Slovakian government and opposition parties are less than happy with the new arrangement. There are rumbles of discontent from the Bundestag too.

However, the International Monetary Fund has expressed concern that the severity of the terms could make things worse. In a ‘secret’ report leaked to Reuters and sent to leaders late on July 13, IMF analysts argued that the closure of the banks and the introduction of strict capital controls were “extracting a heavy toll” on the economy - leading to a further “significant deterioration” in debt sustainability, compared to the projections in previous IMF studies. The inevitable conclusion is that Greece requires far more generous debt relief than is currently on offer from its creditors, perhaps a 30-year ‘grace period’ - either that or face the choice of either annual transfers to the Greek budget, or “deep upfront haircuts” (ie, cancellation of part of the debt).4

But the real point is that the IMF would be forbidden by its own rules, or at least in theory,to put money into a new bailout that it does not believe is sustainable: can it ‘extend and pretend’ again? The assumption has been that the IMF would provide €16.4 billion, around 25% of the total, with the rest coming from the European Financial Stability Mechanism. However, the latter is embroiled in a row - with the European Commission proposing that the EFSM give Greece a €7 billion bridging loan to cover its financial obligations for the next month.

However, several governments are objecting - principally the UK. The latter, for instance, would be required to fork out maybe £850 million, which chancellor George Osborne has described as a “non-starter” - arguing that only euro zone countries should participate in the Greek bailout or bridging loan. Schäuble too has said it would “not be appropriate” to use the fund when some non-euro zone member states were against.


In the end, Athens agreed to terms that a diplomat close to Berlin described as akin to turning Greece into an “economic protectorate” - a debt-colony run from Brussels. Even more cutting, Yanis Varoufakis, the former Greek finance minister, said that the bailout agreed by Tsipras was a “new Versailles treaty” - this is the “politics of humiliation”, he stated.5 He went on to compare the deal to the 1967 military coup, but, whereas then the “choice of weapon” was tanks, “this time it was the banks” - used by “foreign powers” to “take over the government”.

Varoufakis added that he had “jumped more” than he was pushed. He made the decision to resign the moment he entered the prime ministerial office, having been “elated” and “pushed by beautiful winds” of Greek democracy in the referendum - he “sensed immediately” an “air of defeat” which was “completely at odds with what was happening outside”. He also observed, with some truth, that “tragically” Golden Dawn could “inherit the mantle of the anti-austerity drive” - the latter already blaming the left and Marxism for the ignominious bailout.

The explanation for the tougher conditions imposed upon Athens is quite straightforward - payback for the ‘no’ referendum. The Financial Times quotes one senior official at the negotiations saying of Tsipras: “He was warned a ‘yes’ vote would get better terms, that a ‘no’ vote would be much harder” (July 14). Germany played hardball with Greece to make it an example, a deterrent. If you vote Podemos, Sinn Féin, etc, then this is what will happen to you.

For us communists, serious questions are raised about all those on the left who made Syriza a ‘sister party’ - not just LU, but also the Greens, Sinn Féin, Podemos, Jeremy Corbyn, etc. Almost all the soft/reformist left closely identified with Syriza, foolishly saying that they would carry out the same programme if given a chance - thus attaching themselves to inevitable failure.

But Syriza could never deliver, for all its fine promises about ending austerity and ushering in the social democratic promised land. Never in a million years. What a contrast to the Bolsheviks in 1917. When they took power, they did not promise an easy road. Rather, to borrow a phrase, they offered “blood, toil, tears, and sweat”. That is, they took power to prevent economic catastrophe and banked on the German revolution. They were honest with people - can you really say the same about Syriza and groups like it?

In today’s world, it is the United States which is the overwhelmingly dominant power - not the British empire, as it was in the Bolsheviks’ day. Unless you can map out a working class strategy that has a realistic hope of overthrowing US hegemony, then grand phrases about bringing peace, prosperity and a better world are just empty air. That is why strategically we begin with Europe.



1. http://blogs.ft.com/brusselsblog/2015/07/01/leaked-tsipras-letter-concedes-on-many-major-points.

2. https://twitter.com/econhedge/status/620525802778718208/photo/1.

3. www.theguardian.com/business/2015/jul/12/finlands-parliament-in-favour-of-forcing-greece-out-of-the-euro-says-report.

4. http://uk.reuters.com/article/2015/07/14/uk-eurozone-greece-imf-report-idUKKCN0PO1C920150714.

5. www.abc.net.au/radionational/programs/latenightlive/greek-bailout-deal-a-new-versailles-treaty-yanis-varoufakis/6616532.