While we waited with baited breath for a resolution, Greece’s Eurogroup negotiations on Monday broke down again. Rumours of a drafted – and crucially scrapped – agreement linger, but it’s difficult to draw conclusions yet. For those of us trying to keep up with developments, here are five key things the negotiations are forcing us to grapple with:
1. Timing: with ultimatums coming and going, it’s hard to keep track of what the real deadlines are.
The EU component of Greece’s bailout arrangement was originally due to expire at the end of 2014, and was ‘technically extended’ for two months to 28 February. It was clear from the day this was agreed that the previous Greek government had rejected the proposal for a six month extension until mid-2015, instead choosing the end of February as its cut-off point. So, although the current asphyxiating negotiating framework can be interpreted as a bitter outgoing gift by the previous incumbents – i.e. it’s neither an accident nor a surprise – it is important to remember that the EU was not averse to such an extension being given to Greece before Syriza’s election.
The European Central Bank’s (ECB) decision on 4 February which pulled the plug on standard Greek bank liquidity provision was called a bluff when it transpired that, although dependent on ECB liquidity, Greek banks do not rely heavily on sovereign bonds for collateral – and that the real target of the move was to twist the government’s arm. The ECB’s decision on 18 February on whether to extend the emergency liquidity assistance (ELA) to Greece will be crucial.
The repayment schedule over February and March for the International Monetary Fund (IMF) and Greece’s short-term debts remains unchallenged. But why is no one talking about the hedge funds that refused to participate in the Troika-orchestrated private sector involvement (PSI) restructuring of 2012? Troika money has been repaying holdouts all this time, and will continue to do so with €459m in 2015 going to ‘vulture fund‘ Dart Management.
2. An extension of the current programme or a bridge arrangement? What about new conditions?
Both parties agree that overall problems of Greek financing will not be resolved by the existing deadline, so the contention is about the framework Greece should be under until the longer term arrangement is decided. Under what conditions will they proceed until the summer?
The new government was elected to reverse austerity and cancel the debt. Although praised for bold reversals of bailout conditions from day one, the finance minister Yanis Varoufakis also proclaimed that he agrees with 70% of the reforms contained in the existing bailout, and will seek to suspend or withdraw only 30%. There is common ground that easily gets lost.
Varoufakis tried to send conciliatory messages about Syriza’s appetite for reform by bringing in the Organisation for Economic Cooperation and Development (OECD) as a way to potentially lever out the Troika. Although there is no shortage of people who want to see the end of the Troika, agreeing to OECD reforms is not exactly an alternative to neoliberal structural adjustment programmes. The OECD’s 2013 Competition Assessment Review report flags up “555 problematic regulations” and called for “more than 320 recommendations” of neoliberal reforms.
3. Either way, the ECB is treading on thin ice.
Although Varoufakis insists he will no longer cooperate with the Troika, we also hear EU Commission president Jean-Claude Juncker reportedly agreeing that dropping the hated ‘Troika’ is not a bad idea, particularly as the ECB’s increasingly overt political role has begun to overstay its welcome. Bearing in mind the blatant political interventions of the ECB’s secret letters, or how Bloomberg News sued the ECB over its opaqueness regarding the Greek Goldman Sachs swap, it was recent ECB announcements that proved a step too far.
On 22 January a €1tn spending spree was agreed in another attempt to get the Eurozone economy going by removing unwanted assets from bank balance sheets such as government bonds, asset backed securities, and covered bonds, (which by the way, used to be called banking bailouts), it was “the European Court of Justice’s advocate general…[who] seemed to want to ban the ECB from remaining a member of the Troika.”
4. Memorandum versus loan agreement: more semantics?
Since Monday’s meeting it has been widely reported that Greece is likely to request an extension of the loan agreement by the new 20 February deadline. In this way the Greek government is trying to drive a wedge between the international loan agreements that legally ground the bailout money from the memoranda which outline the raft of reforms required to keep receiving the money.
Although the austerity packages are brought hastily to parliaments and bulldozed through, the loan agreements – enshrined in international law – are often not. The creditors have protected themselves from the ‘political risk’ of parliamentary backlash or legal challenges in domestic courts by locking-in the country to prevent future governments calling the bailouts into question. This is done by making abidance to the loan agreement conditional on implementing the memoranda, thus preventing future parliamentary changes from easily altering the terms of the loans.
The loan agreements are just as unpopular, if not as widely reported on, as the memoranda. A group of the most distinguished constitutional lawyers in Greece detailed seven key violations of constitutional, European and international law which the second loan agreement violates. The signing of the loan agreements did not pass basic, formal constitutional or parliamentary requirements (such as being ratified in parliament), presumably because they contain clauses so extortionate they were unlikely to receive parliamentary approval.
5. Renegotiating the fiscal targets: real change or a dead end?
The current programme specifies unrealistic fiscal targets, using a widely acknowledged erroneous fiscal multiplier to make the IMF’s Debt Sustainability Analysis (DSA) figures add up. However, it was on the basis of these wrong estimates in the name of a programme they simply hadn’t calculated properly that schools and medical centres were closed, and widespread pauperisation imposed.
The Eurogroup is still trying to convince everyone that the official aim of the programme of 124% of debt to GDP in 2020 – a similar ratio to what Greece had when it entered the bailouts in 2010 – is reasonable. Syriza’s battle to lower the budget surplus target from 4.5% to 1.5% is crucial as this is the basis from which the government plans will be laid out.
Although tides of change have finally arrived, it is the illegitimate Troika debts that need to be cancelled and the craze of balanced budgets and surpluses – embodied in the cornerstone of the new EU governance rules, the fiscal compact – that needs to be challenged.
For more information on the why, what and how of the crisis see the recently published guide to the crisis by Corporate Watch: False Dilemmas available here.