Sunday, 1 March 2015

Greece flies solo

This article was published by Al Jazeera International under the title 'Greece: Climbing out of debilitating private debt'.

The Bay of Eleusis, half an hour west of Athens, was once a powerhouse of the Greek economy. Smokestacks, concrete kilns and dry docks now tower like grave markers to a great experiment in heavy industry that started here in the 1950s and began to fizzle out in the 1980s.

On the western edge of the bay, however, the rhythmic hole punching and bending of sheet metal can still be heard. Here, the Liritis Rolling Door factory is fighting the Greek recession tooth and nail. Its owner, Dimitris Liritis, has seen all his neighbours fall to a plague of debt.

“For all of 2012, trucks drove out of here carrying machinery – decades’ worth of investments,” he says with a look of bewilderment. “Do you know what they sold them for? Scrap”.

Liritis ought to be retiring comfortably by now. His clients include the armed forces, the 2004 Athens Olympics and the new Athens airport. Instead, he is fighting to stop banks from repossessing the business he inherited from his father, and spent his life expanding.

“It was then a small workshop. Now it covers a hectare, and banks played a role in that. But suddenly we are back to where we started, and we’re all alone,” he says.

Liritis owes banks $9mn, because the rolling door business has fallen to less than a tenth of its pre-crisis turnover; and since real-estate prices collapsed, his factory is no longer sufficient collateral.

His debt is a small bit of the estimated 80bn euros Greeks owe banks. Debts to the state are even worse - 20bn euros in social security contributions and 76bn euros in tax arrears. Finance minister Yanis Varoufakis called this “a major impediment to recovery” in a February 16 letter to his colleagues in the single currency bloc.

In fact, Greek private debt is equal to the 170bn euros in emergency money Greece has so far borrowed from its European Union partners and the International Monetary Fund. Settling it quickly would enable Greece to solve a liquidity crunch between now and April, which is the earliest its creditors may release 7.2bn euros in aid instalments.  

Necessity, mother of invention

Both individuals and the state are coming up with different strategies, but almost all are out of line with the wishes of international creditors.

In an effort to save his father’s business, Liritis helped found Ypervasi – a civic action group whose name means “overcoming”. Its strategy is ingeniously simple: “Instead of sitting on the sofa, waiting for a court bailiff to throw us out of our homes, we’ve launched class action suits demanding a haircut to our loans,” says Ypervasi’s director, Kyriakos Tombras.

“We want 50 percent to our mortgages, 70 percent to our business loans and 90 percent to credit cards… These haircuts are based on the discount Greek banks sell nonperforming loan portfolios at to distress funds.”

Ypervasi now represents 20,000 people with two billion euros in bank debt, and it’s still growing. Tombras doesn’t know what his chances of success in court will be, but he thinks that’s besides the point.

“While this lawsuit is pending, banks cannot ask debtors to pay loan instalments, or if they do they can’t enforce it. They can’t auction off collateral. That gives us our edge in negotiations. It’s going to take 20 years for this class action lawsuit to come to trial. We say to banks, ‘do you want to wait 20 years? Or do you want to settle with us now on a haircut and start earning money again?’”

Tax conundrum

While bad bank debt has been building for many years, two thirds of tax arrears date to just the past five years, when austerity governments piled on new taxes to boost revenue. They are still growing at a rate of a billion euros a month.

Last October, the conservative-led coalition defied the country’s creditors by allowing people to pay their deferred taxes in up to 100 instalments, but that only brought a fraction of the arrears into the scheme.

Greece’s new, leftwing government has now suggested broadening the scheme. It wants to include small debtors (under 5,000 euros) who comprise the overwhelming majority; and it wants to include debtors of over a million euros, because 97 percent of the debt is owed by just 11 percent of debtors.

Alternate finance minister Nadia Valavani also wants to collect a large, up-front sum to show creditors that Greece is serious about revenue. She would like to entice people to come forward with a down payment, offering to match it with a discount. The remaining balance would go into the instalment scheme.

Having offered this carrot to those who are able and willing to pay, Valavani would be left with those who are unable, whose debt would be frozen, and those who are unwilling, who would be punished. “For people who refuse to enter the instalment plan and by income are able to, there will be no mercy,” she said on February 18.

In a deal reached with creditors on February 24, Varoufakis promised to submit this and other ideas in the form of a bill. He vows to create “a new culture of tax compliance to ensure that all sections of society, and especially the well-off, contribute fairly to the financing of public policies.”

Greece is flying solo

However, the government is keeping expectations low about how much debt can be collected from a tax-fatigued middle class and a kernel of tax evaders the state has traditionally failed to rein in.

Valavani revealed that the “effective receivable amount”, which excludes bankrupt companies, state enterprises, debtors with bank claims on them and debt in litigation, is just nine billion euros.

Similarly, markets suggest that the mountain of bank debt is only worth pennies to the euro. If only a fraction of Greek private debt can be reclaimed, what does this suggest about Greece’s ability to repay its public debt?

Over the longer term, Syriza has pledged to meet Greece’s obligations in full, but wants to limit the portion of the economy that is spent on repayment to 1.5 percent – a third of what creditors have stipulated, so that some wealth is left over for reinvestment.

In the short term, however, the state continues to make indiscriminate demands. Just how indiscriminate is apparent from SOS Children’s Villages, a foster care charity. During the crisis, it has taken in 50 percent more children and sends shipments of food to thousands more families; yet its taxes have tripled.

Despite its charitable status, it loses almost half of what it earns in fundraising drives and from interest on deposits; and far from seeking a state subsidy, it brings in money from overseas donors to supplement donations at home.

“We have a lot of important charities and institutions in Greece that could increase their work,” says its director, Yiorgos Protopappas. “But they cannot - not because they lack any government subsidies or support - but because the government, by taxation, is taking the money of a private company or donor that gives to those charities for making and doing what the state should do.”  

Monday, 23 February 2015

Where Greece now stands

Greece fought hard through two Eurogroup meetings on February 11 and 16, to avoid an extension of its current arrangement with its European partners.

This consists of a loan agreement, upon which rides a memorandum of austerity measures. The latter consists of a mixture of spending cuts and legal reforms to better streamline the Greek economy. The two are considered legally inextricable, but decisions at the Eurogroup are made on political, not legal, criteria, so the Greek side felt there was hope of separating them.

Greece asked for an extension of the loan agreement but not the memorandum, which the current leftwing government has promised to abolish. Finance minister Yanis Varoufakis briefly succeeded in severing the two. On February 16, European Finance Commissioner Pierre Moscovici delivered a draft statement offering “an extension of the current loan agreement, which could take the form of a [four-month] intermediate programme, as a transitional stage to a new contract for growth for Greece.”

The Moscovici statement invited Greece’s institutional creditors, the European Union and Central Bank, as well as the International Montetary Fund, to “identify intermediate financing needs, how they will be covered and the appropriate conditionalities.”

This suited Greece well. It would win a truce, or “bridge period” as finance minister Yanis Varoufakis called it, in which creditors would finance the renegotiation of Greece’s arrangement.

“Unfortunately,” Varoufakis later told the media, “that fine document was replaced by the Eurogroup President, minutes before the Eurogroup meeting, with another document that took us back… we were pressurised [sic] to sign up to an extension not of the loan agreement but of the programme itself, being offered only the nebulous two word phrase ‘some flexibility’.”

Varoufakis explained why Greece could not do so.

“To many, our reluctance to accept the phrase “extend the current program and successfully complete it” stems from the determination of this government never to issue a promise that it cannot keep. We fear that if we accept the priorities, the matrix, of the current program, and only work within its overarching logic, even if we change some aspects of it, I fear that we shall be giving the debt-deflationary spiral another boost, we shall lose our people’s support, and, as a result, the country will be very hard to reform henceforth.”

Yet this phrase – “The purpose of the extension is the successful completion of the review on the basis of the conditions in the current arrangement,” - is included in the document the Greek side was prevailed upon to agree to at a third Eurogroup meeting on February 20. It was not a Waterloo for the Greek side; the statement also speaks of “flexibility which will be considered jointly with the Greek authorities and the institutions,” and allows the Greek government to propose the reforms and measures it intends to perform over the next four months, which will effectively form its new interim contract with the EU.

What does this mean? That the Greeks will get their four-month negotiation period, but the Eurogroup will hold them to the commitments of the last government if what they propose on Tuesday appears outrageous. 

Based on statements Varoufakis made at the three Eurogroup meetings, one would reasonably expect the Greek proposals to include the following:

Taxes – the ruling Syriza party has promised to create an Independent tax authority, something the IMF is keen on, and to make tax collection more efficient and transparent.  It also wants to create a tax court system to bypass the backlogged judicial system, and create a new scale of tax brackets transferring more of the tax burden to high net earners.

Public spending
– The government has pledged not to create deficits. It will maintain a balanced budget until June. However, it wants creditors to agree to reduce its primary surplus for this year – the amount of cash it needs to give creditors in repayment of debt – to 1.5 percent of GDP.  

Debt
– The government is committed to repaying the debt in full, and will not ask for a discount to its face value – though after the bridge period it may ask for an extension to the repayment period.

Private sector, business climate
– Varoufakis has suggested creating an Asset Management Company to absorb bad bank debt. Greek businesses and households owe banks an estimated 80bn euros they cannot repay. This keeps both money and human resources tied up in a holding pattern. He also wants to settle tax arrears. Alternate finance minister Nadia Valavani on February 18 said the government would offer taxpayers discounts of up to 50 percent of their arrears if they sign onto an instalment plan. That, however, may now be up for review.

Public sector
– Varoufakis has famously said that no public authority will ask individuals or businesses to provide documents and information that exist elsewhere in the state machinery. It is an example of how Syriza wants to make the state more internally connected and externally efficient. It wants to promote e-government to reduce contact between individuals and he state, limiting opportunities for corrupt practices. The number of public employees has fallen from 920,000 before the crisis to 620,000 today, the ministry of administrative reform says. It intends to replace the evaluation system introduced last autumn with one that state workers are more likely to cooperate with.

Privatisation
– Varoufakis has declared himself in favour of some privatisation. Each project, he says, will be evaluated on its merits, and Foreign Direct Investment will be encouraged as long as state secures revenue streams, and a say in labour relations and in environmental concerns. Syriza wants to ban quick fire sales. It has also promised to abolish TAIPED, the body overseeing privatisation at present. If it does, it may rplace it with a development bank, which would incorporate public assets.

Saturday, 21 February 2015

Greeks reach compromise with Eurogroup

Greece reached a last-minute compromise with the European Union and Central Bank in Brussels on Friday. 

They have agreed to bankroll the country for another four months, in return for Greek assurances that it will undertake reforms and maintain a balanced budget. Greece must submit those reforms for a first appraisal by late Monday. 

Greece’s newly installed leftwing government is declaring a new era for national sovereignty, the economy and relations with Europe. 

"Today Greece has turned a page," a triumphant government statement declared. "Negotiations could have happened all these years. Greece is neither isolated, nor is it sailing for the rocks, nor is it continuing with memoranda [of austerity]." 

The Greeks staved off new austerity terms and won time to renegotiate the existing ones. Crucially, they get to discuss the debt repayment schedule, which Greece cannot meet. 

But they didn’t get a reprieve with no strings attached. The Germans ultimately forced them to pick up the reform programme where the previous government left off. Which means they still have to meet certain austerity and reform targets. 

The crucial language the Greeks had hoped to avoid is in the statement's second paragraph. It states that the loan extension is "underpinned by a set of commitments. The purpose of the extension is the successful completion of the review on the basis of the conditions in the current arrangement." This effectively binds the leftwing Syriza government to the commitments of its conservative predecessors, even though they had fought for an interruption of the programme and a bridge loan separate from the existing arrangement. 

Finance minister Yanis Varoufakis said he was happy with the arrangement. “The memorandum [of austerity[ is over,” he told journalists after talks. “We’re going to sit down and write a set of reforms we want to do in the next four months…  we will be judged on this by the institutions on Monday or Tuesday… and at the end of four months we will be judged on the success of the implementation of these reforms… that is not a memorandum. And this is why you see me quite happy today. We are talking about the transformation of the Greek government, the Greek state, the Greek parliament, to co-authors of the reforms we have to finally pass in this country.”


Varoufakis said the deal “is a small step, but it is a step in a different direction."

Thursday, 19 February 2015

Greece says 'take it or leave it'

Greece and Germany entered a war of words on Thursday, ahead of what promised to be a stormy meeting of the euro area's finance ministers on Friday. 

"A part of the German government stands opposed to the Greek people on Mr. Scheauble's responsibility," said a statement from the Greek government, in reference to German finance minister Wolfgang Scheauble. 

Greece circulated a letter from Scheauble's office, which described a written Greek request for a six-month extension of its financial support from European countries as a "Trojan horse". 


"The Greek letter is not clear at all, but opens immense room for interpretation," read the German letter, circulated by the Greek government. "It is totally unclear how the Greek government wants to pay its bills over the coming weeks with the current short fall in tax receipts," the German letter said. 

"This is why the letter is not in line with the last Eurogroup position. It rather represents a Trojan horse, intending to get bridge financing and in substance putting an end to the current programme. On this basis it makes no sense to start drafting a Eurogroup statement on Friday."

A meeting of the single currency's finance ministers, the Eurogroup, was still scheduled to take place Friday afternoon, though it was unclear if all 19 members would agree to attend. 

A German statement earlier in the day rejected Greece's request for a loan extension. Greece countered with its own rebuttal. 

"The Greek government submitted a letter to the Eurogroup asking for a six month extension of the loan agreement," a government statement said on Thursday afternoon. "Tomorrow's Eurogroup has only two choices - to accept or reject the Greek request. Now we'll find out who wants a solution and who doesn't."

A 50-minute telephone call took place between Greek premier Alexis Tsipras and German Chancellor Angela Merkel, a statement from Athens said, and was "conducted in a positive climate and in the direction of finding a mutually acceptable solution."

The Greek request 

Greece's proposal, submitted earlier in the day, asked its European partners to continue to lend it money for six more months.

It says the next six months will be used to renegotiate the spending cuts and reforms Greece’s European partners have ordered it to make. But Greece needs to convince them to finance that truce, because although it now has a balanced budget, it cannot afford the 25 billion dollars in debt repayments that it faces this year.

A letter from Greek finance minister Yianis Varoufakis to Eurogroup chairman Jeroen Dijsselbloem pledged that Greece would run no deficits during negotiations, and allow creditors to continue to monitor its economy in order to verify this. 

The loan agreement that has kept Greece afloat since 2010 was supposed to end in December, and was extended to February 28. A similar Greek request on Monday divided the Eurogroup, because Greece’s new leftwing government insists on receiving the money without austerity terms. 

Wednesday, 18 February 2015

Greek government to resolve 76bn euro "debt bomb" of tax arrears

The Greek government will try to boost its falling revenues by offering taxpayers discounts of up to 50 percent of their arrears if they sign onto an instalment plan.

The offer expires on April 30 and is designed to bring a cash injection to fast-emptying state coffers.

Tax revenues have fallen sharply since October, when the government estimated it would have a primary surplus of 6.1bn euros for 2014. That surplus fell to 1.87bn euros, well below a target of 4bn set by creditors.

Tax debtors who refuse to sign onto the plan despite having provable income will be penalised.

"For people who by income are able to enter the instalment plan and refuse, there will be no mercy," said alternate finance minister Nadia Valavani. "There will also be no mercy for large debtors," she said. 

Valavani said she hoped to resolve a 76bn euro "debt bomb" to the state, almost two thirds of which has accrued during the past five years of austerity policies. 

However, she revealed that 97 percent of this debt is owned by just 11 percent of debtors. She did not explain how the new leftwing government would prosecute collection of debts from high net worth individuals and enterprises. She did, however, admit that the “effective receivable amount” of tax, which excludes bankrupt companies, state enterprises, debtors with bank debt and tax arrears being disputed in litigation, was just nine billion euros. 

That suggests that the government may fall short of an election pledge to collect three billion euros a year by rescheduling arrears. It also suggests that the ruling Radical Left Coalition, Syriza, elected to power last month, will have to place greater emphasis on active pursuit of tax evasion - an area where Greece has not traditionally met with success. 


Tax collection is a major sticking point as Greece tries to negotiate a loan extension with its creditors, who expect the government to collect about 4bn euros less than forecast this year. That gap would widen if the government abolished a despised property tax and restored a 12,000 euro tax exemption, as it has promised to do. Together they bring state coffers more than 3.5bn euros. 


The government will also decriminalise tax arrears of up to 5,000 euros, Valavani said, relieving 3.5 million people of the threat of imprisonment and confiscation of property. A bill containing these measures was to be presented to parliament by early March. 


Monday, 16 February 2015

Greece accuses creditors of bait-and-switch


Talks between Greece and its creditors broke down in Brussels on Monday, with Greece accusing them of a bait-and-switch strategy. 

Greek finance minister Yianis Varoufakis told journalists that he was presented with a surprise communique at a meeting of the Eurogroup, the single currency bloc's council of finance ministers. 

"Before this Eurogroup I met with [Economic Affairs Commissioner] Pierre Moscovici … he presented me with a draft communiqué I was happy to sign as it then stood," Varoufakis told journalists in Brussels. "It spoke of an extension of the present loan agreement by four months as a transition period for a new contract, and this would provide technical assistance to Greece in the meantime."

"But this draft was withdrawn by the Eurogroup president [Jeroen Dijsslebloem] and replaced with another, which took us back to last Wednesday, asking us again to extend not the loan agreement but the current programme," Varoufakis said. 

Talks had again reached an impasse on February 11, when the last Eurogroup meeting called on Greece to request an extension of its programme.

Greece's leftwing government has declared that it recognises Greece's debt, but will not extend the current programme of austerity and reform, which Varoufakis called "part of the problem, not the solution".

The ruling Syriza party was voted into power on January 25 on a promise to keep Greece in the single currency on more favourable terms. 

Eurogroup president Jeroen Dijsselbloem earlier invited Greece to extend their current memorandum of austerity as the only basis for further talks and flexibility. Moscovici, standing beside him, said "there is no alternative solution." 

"We are prepared to take no unilateral steps between now and August that might derail the current programme and have consequences for financial stability. But we could not support measures that would promote the recession such as raising VAT or act against pensions," said Varoufakis. 

Greece has asked its creditors to finance a four-month truce, during which to renegotiate the schedule of its debt repayments and the austerity measures.  

In Athens, conservative opposition leader Antonis Samaras said, "the government must remain in the negotiation process, which is the only path leading to a positive development for our country... a clash is not a solution." 

An impasse foretold 

Both sides seem to have come to these talks determined to stick to their guns. France's Europe1 radio station reported President Francois Hollande as being prepared for Greece to leave the Eurozone. "It is clear that Europe is ready to face it," he is quoted as having said. The Elysee did not deny the report. 

German finance minister Wolfgang Scheauble arrived at the Eurogroup declaring himself pessimistic. "It seems as though we have no progress so far," he said. "The Greek side has not moved, apparently." 

Varoufakis had earlier in the day published an opinion piece in the New York Times saying, "We are determined not to be treated as a debt colony... The lines that we have presented as red will not be crossed." 

As the Eurogroup meeting broke up, the Greek government issued a statement calling insistence on the existing memorandum "unreasonable and unacceptable". It said Eurozone members "evidently haven't realised that they aren't dealing with a government of yesmen."

Greece has been offered a final opportunity to request an extension of the programme before Friday. A statement from the Greek government has rejected this as "an ultimatum". 

Friday, 13 February 2015

Greece sails into uncharted waters

This article was published by Al Jazeera International.

Greece’s quest to declare a truce with its creditors is now focused on Monday’s Eurogroup, the single currency finance ministers’ council. For three weeks Greece’s proposals for financing the hiatus have met with rebuttals.

Greece’s radical leftwing government, sworn in on January 28, has vowed to renegotiate a memorandum of austerity and reform policies its creditors oversee, saying that it feeds a vicious cycle of falling jobs and living standards.

"Our proposal is this: Neither will we tear up the current programme, nor will [creditors] demand its blind implementation as if elections were never held,” finance minister Yanis Varoufakis told parliament during a debate leading to a vote of confidence last week, which the government carried along party lines.

Last Wednesday’s Eurogroup meeting broke down over the wording of a communiqué, which would have spoken of an extension of Greece’s current programme of fiscal oversight. 

“The new government has no right to ask for an extension of the memorandum, because it cannot ask for an extension of the mistake and the catastrophe,” Prime Minister Alexis Tsipras told parliament.

Five years of austerity balanced the Greek budget and prevented a default on loan repayments; but they put more than a million people out of work and extinguished a quarter of the economy.   

Syriza has asked its creditors to fund a four-month negotiation by forgiving some of its debt, delaying repayment, or allowing the government to borrow from Greek banks. All these ideas have been rejected.

This is partly because most Greek debt is now in the hands of public bodies – Eurozone governments, the International Monetary Fund and the European Central Bank – none of which can countenance write-offs.

The ECB has also refused to buy up any more junk-rated Greek debt, effectively excluding Greece from its 1.2tr euro quantitative easing programme – though it did pump 5bn euros of liquidity into the Greek banking system this month.

A frustrated Greek finance ministry official declared last week, “A central bank tightening a rope around a country’s throat - it’s never happened before. We will bombard them with very reasonable, win-win positions, and if they want to kill us, so be it.”

“Killing” Greece would mean forcing it out of the Eurozone by permanently cutting off funding to the government and banking system.

Greece is already effectively living off home-grown tax revenue, since it cannot affordably borrow from markets. Its surplus cash last year, after public sector salaries had been paid and the underfunded pension system had been topped up, amounted to just under 2bn euros – nowhere near the 22bn euros it needs to service the debt this year.

This means that unless there is a breakthrough with creditors soon, Greece will at some point be forced to issue them with an IOU, effectively inaugurating a national currency.

Syriza has put public finances further into doubt, by announcing the abolition of an unpopular property tax and the reinstatement of a 12,000 euro tax exemption this year. This would deprive public coffers of more than 3.5bn euros, says Yiannis Siatras, head of the Greek Taxpayers’ Association.

“Will [the government] make up the shortfall by pursuing tax evasion? I rather doubt it,” says Siatras.

Was the old compromise so bad?

Syriza’s strategy of pronouncing the memorandum dead while promising to relax austerity has angered the conservatives, who shouldered the political cost of austerity for two and a half years.

“I hope you will give us the chance to support whatever is to the country’s benefit,” former premier Antonis Samaras told Tsipras in parliament. “But we will not allow you to shipwreck the country – all the more so now that we’ve discovered you had no plan, no contact with reality.”  

“The emphasis on the debt was deliberately misleading because [Syriza] wanted to avoid talking about reforms,” says Panagis Vourloumis, a former banker who oversaw the sale of the Hellenic Telecommunications Organisation to Deutsche Telekom a decade ago.

One of the main planks of Syriza’s platform has been the restoration of collective bargaining agreements and of minimum wage to 751 euros a month. It was reduced to 586 euros three years ago, sparking the worst protests of the crisis across the country. The finance ministry source said that the reversal of the deregulation of labour “is one of our redlines.”

Vourloumis believes that this “outweighs all the reforms Syriza agrees with” because it would render the economy unattractive to investors.  

Another former banker and macroeconomics professor, Panayiotis Korliras, agrees: “No country ever repays its debt. You may reduce it a little; you may increase it. The question is to be able to finance it.”

Korliras believes that Greece’s creditors would have offered it lower interest rates and decades longer to repay the debt if Syriza hadn’t polarized voters.

Syriza argues that Greece cannot produce the enormous cash surpluses required to keep repaying the debt. Bleeding taxpayers also deters investment, it says, because that introduces social instability and the threat of even higher taxes.

Siatras agrees. Greek tax revenues grew during the crisis, from 32 percent of GDP to more than 36 percent, almost matching the Eurozone average. “However, this increase in tax revenue took place during a recession, when people’s income fell by about a third, and we had a rapid rise in unemployment; so the revenue came from much fewer taxpayers,” he says.

Money as sovereignty

Greeks elected Syriza to keep Greece in the Eurozone on better terms, and recent polls suggest that support for the new government has grown since the election.  Three quarters of Greeks polled by GPO for Mega Channel last week said they felt its strategy would produce a compromise, and 90 percent want the opposition to back it.

Tsipras captured national priorities in parliament: “Regaining our sovereignty, our role as equal partners in European institutions, facing the humanitarian crisis, restoring our dignity, social justice and the cultural renaissance of our country are the main goals of this government of social salvation,” he said.

Syriza, short for the Radical Left Coalition, has softened many of its positions over two years. It has accepted balanced budgets as a cornerstone of self-reliance; it has reversed support of civil disobedience and now asks people to pay their taxes; it has abandoned the idea of nationalising the banking system to open the floodgates of cheap cash to the real economy; and it has embraced foreign investment.

But it will not accept the humanitarian crisis that has plunged more than two million people below the poverty line; and it does not want the economy to be rebuilt on the back of cheap labour.

“The Greek people issued a strong mandate for the termination of this disastrous austerity … the notorious memorandum has been abolished first and foremost by its own failure,” Tsipras said.

The idea that debt and democracy are opposed was certainly shared by a rally of several thousand who gathered in Athens on Wednesday night. “Besieged but Free” read one banner, a reference to the city of Messolonghi, which was famously crushed by an Ottoman expeditionary force during Greece’s War of Independence.


Another banner had just one word across it - Seisahtheia– a term coined by Athens’ ancient lawmaker, Solon, who inflated the drachma to help the poor pay off private debts. His reform also forbade creditors to enslave debtors or seize their land. In so doing, it helped to create an Athenian middle class and was the first in a series of reforms that established democracy.