Greece simmers ahead of referendum

A slightly abridged form of this article was published by Al Jazeera International. 

“When you talk this way, I can’t carry on a conversation with you!”  shouts a pot-bellied man, marching onto the pavement outside a café in central Athens.

He is addressing a white-haired man, who sits in the back of the café, waving to him to sit back down. But the pot-bellied man is besides himself. “How can you say Tsipras was appointed by the Europeans? He was elected by the people! How can you talk this way at your age?”

It is one of many spontaneous political conversations heard across Athens in these days of slow cashflow and rapid political decline. The young and charismatic prime minister, Alexis Tsipras, who has enjoyed approval ratings twice as high as the 36 percent of the vote his Syriza party garnered in a January election, is for the first time being seriously doubted as an able leader. And as is the Greeks’ wont when things go badly, some are beginning to doubt even the integrity of his intentions.

Capital controls that have shut banks and forced the Greeks to draw up to a limit of 60 euros a day from cash machines are slowing consumer spending; but they are affecting businesses more profoundly.

“Imported meat is already becoming harder to find at the wholesale market,” says Yiorgos Hatzoglou, a butcher in the neighbourhood of Neos Kosmos. Greece imports two thirds of its pork and almost 90 percent of its beef, at a cost of $1.2 billion euros a year. Wholesalers don’t always have the cash to pay importers up front.

“Importers demand cash, which isn’t easy because banks are closed,” said Antonis Zairis, vice-president of the Hellenic Retail Business Association. “The next step will be shortages of products on supermarket shelves. Right now we’re seeing the first signs of that, but we expect the situation to get worse. I believe there is political and state responsibility in this. Perhaps we did not quite understand the balance of power on the global stage.”

Strategic fumble

Tsipras has managed to get caught on the tines of his own multi-pronged strategy with creditors. Last Saturday, he stormed out of an ongoing negotiation in Brussels, and declared a referendum on the package his government was being offered, advising people to vote against it.

The ploy backfired. The European Central Bank, which is one of those creditors, reacted by cutting off liquidity to the Greek banking system, and imposed capital controls.

As queues formed at cash machines and people lashed out at the government, Tsipras relented. Hours before the expiry of Greece’s financial assistance programme at midnight on Tuesday, he wrote to creditors essentially accepting their draft proposals. Deputy premier, Yiannis Dragasakis, implied that the referendum might be cancelled, admitting that it was only ever employed as a negotiating tactic: “The government that decided on the referendum can decide something else,” he said on national television on Tuesday night. “Why did we declare it? To reach an agreement that achieved certain goals.”

But creditors have not accepted the climb-down, and are now holding Tsipras to the result of Sunday’s referendum.

“Given the political situation, the rejection of the previous proposals, the referendum which will take place on Sunday, and the recommendation by the Greek government to vote No, we see no grounds for further talks at this point,” said Jeroen Dijsselbloem, head of the euro area finance ministers’ forum, the Eurogroup, on Wednesday.

Tsipras again on Wednesday asked Greeks to back a No vote - now simultaneously agreeing to a policy package he is asking his voters to reject.

“No does not mean a rupture with Europe, but a return to a Europe of values,” he said on national television. He said a No vote would add pressure on creditors for “a socially just agreement that will distribute burdens to those who can carry them and not only upon wage-earners and pensioners.”

But Tsipras has now lost both the stability a compromise would have brought, and the romantic appeal of going against the odds of unbridled capitalism.

And his inconstancy has made northern Europeans irate, leading to an escalating war of words.

Rupture

European Commission president Jean-Claude Juncker on Monday lashed out at Tsipras after repeated accusations that the Commission and Greece’s other institutional creditors, the European Central Bank and the International Monetary Fund, were to blame for the impasse in negotiations.

The Greek delegation walked out on talks “at the worst possible moment,” on Friday night Juncker said.

“Vice-President Dombrovskis was spending hours, days together with all the other Commissioners involved to put together all the elements needed to provide Greece with a growth package of 35 billion euros,” Juncker said.

He made it clear that he did not believe the Greek delegation departed in good faith, accusing it of “egotism, and sometimes tactical or even populist games”.

Greece said it had been presented with an “ultimatum”. Juncker directly accused the government of lying about creditors’ intentions. “There is talk of an ultimatum, of a "take-it or leave-it" deal, as they say in French. We have heard about blackmail. But who acts this way? Who acts this way? Where do these insults, threats, misunderstandings come from - these incomplete sentences that carry the imagination of those who listen very very far away - too far?”

The deal

The deal Tsipras rejected, but accepted on Tuesday, is closely based on a Greek proposal of $1.5bn in spending cuts and tax raises this year, increasing to $4bn as of next.

But, says Alternate Foreign Minister Euclid Tsakalotos, a senior negotiator, in talks creditors were demanding much greater consumer tax hikes that would have depressed tourism, a key industry.

He also believes Greece’s creditors don’t really want to go after Greece’s oligarchs or beat corruption. “They insisted that liberalising pharmacies and bakers was somehow crucial to addressing the competitive deficit of the Greek economy. We, on the other hand, argued that we should go for the big fish first… important cartels in certain industries, public procurements, and anti-corruption measures.”

The biggest problem, however, is that while Syriza came to power wanting to talk about fundamentals of the programme – the fact that it hasn’t created growth and jobs, and doesn’t render Greece’s debt sustainable, making Greece dependent on new cash injections – it has, like previous governments, got bogged down in quibbles over its budget performance for the current year.

This has invariably meant extra, last-minute revenue measures which have further depressed the economy.

Creditors have, to a certain extent, recognised this problem. They have allowed Greece to spend an estimated $18.7bn paying off its debt over the next four years, compared to the $33bn its current programme demands.

Yet Greece wants a more fundamental approach. In accepting the latest draft proposals, Tsipras asked for a two-year freezing of debt payments altogether.

This picked up an idea expressed by former IMF director Dominique Strauss-Kahn, who suggested that instead of giving the Greeks more loans they will have difficulty repaying, they be given a two-year reprieve from debt payment to put the economy back into growth.

Following that, he said, they should have a significant amount of debt forgiven and a lengthened schedule of payments for the remainder, so as to lighten the annual load.

"My proposal is the following,” Strauss-Kahn wrote. “Greece should get no more new financing from the EU or the IMF but it should get a generous maturity extension and significant nominal debt reduction from the official sector," he said.  

"Having no access to markets and receiving no new financing from the EU or the IMF it will have to balance its budget alone," Strauss-Kahn said, warning that the Greeks would "need to make tough fiscal choices but they would make them on their own".

The trouble is that Europeans no longer trust the Greeks to do their own accounts.

Meanwhile, the referendum is artificially dividing Greeks into Yes and No camps. Both are equally against austerity, but the Yes camp no longer trusts Syriza and wants to oust it with a public vote of censure, while the No camp no longer trusts creditors to cut a fair deal and believes that only a rupture will restore Greek sovereignty.

“We’re going to sell our country piecemeal to the Germans and the Europeans, and one day we’ll look up and the only opportunities we will have will be to work for them and live on $400 a month,” says Angeliki, an student at the Athens University of Economics and Business, who has joined a protest for the No vote. “We’d like to dream of working in what we’re trained for, buying a house, getting married, having children. None of that is feasible at the moment,” she says.

It is people like Angeliki that Tsipras claims to be fighting for. But with Europe’s doors closed against him, banks shuttered at home and businesses dying an asphyxiating death, Tsipras may not long be the man authorised by the Greeks to make a deal.