Will Tsipras 2.0 be better than Tsipras 1.0?

Photo: AFP
Photo: AFP

Alexis Tsipras resigns after seven months in power, but is seeking for reelection in elections in late September. His time at the helm of Greece was marked by a impossible conundrum: defend Greek interests against powerful European and international forces, ending the austerity while finding growth, and dealing with an ideological split within his party.

Prime Minister Tsipras is calling for a new round of elections, most likely scheduled for September 20th, and he will lead the Syriza party. “I believe we haven’t yet seen our best days” announced the Prime Minister on television “and I’m going to ask for the people’s vote to govern this country – with more experience, with my feet more firmly on the ground.” With a disastrous economic and fiscal situation, Greece is now facing even deeper political uncertainties. With his resignation the country will be governed by an interim-government until the next snap elections in September 20th. Tsipras is leaving office for a better comeback and freeing himself from the rebels of his party. He is looking to “return to power with a more manageable coalition.”

Reflection on Tsipras’ First Tenure

Several points need to be reflected upon his time in office. First, PM Tsipras came into power based on an anti-establishment campaign. His extreme-left party, Syriza, took the power based on many promises: defending Greek interests by ending the international and european austerity measures; and an anti-establishment campaign.

Second, his time in office was quite smooth until the looming of the deadlines for repayment of the IMF and ECB loans. Even though he remains one of the most popular politicians in Greece, the summer has created serious political tensions within his party Syriza. The fight between Greece and the Troika (ECB, Commission, and IMF) over an agreement after missing the initial deadline forced the Tsipras’ government to close Greek banks for almost three weeks. Tsipras was obliged to agree to the terms requiring tax hikes and further spending cuts under the threat of complete collapse of the Greek banking system (read here a past analysis). The deal with European creditors infuriated members his party Syriza, but Tsipras managed to get it approve through the Parliament with the help of the opposition.

Third, the resignation of Alexis Tsipras, which should be seen as a two-step process – first the referendum, and second the agreement to the terms of the bailout – marks in some ways a complex existence and survival of socialism in Europe. To many, Alexis Tsipras was the last embodiment of socialism in Europe. Now the question is: was the international market seeking to make a point in going after Tsipras? With Tsipras’ departures, it seems that austerity measures have become the European landmark in solving deep structural economic crisis. But if reelected, Tsipras would be a much more centrist politician than seven month ago. Tsipras had to move towards the middle creating a split with the radical core of his party.

Referendum, Bailout and Political Tension

When did it go all wrong for Tsipras? And, did it go wrong for Tsipras? For many Europeans, PM Tsipras lost the battle after calling for a referendum and advocating for the no vote (remember the oxi?). In retrospective, the results of the referendum actually did not matter, aside for many Greeks feeling that Tsipras tried to defend them. The referendum was perceived by European partners, especially the Germans, as an act of treason. Greece was already on the thin line with his Eurozone partners since the collapse of its economy and the first bailout five years ago. Greece had mis-behaved and lied to its partners (read here a previous interview on the topic). The referendum was another act of treason for European partners. Once Greeks had voted in favor of the no

ATHENS, GREECE - 2014/10/13: MP with the SYRIZA political party, Mr Panagiotis Lafazanis, talks with a megaphone to the demonstrators expressing SYRIZA support. Kurdish people that live in Athens organised a demonstration in support of the Kurdish fighters that defend the Kobani town in Iraq from ISIS insurgents. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
Photo: George Panagakis/Pacific Press/LightRocket via Getty Images

vote, and a week later PM Tsipras agreed to the new terms of a third bailout, his time was counted. His vocal lieutenant, finance minister Yanis Varoufakis, announced his resignation days after the victory of the no vote. Once Varoufakis was gone, and Tsipras agreed with the terms (criticized by the IMF) and started his transition towards the center. But in some ways, Tsipras’ fate was sealed, or not? In addition, it created a real ideological split within Syriza. Tsipras is undeniable moving towards the center, while the old guard of Syriza, led by the former Energy and Environment Minister, Mr. Lafazanis, have not changed their position. On the referendum, The Financial Times reported that “Mr Lafazanis’s supporters speak of an ‘ideological betrayal’ and ‘treachery’ by Mr Tsipras’s faction.” The paradox between calling for the referendum opposing the bailout and then accepting the terms of the bailout created an unsustainable political condition for Tsipras.

Some experts and media are comparing Greece to a European protectorate (at least in the leftist literature) after the agreement on the third bailout’s terms. But aside from asking for the approval of his policies, does Greece need another election in such dire times? Tsipras is gambling on a new election in order to get rid of rebels, or what The Economist calls the ‘wild ones,’ build on its domestic legitimacy, and try to govern and reform Greece with a fresh flow of money. Let see if Tsipras can win another election, and how different will Tsipras 2.0 be from the Tsipras 1.0? Can Tsipras 2.0 bring Greece to reform and become a growing and sustainable country under the current conditions? This remains to be seen.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).
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Greece – Failure of Leadership with Global Consequences

Photo: EPA
Photo: EPA

“Le drame grec n’est pas et ne sera pas seulement national : il a et il aura des effets sur l’ensemble de l’Europe, dont la Grèce fait partie intégrante par son histoire et sa géographie” – Jacques Delors, Pascal Lamy et Antonio Vitorino in Le Monde of July 4th.

Greece and the European Union have their backs against the wall. Greece faces two deadlines, June 30th repayment of €1.6bn to the International Monetary Fund (which remains unpaid until the results of the referendum), and the July 20th of €3.5bn to the European Central Bank (ECB). Even if Greece were to repay the first bill, it would be unable to do so on July 20th.

So far, Greek Prime Minister Alexis Tsipras and his finance minister, Yanis Varoufakis, feel that the terms of the new bailouts are too destructive and would require more cuts on Greek social programs that they have asked Greek citizens to vote on their futures (the referendum is currently taking place in Greece). Without an extension of his first debt, Greece has no chance of receiving the remaining of the credit of €7.2 billion and would ultimately default. So, how has a crisis starting in October 2009 been so poorly managed and is putting at risk the stability of Europe and global markets?

A Call for Democracy?

On the night of Saturday  27th, Prime Minister Tsipras announced on television, at the great surprise of his European counterparts, that he would be holding a referendum on July 5th asking the Greek citizens to decide on the future of Greece, either by accepting the deal and the ensuing austerity measures, or by rejecting the deal and ultimately having to default. In order to hold the referendum, Tsipras asked his creditors to postpone the June 30th deadline by five days, which has been rejected. For instance, the leader of the Eurogroup of Eurozone finance ministers, Jeroen Dijsselbloem, said at a news conference that “The Greek government has broken off the process. However regrettable, the program will expire on Tuesday night.”

International public opinions have been deeply divided when reflecting on Tsipras’ call. On the one hand, some have argued that Tsipras is gambling with the future of Greece and ultimately the Eurozone and the stability of global market. While others have talked of a smart political move by Tsipras. On the question of the referendum, Prime Minister Tsipras has already expressed that he will be campaigning for a ‘no’ vote (read here Varoufakis’ recommendation for a no vote). Two of the top American economists, Joseph Stiglitz and Paul Krugman, announced in separate editorials that they would vote ‘No’ at the referendum. Joseph Stiglitz said clearly in his op-ed that the tension between Greece and its creditors (troika) is about power and democracy rather than economics. Yet, many media outlets have been very critical towards Tsipras as one can see the recent cartoon published by the Economist:

The Economist - July 4th
The Economist – July 4th

Merkel & Hollande, European Leaders? Think again…

The current crisis is more of a political failure than an economic/monetary one. It is the failure of Chancellor Angela Merkel of Germany and François Hollande of France to recognize that saving Greece is more important than letting a Eurozone member

Photo: EPA/WOLFGANG KUMM
Photo: EPA/WOLFGANG KUMM

defaulting on its payments and obligations. Chancellor Merkel has been portrayed as the leader of Europe, which seems to be a wrong assessment in retrospective. A leader is not an individual working on protecting solely the interest of his/her country, but in the interest of the system as whole. In addition, one needs to recognize that Merkel rejected a last minute call by Tsipras to redefine the terms of the agreement. She reiterated that there was no point in holding talks with Greece before the July 5th referendum. Her finance minister, Wolfgang Schäuble, was more critical, saying, “Greece is in a difficult situation, but purely because of the behaviour of the Greek government … Seeking the blame outside Greece might be helpful in Greece, but it has nothing to do with reality.” As hard it may be to justify another rescue of Greece to her electorate, Angela Merkel needs to recognize that a Greek default would endanger Germany, the Eurozone, the EU and global financial markets as a whole.

In the case of François Hollande, he has been too quiet and distant on the question of the Greek default. François Hollande, a socialist by political affiliation, missed a strategic moment in establishing himself as the axiom between the members of the South with the ones of the North. François Hollande’s gamble has been to bandwagon with Germany rather than positioning himself with a clear strategy and eventually offering alternative options in favor of Southern members. Hollande’s gamble is not only failing, but he has become irrelevant on the Greek dossier (not what French finance minister, Michel Sapin, would claim). Such strategic absence by France is regrettable, as the country economic base is so fragile that a Greek default would certainly put a halt to the more than timid recovery if one considers the degree of involvement of French banks in the Greek economy. It is difficult to imagine France striving through another Eurozone crisis with GDP growth rate of 0.6% and an unemployment level at 10.5%.

Global Earthquake, and American Powerlessness

A Greek default would have serious global consequences causing contagion throughout the world. Since Monday morning, global stock markets have been declining and are waiting on the eventual repercussions of a Greek default as many unpredictable consequences could occur considering the complex interconnection of world financial system.

The United States has been following the European drama very closely and powerlessly from the other side of the pond. Even though the US economy is slowly picking up, it has remained very timid with strong quarters and weaker ones. President Obama has been in directly contact (and through his Jack Lew, his Secretary of Treasury) with his European counterparts, Ms. Merkel and M. Hollande, expressing his concerns about the eventual consequences on the global finance and calling for a resolution. Speaking at a news conference, the Chairman of the Federal Reserve, Janet Yellen, said that “To the extent that there are impacts on the euro-area economy or on global financial markets, there would undoubtedly be spillovers to the United States that would affect our outlook as well.” The US have been very worried about the course of actions taken by the Europeans and has urged Greece and the Europeans to reach a deal in order to avoid a default.

A second reality, beside economics, is pure geopolitics and security. With a Greek default, the country would become unable to secure its borders, a real problem with the current migration crisis in the Mediterranean – wherein the EU and its Member States are failing to address – (read previous analyses here and here). Even if most of the coverage has focused on Italy, Greece is the second entry point to Europe by the sea and land. The second geopolitical reality is the rapprochement of Athens with Moscow. This rapprochement is taking place at a time

Reuters
Reuters

wherein the EU is extending its economic sanctions against Russia (so much for European unity vis-à-vis Russia). Greece and Russia are working on an deepening energy and agricultural ties. “Russia wants to build a pipeline through the Balkans, and Greece wants it, too” said Dimitris Vitsas, a ruling leftist Syriza party lawmaker, “We can develop a common enterprise not only in this, but for agricultural products and so on.” From Moscow’ standpoint, the gas deal with Athens is an important entrypoint into European politics. Moscow has been financing European radical parties and worked on transforming its image from within (read here a previous analysis on Russia in Europe).

Geopolitics highly matter in the Greek dossier and seem to have been sidelined for obvious economical and financial realities. With or without a Greek collapse, geopolitics will remain and affect the stability of Europe.

A New Meaning of Europe?

The European project is based on core principles, norms and values: solidarity, peace, democracy and respect. At several occasions, German Chancellor Angela Merkel used the phrase, “If the euro fails, Europe fails,” in order to talk about the need to save Greece. With the Greek fiasco, it seems that each normative dimension has been violated by all European parties. The concept of European solidarity is not embedded in punishing but assistance.

Greece is so indebted with a debt representing 183.2% of the GDP with an unemployment rate above 25% that its future can only be with a serious assistance by its European counterparts. Even if Greek debt is abysmal, Greece’s economy only represents 2% of the eurozone. In order to make Greece stable and functional, it will need to go through serious structural reforms and clean up the high level of corruption. Certainly some Eastern, Central and Baltic Member States, like Lithuania and Bulgaria, feel that Greece should implement the necessary reforms as the quality of life in Greece, especially the level of pensions in Greece, are much higher than in poorer EU Member States. But this could be adjusted once Greece is under European protection. Can these take place under additional austerity measures?

Last but not least, the European political narratives have evolved these last five years. Back in 2009, the concept of Grexit was not an option, just a concept describing an unthinkable future (read an interview on the topic here). Today, a Grexit appears as an option and eventually a reality. On the verge of a default, it seems that the EU project may be endangered because of lack of flexibility and lack of understanding of its heritage. Letting Greece default would be a failure of leadership and failure of strategic thinking.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).