speri.comment: the political economy blog

Greece’s 3rd MoU: a one-way street?

Syriza’s post-referendum agreement with the Troika stands as a ‘tombstone’ over potential alternatives to the Eurozone’s ordoliberal foundations

Alexandros Kyriakidis, Doctoral Student, Department of Politics, University of Sheffield

Alexandros KyriakidisThe Eurozone crisis has brought about fundamental changes in the EU framework of governance. Overall, the founding ordoliberal model, often closely and correctly linked to the ideational hegemony of Germany, has been strengthened. Despite argumentation, by early 2015 all member-states had eventually come to accept the new structure, except for Greece which persisted in resisting reforms and supervision. This raised hopes, especially after the election of Syriza in Greece in the January 2015 election, that a more democratically-oriented and financially-social policy paradigm could be made to work within the Eurozone. Syriza was the first political party elected across Europe that was opposed to austerity, to continuing Memoranda of Understanding (MoUs) and to the Troika. Yet, in the end, Syriza, whether with or without its active input, has perhaps done more to damage these hopes than realise them.

The reality has been that the performance of the new Greek government within the country’s borders has proved to be disappointing. Its cooperation with the right-wing party, ANEL, provided for an awkward combination of left and right, raising real compatibility issues.  On the governance front, the changes made were minimal.  For example, in its first seven months in office, Syriza passed less than half the laws that any Greek government passed in the equivalent period of time since 2004.  The appointments it made were also questionable. Indicative was the appointment of a TV/stage actor without expertise or relevant knowledge as Minister for Labour, Social Security and Social Solidarity (one of the chief issue-areas covered by the MoU inherited by Syriza).

The July 2015 referendum also generated several problems. Rejecting the Troika’s final proposal for prior actions that had to be taken before a Greek deal could be concluded appeared of itself to satisfy the popular sentiment. However, things deteriorated when the referendum on this proposal was proclaimed. Setting aside the debate about the legitimacy of referendums on fiscal issues (Article 44, §2 Constitution of Greece), the full list of proposals on which the judgement of the people was demanded was no less than 37 pages long and included many complex fiscal and other technical issues. Given the limited expertise of a large portion of the citizenry on such issues and the short amount of time provided for the provision of further information and deliberation (only 4 days!), the value of the outcome becomes immediately questionable.  What’s more, the 2nd Greek programme, along with the above proposal to conclude it, unequivocally expired at the end of June 2015, thereby rendering the referendum void in any case. Finally, the consequences of one or the other outcome were always unclear, further hindering the ability of the population to make an informed decision. There were clear indications that a No-vote could lead to Eurozone, or even EU, ‘Grexit’, although this was denied by the Greek Prime Minister, thereby creating confusion in the electorate.

In fact, Syriza’s domestic policy, otherwise lacking in reforms, was completely overshadowed by electoral processes, with three taking place in less than one year (snap elections on 25 January 2015; a referendum on 5 July 2015; and snap elections again on 20 September 2015). This has caused electoral fatigue, disorientation and general disbelief in the potential impact of any outcome, prompting alarmingly low voter turnout (just over 56%) in the most recent elections.

In terms of the agreement eventually reached, and to put it bluntly, Syriza signed up for the exact opposite of its electoral mandate. The negotiations for the 3rd programme could only begin after a set of prior actions had been legislated by the Greek government. The programme provides for up to €86bn financing across for three years at the steep price of further austerity, including – in a clear contravention of Syriza’s electoral mandate – the full reinstatement of the Troika in Athens with the right to be consulted on all draft legislation prior to Parliamentary submission.

Indicative of the harshness of the third programme is the new privatisation fund that has now been established in addition to the existing Hellenic Republic Asset Development Fund (HRADF) set up under the 1st and 2nd programmes. This new fund, to which Greek public assets are to be transferred, is to be overseen by EU officials.  Put differently, Greece has limited input into how its own public assets are to be privatised.  Furthermore, of the total projected profit of €50bn over 3 years – a target that by itself is quite unrealistic, given that HRADF reached approximately €6bn in the four years from 2011-15 – the first €25bn will be devoted to bank recapitalisation. Only additional profits, and only up to €12.5bn, will then be used to repay Greek government debt and, if any other amounts are obtained, to support investments.  In short, Greek public property, mostly real estate, will be liquidated under the supervision of foreign officials to service questionable private banking sector debt (a large part of which is still owed to large banks in northern Eurozone states) and then public sector debt, thereby depriving Greece of the secure value of its real estate and providing minimal opportunity to gear proceeds towards permanent value-creation.

Many EU and Greek citizens invested greatly in the change seemingly signalled by the first election of Syriza, either because of political ideology, financial exhaustion or the apparently more democratic input into decision-making. This had EU-wide implications, with a particularly important political multiplier effect in Spain with respect to Podemos. However, the new programme and the pre-negotiation events surrounding it have made clear that compromise has no place in this reinforced ordoliberal Eurozone.  The impasse created by the unwillingness of the Troika to accept any sort of compromise led to the imposition of capital controls (similar to Cyprus in 2012) and pushed Greece into arrears with the IMF. In addition, the plan for a Greek exit from the Eurozone, also prepared by the European Commission in detail, clearly crossed the EU’s foundational ideals of solidarity and compromise. In essence, even though there was a proposed, realistic, pro-EU alternative and a good portion of citizens backing such an alternative (e.g. in the Greek referendum 61% voted against austerity measures, even with capital controls imposed), this is now deemed to have no importance.

Overall, the deal struck by Syriza and its recent re-election on that basis has effectively buried the hope that any different pro-EU alternative can survive. It has become clear that Eurozone offers only one way, not subject to any change.  The events demonstrated what happens when a member-state wishes to implement a more democratic and fiscally alternative agenda.  It is indicative that Podemos plummeted from 27% in January to 18% in April 2015 to 16% or lower in August 2015 as the Greek situation deteriorated. There were even attempts on its part to create distance from Syriza.   At the same time, the two major political parties in Spain climbed in the polls.

The key questions remain: when did the Eurozone, and the EU, become a ‘take-it-or-leave-it’ entity? And should things remain that way?

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