The ongoing Greek crisis: European negotiations and the Varoufakis proposals

Catroon: Martyn Turner, The Irish Times

10013The dust has hardly settled after Greece managed to evade ‘sudden death’- a bank run followed by euroexit . Greece managed to evade the  trap  Eurogroup had prepared to spring in the event of  failing to reach agreement for the extension of the bailout. A new chapter in the the Greek crisis saga has now opened.


The agreed deal ratified by the Bundestag on the last Friday of February was supposed to give the new Syriza government time to implement a reform program that will lead Greece away from the cycle of tax increases and wage cuts. Wolfgang Schaeuble did himself reluctantly commended the deal to the Bundestad, a deal that during negotiation in Brussels he had referred to as ‘a Trojan horse’.

The wandering Varoufakis, after a long and tough round of negotiations in Brussels and several other capitals of Europe, arrived back home to face some muffled criticism against him and his government.

Evidently Varoufakis did not miss Schaeuble’s reference to Homer, so, when during an interview was accused of capitulating in the face of stern opposition, he replied: “Like Odysseus, one must sometimes be tied up on the mast of the ship to avoid the Sirens. This is what we have been trying to do”.

The Greek negotiating team had indeed faced calls from all the other 18 eurogroup ministers, orchestrated by the formidable Schaeuble, to accept more austerity. In the end the Greek minister had to compromise some of the governments pre election promises, most notably the discussion about debt reduction, in order to achieve an agreement.

But you would be mistaken to think the negotiations are now over, or that the crisis is behind the Greek government.

For instead of allowing the Greek government  to carry on with the agreed reforms, Europe is still holding a big stick over the country through the European Central Bank, by threatening to cut off liquidity to Greek banks and by refusing to allow the Greek government to issue more treasury bills to fund its loan repayments.

The ECB is also excluding Greece from access to using other sources of funding, such as the 1.8 billion euros profits from ECB’s Securities Markets Program which should have been refunded to the Bank of Greece and the option to use of the 10 billion left over from the bank recapitalisation reserve fund.

“Any disbursement is conditional upon the successful conclusion of the previous programme review and the approval of the Eurogroup”, the European bank said, presumably carrying out the instructions of Herr Schaeuble, who wants to force prime minister Tsipras to agree to return to the austerity programme of the previous government.

Meanwhile back in Greece, the government holds its position, buoyed by increasing popular support for its stance, and are declaring determined to proceed with the implementation of their proposals as outlined in the Varoufakis email, despite political opposition from both, the former governing parties within Greece, and from Europe.

The Varoufakis proposals are not exactly revolutionary. The SYRIZA government wants to combat tax evasion, root out corruption and tackle Greece’s “humanitarian crisis” with housing guarantees, free medical care for the uninsured and unemployed, a basic social welfare provision for food and electricity for those facing extreme poverty.

It may come as a surprise to many outside Greece, who may think that Greece is asking for too much, but there are no social security benefits in this country; the unemployment benefit of some €300 a month stops after a year, with further restrictions for seasonal employees and the self employed who have lost their incomes. Furthermore, many of the unemployed who enjoy the luxury of a car or accommodation – rented or owned – are falling into the ‘nominal assumed income’ trap and are taxed, for an income they do not have. Naturally they cannot pay their tax, and these amounts are added to the tax revenue target shortfall.

Therefore, the call for a fairer tax system, the fight against corruption and tax evasion and improvements in social welfare makes perfect sense to the Greek public, who are very well aware that in the last forty years, every time Greece made a purchase —of medicines, highways or guns — a substantial cut went into the hands of the oligarchs and the political elites who hardly pay any taxes. They know that the same banks which have been given more than €50 billion, to be repaid by Greek taxpayers, issued tens of billions in loans without sufficient collateral to the same oligarchs to run media networks and their own personal expenses. The question that remains unanswered however, is why does Europe not give as much importance to fighting corruption as it does to other reforms. The answer, as one political commentator recently observed, ‘could be that in order for someone to receive a bribe, someone else has to pay it’. And in the few cases of corruption investigated in Athens, most have involved German companies like Siemens, Daimler, Ferostaal and Deutsche Telekom, all being suspected of bribing Greek counterparts or of making political contributions to both the dominant political parties that were running the country in the last forty years

And if the SYRIZA government gives any signs that they are actually going to tackle even a small part of the corruption and tax evasion and make even a small step towards improving social welfare in Greece, the public will be ready to support them to the end of the euro.

y xamonakis