The word “progress” is going to crop up in a lot of headlines about Greece today. That’s because the government apparently wants some recognition of the “considerable progress” made so far.
But for the most part, that’s nonsense. On the real issues at stake, there’s no sign of any progress at all.
There are a few reasons that people might be saying the talks are going a little better. Firstly, there have been fewer theatrical events in the last couple of weeks, like calls for reparations from Germany or threats that Mediterranean refugees will stream across Europe.
Secondly, Yanis Varoufakis, the finance minister who seemed to clash both personally and politically with the rest of Europe’s finance ministers, has been partially sidelined.
In some ways Varoufakis has been unfairly treated (at least a little). He may well be arrogant or belligerent in meetings, though I have no idea if that is true. But the reason why he was on a collision course with the rest of the Eurogroup in the first place was because the positions of the new Greek government and the rest of Europe are irreconcilable.
That doesn’t mean that there won’t be some sort of deal. It just means that to get one, one side or another will have to give in on massive chunks of their platform.
Analysts at UBS listed three big issues on which there’ll have to be some sort of compromise and agreement in a note on Monday:
- Pensions: “The Troika will demand that pension reform continues, as the Greek pension system is still too expensive. This will imply a higher pension age and stricter limits on early retirement; the Troika will also resist the re-introduction of 13th-month pension payments.”
- Labour market reform: “A key demand will be greater flexibility in labour contracts and wage negotiations; the Troika will also resist the plans for an increase in minimum wage.”
- Privatisation: “The Troika will continue to demand a comprehensive sale of state assets, as agreed with the previous government.”
Whether they’re reasonable or not, it’s quite clear that these are pretty Thatcherite policy demands, being asked of the most left-wing government in Europe. Grab your nearest Greek Marxist and ask him or her what they think of these proposals.
The gap between what the two sides want is so enormous that even a half-way deal would be unpalatable to both.
A lot of analysts seem to expect that Syriza will be the side to give in and accept austerity, like PASOK, the previous dominant centre-left party before them. But Syriza is a coalition of movements, many are sincerely committed and lifelong left-wingers. They have eschewed more mainstream politics and spent years protesting, campaigning and keeping the faith. Expecting them to fold in the face of a few months of stress is probably not a good bet.
Similarly, it’s not clear that Europe has any wiggle room left. Even without Germany, the bugbear often blamed for preventing a deal, Greece has pretty much no friends in any other European finance ministry. Italian finance minister Pier Carlo Padoan and European Commissioner (and former French finance minister) Pierre Moscovici are probably Greece’s closest allies in the talks — and they’re not really that close.
Greece is running up against not just German opposition, but friction with the centre-right governments of Spain and Portugal, for which any concession to Syriza means emboldening leftist movements in their own countries. The newer entrants to the eurozone in the east are perhaps the least sympathetic of all, since many of their citizens are actually poorer than Greece’s.
But even if this huge gap is breached and the government strikes a deal to access the €7.2 billion ($US8.02 billion, £5.18 billion) bailout tranche, things aren’t over. Once local governments are repaid for the money Athens hoovered up, further debt repayments are made, private contractors (many of whom have gone months without money they’re owed) are made whole, there’s not going to be much left.
And at that point we’re back in an even more difficult scenario, because this bailout tranche is the formal end of Greece’s second programme. More money would need a whole third programme (which Athens rejects entirely) and the rest of the Eurozone would be incredibly sceptical about offering any bigger deal to a Syriza-led government.
Without a deal, there’s only one possibility — default. After that, it will be increasingly difficult to imagine any long-term future for the country in the eurozone.
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