Greek Bailout

On the third anniversary of the referendum to decide whether Greece was to accept the bailout conditions imposed by its creditors, the political landscape of the country looks so much different.

Former firebrands Alexis Tsipras and his SYRIZA-led government which orchestrated the referendum and urged people to reject the conditions by voting ‘No’ on July 5, 2015, have since made a huge U-turn, agreeing to a third bailout program and becoming its most enthusiastic supporter.

Greece is due to complete the third bailout in August, but critics say that tough austerity measures, including pension cuts will be implemented in the next few years, as the country will enter a long period of “enhanced surveillance” by its creditors.

The referendum was announced by Tsipras in the early morning of 27 June 2015, and ratified the following day by the parliament and the president.

From the outset, he saw the referendum as a negotiating maneuver. The idea of a referendum that would “strengthen” the Greek position in the negotiations with the Troika had been floated in the spring of 2015.

“Our aim is for the referendum to be followed by negotiations for which we will be better armed,” he said in an interview on state television.

It was the first referendum to be held since the republic referendum of 1974, and the only one in modern Greek history not to concern the form of government.

As a result of the referendum, the bailout conditions were rejected by a majority of over 61 percent to 39 percent approving, with the “No” vote winning in all of Greece’s regions.

Supporters of the “No” vote danced for joy in the streets of the Greek capital. But, Tsipras refused to join the celebrations.

He declined to make some kind of “victory appearance”, he called meetings with opposition leaders to forge a common position and dismissed Yanis Varoufakis, his finance minister whose six-month negotiating tactics had infuriated his European counterparts.

Varoufakis later described the atmosphere in the PM’s office on the night of the referendum as “downcast”, as if Tsipras and his aides dreaded the emphatic victory of the “No” vote.

Three days following the referendum, Athens “formally asked for a three-year bailout from the eurozone’s rescue fund and pledged to start implementing some economic-policy overhauls” beginning by mid-July 2015.

European finance leaders scheduled a “crisis summit” on 12 July to consider the request. The Greek request included a “drastic turnaround” for Tsipras regarding “pension cuts, tax increases and other austerity measures”.

On Monday, 13 July, the SYRIZA-led government of Greece accepted a bailout package that contained larger pension cuts and tax increases than the one rejected by Greek voters in the referendum.

Greek prime minister in talks with own MPs amid speculation he could be forced to form a national unity government and sideline leftwing Syriza faction.

A beleaguered Alexis Tsipras was locked in talks on Tuesday with his own MPs amid speculation that the Greek prime minister could be forced to form a national unity government to push through the draconian bailout deal imposed by Brussels on debt-stricken Greece. Report The Guardian

Facing a rebellion over the terms of a fresh €86bn (£61bn) rescue package, Tsipras has considered sidelining the increasingly belligerent leftwing faction in Syriza in favour of a broader coalition to push through spending cuts and painful reforms.

In Brussels, meanwhile, EU finance ministers met to discuss how a fresh bundle of loans can be pieced together to bridge Greece’s current funding gap.

Athens faces demands to repay €7bn of debts in July, including €3.5bn due to the European Central Bank on 20 July. This will require a bridging loan of €10bn-€12bn, as the full bailout will not be agreed in time. All of the other 27 EU nations are expected to be asked to contribute.

The UK chancellor, George Osborne, said Britain will not contribute any money to the Greek bailout, telling reporters:

Britain is not in the euro, so the idea that British taxpayers will be on the line for this Greek deal is a complete non-starter. The eurozone needs to foot its own bill.

Britain has contributed around £1bn to the European Financial Stability Mechanism (EFSM), but the funds have remained outside a scheme used to underwrite short-term loans to Greece following a deal between the UK and Brussels in 2010 stipulating that UK funds would only be used to protect the EU.

In Athens, one of the scenarios being considered is the formation of a cross-party government to not only push reforms through parliament but also play a role implementing them against what is likely to be stiff opposition.

The radical-left party is increasingly fighting a battle for survival in government with cadres saying Syriza’s overall aim is not to go down as a “left parenthesis” in power.

“Everything will be judged with the enforcement of real government policy which will not only be the agreement,” the interior minister, Nikos Voutsis, said on Tuesday morning.

Calling the proposed deal “very difficult, very bad”, the minister said the real issue the government faced would be finding and enacting policies that could have an ameliorating affect on the painful consequences that the measures were likely to have socially.

“Social counter-measures must be found which will give hope to people.”

Tsipras is seeking agreement among the 149 Syriza MPs who dominate the 300-strong parliament, but could splinter in response to a vote on the deal.

Greece has promised to pass into law by Wednesday a string of reforms as the price of a deal that include reforming the VAT system, overhauling pensions and signing up to plans that ensure immediate spending cuts in the event of breaching creditor-mandated budget targets.

Athens has agreed to sell off state assets worth €50bn, with the proceeds earmarked for a trust fund supervised by its creditors. Half the fund will be used to recapitalise Greek banks, while the remaining €25bn will pay down Greek debts as well as be investmented.

Determined to keep his party together ahead of an expected onslaught by MPs opposing the outlined deal, Tsipras summoned his closest allies to a meeting in Athens before a gathering of his parliamentary party on Tuesday.

Tsipras won backing from his coalition partner the Independent Greeks, after its leader Panos Kammenos initially criticised the deal and especially the £50bn of privatisations demanded by Brussels, which must be channelled into a separate fund.

Kammenos said: “We will stand by the Alexis Tsipras government.”

Many of Kammenos’s MPs have said the new agreement, as outlined in the marathon overnight meeting in Brussels, is much harsher than the original one the coalition had endorsed last weekend and, as such, is unacceptable.

But Kammenos is still backing the PM, telling reporters that:

“It is clear to all of Europe that [on Monday] a coup happened in the heart of Europe.

The PM was blackmailed into signing a very different agreement. And this coup is continuing here in Greece where people want the government to fall.”

The former Greek finance minister, Yanis Varoufakis, has called the deal “unviable” and likened it to the 1919 Treaty of Versailles – widely seen as the harbinger of the second world war for its crushing of Weimar Germany.

“This has nothing to do with economics. It has nothing to do with putting Greece back on the rails towards recovery,” Varoufakis told Australia’s public broadcaster, the ABC.

“This is a new Versailles treaty that is haunting Europe again, and the prime minister [Alexis Tsipras] knows it. He knows he’s damned if he does and he’s damned if he doesn’t.”

Emphasing the scale of the task ahead, the Bank of England governor, Mark Carney, told the Treasury committee in Westminster, that success will require “Herculean efforts” from all sides.

He said the scale of structural reforms, fiscal adjustment, privatisations required will be significant with “big execution risks”.

The central bank chief also put his weight behind arguments put forward by the International Monetary Fund that Greece needs its €340bn debt burden with public and private lenders to be cut if it is to emerge from under its debt mountain. He warned that Greece’s debts “are not sustainable in their current form”.

Flashback to the Greek Bailout Referendum: When ‘No’ Became a ‘Yes’

Greek bailout or Greek sale-out? Alexis Tsipras battles own MPs over Greek bailout deal