Greek crisis round up – 24 July 2015

—> Wednesday night the Greek parliament approved a 977-page bill as required by the new EU memorandum. Syriza MPs only received it a day before the parliamentary debate. It is clear that nobody could possibly have gone through all the pages to have an informed debate. The hours of debate preceding the vote showed in fact that there was little talk of the actual measures under scrutiny.
We will have to wait for much more refined analysis to understand all the implications of the bill. What English-speaking analyses have reported so far is that the bill covered two main areas: a whole new Civil Procedure code – basically a reform of the civil justice system; and the implementation of the EU Bank Recovery and Resolution Directive, laying out rules for bank rescue – allegedly to avoid taxpayers to bear the burden, in practice to shift the burden towards bank depositors.

Important measures that have been downplayed by pro-agreement media:

– the EU directive now sets rules for bail-in (i.e. bank depositors’ haircuts) for banks recapitalisation in case of insolvency or bankruptcy; the rules will only come into force from January 2016, sparking speculation by some analysts that depositors will take a hit (i.e. they will lose part of their savings to recapitalise the Greek banks), and it is just a matter of when, rather than if. Business analyst Frances Coppola sees the continuation of capital controls as a prelude to bail-in of depositors. There are widespread fears of a repeat of Cyprus, where account holders with more than 100,000 euros lost money. In this scenario, Greek small and medium enterprises would take a major hit, further eroding any chance for economic growth and recovery;

– another hot topic is the issue of home repossessions on non-performing loans (i.e. large numbers of Greeks defaulted on their mortgages). Banks up to now have avoided mass repossessions. According to pro-agreement English-speaking Greek analysis outlet Macropolis, the new measures approved by the bill make it easier for banks to auction homes on non-performing loans. In his speech to the Greek parliament, Tsipras of course reassured with much emphasis that it would be the end of Syriza if the poorest and more vulnerable were not protected – he has not however said much about the real scope of potential home repossessions. This issue is connected to the bail-in. The general orientation of creditors is to make sure that Greek banks’ recapitalisation (accepted by everybody as inevitable) takes place with the least possible burden on international creditors (i.e. reducing the amount of money to be loaned to save the banks). This means of course that the hit will have to be borne by common people and the Greek economy.

—> Predictably, the bill was approved, with pro-agreement opposition New Democracy and PASOK supporting the government. The main attention was focused on Syriza internal dissent. 36 MPs voted no or abstained, down from 39 in the previous vote a week before – the fact remains that the Syriza-Anel coalition does not have a majority anymore. In another spectacular u-turn Varoufakis voted ‘yes’ – apparently arguing that he was already in favour of these measures before.

It is unclear what the implications of this continued dissent are. Syriza’s central committee has not been called yet, Tsipras seems to be stalling on that. There are contrasting views over the real intentions of the dissenters and whether there will be a split or not. Rumours about snap elections in autumn are rife – this seems to be a probable scenario if the dissenters leave and form a new party. Pollsters give Tsipras’ Syriza still firmly on the lead, and Tsipras ratings remain high – this is all to be taken with a grain of salt, these are the same pollsters who hugely underestimated the ‘no’ vote in the Greferendum.

Beyond the questionable numbers, Tsipras seems to be managing this transition pretty well. He has made strong inroads with the pro-agreement Greek media establishment, which was notoriously anti-Syriza and anti-referendum. The rhetoric of a heroic national leader crushed by the unbeatable powers of Germany and Europe, and forced into accepting an unfavourable agreement to avoid complete collapse, seems to be gaining ground. Syriza hopefuls are trying to make sense of Tsipras’ capitulation, while retaining Syriza’s ‘distinctiveness’ vis-a-vis the older political establishment. A popular narrative is that this is just a tactical move and in the end Syriza will rise again, ignore the agreement and get going with the long-term plan of radical and progressive change – but for now Tsipras needs more time to regain strength and come up with a viable plan, the story goes. Of course Syriza dissenters categorically reject such narratives as delusional, and claim that Tsipras’ choice has been disastrous and there is nothing heroic about giving in to creditors and betraying the Greferendum.

—> The Greek bill vote is another milestone of the agreement process, various government leaders and technocrats now estimate that the deal should be finalised in the second half of August. After €7.16bn disbursed as bridge funding last monday (all gone back to the creditors, mostly IMF and ECB), there is talk of another bridge loan to allow Greece to repay €3.2bn to the ECB, due on 20 August – the deal might not be finalised by then.

—> Talks from many quarters seem to confirm that debt restructuring is firmly on the agenda, even though we don’t really know how much, in what ways, what it really means etc. The Italian central bank governor noted yesterday that in fact interest rates on Greece’s negotiated debt repayments are quite low and the timelines spread over time – something that both Syriza and its opposers in the last election made sure to keep well hidden from public scrutiny. According to him, further extensions won’t be enough to sort out the problem, substantial debt relief needs to be on the agenda – translated, this is closer to the IMF line that part of the debt needs to be cancelled, something Germany is not even considering at the moment.

It is significant that high-level US officials continue to join in the conversation, reassuring that the talks are proceeding smoothly and that a deal will be struck and one that is not bringing Greece to its knees – something they did even during the heated days around the Greferendum. This is of course neither altruistic help for allies in trouble, nor merely a preoccupation for the stability of global financial markets. The US has very little interest in Grexit and will do whatever they can to avoid Greece falling into the hands of Putin – something a Grexit would make quite likely.

—> The bailout talks will now continue in Greece, the troika is about to return to its ‘debt colony’. The latest is that there are disagreements between troika chiefs and the Greek government over where the creditors will lodge. Of course this is more about the symbolic moment of capitulation which Tsipras is trying to manage by stalling and appearing like he’s got some say and leeway to contain the troika’s interference in Greek matters.

Major obstacles on the way – or should we say, other bitter pills to swallow for Greeks – are discussions around labour laws reforms that will further weaken workers’ position, market liberalisations and the even more controversial privatisation fund. The Greek parliament will have to approve more neoliberal measures in August. There also remains the open question of IMF disagreement with Germany and other EU countries over debt relief.

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