Tsipras imposes more austerity on insolvent Greece; plans to win new early election soon

Eurozone Summit of 12/07/2015. German Chancellor Angela Merkel, the Greek Prime Minister Alexis Tsipras and the French President Francois Hollande (seen from behind) have a private discussion ahead of the summit. (EC Audiovisual Services, Date: 13/07/2015).

Eurozone Summit of 12-13/07/2015. German Chancellor Angela Merkel, the Greek Prime Minister Alexis Tsipras and the French President Francois Hollande (seen from behind) have a private discussion ahead of the summit. (EC Audiovisual Services, Date: 13/07/2015).

On 9 July this newspaper predicted that the Greek Prime Minister Alexis Tsipras was adamant about keeping his country in the Eurozone. In order to do this the Sting foresaw that he was prepared not only to pay a dear price for a third bailout scheme (April 2010, June 2012 and July 2015) financed by Greece’s creditors (European Union, European Central bank, International Monetary Fund), but he was ready to decimate his own left wing party, the SYRIZA, while passing this solution in Parliament with the votes of the opposition parties.

What ‘prior actions’

It turned out yesterday in a crucial Parliamentary vote on ‘prior actions’, that a round number of 40 SYRIZA deputies didn’t back Tsipras’ proposal, including the tough terms and conditions as foreseen by last Sunday’s a-Greekment (agreement) concluded at the Eurosummit (the council of the 19 Eurozone leaders). These ‘prior actions’ are set in exchange of Greece retaining its position in Eurozone (more austerity, wholesale privatizations, tax increases, reshuffle of the pensions system, etc). The SYRIZA dissident deputies claimed that their voters’ mandate at the 25 January legislative election didn’t include a ‘capitulation’ to creditors and indirectly opted for a Grexit and the introduction of a national currency. Tsipras indirectly considered this as a ‘coup’ against his government and replied that the option of a national currency is tantamount to total catastrophe.

The ‘prior actions’ legislation passed yesterday include large increases in indirect and direct taxation (VAT and income tax), abrupt stoppage of early retirement before the age of 67 or 62 with full 40 years of social security contributions, a structural reform of the pension funds system and the independent functioning of the Greek statistical service (ELSTAT). More measures will be promulgated on 22 July concerning the adoption of a new and more effectual Civil Procedure Code and the full independence of the taxation authority.

New political horizon

After yesterday’s Parliamentary plenary, Greece’s political scenery has drastically changed. Until yesterday, the Tsipras government had a solid Parliamentary backing from 149 SYRIZA representatives plus 14 ANEL deputies in a house of 300. This last nationalistic and right wing group has been cooperating with SYRIZA as a junior government coalition party right after the 25 January election. Yesterday night or rather earlier today, the ‘prior action’ legislation was passed in the legislative with a large majority of 229 votes backed by the opposition parties (major opposition center right New Democracy, socialist PASOK and center-left Potami-river) which supported the extra austerity, more privatizations and the deep structural reforms.

A massive group of 39 SYRIZA deputies (32 voted ‘no’, 6 said ‘present’ and one didn’t show up in the plenary) didn’t back the new austerity measures as proposed by their own government. This leaves the Tsipras coalition administration without an absolute Parliamentary backing turning it into a minority government. The 163 parliamentary majority of the coalition government which was formed after the 25 January election was thus depleted into mere 124 in a house of 300.

Backing from the opposition

Of course with the expressed and concrete willingness of the opposition parties to do whatever it takes to keep the country in the Eurozone, Tsipras can easily pass also the remaining legislation in order to comply with the Sunday 12 July unanimous a-Greekment of the Eurosummit. This ability though may not include other government topics like legislative initiatives concerning immigration, education and health or other crucial fields of action. Clearly the Tsipras administration is now a minority government and this cannot continue for more than a few months.

There is no question then that a new early election is undoubtedly within Tsipras’ political planning for the immediate future. It is also unquestionable that he will choose the best timing to announce such a new legislative ballot, aiming at maximizing his electoral appeal, as the constitution enables him to choose the time he wants. Tsipras’ presently outsized political capital, as reckoned by the unbelievably high score in favor of his own choice ‘no’ (OXI) in Sunday’s 5 July referendum (61,4%), will be surely damaged after the a-Greekment he concluded last Sunday 12 July with his 18 Eurozone colleagues. So he has to ponder the future adverse effects of the new severe austerity measures.

Planning a new election

Understandably his planning is based on the belief that he can clearly win a general election within the next months, before the new austerity measures and the increased taxation start denting incomes and growth, undermining his appeal in the electorate. To increase his electorate potential he may wait for the October discussions with the country’s creditors about a rearrangement and a possible alleviation of Greece’s sovereign debt.

According to the Eurosummit agreement, the creditors have undertaken the obligation to start a discussion in October about the alleviation of the sovereign debt servicing. They have already agreed to refinance the maturing debt up to 2018 and Tsipras will now press hard for a rearrangement of debt servicing beyond that year. This will be done by interest rate reductions, prolongation of maturities and increase of grace periods.

Backing from the IMF

According to the latest IMF estimate – including the new loan arrangement of €84 billion Tsipras agreed with the Eurosummit – Greece’s debt is obviously unsustainable. The relevant IMF’s staff preliminary public debt update says that the “debt is expected to peak at close to 200 percent of GDP in the next two years, provided that there is an early agreement on a program. Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far”. The IMF also proposes a very long grace period. The relevant passage says, “If Europe prefers to again provide debt relief through maturity extension, there would have to be a very dramatic extension with grace periods of, say, 30 years on the entire stock of European debt, including new assistance”. This will send the latest maturities of the debt up to 2080.

Germany has to pay for the Fund to stay

It is obvious that Tsipras, with the support of IMF, will get the best possible debt relief during the next few months. Of course Berlin being the largest creditor to Athens will provide a very strong resistance in alleviating the Greek debt. At the same time Germany has an expressed wish that the IMF stays in Europe and takes care of Greece’s bailout. For this to be possible though the IMF will surely demand that the country’s debt has to be alleviated up to the point of becoming sustainable. The IMF cannot be involved in a rescue mission if the country’s debt is not sustainable. As a result the debt rearrangement has to be important and Germany would be forced to pay.

In conclusion, the Greek Prime Minister armed with a sizable debt relief making Greece’s debt sustainable will undoubtedly use his constitutional prerogative and call for an early election possibly before the end of the year. At that time his appeal to voters would supposedly have reached its maximum. In reality there is no other political force if any, able to lead the country through the economic and social ordeal of the next two to three years.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

A Europe that Protects: Commission calls for decisive action on security priorities

How the diaspora is helping Venezuela’s migration crisis

GSMA Mobile 360 Series – Latin America, in association with The European Sting

1 million citizens try to create a new EU institution

Can free trade deliver cheaper renewable energy? Ask Mexico

On the first day of 2019, over 395,000 babies to be born worldwide: UNICEF

Qualcomm to be the next target of EU antitrust regulators? China might be the answer

Scoring for the environment: what Mathieu Flamini’s top-flight football career taught him about leadership

CEOs in these countries are more likely to go with their gut

Pandemic mental health: the urgency of self-care

Financing fossil fuels risks a repeat of the 2008 crash. Here’s why

Changing how we produce and consume: New Circular Economy Action Plan shows the way to a climate-neutral, competitive economy of empowered consumers

Your smartphone may know more about your mental health than you

Future Forces Forum: Prague will be hosting the most important project in the field of Defence and Security

Gig workers among the hardest hit by coronavirus pandemic

EU budget: Reinforcing Europe’s cultural and creative sectors

Stepped-up efforts needed to combat pneumonia; save nearly nine million children’s lives

COVID-19: What to know about the coronavirus pandemic on 6 April

Brexit and migration dominates the debate on October’s EU summit

EU-Turkey relations: Will Turkey manage to revive the EU accession process talks?

European Semester Autumn Package: Creating an economy that works for people and the planet

Burundi: Inclusive dialogue ‘only viable option’ for resolving country’s political crisis says, UN envoy

EU Youth Conference in Amsterdam: enabling young people to engage in a diverse, connected and inclusive Europe

Africa-Europe Alliance: first projects kicked off just three months after launch

Here are 4 of the most politically charged World Cup games ever played

This chart shows the total number of COVID-19 cases and recoveries so far

Supporting the recovery: MEPs adopt budget priorities for 2021

This is how the Western Balkans will become more innovative

EU out to conquer African Union summit

Nearly half a billion people can’t find decent work; unemployment set to rise: new UN labour report

With potential to boost profits by up to 20 per cent, a woman’s place is at work, says UN labour agency

Junior Enterprises as a solution for Youth Entrepreneurship

Spring 2019 Economic Forecast: Growth continues at a more moderate pace

UN chief condemns suspected Boko Haram attacks targeting Eid al-Fitr celebrations in Nigeria

IMF: The near-term outlook for the U.S. economy is one of strong growth and job creation

Capital Markets Union: Making it easier for insurers to invest in the real economy

Germany loves a strong euro; the new Fiscal Councils can deliver despite the Greek chaos and a wider questioning of austerity

Can Greece’s devastating economy deal with the migration crisis?

Do men and women really have different leadership styles?

We can build a carbon-neutral world by 2050. Here’s how

New identity cards deliver recognition and protection for Rohingya refugees in Bangladesh

Indonesian tsunami death toll climbs over 400 as Government-led relief efforts are stepped up

These 11 EU states already meet their 2020 renewable energy targets

International Court of Justice orders Pakistan to review death penalty for Indian accused of spying

Mother of all mergers between Facebook Messenger, WhatsApp and Instagram: EU Data Privacy restrictions against Facebook’s imperialistic plans

Antibiotics are contaminating the world’s rivers

New ECB boss quizzed for the first time by Economic Affairs Committee

MEPs back update of rail passenger rights across EU

Batteries included: how better storage can transform renewable energy

Venezuelan crisis: MEPs reaffirm their support for Juan Guaidó

‘Reasons to hope’ for sustainable peace in Central African Republic – UN Mission chief

Four million Syrian children have only known war since birth: UNICEF

Germany fears that Americans and Russians want to partition Europe again

Radio still a powerful worldwide tool for ‘dialogue, tolerance and peace’: Guterres

More women and girls needed in the sciences to solve world’s biggest challenges

Stronger partnerships with post-conflict countries needed to ensure ‘path towards durable peace’: UN chief

I accidentally went viral on TikTok. I learned we failed our youngest generation.

Code of Practice against disinformation: Commission calls on signatories to intensify their efforts

To retire at 65, American millennials need to save almost half their paycheck

New EU rules cut red tape for citizens living or working in another Member State as of tomorrow

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s