Wednesday, July 08, 2015

8 July 2015 Recap: What Does Tsipras Want?

Yesterday, I ended my recap with a question: does Tsipras want Grexit? The more I thought about it, the clearer it became that the question should be enlarged: what does Tsipras want? If you haven’t caught Guy Verhofstadt’s speech from today, I highly recommend it. His conclusion:
How do you want to be remembered [Mr. Tsipras]? As an electoral accident who made its people poorer in his country? Or won’t you be remembered, Mr. Tsipras, as a real revolutionary reformer? In the tradition of Trikoupis and Venizelos? 
More or less, this is where I am at. Before I lay out the options as I see them, let me reiterate my sense that Tsipras is genuinely seeking a deal. My latest data point is this: since winning Sunday’s referendum, Tsipras had done very little “campaigning.” He has engaged other political leaders in Greece, he has gone to Europe, and upon his return from Strasbourg today, he met with the President of the Republic and consulted with oppositions leaders. Recall that last week Tsipras was on TV almost daily, making attacks against the creditors and upping the rhetorical ante. We see none of this this week. 

In other words, to come back to yesterday’s question, “what would Tsipras do differently if he wanted Grexit,” he would be keeping up the rhetorical attacks to be able to claim that “they forced us out of the Eurozone.” Instead, we have heard very little from him, even after the European Central Bank sent clear signals on Monday that the wiggle room that Greece has is narrowing. 

By contrast, the press reports that tomorrow’s schedule includes consultations within SYRIZA and the government. In fact, SYRIZA’s left wing is already engaged in a public debate in preparation to rebuff any deal that the prime minster comes back with. Tellingly, an article published on iskra.gr, which often reflects the views of the left wing, concluded with:
Greece has several pathways, all difficult and burdensome. But the worst, the more exhausting, the most humiliating and the most unbearable is the surrender and submission to the institutions of the European Commission, the European Central Bank and the International Monetary Fund. This ultimate submission we ought to avoid at all costs! (emphasis in original). 
In case anyone missed the message: drachma trumps a new deal. 

So where does this leaves Tsipras? It is well understood that Tsipras called a referendum because he could not get a deal through the SYRIZA hardliners (this much was admitted by the now finance minster Euclid Tsakalotos). But the referendum has strengthened Tsipras both within his party and with the Greek electorate, so the dynamics have changed since two weeks ago.

At this moment, Tsipras has two options. First, he can stick with SYRIZA and lead the country out of the Eurozone and maybe the European Union. Since the Greek people still want to be part of the Eurozone, Tsipras would likely pay a cost for such course of action, although he would probably couch it in strong populist and nationalist rhetoric and thus survive. What is not clear is whether the opposition can be mobilized to raise the stakes or even to block him. 

In this scenario, SYRIZA would emerge as a dominant party for now but is likely to face enormous economic challenges straight away, and its electoral strength will dwindle since it will not be able to deliver on its promises of making life better for ordinary Greeks. Whether Tsipras agrees with this assessment (that his troubles will rise outside the Eurozone), however, is not clear. If not, he could be willing to flirt with this idea (the SYRIZA hardliners clearly think that life outside the Eurozone will be better). 

Second, Tsipras can cut loose the SYRIZA hardliners and seek to lead a grand coalition consisting of SYRIZA, Potami and PASOK and possibly ANEL (Independent Greeks) and New Democracy. The negotiation for such a grand bargain will be intense, however; will there be more power sharing in the executive branch? Will the coalition merely offer a vote of confidence or will it blindly support a broader parliamentary agenda? What kind of reassurances will the opposition parties require in order to ensure that they are not signing their own parliamentary deaths? Will they provide support to let SYRIZA rule for the full four years? 

At this point, Tsipras seems to be moving more in this direction.

The toughest point, as I see it, is the balancing act between what domestic constituents want to hear and what will be acceptable to Europeans. Debt relief has already become a non-issue, with Greece only asking for credible commitments for future negotiations regarding debt relief. The only thorny issues are the fiscal measures that Greece will put forth to achieve its primary surplus; and the reforms that will underpin the return to economic growth. The fiscal measures (austerity) are more or less understood although still being negotiated. 

Reforms, however, will be hard. On one hand, SYRIZA’s economic platform has a distaste for markets and private initiative and thus it will be hard to develop a program that would satisfy Brussels, the IMF and Berlin. On the other, the list of things that Greece needs is very, very long and it is possible for SYRIZA to draft enough measures that have a modernizing tone (and do in fact modernize) without succumbing to the kind of neo-liberalism that it loathes (attaching oligopolies, fighting tax evasion, supporting inward investment in large projects, etc.). Whether this is enough to get Europe’s attention, I am not sure; what I am sure is that the Venn diagram between reforms that are acceptable both in SYRIZA (even outside the hardliners) and overseas is very small, and it will be a major challenge to find and include them all. 

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