The Greek Bailout: Syriza's Ill-fated Choice

After months of negotiations, the Greek government narrowly avoided an exit from the Eurozone on 13 July, as 17 hours of tense talks in Brussels culminated in a provisional bailout agreement between Greece and its creditors. In the days following, the European Central Bank and European Union pledged emergency funding and bridge loans to sustain the country until a full three-year bailout is finalised. While the agreement has prevented Greece from leaving the Eurozone, the terms of the deal are stringent. In exchange for funding worth up to EUR 86 billion, Greece has agreed to significant pension adjustments, increases to Value Added Taxes (VAT), a complete overhaul of its collective bargaining system, measures to liberalise its economy and tight restrictions on public spending. The Greek government has also agreed to appropriate EUR 50 billion of public assets in a special privatisation fund to act as collateral on the deal.

These conditions are the antithesis of the Syriza government’s far-left objectives. Calling for major economic reform in the country, the party was elected to power on an anti-austerity ticket in an early election in January 2015. Initial populist proposals included raising the minimum wage, rolling back privatisations, re-hiring persons retrenched from the public sector during previous austerity programmes, the halting of pension cuts, and increasing social benefits. However, with EUR 320 billion in debt, Greece was in no position to enact these proposals nor bargain with the Eurozone. On the contrary, Syriza’s vociferous anti-German rhetoric throughout the talks – including calls for Germany to pay further World War II reparations – gave Eurozone members, such as Germany and France, resolve to harden their stance towards Greece.

Following this failure in diplomacy, Greece held a referendum over the proposed bailout deal in early July. While Prime Minister Alexis Tsipras claimed that the referendum would give Greece more leverage in negotiations, the vote had the opposite effect as both global markets and the international community interpreted the poll as a vote on a ‘Grexit’. The referendum triggered a slump in the European stock market and although the vote resoundingly rejected the tabled bailout package, the government ignored the results. International creditors interpreted this backtrack as an indication of Greece’s lack of power to dictate any meaningful terms of the deal. The Greek government’s capricious and unrealistic negotiation strategy ultimately pushed the country into a position where it was forced to agree to terms that are more draconian than the bailout conditions rejected in the referendum.

Syriza’s concessions have resulted in divisions within the party. While the first round of austerity reforms were approved by 229 out of 300 Members of Parliament (MPs) on 16 July, out of Syriza’s 149 parliamentary seats, three ministers and 39 of the party’s MPs refused to support the new measures. The division is between the more moderate faction of the party, which includes Prime Minister Tsipras, and the radical Left Platform, a faction that favours a Grexit. While Tsipras has since reshuffled his cabinet to remove dissident ministers, discontent over Tsipras’ concessions to creditors runs high in Syriza’s main body, the Central Committee. The Syriza government is required to pass further unpopular reforms over the coming months, a task that is likely to lose support from several more Syriza MPs. Moreover, although Syriza is still mandated to govern Greece, going forward it will be unable to do so without support from opposition parties. As Greek politics has historically been fractious and has consisted of weak coalitions, the likelihood of Syriza being able to hold onto power beyond 2015 is therefore remote. These divisions are likely to result in either snap elections, or a national unity government, such as the one created under former Prime Minister Lucas Papademos in late 2011.

Outside of parliamentary developments, protests over the reforms are likely to persist over the next three months at least. Recent anti-austerity protests in Athens were infiltrated by anarchists and degenerated into violence. Nevertheless, demonstrations are unlikely to result in significant insurrectionary violence, as it appears that the minority of Greeks would opt for a Grexit. A poll published on 18 July by a local newspaper suggested Syriza would garner 42.5 percent of the vote if an election were held in Greece today, almost double the conservative New Democracy party’s 21.5 percent. In addition, 70 percent of respondents would accept the bailout deal if it kept Greece in the Eurozone. Public confidence in the party is nevertheless likely to decline significantly over the next six months, particularly after new austerity measures are enacted.

Greece is now in a paradoxical position where a far-left government has been forced to adopt neoliberal policies. This contradiction ultimately places Syriza in a lose-lose situation, with an impending crisis of legitimacy on the cards.