Greek Non-Drama – Has Syriza Really Given Up?

Greek Government Seemingly Blinks

Alexis Tsipras has tried his best to sell the outcome of Greece’s negotiations with the EU to his voters over the weekend. As far as we can tell, the Greek government hasn’t achieved even a single one of its aims so far. The bailout was extended by four months, but in spite of a few cosmetic changes to the wording accompanying it (e.g. the “troika” has been renamed “the institutions”), it is still precisely the same bailout agreement as before.

Yanis Varoufakis and Alexis Tsipras. What’s the plan?

Photo credit: Alkis Konstantinidis / Reuters

Not so, avers Tsipras. Here are a few quotes from a televised speech he delivered on Saturday, as reported by Reuters:

“Yesterday we took a decisive step, leaving austerity, the bailouts and the troika,” Tsipras said in a televised statement. “We won a battle, not the war. The difficulties, the real difficulties …are ahead of us.”

Tsipras and his Syriza party won power last month on promises to end Greece’s EU/IMF bailout program and end cooperation with the hated “troika” — inspectors from the European Commission, European Central Bank and IMF who have monitored Greece’s compliance with its austerity and reform commitments. Instead Athens was forced to accept the conditional extension of the bailout and still deal with the troika, renamed in the deal as “the three institutions”.

Nevertheless, he said: “Yesterday’s agreement with the Eurogroup … cancels the commitments of the previous government for cuts to wages and pensions, for firings in the public sector, for VAT rises on food, medicine.”

Tsipras, a radical left-winger, had been under heavy pressure to secure a deal as Greeks have been pulling huge sums out of the country’s banks, fearing the talks with euro zonefinance ministers would fail and Greece would be cast adrift as the bailout had been due to expire on Feb. 28. Without naming names, he attacked conservatives at home and in the euro zone. “Yesterday we averted plans by blind conservative powers, within and outside the country, to asphyxiate Greece on Feb. 28,” he said.

About 1 billion euros fled Greek bank accounts on Friday, a senior banker told Reuters, due to savers’ fears that Athens might have to halt such withdrawals or prepare to reintroduce a national currency. Greece says Friday’s extension should calm such fears.

“Greece achieved an important negotiating success in Europe. We showed determination and flexibility and in the end, we achieved our basic goal,” said Tsipras.

This sounds like a fantasy. This is the first time we are hearing that many of the previous government’s commitments have actually been canceled, but maybe we have misunderstood something. It seems more likely that Mr. Tsipras is taking some license with interpreting the agreement that was struck on Friday.

Readers may recall that we have already wondered whether the dispute between the Syriza government and the EU was scripted beforehand, with the outcome preordained (see “Greece and the EU – Nothing But Political Theater?” for details). Nothing that has happened so far has done much to dispel this impression.

As an aside, the financial markets appear to have anticipated the outcome of the negotiations to some extent (see the charts immediately below). It seems likely that Greek government bonds and the Athens General Index will rise further on Monday, although the agreement has not been fully consummated yet. The Greek government must still submit a list of reforms it intends to implement to the EU, and the bailout extension must subsequently be approved by the parliaments of EU member states.