The Bailout Kiss of Death
Can Alexis Tsipras survive bending to the will of Greece’s creditors?
For the past five years, Greek politics have been defined by a simple divide: those parties that agree to the mnimonio — the memorandum, as Greeks refer to the terms of bailout loan aid — versus those that rail against it. Each party that has signed on to a mnimonio has seen its support rapidly erode. The center-left Pasok won a decisive victory in 2009, but after agreeing to two bailout programs, it’s now one of the smallest parties in the Greek Parliament. Pasok’s former rival, the center-right New Democracy, took power in 2012 after opposing the first mnimonio. After changing tack and agreeing to push through Greece’s second bailout, New Democracy eventually lost popularity and power — falling to the leftist party Syriza in a snap election this January. New Democracy’s longtime leader, former Prime Minister Antonis Samaras, resigned as party head this month, finalizing his political demise.
Now Prime Minister Alexis Tsipras, who denounced the first two bailout agreements, is tasked with pushing through a third. Last week, he stood in front of the Greek Parliament and asked lawmakers whether they believed the European creditors’ “blackmail” of Greece was “real or fake.” If the parliamentarians believed it was real, he added, they had no choice but to approve the latest set of austerity measures. Despite opposition from within Syriza, the Parliament abided, pushing through a first round of unpopular measures that included consumption-tax hikes and pension reforms. Early Thursday, July 23, the Parliament voted through a second set of required overhauls, including judicial and banking reforms.
It’s an extraordinary reversal for Tsipras. He vows to push through the creditors’ stringent conditions despite his long-standing and very public opposition to them. The measures are not only anathema to the Greek left, but deeply unpopular in a country weary of several years of economic depression and fiscal austerity.
Whether Tsipras can fulfill the creditors’ demands and survive politically remains doubtful. He faces not only the challenge of keeping his own party intact, but arguably a far more difficult chore: pleasing both Greek voters and the creditors. If the fate of the previous ruling political parties that have governed under bailout regimes provides any clue, Syriza’s future does not augur well. To prevail, Tsipras will have to remake himself and his party in a very short amount of time. The country’s place in the eurozone could hinge on his success.
Despite the profound political chaos of the past months, Tsipras continues to enjoy widespread popularity. Many Greeks perceive him as having fought a just battle against the creditors in his months of negotiating. At the same time, the majority of Greeks support his decision to back down and reach an agreement. After years of national humiliation, Tsipras gave Greeks what they wanted — a fight in the name of pride and sovereignty, but also a compromise to keep Greece in the euro. One recent poll puts Tsipras’s approval rating at almost 60 percent. If there were an election in Greece today, Syriza would likely win in a rout.
Yet, political support, particularly at a time of tax hikes and spending cuts, can quickly fade. As Tsipras moves to satisfy his creditors, he is almost predestined not to meet their expectations. His open disagreement with the bailout’s terms could sabotage any authentic effort to implement the agreement. Greeks may ask themselves why they should abide by steep new taxes when their own government decries the hikes. Adding to the challenge are the plan’s unrealistic fiscal targets, which call for large primary surpluses over decades. The International Monetary Fund, in a recent call for Greek debt relief, noted that few countries have been able to accomplish this.
The economic agenda that has been put into place under the bailouts is “not compatible with a parliamentary democracy,” says Dimitris Papadimitriou, a professor of politics at the University of Manchester. The reduction to Greeks’ standard of living under the creditors’ oversight, he says, has led to the fragmentation of Greece’s centrist parties. “What that has done has provided fantastic ground for the extremes,” he says. “Syriza first benefited from it. Now Syriza is also getting into the mincing machine.”
But Tsipras may have found a way to try to keep his radical bona fides while still forcing through a painful austerity program. Early on the morning of July 13, after he emerged from an all-night negotiation session in Brussels, the Greek prime minister stepped in front of television cameras and alluded to how he would seek to govern his country under a third mnimonio. The burdens of its terms, he said, would be “allocated with social justice.” His government would enact “radical reforms” to take on the oligarchs and powerful interests who led the country to collapse and have yet to pay their fair share to help it recover.
Now that Tsipras finds himself with no better choice than to abide by an austerity regimen he opposes, he vows to focus on policies over which he has more control — to crack down on corruption and tax evasion, particularly among the rich and politically connected. Previous Greek governments were seen as exempting the most powerful offenders from their halting campaign to crack down on tax evasion — pursuing tavern owners before elites with Swiss bank accounts. Tsipras promises to pursue corruption at the highest levels. This kind of approach is part of a wider effort to convince Greek voters that austerity under his government “will be better and somewhat more acceptable” than in previous years, says Dimitri Sotiropoulos, an associate professor of political science at the University of Athens.
As a would-be reformer, Tsipras has one key advantage: He is new to the political scene and untarnished by the corrupt political establishment that has long ruled Greece. For decades, Pasok and New Democracy benefited from a patronage system they had largely constructed. In the past five years, those same parties were charged with reforming that faulty system. The parties’ jumbled, post-bailout efforts to do so bred more resentment than change.
Syriza, however, has yet to prove it can make sorely needed reforms. Having risen to power as a member of a protest party, Tsipras has shown an exceedingly strong talent for appealing to the emotions of Greek voters. Yet, if he is to have any chance of governing for long, he will need to reshape his party, bringing into his administration more people with the technical expertise needed to implement difficult overhauls. Tsipras will also have to show he is willing to defy powerful constituencies — not only the oligarchs, but powerful groups he has long curried favor with, such as Greece’s public-sector unions. Those unions praised Tsipras for restoring the jobs of laid-off public-sector workers shortly after he was elected, but they are certain to resist efforts to reform the country’s problematic public administration — which remains one of the creditors’ demands.
Tsipras now enjoys one key domestic political advantage his predecessors did not. The anti-mnimonio camp in Greek politics, which was once dominated by Syriza, has now shriveled and comprises only the uttermost political extremes. Along with a splinter faction of hard leftists within Syriza, only the Communist Party and fascist Golden Dawn — still Greece’s third-largest party — continue to favor a rupture with the eurozone. The vast majority of those in the Greek Parliament, in other words, are now in the pro-mnimonio camp.
Still, the opposition to a third bailout from within Syriza is destabilizing the Syriza-led government, allowing it to pass bailout measures only with the support of centrist opposition parties. Syriza officials themselves acknowledge that, without an effective ruling majority, the current government can’t remain in place for long. Some publicly suggest new elections will take place prior to the end of the year, after the current government has finalized the bailout. Barring a rapid plummet in his popularity, Tsipras is likely to remain prime minister after a potential election and may perhaps come out stronger, presiding over a more moderate Syriza stripped of its most strident leftists.
If he is to effectively lead Greece, however, Tsipras will have to make the case that he is far more than a spirited fighter who succumbed to foreign blackmail. He will have to rapidly evolve into a statesman capable of navigating through extremely challenging times. Whether he is capable of such a transformation is far from clear, but even Tsipras’s detractors should hope he succeeds. The Greek Parliament is now largely composed of a crumbled political establishment and alarmingly extremist parties. If Tsipras falters, who will be left to govern Greece?
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