Greek Capitulation

Unless I’m missing details hidden deep between the lines, the Greek government completely capitulated to the EU, IMF and their creditors with their proposal last night, an offer much more severe than the one voters overwhelmingly rejected in the referendum last weekend. Some reports indicate that the proposal is even missing any real debt relief component.

I didn’t expect Europe to back down, but didn’t expect Prime Minister Alexis Tsipras to cave in so completely, either.

It’s baffling, but lends credence to the view voiced by some last week that Tsipras and Syriza were actually expecting to lose last Sunday’s referendum and then later go down with the ship fully knowing they were never up to the task of taking on Germany and the rest of the EU.

From this very good and thorough rundown of the Greek crisis as of this morning by Yves Smith on her site Naked Capitalism, which includes a complete transcript of the proposal, and which I urge you all to read:

Close confidant of Yanis Varoufakis and Greek government advisor, Jamie Galbraith, confirmed that Tsipras never intended to win the referendum. He essentially confirms the report by Ambrose Evans-Pritchard that many readers rejected, that the referendum was a ploy to save Tsipras’ and Syriza’s face in admitting defeat and allowing a new coalition or a new government to cut a deal with the creditors. From the INET interview with Lynn Parramore:

The recent Ambrose Evans Pritchard piece is very much on the mark (“Europe is blowing itself apart over Greece – and nobody seems able to stop it”). The Greek government, and particularly the circle around Alexis, were worn down by this process. They saw that the other side does, in fact, have the power to destroy the Greek economy and the Greek society — which it is doing — in a very brutal, very sadistic way, because the burden falls particularly heavily on pensions. They were in some respects expecting that the yes would prevail, and even to some degree thinking that that was the best way to get out of this. The voters would speak and they would acquiesce. They would leave office and there would be a general election.


The Greek government faces a legitimacy crisis. Given the overwhelming Oxi vote, how can Tsipras sign up for a deal that is even worse? There is a real possibility that young people, particularly in Athens, which has the highest population density of any city outside of Asia, will take to the streets.

And even if there is no outburst of protests, how can any government that signs a creditor-acceptable memo be seen as anything other that a Vichy state? Politico points out that Tsipras is likely to fracture Syriza with the proposal and will need to enlist other parties who supported a “Yes” vote to get the parliamentary approval he needs. That should hardly be a surprise to Naked Capitalism readers; we pointed out the disconcerting move the morning after the referendum, in which Tsipras met with leaders of all the parties outside the government save Golden Dawn and asked for their support, and all agreed save the communist party KKE. Did FDR seek the support of the defeated Republicans in 1933? I struggle to think of a similar move (beyond a mere polite gesture) after a landslide win.


Syriza has thus managed to deliver to the neoliberals a victory more complete than they could ever have engineered on their own. This has been the basis of our criticism, that Syriza by engaging in an open war against an opponent it could never hope to vanquish, was doing not just itself but also the Greek people and the left, lasting damage.

What was the best case scenario here?

Referring to the referendum, a friend asked on Facebook what the best case scenario here always was, to which I replied something like this:

The ‘best case scenario’ already played itself out with the debate this stirred, showing to the uninitiated the inherent weaknesses of the euro, how power politics plays out in the united Europe, and to a lesser extent how democracy has and will continue to take a back seat for the union’s ‘greater good’. It’s important for European to remember that to most who don’t live on the continent, how the EU actually functions largely remains a mystery. This episode has proved at least somewhat enlightening.

From a purely selfish point of view, I wanted to see the Grexit because in the long term that is still what’s best not only for Greece, but probably the best option for other second tier euro zone countries as well. Such an exit would however require time and planning and preferably not done staring down the barrel of a creditor’s sawed-off shotgun. Even then, finding a politician or party to lead that exodus and force the country to suffer the short- and mid-term consequences is pretty much impossible, even if the currency’s breakup is quite likely destined. Smith closes:

The net effect is to give Germany, its retrograde ordoliberals, and its neoliberal allies freer rein to continue their destructive austerity policies. Despite how counterproductive austerity clearly is, Greece will be used as tangible proof that the cost of Euroexit is vastly higher. And that means that Germany will be able keep pursuing policies destined to destroy the Eurozone going well beyond their sell-by date: running large trade surpluses, refusing to finance its trade partners, and bucking all measures to move to meaningful Federal fiscal spending that might buffer national differences in performance and stealthily recycle some of the German trade surpluses. The end result will be more oppression, more suffering, and a more catastrophic eventual Eurozone breakup.

Finally, I need to add that even if short-lived, it was nonetheless refreshing to see a country stand up to the IMF – and it actually being noticed. Developing countries in the south who have been forced to live for decades under the IMF’s brutal dictates never had the luxury of even having their concerns heard because few noticed and even fewer cared. That’s also economic racism, which is a whole ‘nother discussion.

Image: Detail from San Juan Evangelista by El Greco, 1608, Museo El Greco, Toledo, Spain, May 2015


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