The PJ Tatler

The Greek Left's Fantasies Destroyed by Reality

There is something childlike in the Greek government’s view of the bailout that saved their country from utter ruin. The Marxist who plays at being the finance minister of a supposedly capitalistic country is especially endearing. Yanis Varoufakis has declared “victory” after the EU finance ministers forced Greece to do what Syriza promised the voters they’d never do; deal with the hated “troika (ECB, IMF, and EC) and extend the bailout.

EU finance ministers extended the Greek bailout under the condition that Greece continue to abide by the austerity measures that were imposed as a result of the loans Athens received to keep their country afloat. All the grandiose spending plans of Greek’s far left Prime Minister Alex Tsipras are now dead — at least as far as the EU is concerned. If Greece wants to spend profligately, European taxpayers won’t subsidize it any more.

But it still has a hard time sinking in, as Tsipras showed in his statement following the deal:

“We won a battle, not the war,” Mr Tspiras said on Saturday.

The deal is widely regarded as a major climb down for the PM, who won power vowing to reverse budget cuts.

He hailed the agreement as a “decisive step” that “achieved much” towards ending austerity, but added: “We have a long and difficult road ahead.”

The Greeks continue to cling to the fantasy that they control their own destiny:

The new left-wing government effectively crumpled Friday under pressure from the rest of the currency union and accepted it had to complete the reforms demanded of it two and a half years ago in return for continued access to the only financial lifeline it has. It also promised to honor all its debts and not to reverse any of the reforms undertaken so far under the 2010 and 2012 bailout programs, backing down from its most important pre-election promises.

In return, the creditors agreed to extend by four months the existing deal, meaning that Athens will still get some €3.6 billion from the Eurozone and European Central Bank, and a bit more from the International Monetary Fund this year. They also all but guaranteed to loosen the country’s budget targets, and to keep available nearly €11 billion earmarked for recapitalizing Greek banks if they get into trouble.

The best that Athens can say about the deal is that it gives the new government the opportunity to substitute some reforms of their own for the ones that they most dislike in the existing program. With energy and imagination, the Greeks could yet draft an alternative agenda that it could claim to co-own.

“We are no longer going to be following a script that was given to us by external agencies,” Greek Finance Minister Yanis Varoufakis said at a press conference after a mercifully short meeting. The old program, he added, is “in abeyance.”

And Greece is by no means out of the woods. They must come up with a list of reforms by Monday and those reforms must be approved by EU finance ministers for the bailout to continue.

In the meantime, the Greek government is being kept on a very short leash. It only has until close of business Monday to present its list of alternative proposals to the same hated ‘Troika’ of technocrats–from the European Commission, European Central Bank and International Monetary Fund–that it promised to abolish. They only have until April to hammer out the finer points. As an indication of how much trust Greece has lost in the last month, the bank recapitalization money will be moved back from Athens to be kept safely under lock and key in Luxembourg, in case the government gets the urge to use it to fund the government’s deficit in the meantime. At the same time, the ECB will keep Greek banks on hunger rations, not restoring their former privileges until the Troika–sorry, ‘the Institutions’–say it’s safe to.

First reports out of Athens on the list of reforms don’t sound like the Tsipras government has grasped the idea of “reform.”

Greece’s list of reforms to be submitted to the euro zone on Monday comprises pledges on structural issues such as tax evasion and corruption over the next four months without specific targets, a government official said on Saturday.

Athens clinched a last-minute deal late on Friday to avoid a banking collapse by accepting a conditional extension of its bailout program. The accord requires Greece to submit by Monday a letter to the Eurogroup listing all the policy measures it plans to take during the remainder of the bailout period.

If the European Commission, the European Central Bank and the International Monetary Fund are satisfied, the Eurogroup is likely to endorse the list in a teleconference without the need for a formal meeting. Then euro zone member states will need to ratify the extension, where necessary through their parliaments.

Greek officials have been working on the reform list since Saturday morning and plan to submit a short list of pledges on areas such as tax evasion, corruption and public administration, the Greek official said.

There will not be specific figures or targets to be achieved tied to the goals, the official said, adding that the two sides had not yet discussed how Greece would be evaluated on the reforms.

Despite a climbdown from promises to end the bailout and stop dealing with the hated “troika” of EU, ECB and IMF, Athens has tried to stress that Greeks are now shaping their own destiny rather than having reforms imposed from abroad. The official said that what counted was that Greece had “ownership” of the program.

However, Athens has already promised not to take any action that could burden Greece’s fiscal targets.

Meanwhile, capital is fleeing the country — more than $1 billion on Thursday and Friday alone. If there is trouble on Monday with the EU finance ministers adopting the Greek “plan,” Athens may be forced to impose capital controls to avoid disaster.

European paymaster Germany comes out the big winner in all of this. Their firm stand probably saved the eurozone. If Greece had been allowed to make its fantasy a reality, the likelihood is that other bailout nations like Spain, Portugal, and Ireland would also demand “adjustments” to their repayment plans, thus throwing the entire bailout regime into crisis.

The question of whether the Tsipras government can survive this massive betrayal of its campaign promises may come down to how the people of Greece perceive the Tsipras surrender. If they see it as a pragmatic move to save the nation’s finances, they may reluctantly support it.

But Tsipras may have to pull a rabbit out of a hat if the EU finance ministers reject his plan. Time is running out and the potential of a Grexit only grows the longer the bailout extension is up in the air.