Greek officials are publicly pointing to limited progress in talks with the “Brussels Group” over the weekend in basically three major areas: adjustment of the VAT rates; administrative consolidation of the public pension programs, and; a potential compromise on the numerous exemptions allowing for early retirement benefits prevalent in the Greek pension system.
An agreement on the first two items would certainly be of no surprise to anyone – they have been on the negotiating table now for weeks. Any concession on early retirement benefits, on the other hand, would be a sign of progress with Syriza finally budging on one of the modifications to its “red line” positions it has hinted in private could be possible now for months (see SGH 5/29/15, “Greece: The Final Stretch”).
*** There is a possibility EU officials may choose to grasp at these straws in order to avoid a deepening crisis, but from what we understand the EU and specifically the IMF have far more substantive concerns over the size and sustainability of the Greek pension system, and have been aggressively pushing for Greece to either modify its 13th month “supplemental” pension benefits or show it to be self-financing. Syriza has drawn a hard line on supplemental pensions and if it holds to that Athens will have quite a challenge to make the case Greece’s pension program is anywhere close to self-financing. ***
*** It is in this light that Greek Prime Minister Alexis Tsipras has been engaged in almost daily shuttle diplomacy with German Chancellor Angela Merkel and French President Francois Hollande. While the content of those three-way calls has not been disclosed, from what we understand, Tsipras appears to be pressing the EU leaders on his limited political capacity to manoeuver and deliver concessions domestically that could threaten his party unity and political stability, even if passed with the support of opposition parties. And that reliance on the opposition could undermine Tsipras to the point of forcing early elections. ***
*** And while Greek officials have been negotiating furiously and touting progress, we have reason to believe the Bank of Greece has quietly drafted measures that would need to be taken for a legislative bill imposing capital controls on financial transactions should the current round of negotiations fail. Indeed, confidence is so shaky that the mere rumors of a potential tax on ATM withdrawals, that were swiftly refuted, apparently may have led to as much as a whopping 300 million Euros of withdrawals from Greek banks over a mere two-hour period. ***
Fiercely Anti-Troika Coalition Partners
Deepening strains within Syriza and its coalition partners are becoming increasingly apparent. There are fears, for instance, that finance minister Yanis Varoufakis may even balk at signing a deal deemed overly friendly to “The Institutions,” in a bid to salvage his increasingly tattered political legacy.
And the announcement today that the economist Elena Panaritis would not accept her appointment as Greece’s representative to the IMF after vehement protests from Syriza’s radical left over her previous association with the PASOK government is a harbinger of the political and legislative struggles facing Tsipras even were a deal to be concluded in short order.
Assuming there is an agreement, there is a possibility that Tsipras may retain enough party unity to pass legislation through Parliament on the back of his own 149 Syriza delegates (out of 300 seats), even were he to lose, as is very likely, support from some if not almost all of the rabidly anti-Troika 13 Independent Greeks coalition partners.
Should Tsipras fail to garner enough support, the opposition To Potami party has promised the unconditional support of its 17 delegates towards a salvation budget, and the formerly powerful but now decimated center left PASOK has hinted it may back such legislation as well. The position of the center-right New Democracy is far less clear – there are divisions within the party as to how far to push Syriza, were they to be on the ropes – and ND support would represent the bitterest “poison chalice” of support to Syriza.
However, from what we understand, the talk in political circles in Athens has moved away from the possibility of a referendum, were Tsipras to find himself at risk of being unable to pass legislation on the back of his own party and coalition majority in Parliament, straight to the far more disruptive, costly, time-consuming possibility for a new election.
In other words, for all the offers of help from the other parties, Tsipras needs to and will continue to look for a deal that he can sell – and pass in parliament – on the back to his own Syriza base.
The reason is simple – reliance on the opposition could and probably would mark the death knell to Tsipras and Syriza’s ability to govern the country for much longer. If that is not a possibility, it is increasingly likely we now believe Tsipras may lead Greece into early elections.