Late on Friday February 20th, European finance ministers emerged from what had appeared to be a problematic meeting with seemingly positive news. Greece had agreed to pay all of its debts, pending further conditions being met, and in turn been granted a delay to the deadline of those payments.
This superficially good news comes after a great deal of sabre rattling from both sides, with new Greek finance minister Yannis Varoufakis going as far as to tweet out a link to a blog post written by economist Phillippe Legrain stating ‘Greece should not give in to Germany’s bullying’. It is hardly the quiet, polite democracy to which we have grown accustomed.
Syriza has seemed a breath of fresh air to many Greek people since their election in January, but what does this deal actually mean? Certainly it is one step away from disaster for the EU, with fears of a Greek default shelved for at least another few months. The extension is currently four months long, but there will be further reviews in April and June to assess Greece’s progress.
Whilst a useful stopgap, however, it is hardly an ideal situation for anyone involved. Despite some claims that this is an ideal solution that has emerged from the talks, it is difficult to see that as any more than the usual political smoke and mirrors, as neither side will be entirely happy with the result.
First, let us remember that Greece wanted up to one third of their debt cancelled entirely. Indeed, that was one of the central policies upon which Syriza ran and were elected. An extension of their debt is hardly an ideal solution for the hard line anti-austerity party that they claim to be. With the agreed budget discipline that accompanies this extension, it is highly unlikely that Syriza will be able to meet their anti-austerity promises without upsetting the European Commission.
And that is the problem for the Eurozone as a whole. Whilst fears of a Greek exit have momentarily been allayed, there is nothing to stop Syriza deciding that, realistically they don’t agree with the terms of the extension, leave the Eurozone, and print Drachma tomorrow. And this is why the deal is not really something to be celebrated.
For all Varoufakis’s aggressive talk, then, Syriza have lost face here, and that is a dangerous position for a party elected on very demagogic principles to find itself in. If Syriza cannot even deliver on their one major promise, it bodes ill for them as a party for the future. They are seen by some as the new face of politics, doing away with the pretension of the three-piece suits and getting back to basics, but they have so far failed to deliver on those promises, thus making all the talk of doing away with the old regime largely irrelevant.
The issue has been swept under the rug amidst nominal concessions from both sides. The hope is that it will help the Greek economy to start picking itself up, so that it can deal with its crippling debt better when payment day comes, but there is an even possibility that that will not happen at all, and we will be having the same discussion again in four months’ time. The Eurozone still faces two potential domino effects. Either they play hardball with Greece, and risk them leaving the Euro, potentially followed by other heavily indebted nations such as Italy and Spain, or, they give in to Syriza’s demands. The risk here is that countries like Italy and Spain then see this as an opportunity to ask for leniency on their debts, which could cause further instability and a weakening in the Euro as a dependable currency. These issues remain unsolved, albeit temporarily delayed.
This is why the Eurozone, and Germany in particular will remain nervous. They will know that Syriza will not want to lose face many more times, and so, if faced with the same situation in four months’ time, a different result may well occur. Either way, it is going to be a very interesting first half to the year, as neither Greece nor the EU can afford to be entirely confident of its position, and we may find ourselves here again sooner than we might hope.
This article was originally posted on the-newshub.com