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After the referendum – Quo Vadis Greece?

Posted by (Author) on July 8th, 2015 - 4 Comments
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The referendum result in Greece is a resounding victory for Prime Minister Tsipras. He undoubtedly commands huge popularity at home. By contrast, the political establishment that brought to Greece to bankruptcy has been utterly discredited. For many people, voting ‘yes’ was tantamount to condoning the practices of the political elite that brought the country to its knees. Little surprise, then, why they were not convinced by old-stylepoliticians to vote ‘yes’. Amazingly, the ‘yes’ won in no region whatsoever!

The referendum question, however, was heavily loaded. How likely is it that people will voluntarily consent to reducing their own incomes? As a friend of mine who voted ‘no’ said to me, “how can I vote ‘yes’ to further cuts to my salary and my parent’s pension? If I were to do this I will have acquiesced to my own destruction and will have lost my right to protest against further austerity in the future”.

Voters showed that they trustMr. Tsipras to negotiate a beneficial deal for Greece with the country’s creditors. As the PM put it, in his first victory speech last night, his mandate is “not for a break” with the creditors but for a sustainable deal. However, the referendum outcome, although politically empowering for him, will present him with significant problems.

The main problem is that the strong rejection of the bailout proposal creates less room for compromise for Tsipras. The left in his party will be emboldened to become even more intransigent. It is clear that a compromise will involve further painful austerity measures, which, however were rejected by voters in the referendum! The creditors already sound uncompromising and, at any rate, they are unlikely to alter the very logic of the bailout program. What they can offer is a commitment on debt relief (as the IMF recently argued for). The latter, however, will be conditional on Tsipras seriously and palpably committing to reform, something his government has no strong appetite in doing. The reinstatement of the state public broadcasting organization (ERT) and the re-employment of sacked state employees (several of whom had been illegally recruited by previous governments and sacked by the predecessor Samaras government, at the insistence of creditors) are examples not so much of reform as of perpetuating clientelistic practices.

It should be noted that while both creditors and SYRIZA talk about “reforms” they do not mean the same thing.  Creditors push for market liberalization and deep state reform, while SYRIZA is bent on offering protectionism, versions of clientelism, and state expansion.Moreover, creditors demand reform in exchange for debt relief, while Tsipras demands debt relief in exchange for reform. It is a classic dilemma (‘who-goes-first’) between parties that do not trust each other, while lacking a superordinate mechanism for resolving it. The referendum outcome has done nothing to resolve this dilemma. Tsipras, on the strength of his mandate, will keep on asking creditors for more concessions, while creditors, mistrusting him for the way he has conducted negotiations in the last five months, will keep insisting on Tsipras playing by the rules. A possible way out would be for Tsipras to do a radical reshuffle to signal his commitment to reform. Dropping his coalition partner ANEL (a populist right-wing party) for centrists and social-democratic MPs would be such a move. But that would require a radical U-turn in his language and orientation that is unlikely. He is not known for bold, unconventional moves, preferring the comfort of his party and its populist allies.

Meanwhile, the banking system is approaching near collapse. Liquidity is in short supply and decreasing by the day, people experience humiliation in queuing up for hours to withdraw 60 euros per day, and the ECB will soon be asked to decide on whether to withdraw, increase, or maintain the same emergence liquidity assistance to Greek banks.

The next few days will be critical for Greece and the eurozone. The referendum has pushed Greece nearer Grexit. It has created a dynamic of defying creditors within SYRIZA, from which Tsipras will find difficult to disengage. Like in his election pledges in January 2015, he offered voters all they desired: keep the country in the euro, negotiate hard for a good deal (within 48 hrs!) and open the banks almost immediately.In a country where national pride is important, people were moved by the way Tsipras stood up to creditors. However, they may be surprised to find that national dignity is not so much served by confrontation and protests at rallies but by pragmatically building alliances, searching for compromises, and making credible commitments.

 

Haridimos Tsoukas holds the Columbia Ship Management Chair in Strategic Management at the University of Cyprus and is a Distinguished Research Environment Professor of Organization Studies at the University of Warwick (www.htsoukas.com). He is a co-editor of From Stagnation to Forced Adjustment: Reforms in Greece, 1974-2010 (Columbia University Press, 2012).

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4 Comments
  1. avatar
    Anonymous2 on July 8, 2015 - (permalink)

    This is a good analysis of the Greek domestic situation but presents a rather simplistic picture of international creditors. They are anything but United after the referendum, while they were one voice just before.
    The French are, for a first time in years, standing up to Germany and so are the Italians. Juncker and Schultz have both been forced to make a U turn, last week they both said a NO vote is tantamount to Grexit, now they are working hard to avoid it. It is also dividing the Germans themselves, the hardliners are coming out very strongly in favour of Grexit but no so Frau Merkel, who is still seeking a compromise (has she developed a soft spot for young Alexis?). Tsipras is looking for a deal and the replacement of Varoufakis by Tsakalotos is a good signal. Domestically, if Tsipras loses some of his hardline leftists, he can rely on support from moderates in other parties, if he clinches a last minute deal. The meeting with other parties on Monday was a very good move, he is beginning to show the makings of a great leader that Greece so much needs. The next few days will reveal all.

  2. avatar
    Savvakis C Savvides on July 8, 2015 - (permalink)

    I generally like your articles. I have to disagree however with your conclusive remark. Surely, Tsipras, like all his predecessors, promised more than he can possibly deliver. No one doubts that, although it is also true, as he admitted today in the European Parliament, that there is a lot more the Greeks can do to make a viable deal work. However, to argue that “national dignity is … served .. by pragmatically building alliances, searching for compromises, and making credible commitments”, is wrong. Without a viable program, one that reduces the level of debt to about 100% of GDP no program can be deemed as desirable. Therefore, what is the point of, as you say, “pragmatically building alliances, searching for compromises, and making credible commitments” when what your partners are willing to give you is clearly non-viable and I am trying not say “suicidal”. National dignity is indeed best served by NOT compromising your correct principles and if need be, be willing to take your destiny in your own hands if your partners, as it seems is the case, drag you down to agree to a program which condemns a whole nation for generations to come.

  3. avatar
    Παναγιώτης Σαββίδης on July 8, 2015 - (permalink)

    Quo Vadis Neoliberal populism in Europe?

    The professor’s main problem is that SYRIZA and to a great extent Tsipras and his team, is now left alone to apply income inequality reduction policies.

    What the professor calls the reinstatement of ERT and the cleaning ladies as clientelistic, Tsipras calls clientelistic tax deductions for the so called “creators” of jobs and other mumbo jumbo that neoliberals talk about.

    Below is exactly what the neoliberal populists have been scared of will happen in Greece. Finally, somebody is going to put a stop to the 40 year racketeering in Greece.
    «Δεν είμαι από τους πολιτικούς που πιστεύουν ότι για την κατάσταση στη χώρα μου φταίνε οι ‘κακοί ξένοι′. Η διαφθορά, η διαπλοκή και το πελατειακό κράτος όξυναν το πρόβλημα. Καμιά από τις υποτιθέμενες μεταρρυθμίσεις των προγραμμάτων του Μνημονίου δεν βελτίωσε τον φοροεισπρακτικό μηχανισμό, ούτε αντιμετώπισε το ‘τρίγωνο της διαπλοκής’ (τράπεζες, πολιτικό κατεστημένο, μιντιακοί ολιγάρχες). Το παλιό πολιτικό σύστημα δεν ήθελε να γίνουν αυτές μεταρρυθμίσεις, αυτή είναι η αλήθεια. Ο εκσυγχρονισμός της δημόσιας διοίκησης, η πάταξη της φοροδιαφυγής και των καρτέλ, η αναδιαμόρφωση του μιντιακού τοπίου αποτελούν βασικές προτεραιότητες για εμάς».

    Δίνει νέα έννοια στο κυπριακό: Να τους το κόψεις σύριζα.

  4. avatar
    MM on July 9, 2015 - (permalink)

    The core issue as I see it is the reform of the Greek economy, and not the political posturing of the given time such as the Tsipras phenomenon.

    It is not surprising that the Tsipras-phenomenon was there at the ‘right’ time, and got elected.

    The voters have nothing to lose by voting in favour of any Tsipras. As the saying goes “a drowning man is not scared”.

    The point I want to make is this. Notwithstanding a Grexit or new Programme, should the Greek government not restructure its economy in any case? If in Drachma (or other type of IoU’s), or in the euro the Greek government has to slim down its public sector, root out the black economy, combat tax evasion and avoidance, privatize, provide incentives for new investments, and surely many more other things.

    Is the Syriza party and its partners going to do these regardless of a euro or a Drachma solution? I doubt it.

    The situation resembles what is happening in Cyprus. Lack of political appetite to reforms.

    That’s the problem in Greece, and this is what the EU want Greece to do in order to loan it more money, and they are right!

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