That is the lesson to be drawn from the results of the meeting between EU finance ministers and Greece, the details of which can be read here:
Jim Armitage, “Greek bailout: Germany claims victory as Greece agrees four-month bailout extension,” Independent, 20 February, 2015.An official summary of the agreement can be found here. It makes grim reading.
Phillip Inman, “Greece deal is first step on the road back to austerity,” Guardian, 21 February 2015.
Jennifer Rankin and Helena Smith, “Eurozone chiefs strike deal to extend Greek bailout for four months,” Guardian, 21 February 2015.
Raoul Ruparel, “Greece bends to Eurozone will to find short-term agreement,” Open Europe, 20 February, 2015.
The Germans already rejected Greece’s plan of a moratorium of six months on loans and an end to austerity measures.
Instead, a four-month extension of the bailout has been agreed, but Greece is widely seen to be committed to much the same austerity as before, and must explain by Monday what measures and reforms it will take and how these will be in accord with the terms of the bailout.
Here is a crucial aspect of the agreement:
“The Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and timely.What does Greece get in return? It gets more time to renegotiate the burden of its debt, it may be able to avoid pension cuts and VAT hikes, but will try to balance its budget by cracking down on tax evasion.
The Greek authorities have also committed to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement. The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.
In light of these commitments, we welcome that in a number of areas the Greek policy priorities can contribute to a strengthening and better implementation of the current arrangement. The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.”
“Eurogroup statement on Greece,” European Council, Council of the European Union, 20th February, 2015
In other words, what has occurred is that Greece is committed to a balanced budget, just by bringing in more tax revenue. No serious fiscal expansion can be done under these terms.
People on the left may like to put a brave face on it, but what has happened is simple: it is plain for everyone to see that a nation’s democracy means virtually nothing under the Eurozone. Greece is being forced to into the same basic policy, but with some minor concessions, and, given how weak its position is, it may well be forced into capitulation, despite the election of Syriza.
What will anti-austerity parties around Europe learn from the fate of Greece?
Being Eurosceptic and anti-austerity is not enough. Any government that promises to remain within the EU can do nothing. The government has to credibly threaten to leave the EU, and maybe even take unilateral steps like suspending loan re-payments and implementing capital controls. The EU can clearly humiliate poor little Greece, but what happens when voters in Spain, Italy or even France act on their hatred of the austerity and their governments start to listen?