The first time Greece “starred” on the global politics scene, many were intrigued by the particularities and magnitude of its politico-economic challenges. Currently, however, it seems like the Greek crisis is going through an eternal cyclical and self-reinforcing path: crisis point – tough negotiations – solution agreed – reforms implemented partially – new crisis point.
To an independent observer it might seem logical to assume that the current negotiations will also eventually lead to a solution as they did in 2016, 2015, 2012, and in 2009. However, the external and internal conditions surrounding the current negotiations are remarkably different, putting Greece in a much more precarious position.
In the current negotiations there seems to be a stalemate. On the one hand, the IMF has assumed a hard line demanding that Greece undertakes more reforms and that the Eurozone members agree to debt relief. On the other hand, the European creditors can’t agree on a debt relief and prefer postponing the unpopular decision for later. Finally, the Greek government seems to be experiencing reform fatigue especially regarding unpopular reforms such as pension cuts. These conditions create a challenging situation in which compromise is difficult.
In order to further understand the Greek government’s hesitation in implementing these reforms, it is necessary to examine the domestic political climate. The SYRIZA government has adopted a tactic of agreeing to the creditors’ demands and then presenting the minimum concessions it gets as a major victory at home. This communication tactic, however, might have reached its limit. After trying to spin all new austerity measures as a victory, the government seems to have exhausted the people’s patience. Meanwhile, the economy is deteriorating, austerity gets harsher and the opposition is leading a fierce fight demanding the government’s resignation. All these have put SYRIZA in deep trouble which, according to all opinion polls, comes second by far (as much as 10%) in intentions to vote.
Pension cuts are a particularly sensitive issue in Greek politics. This is mainly because it affects all constituents since everyone participates in the state-mandated and administered insurance. Therefore, even people who don’t currently receive a state pension will do so (or hope to do so) in the future. Moreover, retirees are seen as one of the most hard-hit social group of the crisis with images of gray-haired people lining up at church-ran soup kitchens featuring on the news. Because of their controversy, the pension cuts also invoke internal party disagreements and the government’s thin 2-vote majority is under stress.
Even if pension cuts were not part of the new measures, Greeks can overall be accurately described as tired and disappointed. In a new survey of Greek public opinion, 60.5% of Greeks believed that in 10 years Greece will still be facing an economic crisis. Moreover, trust for government is at an-all time low with 93.6% of Greeks blaming governments (collectively) for the current crisis and a record-low participation of 55.6% in the last elections. All these create a climate of disappointment, withdrawal and anger that makes it hard for the government to gather the popular support necessary for the much-needed structural reforms. On top of that distrust for domestic actors comes the European creditors’ unwillingness to make any concessions which further exacerbates the situation and fuels Euroscepticism.
If the new measures include more austerity (such as pension cuts) there are two likely scenarios for Greece. The first is that the SYRIZA government will accept all austerity measures and manage to pass them through parliament hoping that by 2019 the economic situation will have improved along with its chances for re-election. The second scenario is that seeing that it is impossible to pass the measures (due to internal disagreements), SYRIZA will opt for a “heroic exit” proclaiming elections and going back to being opposition while its percentages are still decent. This second scenario would be a dangerous political gamble because it would put Greece in tremendous political instability only 3 months before it runs out of money. If a government is not formed quickly enough it is very likely that Greece would default under the second scenario, as it would have no government to conclude the negotiations before its payments are due.
Photo: Prime Minister Tsipras faces a difficult decision (source: http://news.forexlive.com/!/greeces-tsipras-could-tout-new-elections-in-speech-to-the-nation-20170316).