Year in Review: The EU and Greece

Written by on December 29, 2015 in Perspectives - Comments Off on Year in Review: The EU and Greece

As clocks ticked away the last hours of 2014, the news that the parliament in Athens was dissolved on the last day of the year to pave the way for early elections made for a pretty clear sign that Greece was in for an eventful year in 2015, although few would have guessed just how eventful it would prove to be.

Alexis Tsipras, the leader of Syriza and favourite firebrand to all European left-wingers, had successfully blocked the election of a new president and was seen as finally making his big move to take the reins of government in a country tired of austerity policies imposed as part of its second bailout agreement with international creditors.

Hopes ran high in some circles that should Tsipras succeed in his endeavour, it would open the doors wide for movements similar to Syriza to gain traction in an Europe that has not exactly bounced back strongly after the end of the global recession, which is why so much attention across the continent was paid to Tsipras’ new cabinet after he did win the elections on January 25.

And Tsipras did not disappoint, lambasting the much-despised (in Greece) ‘troika’ of international institutions – the European Union, European Central Bank and International Monetary Fund – and promising to make his case directly to the EU heads of state, while at the same time appointing colourful academic Yanis Varoufakis as finance minister.

Things came to a head quickly, with frenetic talks throughout February resulting in a four-month extension of the bailout plan, a period during which the authorities in Athens and its creditors were to reach a new agreement.

What followed was months of recrimination on both sides as to who was to blame for the failure of the ongoing talks, all the while media speculated each time a repayment deadline approached whether Greece could scrounge enough money to avoid defaulting on its debts. (Meanwhile, for all its talk of fighting corruption, the Greek cabinet did little in achieving that goal).

When Greece finally missed such a deadline in early June, however, it was seen initially as a technicality, since Athens had until the end of the month to make the payment under IMF rules – incidentally, that was also the deadline imposed by EU leaders for reaching a new agreement between Greece and its creditors.

In the weeks that followed, euro zone finance ministers logged more air miles flying to Brussels and back than as they would normally in a full year, as meetings were held weekly to discuss a possible solution and the prospect of Greece exiting the euro zone, or Grexit, began to be discussed in earnest. (In total, the Eurogroup met more than a dozen times in the first half of the year to discuss the Greek crisis.)

With time running out, Tsipras made his most puzzling move of the year, calling for a referendum on July 5 on the terms of the bailout proposal made by the EU. Although many hailed Tsipras’ decision as a “win for democracy” (while others griped that unilateral decisions to stop paying debts owed to other EU countries without asking the taxpayers of those other member states was hardly democratic), the EU leaders were also quick to point out that the referendum’s timing came after the deadline for a new bailout, so Greek voters would in effect be voicing their opinion on an offer that was no longer on the table.

The day after the referendum was announced, Greece imposed capital controls and limited daily cash withdrawals, while the government campaigned asking voters to reject the terms of the bailout – and got the result it sought, but was told by EU heads of state that Athens would get no more money without committing to drastic reforms and spending cuts.

The EU summit on July 12-13 was later described as one of the longest and most tense in the bloc’s history, but it was Tsipras that had to accede to the demands of the rest of EU leaders, rather than the other way round. Despite the resounding anti-austerity vote in the referendum and with no EU commitments for debt reduction down the line, the Greek parliament voted a new austerity plan on July 16, as protesters took to the streets in anger at what they saw as the government’s “capitulation” to creditors.

As the calendar turned to August, more austerity legislation was passed as Syriza was fraying at the seams (Varoufakis, who was being increasingly sidelined and resigned after the referendum to pave the way for a deal with creditors, was one of the big-name defectors), prompting Tsipras to call the second early elections of the year.

By the time election day came in September, Europe was already gripped by the migrant crisis and Greek domestic politics no longer held the same fascination for the rest of Europe as it did just several months prior – more austerity legislation and a general strike in November went all but unnoticed outside Greece’s borders. For the record, Tsipras won again and stayed on as prime minister, while the Syriza group that splintered in disagreement with the bailout failed to make the three per cent threshold.

And yet, even though the attention of much of Europe is now firmly on another crisis – one that that has appears to be much more divisive than the Greek issue ever was – the threat of the Grexit scenario resurfacing in 2016 cannot be discounted.

The imposition of capital controls in the summer derailed economic growth and sent Greece back into recession, which means that systemic issues like the high ratio of non-performing loans and the pension reforms will be even more difficult to resolve. (Greece has also committed to raising 50 billion euro through privatisation of state assets, but little progress appears to have been made on that front just yet).

And as European countries spend more to deal with the refugees flow (as well as on security, in the wake of the Paris terrorist attacks in November), the prospect for any sort of debt relief looks even more grim than it did at the height of the Greek crisis in summer. The next chapter in the EU-Greece story awaits to be written, and it will likely be another tumultuous one.

(Alexis Tsipras speaking to German chancellor Angela Merkel at the EU council in March 2015, when most observers still hoped that the Greek issue could be resolved in a timely and orderly fashion. Photo: EC audiovisual service)

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About the Author

Alex Bivol is the news editor of The Sofia Globe.