Greece Teeters Back to the Edge of the European Union

The bailout program has fallen far behind schedule and is on the verge of falling apart.

The Wall Street Journal

"It is inconsistent to attack the government both for not completing the review and for the measures needed to complete it."


By YANNIS PALAIOLOGOS
Feb. 21, 2017 4:07 p.m. ET
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Greece’s Prime Minister Alexis Tsipras has been in a defiant mood lately. Some say it’s just a ploy, others believe he’s sincere. Either way, he could be pushing his country back to the brink of Grexit.

Speaking to his party’s central committee earlier this month, the prime minister had harsh words for Wolfang Schäuble, speaking of the German finance minister’s “constant aggressiveness” against Greece and his “contemptuous remarks” toward the country.



At the same meeting, Mr. Tsipras also accused the International Monetary Fund of not telling the eurozone the truth about the requirements for Greece’s recovery. The IMF, he raged, has lost “all scientific credibility” because of its handling of the Greek crisis.

Last month, on the second anniversary of his party’s rise to power, Mr. Tsipras claimed that the latest review of Greece’s third bailout program would be completed without his government having to legislate “a single euro” in new fiscal measures.

And earlier, during a Dec. 20 speech in Crete, he defended the bonus he offered to 1.6 million pensioners, against the protestations of Greece’s creditors. “No one has the right,” he said, “to tell us how we will make use of the surplus sums that stem from the hard work of the Greek people.”

Yet a successful review of the bailout program will inevitably require the legislation of additional measures, something that became clear in Monday’s eurogroup meeting. The August 2015 bailout agreement also stipulates that annual surpluses in excess of program targets must be verified by Eurostat, and that creditors must be consulted on how excess savings will be spent.

Mr. Tsipras’s latest salvos at his creditors, however, aren’t so much a statement of intent as a demonstration of the prime minister in his usual mode at home: Declaring resistance against the demands of foreigners and promising to fight for the rights of his people while ultimately—begrudgingly—abiding by the conditions of the bailout program. This strategy has been a central reason why the latest program has fallen far behind schedule and is on the verge of falling apart.

In the eurozone, the assumption is that Mr. Tsipras, despite the delays, remains committed to the bailout program and will do whatever is required once he has exhausted the limits of his fruitless defiance. After all, the prime minister’s only hope to recover politically, most observers believe, is a swift conclusion of the review. This would allow Greek bonds to be included in the European Central Bank’s quantitative-easing program, lift the country’s capital controls and restore confidence in the nation’s economy.

But another play is being whispered in the prime minister’s ear.

With Mr. Tsipras’s Syriza party already behind in most polls by double digits, some of the prime minister’s aides are telling him that completing the bailout review now would further shrink the party’s dwindling support. It may even threaten Syriza’s long-term prospects as a governing party.

They suggest instead that Mr. Tsipras call an early election. If Syriza were to lose, then at least someone else would be left to clean up Greece’s mess. Should no other party emerge with a clear majority, a repeat election would be held, this time under the new, proportional electoral system that was voted in last summer. In such a scenario, Syriza might well return to power in a coalition government.


As for the opposition New Democracy party, its leader, Kyriakos Mitsotakis, has been resisting the typical opposition temptation to promise all things to all people. Yet his free-market, socially liberal views are a minority within his own party. There is concern that, in the interests of party unity, he has done too little to rid New Democracy of its clientalist tendencies and to break decisively with its corrupt governmental past.

He is also lapsing back into some of the bad habits of oppositions past. Given Mr. Mitsotakis’s pledge not to dismiss public-sector employees, his commitment to ease Greece’s crushing tax burden rests entirely on his ability to extract a better fiscal deal from his country’s creditors. In the current framework, there is little he can do different on the fiscal front, yet his party continues to criticize the government for policies needed to conclude the bailout review. It is inconsistent to attack the government both for not completing the review and for the measures needed to complete it.

Meanwhile, despair in the country is growing. In a poll published in mid-January by the University of Macedonia, 72% of respondents said that 2017 will be worse than 2016, 86.5% declared themselves disappointed with the government’s performance, and 88% thought the country is headed in the wrong direction. The percentage of people supporting a return to the drachma is increasing, and may soon become a majority.

At that point, expect Greek politics to turn again. This time, irrevocably, away from the eurozone.

Mr. Palaiologos is a journalist at the Kathimerini newspaper in Athens and the author of “The Thirteenth Labour of Hercules” (Portobello Books).