Greece's prime minister Alexis Tsipras speaks during a parliament session ahead of the confidence vote of the new government on February 10, 2015 in Athens. Tsipras said on February 10 that the country "cannot return to an age of bailouts and supression," ahead of critical talks with Athens's EU creditors. AFP PHOTO/ LOUISA GOULIAMAKI (Photo credit should read LOUISA GOULIAMAKI/AFP/Getty Images)
Crucial debate: Greek prime minister Alexis Tsipras addresses parliament © AFP

Below the walls of the Greek parliament, on the spacious, sloping square of Syntagma in central Athens, the most unusual public protest of the Syriza era took place on Thursday.

When it is not lecturing European countries on their mishandling of the euro crisis — a crisis that, as every day passes, is bringing Greece closer to a debt default — the nation’s ruling radical leftist party likes to portray itself as the champion of the proletariat and the defender of the oppressed on home soil.

But Thursday’s protest told a different story. Waving flags and dressed in hard hats and luminous yellow jackets, a couple of thousand demonstrators from northern Greece — gold mine workers, accompanied by families and friends — spread out across Syntagma.

After a 14-hour bus journey they had arrived in Athens to demonstrate against the government’s suspension of one of the Canadian-owned mine’s operating licences. The miners suspect that the measure, ostensibly adopted on environmental grounds, is politically motivatedand will cost them their jobs. “We think it’s unfair and illegal,” says Dimitris Ballas, a geologist at the mine.

The rally was the first sizeable anti-government protest since Syriza swept to electoral victory on January 25. It indicated that Greeks, if they feel mistreated or misgoverned, will turn against the political upstarts of Syriza just as they turned against the traditional parties of left and right whose misrule pushed Greece to the abyss.

How to maintain public trust is a crucial piece of the equation for Alexis Tsipras, prime minister, as he enters a three-week period in which he faces agonising choices that will define his career and shape Greece’s destiny for years to come.

Since January, Mr Tsipras and Syriza have been riding high in opinion polls — his approval rating stands at close to 70 per cent in some surveys — partly because no government measures have hit Greeks in their pockets. Now the moment of truth is approaching.

The premier’s fundamental choice is whether, or on what terms, to cut another rescue deal with Greece’s creditors — European governments, EU institutions and the International Monetary Fund. In two emergency operations valued at €245bn, they have kept Greece afloat since 2010.

More financial aid for Greece will require detailed commitments on fiscal discipline and economic reform, the polar opposite of the anti-establishment, anti-austerity platform that catapulted Mr Tsipras to power. Such a deal would prevent Greece from defaulting and tumbling out of the eurozone, at least in the near term. Pro-EU opposition parties would back Mr Tsipras in pushing it through parliament.

But politicians in Athens predict it would split Syriza, because a band of ultra-leftist diehards would refuse to sup with the capitalist devil. Resistance to the creditors’ demands is so strong in the government and ruling party that it became clear this week that no deal with the Europeans and IMF would be ready by April 24, when eurozone finance ministers meet in Riga, Latvia’s capital.

The alternative — no compromise with the EU-IMF lenders — will see the government run out of cash next month, leaving Greece unable to meet foreign debt repayments or even to pay state pensions and public sector salaries. Among possible scenarios thereafter are bank runs, capital controls, the printing of IOUs or a new drachma to replace the euro, economic misery for millions and a political climate poisonous enough to threaten democracy.

In that scenario, should Syriza fail just like the pro-EU parties before it, the largest political party likely to benefit would be Golden Dawn on the far right. It now stands third in opinion polls.

Were Greece to crash out of the eurozone, it would arguably represent the biggest disaster to strike a non-communist European state since the second world war. Commenting this week on a possible Greek exit, José Viñals, director of the IMF’s monetary and capital markets division, said: “I think it would be terrible for Greece and the Greek people. I think it would have tremendous economic costs. As for the euro area, there could be confidence effects that should not be underestimated.”

Which way will Mr Tsipras, 40, turn? One person who knows him says: “He’s conservative, in the sense that he comes from a middle-class family. He doesn’t want to be the man who steered Greece on to the rocks.”

Who will blink first?

However, if he signs a deal with his European allies and the IMF, he will have to present a bill stuffed with creditor-approved economic reforms to parliament — the antithesis of what Syriza promised in its election campaign.

Aristides Hatzis, a professor of law and economics at Athens university, says that, if the prime minister concludes that his national duty is to keep Greece in the eurozone, he will have to jettison Syriza’s hard-left faction and embrace moderate centre-left opposition parties.

“If Tsipras is to dominate Greek politics for the next eight to 10 years, he has to move to the centre-left. He has unprecedented political capital, so he can do it, though it’s a little early [to break with the hard left] right now,” he says. “His problem is that a lot of his Syriza colleagues are amateurs and don’t want to know how the world economy works. They really believe they can drag their heels with the creditors.”

The government appears split into three camps. The first, which includes Panayotis Lafazanis, energy and environment minister, would be happy for Greece to leave the eurozone and return to the drachma. The second, which counts Yanis Varoufakis, finance minister, and some of Mr Tsipras’s close advisers among its members, calculates that Greece’s European partners will blink first, offering terms that will enable the Syriza government to stay in the eurozone and frame it, for domestic public opinion, as a victory. The third group, which is close to Yannis Dragasakis, the deputy premier, supports a compromise with Greece’s creditors.

On the surface, life in Athens continues with a calm that contrasts starkly with the awareness of politicians, bankers and the business community that time is running out. Any assessment of Mr Tsipras’s intentions must take into account his deep sense of loyalty to his Syriza comrades, including those on the far left which, by some estimates, make up one-third of the parliamentary party. He is likely to do everything possible to avoid a rupture with them, taking negotiations with the EU and IMF to the wire.

“Tsipras has a strong allegiance to his troops. He thinks, ‘Am I to be the one who betrays them?’ I tell my European friends, beware of mistaking him for a social democrat,” says Kyriakos Mitsotakis, a prominent figure in the centre-right opposition New Democracy party.

“Syriza still says: ‘We’re going to keep the euro and someone’s going to give us money with no strings.’ This was their election narrative, and it hasn’t changed. If they were going to compromise with the creditors, you would expect them to have softened up public opinion by now. My sense is that we are heading for a national catastrophe, and yet nobody is agitated about it,” says Mr Mitsotakis.

Limited options

The next three weeks will be decisive. To pay out more than €1.7bn in pensions and salaries at the end of April, and to make a €186m repayment to the IMF due on May 6, Mr Tsipras’s only option will be to raid the remaining cash reserves of Greek state entities such as local councils and social security funds.

After that, there will not be enough money to meet a €707m IMF bill due on May 12, let alone to pay next month’s salaries and pensions. This suggests that the crucial moment in the creditor talks may be a eurozone finance ministers’ meeting in Brussels on May 11.

An interim deal is possible. It would require Greece to implement the least contentious measures demanded by the creditors — not labour market or pension reform but, for example, legally enshrined independence for the tax authority in Greece’s finance ministry.

In return, out of €7.2bn in bailout funds that have been held up since last year, Greece could be given €1.9bn — representing profits made by the European Central Bank from buying Greek bonds after the first rescue of May 2010.

Such a fix might pave the way for a longer-term settlement, involving up to €25bn-€30bn in new financial aid, by the end of June. But the basic logic of assistance in return for economic reform would remain unaltered, meaning that Mr Tsipras would still have to confront his party’s ultra-leftists.

In northern Greece stands a limestone and concrete sculpture, the Zalongo monument, which honours Greek women villagers who in 1803 threw their children and themselves off a cliff rather than be captured and enslaved by Ottoman forces. According to legend, they sang and danced to their deaths.

The world is watching to see if Mr Tsipras and his Syriza colleagues plan to re-enact the Dance of Zalongo.

Get alerts on EU economy when a new story is published

Copyright The Financial Times Limited 2022. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article