Greece Requests Extension on Loan Agreement
Dimitri Lascaris Report: Germany rejects the extension before the Euro Group could formally respond
SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to The Real News Network. I’m Sharmini Peries, coming to you from Baltimore.
Germany rejected a Greek proposal for a six-month extension to its European zone loan agreement on Thursday, saying it was not a substantial solution, because it did not commit Athens to stick to the conditions of its international bailout.
To discuss why, we are joined by Dimitri Lascaris. Dimitri is a partner with the Canadian law firm Siskinds, where he heads the firm’s securities class-actions practice.
Thank you so much for joining us, Dimitri.
DIMITRI LASCARIS, SECURITIES CLASS ACTIONS LAWYER, CANADA: It’s good to be back, Sharmini.
PERIES: So, Dimitri, let’s start off by explaining why they rejected Greece’s proposal.
LASCARIS: Well, I think a lot of people in the Eurozone are asking themselves that very question today, because it’s not entirely clear, despite the torrent of heated rhetoric coming out of Berlin. What happened today was that the SYRIZA government did something which it had indicated previously quite clearly it was not going to do, and that is it sought an extension of a loan agreement called the Master Financial Assistance Facility Agreement. And under that agreement, Greece has extended financing on condition that it comply with the 2012 memorandum that stipulated the terms of this rigorous and inhumane austerity regime, which has devastated the Greek economy.
And so, today, when it applied for an extension of that agreement, many people within the Eurozone believed that implicitly, implicitly it was committing to compliance with the 2012 memorandum, something it had said it would not do, at least not completely. It was prepared to comply with something in the range of 70 percent of the measures, but not the most punitive measures. And many people viewed this as a capitulation. In fact, even in the relatively progressive part of the mainstream media–in Europe, for example, The Guardian, the economics editor, published an op-ed upon learning of this, in which he said that Athens has raised the white flag.
However, before the Eurogroup could respond formally to the proposal, the government of Germany issued a heated enunciation of the proposed extension of Greece. And apparently–and it used the words Trojan horse, and it described the agreement or the proposal as being in effect what Greece had been saying it wanted all along, which was a bridge facility or terms of financing that it did not include a commitment to the austerity program.
And I think really, as best as I can tell, what’s rankling the German government is that the Greece, the new Greek government has not explicitly and unequivocally stated in writing that it is going to comply with the terms of the 2012 memorandum. But as I say, many people in the Eurozone think that at least implicitly that’s what the Greek government committed to do today when it applied for an extension of the Master Financial Assistance Facility Agreement.
So the question now is: what is Greece going to do? You know, one government official was quoted in the press after learning of the German reaction that this was Greece’s final offer and that Greece was not going to make any further commitments beyond those stipulated in its proposal today. It will probably find out within the next 24 hours. There’s going to be a key meeting of senior figures within the Eurozone tomorrow. It may be that the German government has overplayed its very strong hand by insisting on an explicit capitulation by the Greek government. Oftentimes in negotiations, people leave some things unspoken because they realize that pushing the other side to the point of explicitly conceding an important point could cause an entire agreement that is, on the whole, satisfactory to one side or the other to unravel. The Germans seem prepared to take that risk, the risk of seeing the entire proposal unravel because of its demand that there be an explicit capitulation by the Greek government.
PERIES: And perhaps they preempted what might be taking place in terms of conversation over the next day in Athens. What do you anticipate that conversation will sound like, given what Germany has just said?
LASCARIS: Well, I think there were some interesting photographs in the press today about what the Greek press has been saying, and it was being contrasted to what the German press has been saying. And on both sides there’s a great deal of inflammatory language.
One Greek newspaper, well-known Greek newspaper, had blazoned on its front page “Jawohl, Kommandant”. And another, a German newspaper, a major German newspaper, had a picture of Putin and Tsipras on the front page and asked the question in German, which of these individuals is more dangerous to the future of Europe? So there’s very inflammatory language being used. I think that the language is going to become increasingly inflammatory. A left-wing party that did not–it’s not aligned with the communists or with SYRIZA. It’s called ANTARSYA–already issued a blistering denunciation of SYRIZA several days ago, because it had already come to the conclusion that SYRIZA was in effect capitulating to the demands of the austerity bloc.
I expect you’re going to see more vigorous and heated denunciations from the left directed at SYRIZA in the days ahead. And from the so-called center, from–or the center-right, which is actually the extreme-right in Greece now, the New Democracy Party and the formerly socialist party, PASOK, you’re going to hear the refrain, I told you so, that this is exactly what we predicted, that in fact nothing was going to change, and SYRIZA is embracing the very reality that we were responsibly coping with before the election. So that’s the kind of language you’re going to hear, I think. And regrettably, I think that message, it may very well gain some traction with the Greek electorate.
PERIES: So, Dimitri, what options does Athens have, does SYRIZA have?
LASCARIS: Well, the problem is it’s boxed itself into a corner. It has removed explicitly the option of an exit from the Eurozone. It’s removed explicitly the option of defaulting on Greece’s debt. It removed explicitly the option of running a substantial deficit, which is precisely what any responsible government would do when it its economy is deeply depressed. It would try to generate demand within the economy through spending. And this government committed to a primary surplus of 1.5 percent of GDP, notwithstanding the extraordinarily depressed economic conditions in the country.
So it from the very beginning–understandably, from one perspective, because it is in a very difficult position in terms of the financing needs of the state, but it took off the table its most powerful weapons. And furthermore, it’s negotiating with people who are, down to their very bones, committed to a radical neoliberal agenda, and furthermore, who quite apart from what their ideology may be, are heavily politically invested in the disaster of austerity. You know, if there were to be an implicit or explicit recognition by the government of Angela Merkel, for example, that austerity has gone too far, it hasn’t worked, or has actually undermined the ability of countries like Greece to service their debts, which it clearly has, these people would go down in infamy as having been the architects of a European disaster. So they’re politically invested, they’re ideologically hostile to SYRIZA, and SYRIZA has taken off the table its most powerful weapons.
So, ultimately, what can it do in the current circumstances? Very little. However, if it were to reconsider its commitment to the euro, which is precisely what it should do, and if it were to put on the table in a responsible and intelligent manner the option of a Grexit, which precisely what it would do, I suspect that it would be able to achieve a much better outcome in this.
PERIES: And those options are really not off the table, even though they have stated that that’s not the preferred option. Those options still remain.
LASCARIS: Well, clearly they could embrace that option. And there are clearly people within SYRIZA who, at least in the past, have embraced that option. One such person, a very able and eloquent economist who’s been on The Real News several times, Costas Lapavitsas, he’s embraced that option, although he’s begun to moderate his tone since becoming an MP for SYRIZA in the most recent election. There clearly is within SYRIZA a significant constituency that favors a Grexit. Within the party now they have the economic sophistication to navigate through the very difficult project of exiting the Eurozone. What remains to be seen is whether the political will to do this is there.
PERIES: Right. So, Dimitri, I want to thank you so much for joining us today and explaining this, but we will be following this over the next 24 hours, so I hope you can come back tomorrow and we can see what the response of the Greek government is.
LASCARIS: It will be my pleasure, Sharmini. Thank you.
PERIES: And thank you for joining us on The Real News Network.
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