The End of the Beginning

The Syriza government came to power in January 2015 with a determined, forceful and vocal campaign to do away with the “austerity program imposed by the Troika” on Greece and to reverse major policies introduced by the previous government in the course of the bailout program.

Seven months later, specifically on July 12, 2015, the Greek Prime Minister capitulated 100 percent and accepted a new bailout program that was stricter than the earlier one, included all the missed benchmarks by the previous government, did not include any promise for a debt haircut, and eventually led to the break-up of the ruling party.

Several developments between January 25-July 12 2015 have become public and now form part of the historical record. The basic narrative is that the IMF, the Commission and the ECB initially gave the benefit of the doubt to the new government and attempted to negotiate a new stabilization and adjustment program in good faith. A fundamental advantage of the new government was that it brought a fresh and encouraging approach against corruption, tax evasion and cronyism, three areas in which the previous governments since the beginning of the bailout program had checkered records. The beginning of the new government in its negotiations with the Institutions was august and reflected a series of compromises on behalf of the creditors, including the change of the name from “Troika” to “Institutions”, the shifting of the meetinglocus from Athens to Brussels, and other such procedural changes to help move the process forward.

What, then, changed between January and July and, in particular, what was the turning point in the relations between Athens and its creditors? Extensive commentary has appeared in the media about substantive, behavioral and procedural surprises that the creditors had to face in their dealings with the Greek authorities during the period February to April 2015. But the true turning point were two events that took place during April 5 and April 6, when a Greek delegation visited Washington to meet with IMF management and senior US officials. The Greek delegation, which asked to meet with the IMF’s Managing Director on Easter Sunday (and the request was graciously granted), put the nail in the coffin of already diminishing hopes and expectations by the international creditors for a viable agreement with the vocal government of Greece. Both the composition and the substantive comments/requests of the Greek delegation led its IMF counterparts to conclude that the Syriza government violated international practices and that it was unable to negotiate within the framework of accepted procedures. The US government officials came to a similar conclusion a day later.

Thus, the three day period between Friday, April 4, when the decision was taken in Athens to send an unorthodox delegation to Washington, and Monday, April 6, after the discussions with the US officials (a “fateful long weekend”), proved a turning point in the international campaign of the Greek government. The initial conclusions of the IMF and the US government were confirmed a few days later, during the Spring meetings of the IMF/World Bank, when the Greek delegation again violated international procedures and avoided serious discussions.  The middle of April, 2015 was therefore the end of the initial phase between Greece and its creditors, during which Greece was in the driver’s seat. The Eurogroup meeting of April 24 in Riga was the first clear indication that the international community was not prepared to give the Greek government the benefit of the doubt any longer. After that, Greece’s international creditors began feeding the government with more or less “take-it-or-leave-it” proposals, initially in a measured pace and later on at an accelerated pace, which culminated in the July 12 statement by the Euro Summit.

1 Comment

  1. Eleni Tzavara says:

    Amazing idea to create a blog and to share your experience and knowledge with all the people who are now very much confused with the roots, the development and the prospects to overcome the Greek Economic Crisis. Congratulations!!!!! Excellent job

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