Wednesday

14th Apr 2021

EU to Greece: No more solidarity if you vote No

  • Police deployed in front of parliament in Syntagma square, Athens (Photo: mkhalili)

On the eve of perhaps the most significant vote in the Greek parliament since the return of democracy to the country in 1974, the European Commission has warned Greek deputies that if they do not vote the right way, then "everything changes" as to whether "EU solidarity continues".

The Greek parliament opened debate on Tuesday (28 June) on a draconian package of public spending cuts, structural reforms and a massive €50 billion sell-off of state assets imposed by international lenders. The Greek parliament is due to vote on the mid-term package on Wednesday and hold a second vote on its implementation on Thursday.

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In a stern public statement issued the same day, EU economics commissioner Olli Rehn said there are only two options for the country: pass the mid-term package or default.

"The only way to avoid immediate default is for parliament to endorse the revised economic programme," he said in a communique read out to reporters by his spokesman, Amadeu Altafaj-Tardio.

"To those who speculate about other options, let me say this clearly: there is no Plan B to avoid default."

In recent weeks, a range of commentators, including mainstream and heterodox economists have recommended a range of other paths out of the crisis than those on the table.

The EU executive however dismissed such ideas as unrealistic.

"According to press reports over the last hours, there seems to be an illusion that there will be other plans on our desk," Altafaj-Tardio told reporters. "This should be clear in all journalists, politicians and markets' minds."

Pressed whether the commissioner's words meant that if the vote is defeated, Greece will be allowed to go bankrupt, the spokesman said: "If Greece does everything to take the objectives set a year ago, then EU solidarity continues. If not, then of course everything changes."

He refused to answer whether a country can default and still be a member of the eurozone.

"We are not putting ourselves in a scenario without Greece at this point in time," he said.

However, a eurozone source close to talks on the subject confirmed to EUobserver that there are indeed "half-formed" ideas about emergency measures to take in the event that the Greek parliament votes down the measures.

"It would be extremely irresponsible if there were no Plan B. There have been discussions on what to do, a contingency plan in the event that Greece doesn't vote the right way," said the contact.

Ideas include a show of public support, possibly with the European Financial Stability Fund directly purchasing Greek government debt - an option that has until now been forbidden.

One idea would involve allowing Greece to miss a payment and the EFSF then swooping in and buying up debt at a significantly discounted rate, but with very strict conditions.

Another possibility is that Greece could return to the private sector for funding, although such a move would entail borrowing at acutely high rates.

A market analyst speaking to this website also confirmed that in theory, there is nothing preventing Athens from selling debt to private creditors, at least for a short period.

"In the event of a failed vote, Greece could still make the repayments due in July and August by borrowing in the short-term money market, albeit at a very steep interest rate," Sony Kapoor, the director of international economic think-tank Re-Define, told EUobserver.

"This would buy two more months of negotiation time."

In the same statement, the commissioner again told opposition forces to drop their resistance to the mid-term package and forge "the necessary political consensus".

Rehn appeared to respond to critics alarmed at the unprecedented interference by Brussels in domestic party politics, a phenomenon that has accelerated over the course of the year as the EU has successfully intervened to force cross-party consensus in three member states around election times, in order to prevent results from upsetting the economic apple cart.

He stressed that he "fully respects the prerogatives and the sovereignty of the Greek parliament". He also insisted, against criticisms from the left that working people, pensioners and the poor are being hit hardest by the austerity measures: "This is about social justice," saying that the mid-term package fights tax evasion and "supports honest work".

Rolling black-outs

The austerity has provoked furious country-wide resistance to the measures. A two-day general strike was launched on Tuesday.

According to on-the-ground reports, industrial action managed to paralyse much of the country although demonstrations were substantially smaller than during the last, one-day general strike, with an estimated 25,000 gathered in front of the parliament building.

Flights were largely grounded as air traffic controllers struck, while electric company workers have maintained rolling blackouts throughout the country. Most large private-sector enterprises and public-sector services were shut down, but many small and medium-sized businesses continued to operate as usual, with workers afraid for their jobs if they participate.

Meanwhile, violent skirmishes broke out in the capital between police and protesters, with extensive use of tear gas and stun grenades. Some 18 people have been detained, according to police, and four arrested.

Trade unions are set to march on the parliament in the evening.

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