Monday’s Eurogroup financial ministers’ meeting broke up acrimoniously without agreement. But since then, the battle between Greece and its creditors has been played out in the press and on social media.
First, Varoufakis announced to the world’s press that he had been ‘happy to sign’ a draft agreement produced by the European Commission’s Pierre Moscovici, but that the version actually presented to the Eurogroup meeting contained commitments to which he could not agree.
Concurrently, a copy of the draft communique presented to the Eurogroup meeting by Jeroen Dijsselbloem was leaked to the press, complete with angry annotations from the Greek finance minister. It would have committed the Greek government to complying 100% with the existing programme—which they had already said they would not do.
It was some time before Pierre Moscovici’s ‘alternative version’ was released. Initially, an early draft was posted by Channel 4 journalist Paul Mason on Facebook. But he then updated it with a later version, released very late on Monday night—long after the talks had concluded. This version was widely seen as more ‘pro-Greek’ because it included some wording that the Greek delegation had specifically wanted—‘containing the humanitarian crisis’ was mentioned for the first time—and apparently did not commit Greece to the existing programme.
Or—did it? What are we to make of this paragraph?:
Greece will fully respect its commitments to its partners to ensure sound and sustainable fiscal finances, by reaching and then sustaining sizeable primary balances. The feasibility of reaching the fiscal target for 2015 will be considered in the light of evolving economic circumstances. Measures for reducing the debt burden and achieving a further credible and sustainable reduction of the Greek debt to GDP ratio should be considered in line with the commitment of the Eurogroup in November 2012.
This does not read to me as if the Eurogroup has conceded anything at all. ‘Sizeable primary balances’ are surely a good deal larger than the 1.5% proposed by Mr. Varoufakis, and there is no suggestion that the feasibility of the 4.5% primary surpluses that Greece is supposed to achieve from 2016 onwards might be reconsidered. The Eurogroup’s commitment in November 2012 was to a reduction of Greek debt-to-gdp to 120% by 2020. If this commitment is maintained, as seems to be the implication of this paragraph, then reducing primary surpluses to something more reasonable will not be possible. Indeed, if the 2015 fiscal target is missed, then the subsequent primary surpluses would have to be even larger. This paragraph is disastrous. Pro-Greek, it is not.
The reference to a ‘contract for growth’ in a subsequent paragraph is not quite what it seems either. The existing IMF programme has as one of its primary objectives the restoration of growth. Hardliners will therefore no doubt argue, with some justification, that the existing programme is a ‘contract for growth’, even though it has yet to deliver any.
The inclusion of words acknowledging Greece’s social and humanitarian objectives and suggesting that there might be a new ‘contract for growth’ seems to have lulled some commentators into believing that the Eurogroup’s stance has softened. I see no indication of this at all.
I also have serious doubts that this was the draft agreement that Mr. Varoufakis discussed with Mr. Moscovici. It seems to be far too close to the spirit if not the words of Jeroen Dijsselbloem’s missive that was angrily rejected by the Greek delegation. Mr. Varoufakis is no fool: if I can deduce that the above paragraph in effect locks Greece into the existing programme without anything other than very short-term relief, then so can he. Why would he be happy to sign something that undermines the entire Greek case for change?
Considering how much noise there has been on social media about these drafts, Mr. Moscovici has been astonishingly quiet. He is a regular Twitter user, but at the time of writing there have been no tweets from him since the Eurogroup meeting broke up. I suspect the Eurogroup silenced him just as they did Jeroen Dijsselbloem after he inadvertently revealed the real objective of the Cyprus bail-in. And I further suspect that the ‘final’ version of his piece released to the press late on Monday night was amended by the Eurogroup after the meeting broke up.
Fortunately, the Greek delegation has not agreed to any of these drafts. The Eurogroup’s title for the second draft of Mr. Moscovici’s missive, ‘Close of Play Statement’, speaks more to hope than reality. There will no doubt be more talks in the next few days, and like many I believe that there will eventually be a deal of sorts to avert imminent default, followed by protracted negotiations over the terms of a new-ish agreement.
But the Greek delegation needs to beware of the Eurogroup’s weasel words. The Eurogroup has a history of using the media to spread disinformation in order to further its political objectives. For example, there were widespread reports of a split in the Greek camp after Friday’s Eurogroup meeting broke up without agreement, apparently after the Greek delegation was told by Athens that the draft agreement was unacceptable. This may indeed have been the case, but the information came from ‘sources in the Eurogroup’. It would, wouldn’t it?
The new Greek government has demonstrated some naivety in its dealings with more experienced European politicians and bureaucrats, and consequently has allowed itself to be wrong-footed more than once. If it is to get anything close to what it wants in these negotiations, it has to become much better at playing the Game of Spin. ‘Red lines’ that it will not voluntarily cross are fine, but it may find itself unwittingly being forced across them unless it sharpens up.
Frances Coppola is a writer and commentator on economics and finance. She is associate editor at Pieria and contributes to Forbes.
For background to the Syriza-Eurogroup stand-off, see here.
Top image via Wikimedia.