How Greece’s Creditors Trounced Syriza

As the final votes poured in last January, Greece seemed primed for a political earthquake.

Syriza, the nascent left-wing coalition led by the telegenic Alexis Tsipras, rocketed to power in a decisive vote against the devastating neoliberal economic policies foisted on Greece by its international creditors and implemented by Tspiras’ predescessors.

Syriza’s victory produced a collective sigh of relief. The old political dynasties of PASOK and New Democracy, Greece’s ruling parties that had racked up enormous debt over 40 years of entrenched corruption and economic mismanagement on a grand scale, had finally fallen. Syntagma Square, the nerve center of anti-austerity protests since 2010, now opened up for celebrations.

Yet come mid-summer, Tspiras himself was ramming through a new bundle of pension cuts, sales tax hikes, labor regulation rollbacks, and privatization schemes every bit as austere as the ones he’d run against. Greece’s European creditors had given him no choice, he lamented, but to begrudgingly implement a slate of measures “I don’t believe in.”

Tsipras may have accepted the role begrudgingly, but he played it convincingly. He effectively transformed Syriza into a pro-austerity party, purging dissenting ministers from his cabinet as the party’s left flank bolted the bloc. Having lost his parliamentary majority, he then announced new elections to bolster his hold on power, launching a campaign urging the Greek people to vote for Syriza as a pro-memorandum party free from the insitutionalized corruption of previous governments. The move elicited anger, widespread disappointment, and disillusionment. Twenty-nine Syriza legislators abandoned the party to form the rival Popular Unity party.

Greeks will go to the polls again on September 20, with the country as mired as ever in economic and political turmoil. How did it come to this?


It’s worth recalling what it was that Syriza once ran against.

The hope invested in the party came after five long years in which New Democracy and PASOK effectively defaulted on the people, shifting the responsibility for 240 billion euros in debt by private investors and banks onto the public.

The loans the old ruling parties requested from Greece’s “troika” of creditors — the International Monetary Fund, the European Central Bank, and the European Commission — to pay that debt came at a steep political and economic cost: Unelected technocrats in the EU’s headquarters in Brussels drew up some 143 memoranda laws, with thousands of attached articles, which were enacted by legislative decree or rammed through parliament under suffocating, creditor-imposed timetables.

The combination of deep wage and pension cuts, sweeping public sector lay-offs, and regressive taxes — alongside the decimation of the country’s public health and education budgets — shrank the Greek economy by 25 percent, pushing it from a recession into a full blown depression. It triggered the largest drop in living standards since the end of World War II.

By 2013, over 44 percent of the Greek population had an income below the poverty line. National unemployment rocketed from around 7 percent in May 2008 to over 25 percent in February 2015. Youth unemployment rose even higher, hitting 50 percent last February even after tens of thousands of young people emigrated.

Since 2010, public sector wages have been slashed by nearly half, private sector employment has collapsed, and pensions have been cut by 44 percent. Whole extended families are being supported by one grandparent’s 400-euro monthly pension, or one worker’s monthly minimum wage of 520 euros. Child poverty has nearly doubled to 40 percent — the highest rate in the developed world.

Small businesses and the self-employed were also hit hard. “Business is bad and I am barely hanging on,” says 47-year-old Yiannis Skarakis, who runs a digital products and services business. “Taxes have increased significantly with the austerity measures. I always pay what I can, but if it’s a choice between paying taxes and feeding my children, I choose to put food on the table.”

On the other hand, the austerity program is working very well for the creditors, who have a huge profit incentive in maintaining the debt status quo.

According to the Jubilee debt relief campaign’s latest analysis, “the European Central Bank and its member national central banks are on track to make between €10 billion and €22 billion of profit out of lending to Greece, if Greece pays its debts in full.”

“The European Central Bank has acted exactly like a vulture fund,” adds Jubilee economist Tim Jones, “buying up debts cheaply during the crisis, refusing to take part in a necessary restructuring of the debt, and demanding to be repaid at a large profit.”


Almost immediately after taking power, Syriza plunged into an asymmetrical war with Greece’s creditors and their neoliberal economic model. The loan terms, party leaders said, had to be renegotiated in light of Syriza’s democratic mandate to ease austerity within the Eurozone.

But the creditors were indifferent to Syriza’s political arguments. And besides, the European Central Bank had a trump card: cash flow.

Greece has been unable to borrow from the markets since 2009, and without loan financing since August 2014. On February 4, shortly after Syriza took power, the European Central Bank stopped accepting Greek bonds as collateral, replacing its normal funding operations with a drip-feed of weekly approved emergency liquidity assistance. It also capped Greece’s treasury bills at 9 billion euros, down from the normal 16 billion, and excluded Greece from the trillion-euro quantitative easing program for southern European countries.

The result was a full-blown liquidity crisis. The Greek government had to scramble to fund its daily operations even as it tried to renegotiate the devastating terms of previous bailouts.

Increasingly desperate to avoid default as the negotiations dragged on, the government started draining public coffers, including national health insurance and pension funds, to pay public sector salaries and service debt. In an extraordinary move, the prime minister issued a legislative decree in April to municipal governments and public entities, including hospitals and schools, to transfer their cash reserves to the Central Bank of Greece.

This was not popular, and the consequences were severe.

“The public hospitals are in dire crisis,” explains Dimitris Sildiris, who owns a restaurant south of Athens. “My 83-year-old mother was recently admitted to Agios Pavlos hospital in Thessaloniki for kidney dialysis. They don’t have basic supplies like medicines, bandages, bed linen, even toilet paper, and the patients’ relatives have to fill the gap. Hospitals are even boiling hypodermic needles for re-use. This is explicitly forbidden and doesn’t happen anywhere, not even in Africa! The fact that Syriza drew on hospital cash reserves to pay the debt is unforgivable.”