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Debt Deal Puts Greece's New Prime Minister Alexis Tsipras in a Tough Spot

A frustrated reaction to the deal from voters and governing Syriza Party members reflects the mood of most Greeks, who are sick and tired of wallowing in financial crisis.

by Nikolia Apostolou
Feb 27 2015, 11:55pm

Photo by Matthew Tsimitak

As he closed his butcher shop for the night in the middle-class Athens neighborhood of Kypseli, where Greek Prime Minister Alexis Tsipras resides, Yiorgos Petroutsos was wondering how long he could go on. His business has lately lost considerable revenue after running a profit for decades, and he now owes back taxes.

Petroutsos supports the recent agreement Greece's government negotiated with the European Union, European Central Bank, and International Monetary Fund that gave it four months to reorganize the country's finances as the nation struggles with a severe economic depression.

The deal ended a stalemate between Greece and its creditors, especially Germany, that could have ended with the Mediterranean country defaulting on its international debts and potentially triggering a new eurozone crisis.

Related: How Greece Could Change the Future of Europe

"It seems like the government is trying to get things on the right track," said Petroutsos. "Concerning the agreement, it seems like we did something good. At least we upset them, which the previous governments didn't do. Whatever they were given, they would sign it."

But plenty of Greeks are angry about the arrangement hatched by Tsipras.

On a rainy Friday, thousands of protesters supporting Greece's Communist Party assembled in Syntagma Square in front of parliament to denounce the agreement.

"Who's going to pay the bill for this new deal, the new commitments that have to become laws?" Communist Party General Secretary Dimitris Koutsoubas asked the crowd. "The lower-class families will pay the bill — the people who have bled the previous years and will continue to bleed."

This was among the first anti-government demonstrations since the far-left Syriza party won election in January largely by criticizing the former government that negotiated the terms of the $270 billion rescue loans that forced Greece to enact draconian tax hikes and spending cuts. Rallies in the square in recent days had usually been in favor of Tsipras.

Related: Eurozone Agrees to Extend Greek Bailout, Sending Global Equity Markets Soaring

The Communists probably don't represent a political threat to Tsipras, having won only 5.5 percent of the vote in the recent election. But the agreement has put the prime minister in a tough spot.

Members of his own party are also displeased. For years, Tsipras and his colleagues had been promising to cancel the bailout agreement with a single law as soon as they came to power. That turned out to be easier said than done once Chancellor Angela Merkel and other European leaders signaled that they would cut financing if Greece unilaterally pulled out of the deal.

In a closed-door meeting of Syriza parliament members that lasted for 11 hours, roughly 40 of the 149 suggested that they would either abstain or vote against the debt agreement.

Their reaction to the deal reflects the mood of most Greeks, who are sick and tired of wallowing in financial crisis.

Seven years after the 2008 meltdown ignited a recession in Greece as bad as the Great Depression that afflicted the US in the 1930s, the country hasn't recovered. Only a small fraction of the $270 billion bailout was invested in government services or projects. Around 80 percent simply financed payments on previously secured loans.

In the meantime, unemployment has tripled. Those lucky enough to have jobs have lost more than 40 percent of their income as the government tightens its belt and the private sector shells out more in taxes. A third of the country's people live under the poverty line.

Many of Petroutsos's clients now buy meat with credit. He knows some will never pay him back.

"People are having a really difficult time," he said. "Europe is treating Greece in a very harsh way."

Related: Greece Is Playing Economic Chicken with the Rest of Europe

But the German parliament approved the deal on Friday after Finance Minister Wolfgang Schäuble, one of the loudest critics of Greece and Europe's biggest cheerleader for austerity, voiced his support for the deal.

"We're not talking about new billions for Greece. We're not talking about any changes to this program," Schäuble in a speech to lawmakers in Berlin. "Rather, it's about providing or granting extra time to successfully end this program."

At the same time, Tsipras announced that a raft of new reforms would be put to a vote in Athens next week, including a crackdown on tax evasion, the creation of installment plans for taxpayers, and bolstering the social safety net for the poor.

Those measures are just stopgaps. Some European officials are already talking about a new bailout, as Greece needs to scrape together $33.6 billion to make its debt payment this year.

In addition, a financing gap was created after the election campaign, as many struggling Greeks haven't paid their taxes waiting to see the new laws concerning the 72 and 100 installments.

Nobody is sure where Tsipras will find the money.

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