A lot at stake as Greeks face hard test over euro decision

POLITICAL parties rarely commit suicide. The current crisis in Greece, which has led to Sunday’s referendum on the terms of a deal with the EU, is mainly about the survival of Prime Minister Alexis Tsipras’ Syriza Party. But it is also about the electoral future of Germany’s governing party, the Christian Democratic Union.

Almost all of Tsipras’ time since Syriza was swept into power in last January’s election has been devoured by negotiations about Greece’s foreign debt – at 175 percent of GDP, the highest in the developed world. But the negotiations did not focus on what to do about that staggering burden which is so big, it can never be repaid.

Four-fifths of the money is owed to official European bodies like the European Central Bank, with a relatively small role for the International Monetary Fund (IMF), but the “eurozone” authorities just want to kick the can down the road. Why? Because 90 percent of the money they have lent Greece goes straight back to the German and French banks that financed Greece’s ten-year party on borrowed money.

So, Greece got the money, but to justify these bailouts to voters in the richer eurozone countries, the Greeks had to accept severe austerity measures. These were so severe that the economy has shrunk by a quarter in the past five years and 25 percent of Greeks are now unemployed.

Yet during that time, Greece’s debt has continued to grow. Greece’s only hope of escape from perpetual austerity is a “restructuring” of the debt that writes off as much as half of it. But Germany and the eurozone’s other creditors will not even discuss that, because their own taxpayers would rebel.

Negotiations have just been about what new austerity measures Greece must accept to get the last tranche of the bailout, which would give Athens enough to pay the loans that are coming due this summer.

Tsipras was elected on an anti-austerity platform, and the left of his own Syriza Party would rebel if he gave in to all the demands for further cuts. He came close to his “red lines” last month, but he would not cross them – and Germany’s Chancellor Angela Merkel still won’t discuss writing off some of Greece’s debt. So, in the end, Tsipras walked away and called a referendum.

The last eurozone offer, which only crossed Tsipras’ red lines a little bit, is no longer even on the table, but the referendum on Sunday asks Greeks if they will accept it. The eurozone leaders say it is, therefore, a vote on whether Greece wants to leave the euro (and quite likely the EU as well), but Tsipras insists that a “no” vote will just strengthen his hand in another round of negotiations.

If the Greeks vote “yes” – and they may well do so, because they really want to stay in the euro and the EU – Tsipras says he will quit and let somebody else take the blame for accepting the terms. His own party’s unity will be intact, and he will be a hero to the Greek left.

If the Greeks vote “no”, Tsipras will stay in power. Maybe there would then be further negotiations, but that depends mainly on whether Angela Merkel can be moved on the question of debt relief. That could be very costly politically for her, but after the talks collapsed, both the European Commission and the IMF put out statements saying that writing off some of Greece’s debts could be part of future negotiations.

If Tsipras doesn’t get a solid promise on that after winning a “no” vote, he might end up leading Greece out of the euro and the EU. That would open new cans of worms, but we can wait until Sunday before we get the openers out.

Dyer is an independent journalist whose articles are published in 45 countries