German Grexit plan offer probably better than bailout plan accepted by Greece

Greek negotiators finally arrived at a deal for a further bailout from the European Stability Mechanism (ESM) and the IMF. The deal has harsher austerity conditions than the one rejected by over 60 percent of Greeks voting in a recent referendum.

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The details of the agreement with the European Stability Mechanism can be found here. Accepting this deal meant ignoring any red lines that remained for Greek negotiators. The deal imposes even harsher austerity conditions on Greeks, as well as forced privatizations of state assets. Even so, many leftists and others still support the deal as better than a Grexit. A Grexit was actually mentioned as a possibility by the German Finance Minister Schaueble and the German Foreign Ministry as an alternative to another bailout. The German newspaper Frankfurter Allgemeine Sonntagszeitung (FAS) reports the latest reform proposals from Greece did not go far enough and suggested two alternatives in a position paper:"... the ministry set out two alternative courses for Greece. Under the first, Athens would improve its proposals quickly and transfer assets worth 50 billion euros ($56 billion) to a fund in order to pay down its debt.

Under the second scenario, Greece would take a "timeout" from the euro zone of at least five years and restructure its debt, while remaining a member of the European Union."During the timeout period of the second scenario Greece, as a member of the EU, would still qualify for "growth enhancing, humanitarian, and technical assistance." The majority of creditors apparently regarded this second scenario as not worth discussing and a Greek official claimed that indeed the Grexit plan was not even discussed in the Eurogroup. Instead we find in theactual agreement the first scenario with precisely the same amount in the fund as suggested in the German Foreign Ministry position paper:".. to develop a significantly scaled up privatisation programme with improved governance; valuable Greek assets will be transferred to an independent fund that will monetize the assets through privatisations and other means. The monetization of the assets will be one source to make the scheduled repayment of the new loan of ESM and generate over the life of the new loan a targeted total of EUR 50bn of which EUR 25bn will be used for the repayment of recapitalization of banks and other assets and 50 % of every remaining euro (i.e. 50% of EUR 25bn) will be used for decreasing the debt to GDP ratio and the remaining 50 % will be used for investments.This fund would be established in Greece and be managed by the Greek authorities under the supervision of the relevant European Institutions. "

Note that the process while carried out by Greek authorities is under the "supervision of the relevant European Institutions." The Greeks no longer control their own privatization process, nor do they control what happens to the proceeds, half of which go to pay back the bailout loans! So foreign investors can buy Greek assets and half the funds just go back to the "institutions." Only one quarter can be used for investment and no doubt that investment must be approved by the institutions.

The new agreement ensures not only that all Syriza's red lines have been breached but that with one exception, anti-austerity legislation passed earlier that might have breached the conditions of the previous bailout must be rescinded and any new legislation must be approved by the institutions:".. to fully normalize working methods with the Institutions, including the necessary work on the ground in Athens, to improve programme implementation and monitoring. The government needs to consult and agree with the Institutions on all draft legislation in relevant areas with adequate time before submitting it for public consultation or to Parliament. With the exception of the humanitarian crisis bill, the Greek government will reexamine with a view to amending legislations that were introduced counter to the February 20 agreement by backtracking on previous programme commitments or identify clear compensatory equivalents for the vested rights that were subsequently created."

No wonder in social media the new agreement is called a coup. John Pilger notes just a few of the ways in which Tsipras not only jettisoned almost completely the Syriza program but also went quite counter to his promise to negotiate a better deal:Prime Minister Alexis Tsipras has pushed through parliament a proposal to cut at least 13 billion euros from the public purse – 4 billion euros more than the “austerity” figure rejected overwhelmingly by the majority of the Greek population in a referendum on 5 July. These reportedly include a 50 per cent increase in the cost of healthcare for pensioners, almost 40 per cent of whom live in poverty; deep cuts in public sector wages; the complete privatization of public facilities such as airports and ports; a rise in value added tax to 23 per cent, now applied to the Greek islands where people struggle to eke out a living.

Had Syriza planned for Grexit in the early stages of negotiations, it would have been able to press for Germany's alternative scenario as a far better alternative to a fire sale of its assets with the money used mostly to pay debt. It really does not matter that Germany and other countries want a Grexit because they consider Greece a burden to the eurozone and its taxpayers, a Grexit would still free Greece from being ruled by creditors and at least give them control of their own legislature and resources. Surely that is better than a promise of three years of debt slavery and a possible debt restructuring but no "haircut." What is required immediately by the deal is proof that Greece is serious about cutting pensions, boosting taxes even on those least able to pay and other wholly regressive policies. All of this being implemented by those the media calls "radical leftists."