April 6, 2015 / 2:03 PM / 3 years ago

Divisions, public pressure push Greek PM into tightrope act

ATHENS (Reuters) - First it was for sale, then the deal was scrapped, then the sell-off was back on and now it is to be a joint venture, or maybe not.

People holding umbrellas make their way next to fluttering Greek national flags on the main Constitution (Syntagma) square during heavy rainfall in Athens March 13, 2015. REUTERS/Alkis Konstantinidis

Few issues sum up the confusion of leftist Greek Prime Minister Alexis Tsipras’s first two months in office better than the bewildering saga of the country’s biggest port, Piraeus, a bastion of militant trade unionists.

His government’s first declaration in January was to say the asset sale - a key part of Greece’s privatization program agreed with international creditors - had been canceled.

Athens then appeared to change heart: on a trip last month to China, which is a bidder and already runs part of the port, the deputy prime minister said the sale would go ahead.

Three days later, the economy minister appeared on television to insist the sale remained halted and that a joint venture would be agreed instead. The same day, Greece sent its lenders a list of reforms that cited the Piraeus port sale as among the privatizations going ahead.

Whether the port is actually open for bidders is anybody’s guess. Indeed, it is not clear if the government itself knows, given the multitude of contradictory statements that has come to characterize Tsipras’s administration.

The message is equally confused in talks with foreign creditors that affect the financial survival of the cash-starved Greek state, one European diplomat involved in talks said.

“It is as cacophonic as it seems,” the diplomat said.

Inability to agree - much less implement - a common line on privatizations underscores the challenges Tsipras faces to convince lenders his government is committed to reform and worthy of financial aid.

With Athens weeks away from running out of cash, Tsipras has called for an “honest compromise” and held a series of fence-mending meetings with European leaders that have helped lower the tone of acrimony with the euro zone and IMF.

But the novice prime minister has to juggle divergent voices within his own Syriza party and has little room to offer major concessions without undermining support from the public, his party’s far-left flank and his right-wing coalition partner.

Losing any of the three could bring a government collapse. As if to underscore the point, Panagiotis Lafazanis, the outspoken head of Syriza’s far-left faction, warned this weekend that any retreat from anti-austerity and anti-bailout pre-election promises would be suicidal.

“The government will stand firm on its pledges in the face of vile blackmail and disorienting dilemmas not because of party pressure but because such a retreat would be a real ‘Waterloo’ for the government,” Lafazanis, who is energy minister, told the Agora newspaper, invoking the fall of French Emperor Napoleon.

In an early sign of dissent, about 30 out of 149 Syriza lawmakers voiced doubts at a closed-door meeting about a Feb. 20 agreement with lenders that averted a banking collapse, though only a handful opposed it in the end, Syriza officials say.

A fresh impasse with lenders and internal rifts are spurring media speculation that Tsipras may have to call early elections or a referendum to avoid caving to lenders’ demands, though his government denies any such plan.

Even as Greece teeters closer to the financial abyss, there is scant public debate about what might come next. Almost no one publicly advocates defaulting on Greece’s 240 billion euro debt to the euro zone and the International Monetary Fund.

RED LINES

Polls show Tsipras enjoys support from a stunning 78 percent of Greeks, but that could quickly evaporate if austerity-weary voters see him reneging on the pledges that won him election to end painful spending cuts but stay in the euro zone.

Keeping the public on side is important for Tsipras, who often refers to his “popular mandate” as the key weapon the pro-bailout opposition lacks.

Addressing parliament last week, he defined the government’s red lines as avoiding pension cuts and mass layoffs, reversing labor market deregulation and retaining state control in key asset sales. He appealed for opposition support to defy lenders.

“These are our red lines. I want to make clear we won’t back down no matter how much they blackmail us or put pressure on us,” Tsipras said. “These are not just Syriza’s red lines but the red lines of the Greek people, and of Greece during tough negotiations which we all believe will be effective.”

Finance Minister Yanis Varoufakis has gone further, saying Athens has made clear how far it can go with its latest reforms list that focuses on cracking down on evasion and blocking early retirement, and that it is up to the lenders now.

“We won’t condemn the country to long-term asphyxiation as previous governments did,” he told Monday’s Naftemporiki daily. “The real question is, what does the other side propose? The negotiations will come closer to a conclusion when there is an answer to this question.”

WHO‘S IN CHARGE?

Flip-flopping on issues such as Piraeus has undermined trust with foreign lenders and bred confusion over who is in control and what the government’s position is, sources close to the talks said. Some paint a picture of a chaotic state stumbling towards bankruptcy.

One source close to talks said foreign negotiators faced a quandary because lower-level officials would say they did not have the authority to talk about policy while senior figures spoke only in broad terms without the figures to underpin their arguments: “In the end you don’t know who is in charge.”

The appearance of two different technical negotiators Giorgos Chouliarakis and economics professor Nikos Theoharakis in talks with lenders has fueled speculation of a tug of war within the cabinet. The former is said to be close to Deputy Prime Minister Yannis Dragasakis, the latter to Varoufakis.

The government denies any such rift between the officials.

Varoufakis has been at the center of speculation since he dropped out of sight after weeks of whirlwind travel and sharp-tongued attacks on austerity and the European Central Bank that made him a media darling but infuriated EU and IMF lenders.

After staying home during Tsipras’ key trips to Brussels and Berlin, the outspoken economist reappeared in Washington on Sunday to reassure IMF chief Christine Lagarde that Athens would repay an IMF installment on time this week.

Despite the cacophony, some Syriza officials privately say the leftist party is proud of a tradition of letting members debate openly and that ultimately the party line will hold. The government has also become more vocal in underlining that it is not split on core issues like negotiations with lenders.

“The Greek delegation is one, tight like a fist, and acts united in line with the government’s commitments to the people,” the finance ministry said in a statement this weekend.

Editing by Paul Taylor

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