What do the EU political families think about Greece, austerity and budget commitments?

This week, Greece has reached a deal with its Eurozone partners to extend its current bailout programme by 4 months. The extension buys time for the new government in Greece to assess its options. Greece is required to submit a reform proposal to the Eurogroup, listing all the policy measures it plans to take during the remainder of the bailout period.

What do Members of the European Parliament say and why is this important?

Regardless of the Eurogroup’s ability to reach a compromise, political groups in the European Parliament have taken their own positions on the situation in Greece and in general about how the economic crises should be dealt with.

Unlike government officials, whose statements can easily be portrayed as official commitments, MEPs, as directly-elected citizen representatives, but which do not directly hold the power of economic policy decisions, feel less restricted when expressing their own views. Consequently, ideological orientations are easier to observe and the opinions differ substantially across the political spectrum.

The positions of the MEPs provide very useful clues on the starting positions that their national governments (in fact, their party colleagues in the national executive branch) may have in the negotiations within the Eurogroup or other EU and international bodies.

The European Parliament, for its part, does not have direct say on the economic policies of the Member States. However, the MEPs can influence the recommendations made annually by the Commission through the procedure called the European Economic Semester and may also impact indirectly on these policies by the amendments they draft to new EU legislation.

The left-leaning EP groups are placing more emphasis on the impact that further austerity would have particularly on the less advantaged categories of the society. They say that the Greek government should be allowed to spend more money and the weight of the debt should be reduced, to allow for more social policies. The right-leaning groups, on the other hand, emphasise the negative impact that the breach of international commitments of respecting budget discipline and paying back the loans would have. They say that this would lead to the destruction of trust between international partners, which would in turn spiral into a new chapter of economic and social crises.

The far-left GUE/NGL group stresses that the Greek’s repayments must be handled with softer strategy.[1] According to this group, where the Members of the Syriza party also sit, the EU should reduce the pressure to implement austerity policies on the Greek government and come up with a new plan.

The Members of the Greens/EFA group also support a softer approach on Greece’s debt. The group suggests that in order to find a sustainable solution it is important to find more realistic debt repayment targets. The Greens believe that the EU and the government of the Greece need to extend the maturity of the current loans and reduce the interest rate paid for these loans.[2] The group fully backs the new Greek government, being of the opinion that it is time for the governments of Germany and Spain to stop blocking the agreement proposed by the Greeks.

The Socialists in the European Parliament also positioned themselves against further austerity measures, but had a somewhat less radical view than that of the far-left or the Greens. The S&D group stated that while they are against cutting Greece’s debt, Europe must show solidarity with the Greek people. The group stated that European institutions should be open to the renegotiation, in particular the extension of the terms of its bailout plan. The group says that Greece must be allowed to reduce its primary surplus, so that it can reform, invest and help the poor.[3]

Liberals and democrats (ALDE) group is of the opinion that the Greek government should first commit to and deliver serious reforms and then ask for softer conditions.[4] ALDE group emphasizes the importance of Greece’s own role, as Athens can only start recreating wealth and jobs by reviving its private sector. ALDE pointed out that the EU and Greece must find a compromise; a possible Greek exit from the eurozone will not benefit anyone, especially the Greek people.

Christian democrats and Conservatives are also unsupportive of the approach by the new Greek government. The EPP group stated that Greece must respect existing commitments, as continuing on the path of structural reforms and budgetary consolidation is the only way to bring back jobs and growth.[5] The group criticizes the new Greek government, saying that the promises made to the Greek people by the Syriza Party are just electoral lies[6].

The Conservatives and Reformists share the critical views of the new government’s fiscal approach to its debt problems.[7] ECR emphasizes that the Greek government has to understand that being part of the euro means that you must have the agreement of other eurozone countries when changing prearranged economic course.

 

Background: what the Eurogroup decided

The general feeling within the Eurogroup was that given the ongoing discussions about how the program should work, both parties need more time for negotiations. Currently, the Greek side obtained the extension of the bailout, the bank funds and freedom to decide how to organise Greece’s budget, but at the same time it cannot abandon running a budget surplus or reschedule its debts.

The rupture between Greece and the rest of the eurozone has led to an 18 against 1 negotiations, where members of the Eurozone are insisting Greek debts are to be paid back completely. For Germany, fiscal discipline and spending controls are the only basis for the sustainable growth needed to create jobs. Germany insists Greece should stick with the austerity commitments included in the loan programme. Germany’s government has pointed out that although the Greek offer doesn’t meet the euro region’s conditions for continuing aid, it is essential that Greece stays in the Eurozone.

Members of the euro zone acknowledge the risk that one country’s retreat could trigger more transitions. This effect could be particularly problematic if it passed on to larger troubled states, for example Spain, where popular movements also gain more power and challenge traditional economic and political systems. Consequently, Spain’s government is particularly sensitive in matters about Greece, stating that the debt must be paid back completely.

 

[1] http://www.guengl.eu/news/article/gue-ngl-news/eu-leaders-must-act-in-good-faith-on-negotiations-with-greek-government-on

[2] http://www.greens-efa.eu/greeceeu-summit-13533.html

[3] http://www.socialistsanddemocrats.eu/newsroom/sds-urge-eurogroup-consider-greek-proposals-open-mind

[4] http://www.alde.eu/nc//press/press-and-release-news/press-release/article/guy-verhofstadt-calls-upon-the-greek-government-to-make-progress-with-their-reform-plans-and-to-come/

[5] http://www.eppgroup.eu/press-release/Greece%3A-EPP-Group-calls-on-government-to-respect-commitments

[6] http://www.eppgroup.eu/news/Greece%3A-the-path-towards-reform-needs-to-be-continued

[7] http://ecrgroup.eu/news/greece-elections-put-euro-on-a-collision-course/

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