In 1981, the socialist François Mitterrand swept to power in France on a left-wing economic platform that repudiated spending cutbacks and pinned hopes for recovery on spurring growth through consumption and big infrastructure projects. Mitterrand was the first socialist to wrest control of the Élysée Palace from the right, and his party was euphoric.
Two years into his term, however, Mitterrand effected a reversal that still haunts French socialists. With a spiralling deficit, market confidence plummeting and the franc under attack, he abruptly abandoned his election promises and shifted course. The embrace of austerity became known as the turning point, "le tournant de la rigueur", and memories of the trauma are so fresh that, almost 35 years on, the word "rigueur" remains taboo in French politics.
The crisis facing Alexis Tsipras is radically different to the one Mitterrand encountered. The Greek prime minister took over a country where unemployment was running at 25 per cent and where social deprivation had soared over six long years of austerity.
Today, Greece’s economy is in freefall. Its banks have been closed for almost two weeks, cash is drying up and the country could crash out of the euro zone within days.
But now, six months after he came to power promising a rupture with austerity, Tsipras, confronted with lenders' threats to pull the plug on Greece this Sunday, has gambled all his political capital on a €13 billion round of cuts and tax rises aimed at averting a chaotic exist from the euro.
Reaction at home
The plan may mollify the creditors, but a great deal hinges on how it’s greeted at home. In particular, will Syriza MPs fall into line, in the coming days and weeks, behind a reform package that looks substantively like the one offered by the creditors on June 26th? And what of the 61 per cent of the population that rejected those proposals in a referendum just five days ago?
The thought of signing up to another round of cuts and savings galls many Syriza MPs. For some it’s a step too far, and the indications were last night that Tsipras would lose a number of his deputies as a result – even though support from conservative and centrist opposition parties was expected to ensure the proposals passed through parliament.
But what of those No voters who celebrated on Syntagma Square on Sunday night, thinking they had rejected this type of austerity? How will Tsipras placate them?
First, it seems, by warning them about the alternatives. At the meeting of his Syriza MPs yesterday, Tsipras said the choice, explicitly laid out by European leaders’ ultimatum this week, was between staying in the euro zone or leaving it, with unpredictable results.
He reminded them that there were two messages delivered by the people last Sunday: no to harsh austerity, but yes to the euro. “We have a mandate to bring a better deal than the ultimatum that the eurogroup gave us. We do not have a mandate to take Greece out of the euro zone,” he said.
Second, the Syriza leadership will try to convince their base that, while their opponents at home and abroad shout capitulation, they could end up with a better deal, in some respects, than they had on the table two weeks ago.
Yes, Athens is signing up to higher VAT and less generous pensions of the sort they resisted two weeks ago. But the June 26th proposals were in exchange for a five-month €7 billion lifeline. This time, on broadly the same terms, Greece will receive €53 billion over three years. Tsipras will also point out that the bulk of the tax increases are still aimed at the wealthier in society, and that it has a redistributive bent.
Debt relief
Then there’s debt. The Greeks are reasonably confident, given positive hints from Paris and Brussels in recent days, that they will secure in the final document a clear reference to debt relief and a commitment from the lenders to begin discussing ways to alleviate the debt burden from October.
It’s vague, but it could allow Tsipras to hold up a concession he didn’t have before the referendum and tell ordinary Greeks that he can begin to work towards giving them what they yearn for: sight of a clear route out of the trauma of the past six years. That yearning has only grown more intense in recent days; with the banks closed for a second week and cash fast running out.
Tsipras knows that a deal on these terms will leave many of Sunday’s No voters feeling deceived. But he knows that many of them will also be relieved.