Greece Makes Troika Back Off

Even before Greece’s international lenders began to back off from pressing for more austerity measures, there were signs that the government’s hard line against more pay cuts, tax hikes and slashed pensions was beginning to wear them down.

Prime Minister Antonis Samaras, fearing the uneasy coalition of his New Democracy Conservatives and their partner, the PASOK Socialists – with a thin four-vote majority in Parliament – couldn’t withstand more social unrest, dug in his heels when envoys from the Troika of the European Union-International Monetary Fund (EU-IMF-ECB) were in Athens to check the progress of reforms.

Even a delay in the release of a pending one billion euro ($1.37 billion) installment didn’t make Finance Minister Yannis Stourarnas buckle under pressure from the Troika to speed the pace of delayed reforms.

The two sides were most at odds over the size of a hole in the 2014 budget – the Troika put it at as much as 2.9 billion euros while Stournaras said it was 500 million at most. The Troika had been talking as if there was no alternative to more austerity if the hole couldn’t be filled with more revenues.

Samaras, in a meeting last week with German Chancellor Angela Merkel in Berlin, then went even further when he said there’s no budget gap that can’t be filled with going after tax cheats and waste – two promises on which he and every other previous Premier has broken.

Still, some analysts said Greece’s tough stance appeared to have made the Troika back off for now and given Samaras breathing space and to put aside the idea of breaking his vow not to impose any more austerity.

“The calculus in Athens has begun to shift in ways that some fear has weakened the incentives for a deal,” the Financial Times’ Peter Spiegel wrote just before Troika envoys left without a deal and said they wouldn’t return until sometime in December when Eurozone chiefs are to take up the subject of that delayed loan and Greek reforms.

Spiegel noted that there was a fundamental shift in Greece’s approach to dealing with the Troika in which successive governments have pretty much done as ordered. This time the fate of the Samaras coalition and legacy seemed to be at stake and the premier took a gamble he could play tough.

“Athens, never an enthusiastic reformer, has even fewer reasons to co-operate,” Spiegel wrote and a Troika negotiator told the news site that, “Clearly what’s happened is the political casualties are becoming very evident. There’s just this groundswell of opposition.”

That could be bad news for the major opposition party Coalition of the Radical Left (SYRIZA) which opposes the Troika deal and has failed to get any serious backing for its calls for the government to relent and for Greeks to rise up and beat it down.