Greek Prime Minister Alexis Tsipras celebrated his referendum success as a “victory of democracy,” but in other European democracies which have tightened their belts, showing any further generosity to Athens would be a hard sell to voters.
The prospect of providing more funding for Greece and deferring to its demand for a reduction of its outstanding debt — a crushing 180 percent of GDP — is an especially sore point in eurozone countries that have gone through deep recessions of their own and struggled back to economic health, often by taking the same austerity medicine so fiercely resisted by the Greeks.
To get a deal, Athens must make its case not to Paris and Berlin, but also to Riga, Tallinn, Dublin and other capitals.
The experience of many of Greece’s eurozone partners means, at the emergency eurozone summit Tuesday, Tsipras may hear less support for debt relief and more about buckling down and undertaking the same kind of painful reforms that they did.
The Baltics
The three small Baltic republics are poster-children for austerity advocates. They all boomed thanks to a flood of cheap money from Scandinavian banks which ignited a real-estate bubble. Once the crisis hit, the advice from the International Monetary Fund was to unpeg their currencies from the euro and devalue. All three refused — choosing instead to regain competitiveness by slashing wages and social benefits.
Latvia’s per capita GDP contracted by 23 percent from 2008 to 2010, almost the same slump as Greece has experienced since 2008. Lithuania fell by 17 percent, while Estonia contracted by 13 percent.
Instead of asking for help, Lithuania borrowed on international markets at a rate of more than 10 percent. Some civil servants saw their pay slashed by one third. Pensioners also saw their benefits cut.
Latvia had an aid program worth €7.5 billion, but only tapped €4.5 billion of that, and repaid the loan early.
Lithuania’s per capita GDP is now 21 percent higher than before the crisis, Estonia is up by 20 percent, while Latvia is 8 percent higher, according to Eurostat.
That experience has made Baltic leaders very critical of Greek demands.
“The Greek government, instead of telling the truth to its people about the real outcome of such decision, agitated to vote against reforms which are necessary to stabilize the financial situation,” said Lithuania’s President Dalia Grybauskaitė.
Estonia’s official exposure to the €341 billion in Greek aid from the eurozone is €800 million, or about 4.2 percent of GDP, more proportionately than Germany and France. Estonian President Toomas Hendrik Ilves asked on Twitter, “Do we raise our taxes to bail out Greece?”
Slovakia
Slovakia didn’t get hit as badly as the Baltics and Greece, but it experienced a much tougher transition in the early 1990s.
It went from being a dysfunctional and deeply corrupt country under autocratic Prime Minister Vladimír Mečiar to the fastest growing economy in the EU after cutting taxes, revamping pensions and health care, and liberalizing the economy.
“In 10 years we went from the black hole of Europe to being the Tiger of the Tatras,” said Vladimir Vano, chief analyst at Sberbank Europe. “Initially, the cost of reforms outweighed the benefits, but we went through the valley of tears and are now in a much better place. Slovakia should serve as an example to Greece — if we can do it, they can too.”
Controversy over bailing out Greece helped unseat Slovakia’s government in 2011, and since then Bratislava has been a hardliner on helping Athens.
“Rejection of reforms by #Greece cannot mean that they will get the money easier,” tweeted Peter Kažimír, the Slovak finance minister.
The issue is particularly acute in the Baltics and in Slovakia, because Greece still has a higher per capita GDP than they do, making it even more difficult to persuade skeptical voters of the need to pay more into another bailout.
Ireland, Portugal and Spain
All three are wealthier than Greece, but they also went through a very difficult crisis. Despite deep reforms, all three still have a smaller per capita GDP than before 2008.
Tsipras’ left-wing Syriza party serves as an example to populist parties like Spain’s Podemos and to Ireland’s Sinn Féin, whose leader Gerry Adams praised Greeks for their “historic decision” to fight austerity and demand debt relief.
Spain’s Economy Minister Luis de Guindos said Monday that Greece should remain part of the eurozone and that Spain would negotiate for a third bailout package, but stressed it was more important to return Greece to growth than to slash its debt.
It is the same message from Ireland’s Prime Minister Enda Kenny, who has said there would be no support for Greek debt relief.