Headed by Syriza leader, and now prime minister, Alexis Tsipras, and its flamboyant, unorthodox finance minister Yanis Varoufakis, the new Greek government set out to renegotiate its bailout deal and extract more favorable conditions from its creditors, including a steep debt reduction. Its strategy consisted in threatening to default on its debt which, in theory, could endanger the euro and shake the European Union.
Although there were good arguments in favor of a renegotiation of the bailout agreement, Greece’s goals were not really achievable. For one thing, a debt haircut was extremely unpopular among creditor eurozone countries, some of which were poorer than Greece; for another, such an outcome would have set a precedent and make the eurozone subject to blackmail by member states. In addition, most investors did not see a Greek default as posing a critical eurozone risk. Soon it became clear that the negotiations were going nowhere and the Greek government was hitting a wall.
Faced with this impasse, Tsipras called a referendum in July 2015, advocating the rejection of the bailout agreement’s austerity policies. At the same time, he assured the Greek electorate that the costs of rejection were minimal. As a result, over 60 percent of the electorate followed his recommendation. The world held its breath. Would the eurozone cave in to Greek demands? Or would Tsipras concede and lose face? We know the outcome. The eurozone did not blink, and Germany went as far as propose that Greece exit the eurozone. Faced with the risk of economic implosion, Tsipras caved in. He fired Varoufakis, purged his party from its most radical faction, and signed on the austerity measures.
The key lesson of the Greek case is that the crisis de-escalated when the Greek anti-austerity bloc split as a response to the economic cost of following through.
The Catalan crisis shares a key parallel with the Greek crisis. Setting aside arguments in its favor, the Catalan demand for independence is a very long shot, as perhaps was Greece’s demand for a debt haircut in 2015. Catalan society is divided in the middle and secession creates a precedent that most states wish to prevent. It entails enormous complications, including Catalonia’s EU and eurozone membership. The unilateral declaration of independence that the Catalan government has just voted in is an even longer shot. It goes against the wishes of a substantial part of the Catalan population and its elected representatives, the rest of Spain, the European Union, and the international community more broadly, including the United States. In many ways, the Catalan independence proclamation is reminiscent of the July 2015 Greek referendum. It is an expression of a wish rather than a real policy, a part of the bargaining process between the Catalan separatists and the Spanish government rather than its conclusion.