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Below is an analysis by Miranda Xafa, a senior scholar at the Centre for International Governance Innovation and Vice-Chairperson of the Drasi party.

Alexis Tsipras caused early elections this January in the name of a new agreement that should have put an end to austerity measures and reduce Greek debt. The six-month-long "tough negotiations" have however plunged the economy into recession, sparked a huge deposit run, increased non-performing bank loans and the outstanding obligations of the state, and led to the imposition of capital controls. The negotiations have ended with the prospect of a third memorandum worth 86 billion euro instead of the preventive support line amounting to 11 billion euro that was on the negotiating table in November 2014.

According to calculations of the International Monetary Fund, the outstanding obligations of the state and the loans that it must repay to various organizations of the broader public sector have added 11 billion euro to its credit requirements. What prevented Yanis Varoufakis from taking measures to avoid turning the primary surplus that he had inherited into a deficit? Wasn’t he himself saying “never, never, never” with regard to new primary deficits?

The final agreement is cruel and painful, but unfortunately, any other choice would have been disastrous, as recognized by the Prime Minister, especially for the most vulnerable population groups. What was quite clear even before the elections only now becomes apparent for Alexis Tsipras. "We made mistakes", he said during the debate in parliament on Wednesday, without specifying them. Moreover, it is unclear if he has realized the scale of the damage that he has caused to the economy over the course of several months and for nothing at that.

The government’s joy of the upcoming debt relief ignores the fact that it itself is largely responsible for the dramatic deterioration of debt sustainability. According to the decision of the Summit on 12 July, "There are serious concerns about the sustainability of Greek debt. This is due to the weakening economic policy over the past 12 months, which has led to the recent deterioration of the macroeconomic and credit conditions". In March 2014, the International Monetary Fund forecasted that the debt would increase to 174% of GDP the same year and would gradually decline to 128% of GDP in 2020. Under the baseline scenario, fiscal consolidation should have continued and real GDP should have increased by 2.9% this year and 3.5% next year. I.e. the debt was expected to be slightly higher than 124% of GDP in 2020, and besides, in November 2012 the Eurogroup had agreed to propose a further debt relief.

The updated analysis of Greek debt sustainability made by the International Monetary Fund in late June, just before the imposition of capital controls, provides for a debt of 150% of GDP in 2020, with zero growth this year (later the European Commission estimated it at -3% to -4%). The same analysis estimates at 50 billion euro the credit requirements of the country over the next three years.

Before the referendum on 5 July, Alexis Tsipras used the report by the International Monetary Fund to strengthen his position in favour of the negative vote. He defined the study of debt sustainability by the International Monetary Fund as a fact of particular political importance, noting that it "strongly supports the government's position because it confirms what is obvious, namely that Greek debt is unsustainable. Only that creditors have not presented this position to the Greek government, not once over the course of the five months of negotiations, it is not present in the final proposal of the institutions, which the Greek people are called upon to approve or reject on Sunday." The Greek Prime Minister said that the report of the International Monetary Fund "justifies our choice not to accept an agreement that disregards the fundamental issue of debt," adding, "the main initiator of the memorandum now confirms the correctness of our position that the proposal made to us does not lead to a sustainable emergence from the crisis."

Alexis Tsipras, however, had selectively read the report of the International Monetary Fund. To his regret, the report is not a justification for the government but a true slap for the deficits and uncertainty caused by the protracted negotiations and the lack of political will to take measures that would stop the financial collapse. The International Monetary Fund states that the huge credit requirements caused by SYRIZA have made Greek debt unsustainable, "Until the summer of 2014, while interest rates were falling and economic recovery was already imminent, a further debt relief under the decision of the Eurogroup of November 2012 did not seem to be required. However, significant changes in the financial policy, mainly the lower primary surpluses and the lack of privatizations are leading to much higher credit requirements that are to be added to an already high debt. These additional credit requirements are making the debt unsustainable."

A few days later, on 14 July, the International Monetary Fund published a new study on the sustainability of Greek debt. It takes into account the closure of banks and capital controls that have further exacerbated economic activity and debt dynamics. According to the new report, the credit requirements of Greece would increase to 85 billion euro over the next three years and its debt would exceed 200% of GDP. The report ends with the conclusion that measures already "much more significant than those discussed by Europe so far" could only recover debt sustainability, implying a possible debt haircut.