Tsipras won't get everything he wants but probably enough to paint it as a victory for beleaguered Greeks
Seven long years after the collapse of Lehman Brothers and the doctrine of austerity that has held sway in Europe since the crash has been conclusively rejected by a major European electorate.
There had already been false dawns: the election of Francois Hollande in France in 2012 was supposed to signal to Brussels that austerity wasn’t working. Riding a wave of anti-austerity sentiment, the new President promised to squeeze the rich and invigorate the French economy with Keynsian stimulus.
And yet the French election of 2012 wasn’t to be the transformative turning point it was initially billed as. Soon after taking office Hollande rowed back on many of his pre-election pledges and embarked on his own programme of cuts. It was the anti-austerity revolution betrayed once more.
But the election of Syriza in Greece feels different, not least because the country has suffered far greater hardship from austerity. Since the onset of the recession in 2008, Greece has lost around a quarter of its economic output and 26 per cent of the country’s labour force are unemployed, according to government figures.
This, supposedly, was the price ordinary Greeks were meant to pay for the Troika’s (the European Union, the International Monetary Fund and the European Central Bank) 2010 bailout of Greek banks; the Greek government was granted €240bn but strictly on the condition that it implemented a brutal austerity programme.
The election of Syriza over the weekend means that, for the time being at least, that ship has sailed.
Already the continent’s austerity hawks are circling Greece with dire warnings of impending chaos and penury. David Cameron this morning tweeted that the “Greek election will increase economic uncertainty across Europe”. Meanwhile Bundesbank President Jens Weidmann said he hoped “the new Greek government will not make promises it cannot keep and the country cannot afford”.
Right-wing political leaders sound worried and they ought to be: Greek voters have categorically rejected a key plank of the eurozone policy for dealing with the fallout from the financial crisis: cuts, cuts and more cuts.
This poses two big questions: how will German Chancellor Angela Merkel respond? And how will European centre-left parties react to the election of a radical anti-austerity party?
The new Greek government must come to some agreement with the ECB by 28 February, which is when the current deal with the Troika runs out. Should this fail to happen, Greek’s deal with the ECB will officially come to an end, triggering a run on Greek banks. The ECB could then offer to recapitalise the banks but with enormous strings attached – think neo-liberal reforms and further austerity.
However the size of Syriza’s victory (and the message it sends to European elites) means that the sensible money is probably on party leader Alexis Tsipras successfully renegotiating the 2010 bailout terms with Brussels. Tsipras won’t get everything his party wants from the ECB but will probably get enough to paint it as a victory for beleaguered Greeks. With an eye on polls showing that 70 per cent of his countrymen want to stay in the Euro, the Syriza leader won’t want to be the one who takes country back to the Drachma.
As such, expect Greece to stay in the Euro but the unity of Syriza to be short-lived: any compromise with the ECB will invariably be painted as a ‘betrayal’ by the party’s hard-left.
A compromise is made more likely by the fact that, while Merkel and the ECB won’t want Greece to leave the Eurozone, ‘Grexit’ would not be the unmitigated disaster for the rest of Europe it once might have been. Since the dark days of 2010 bank restructurings and ECB liquidity have significantly reduced the risk of potential Europe-wide contagion, meaning that Grexit would be a challenge for Europe rather than a disaster. The hand of Greece’s creditors is therefore strengthened.
The other big question is how European leaders of the centre-left react to the emergence of Syriza as Greece’s largest party. Will Tsipras’s victory provide Hollande in France and Matteo Renzi in Italy with an opportunity to push back against Brussels and Berlin-backed budgetary constraints? Combined with ECB president Mario Draghi’s intervention last week, does Syriza’s triumph further isolate the hawkish Merkel?
It ought at the very least to give the left a stronger hand when arguing the toss with Merkel over the best way to reinvigorate economies that are still feeling the pain from the 2008 crash.
James Bloodworth is the editor of Left Foot Forward. Follow him on Twitter
55 Responses to “Syriza: The Greek left has triumphed. So what next?”
LB
It’s not the price of the Troika. It’s the price of their government spending and borrowing to the point they can’t pay. After the party comes the bill and the clean up costs.
So we now have a great experiment. The Greeks default, get kicked out and go all socialist. We then see if they can manage without the support of the EU in their great socialist experiment. It will of course go tits up.
Why would the ECB bail the banks out when all they do is piss the money away? 230 bn lent/given and its not solved it. Why will more solve it.
So my bet, they will fuck the Greeks and leave them to sort out their mess, in order to remind the other countries they owe money too.
Draghi will go on the default. Sacked.
The IMF have to pull loans like mad from the third world to cover their 100 bn loss. That’s a trillion in loans not made. Austerity for the third world so the Greeks can party.
The Greek’s hand is weak, very weak.
swat
Its the morning after the night before. Boy, the Greeks really do know how to party!; they’ve been doing that for the past 50 years.
Waiting in the wings are the facists, and of course the Army, on standby if things collapse, beyond repair.
The EU should call their bluff about renegotiation, or just kick them out, and have done with it.
Dave Stewart
Please bear in mind that the reason the Greek Banks (not government, although it was the government who was forced to take on the debt) were bailed on not out of some altruistic compassion to save the Greek economy but because the people who stood to lose a lot of money out of Greek banks defaulting would have been largely French and German banks, with a few British ones as well. It was nothing about saving Greece and everything about saving richer European countries banks who had been making dangerous loans.
Asteri
Syriza is a lot different from the French ‘socialists’, who are a establishment, squint and you’ll see it, socialist party, whose members such as Strauss-Khan have served as president of the IMF. They are not remotely against EU policies so it should have been no surprise that they u-turned. In 2012 they were a party that didn’t even want to win because they knew they had nothing to offer.
It is true that Syriza is less radical than PASOK where in the 1980s when they did not fulfill their promises to leave NATO and the EEC but they are still an unknown quantity. They will either try to fulfill their agenda and the EU will move to destroy them or they will compromise to survive.
Now, its true that Greece is far from innocent in this mess, but the fact remains the EU wanted Greece for its strategic position, access to its ports and merchant fleet, and as an economic opportunity. Greece in 1980 was a semi third-world country ripe for investment and development which Germany massively benefited from. It followed a similar pattern with Spain and now countries like Romania and Poland where huge amounts of EU funds were spent on road building (neglecting other needs) to benefit the German auto industry. Germany and the EU knew all about the state of Greek corruption and finances but did nothing for 30 years and were totally complicit in covering it up for so long.
Tom
26 per cent of the country’s population are unemployed?
really?
or 26 percent of the workforce?
I’d get a new editor if I were you guys.