Syriza has just pulled off the most amazing of political coups. There is little doubt that the Greek voters were simply sick and tired of the parlous state of their economy, combined with years of austerity which have undoubtedly caused economic and social havoc. Things simply could not go on as before; something had to give. Politics gave, resulting in a stunning electoral success for Syriza and its young leader, Alexis Tsipras, already dubbed Sexy Alexi. The reality though, is that there is little of an appealing nature about the aftermath of the Greek election. There is nothing ahead but more turbulence and socio-economic strife in the short-term for Greece and the other countries undergoing austerity in the eurozone and beyond.
Greek society has been traumatized by what has been happening since 2008/9. However, there seems to have been a strange collective loss of memory about the role of the Greeks in this tragedy. Instead there has been a deliberate and consistent demonization of the eurozone, the Troika and, most prominently, Germany itself, which has characterised this stunning electoral victory. On the eve of the election, Mr Alexis Tsipras said at his final campaign meeting: “On Monday we shall be done with national humiliation. We will have finished with orders from abroad,” 23rd January 2015. This theme was consistent during the lead up to the election and has continued since.
Let us consider the Greek role in that national humiliation and the role of those issuing orders from abroad, an euphemism for the EU, the Troika, the Eurozone generally and Germany in particular:
- Greece’s problems did not start with joining the EU or the Euro.
- They are the product of generation upon generation of decisions made by Greek leaders.
- These same Greek leaders, at least since 1975, have been democratically elected.
- Joining the EU in 1981 gave a massive social and economic boost to Greece.
- Through its own macroeconomic decisions, it has built-up unsustainable levels of debt.
- Through its lack of wage restraint, combined with lack of reform, Greek decisions led to a systematic loss of competitiveness during the long economic boom until 2008.
- Extensive tax avoidance and evasion combined with corruption remains a problem.
- During the last general election, the Greek people voted to remain in the EU and Euro.
- The Greek government chose not to exit the Euro and thus sought support from the EU.
- Even though EU treaties forbid eurozone states from assuming the debts of other states (bailouts), emergency rescue funds were formed to support debt crisis states to meet their financial obligations and buy time for reforms to regain competitiveness.
- The Eurozone has provided various rescue funds which have avoided default and massive social and economic disruption. A long and painful “internal devaluation” is occurring.
- The price of these rescues is a programme of reform and cuts, agreed with and signed off by the Greek government as the pre-condition for the various rescues.
- The price, in terms of human suffering and the effects on the economy have been huge. Internal deviation has finally delivered growth but at the price of a reduction of 25% of GDP, 25% unemployment, 50% youth unemployment and 23% poverty rate.
- This is now interpreted as humiliation, bullying and dictatorship, with Germany singled out.
It is a delusion almost gleefully perpetuated by certain parts of the media, to imagine that the EU, and Germany are responsible for all the above. This is the end-product of Greek voters’ decisions and their chosen democratically elected Governments, even if the average person now feels completely divorced from the traditional parties. People can bang on as much as they like about the EU, eurozone, Euro, Troika and Germany being responsible for the lot of the Greeks, but it rings hollow for anyone that cares to reflect on the reality. They may put-up their anti-EU and anti-Germany slogans, posters and graffiti to express their rage and helplessness, but the facts are different. None of this is to imply or deny that the Greek people have suffered tremendously or indeed to blame them for wanting a change from a downward vortex that they find themselves trapped in.
This is indeed a national humiliation, but one made in Greece. It is a travesty to leave unchallenged the assertion that Greece is simply taking orders from “abroad”. Greeks voted to remain in the EU and the euro at the previous General Election and this is what their previous democratically elected government delivered. The EU and Eurozone have made extensive efforts to meet the wishes of the Greek electorate, while also keeping the economy afloat and the country in the euro. No one suggested that there would not be a price pay in terms of painful reforms required from internal devaluation, as opposed to default which would have been at least as painful.
There was an outpouring of joy about the Greek election results and the expression of solidarity in many European countries. The hope is that this election result will spell the end of “Germanic” austerity in Europe. So let us examine what exactly the Greeks have just voted for.
Unsustainable to the Nth Degree
For those that are not aware of it, Syriza stands for the Radical Left Coalition. The Greeks have voted (36%) for a party which has a series of policies which stretch credulity beyond breaking point:
- Stay in the EU and the Euro.
- Negotiate the level of the debt burden (175% of the GDP or €318 billion) immediately
- Reboot the economy (New European Deal and Investment Bank) and create 300,000 jobs
- Bring about an immediate end to austerity:
- Tax reductions (abolish taxes & social contributions for 7 years & income tax of 30%)
- Raise the minimum wage from €586 to €751
- Re-introduce 13th month for the lowest retirement pensions
- Distribute electricity or housing coupons and free access to public transport for the poorest 300,000 households
- Introduce free healthcare for all.
- Stop privatisation on its tracks.
- Various other pledges, depending on the source considered.
Individually all the above items are logical, especially in a country which is in economic and social turmoil. Collectively they certainly are not. The only radical thing about this programme is that Syriza wants to have its cake and eat it, and has managed to persuade the exhausted Greek voter to buy a ticket for a bumpy ride. How is all this possible to achieve given the parlous state of the Greek economy?
If Greece wants to finish with “orders from abroad”, it could have done so at the last general election and it can certainly do so now by leaving the euro and/or the EU, but it cannot have it both ways. It cannot insist on staying in the EU and euro but require everyone else to prop-up the country and its standards of living for the foreseeable future. This is not a eurozone or an EU that almost anyone else would wish to be part of. The transfers from other countries implied are, rightly, forbidden by EU treaties.
That’s not all, folks
As if this was not challenging enough, Syriza has just made the situation a lot worse than it needed to be. Three seats short of an outright majority, it had to select its coalition party. Instead of going for the more moderate To Potami party (The River, 6% of the vote), Syriza selected the Independent Greeks Party (4.6% votes) as its coalition partner. So let us examine the Independent Greeks Party’s key election pledges:
- Revoke the loan agreements between Greece, EU and International Monetary Fund (Troika) and prosecute those who negotiated them.
- Repudiate part of Greece’s debt because it was created by speculators in a conspiracy to bring Greece to the edge of bankruptcy.
- Require German war reparations for the invasion and occupation of Greece during WWII.
- Oppose multiculturalism, reduce immigration and develop a Christian Orthodox-oriented education system.
Its leader Mr Panos Kammenos makes much play of the fact that ‘The Troika’ has turned Greece into a “laboratory animal” in an austerity experiment using “… public debt as a means of control.” Mr Kammenos concentrates his ire on Germany: “Germany is not treating Greece as a partner but as its master. … It tries to turn a Europe of independent states into a Europe dominated by Germany.”
He does not seem to focus much on the role his own countrymen have played in creating this Greek Tragedy for generations, even before joining the EU, before joining the euro 10 years ago and then going into a massive debt-fuelled public and private spending spree. No, apparently it is all the responsibility of the German banks that pushed piles of cash into the unwilling hands of Greek public and private borrowers. Apparently it is all the responsibility of the Troika for responding to the express wishes of the Greek electorate to remain in the euro at all costs. And it is all the fault of the hard-hearted Germans, hell-bent on European domination once again. The reality is different. All serious commentators agree that Germany is a “reluctant European hegemon.” Mrs Merkel leads because there is no one else to lead, with France imploding and Britain vacating the EU stage.
In selecting the Independent Greeks Party as its coalition partner over To Potami, Syriza has made a major miscalculation that will complicate the tough negotiations with the EU to come and the massive reforms which will continue to be needed for the foreseeable future, even if all of the Syriza pledges were to be achieved, which they most certainly will not.
Endgame: pressing the reset button
The endgame will not be long in the making both for Greece and for the whole of austerity Europe. The Spaniards, Portuguese and others including Italy and France look on curiously. Britain stands aloof, perhaps feeling protected by its own currency, yet still gripped by its own variant of austerity which is no less cruel. There is no doubt that what happens in Greece will have repercussions throughout Europe and not just in the eurozone.
A decision is imminent since the next round of discussions on the EU support to Greece is due. The newly minted Greek government is maintaining its tough talk but it is a high stakes poker game for both sides. Quite simply, the game is up for Greece if it fails to agree the next EU rescue. It will have to default and go through all that which it tried so hard to avoid since the last general election. The difference is that the suffering experienced so far with be a cakewalk compared with what would follow. On the other hand, if the EU does not compromise on austerity, the whole eurozone edifice could crumble. The chances are that a compromise will be found and the eurozone will simply muddle through, but there would need to be a very significant change to the current Syriza / Independent Greeks Party electoral programme to achieve a workable compromise.
But default is not out of the question. Many economists and commentators in Britain, Germany and USA are increasingly portraying default and dropping out of the euro as the lesser of two evils for Greece. The argument is that it would be best for Greece to pull out. What would follow is bound to be a short, sharp shock or so says economic theory (which did not prove all that sound in predicting the current financial and economic crash). The argument continues that countries such as Argentina have done it and the experience shows that default and a new currency is normally followed by rapid economic recovery. Their conclusion is that this scenario would be infinitely better than death by a thousand cuts via the current internal devaluation in the eurozone.
Maybe, maybe not.
I ask these economists and commentators: have you and you families experienced anything remotely like what the average Greek family already has in the last six years? Who are you to suggest to the Greeks that a round of short, sharp “shock therapy” arising from sovereign default is bearable for a country that has already suffered so much? What makes you so confident that Greece will arise Phoenix-like from the ashes, ready for rapid growth and regenerated from such a catharsis? How can you be so sure that contagion will not take hold in other eurozone countries?
Eastern Europe went through variants of shock therapy in the 1990s and the Russians, Poles and all the others will confirm that very little was predicted by economic theory, that recovery took much longer than anticipated and that they have absolutely no desire to ever experience such wanton destruction again. I would not wish this upon Greece or any other nation. I would much rather another round of muddling through in the classical European way instead of the destructive, unpredictable catharsis that is being floated. But I also know that many would disagree and not just in Greece.
So step-up to the plate Syriza / Independent Greeks Party: a lot rests on you so let us see what you can do.
Ricardo Pinto, AngloDeutsch™ Blog, www.AngloDeutsch.EU