One week ago, Greece’s left-wing Syriza swept away the ‘pro-austerity’ establishment, riding a surge in popularity to office. Greece, Europe and the wider world are still trying to comprehend the implications of Syriza’s transition from a fringe party to a (radical) party of government. It fell just one seat short of an overall majority (parliamentary majorities have long since become a thing of the past). The new prime mininister, Alexis Tsipras (pictured) built a coalition not with the hardline Communist Party, which refuses to co-operate with any capitalist government; not with the so-called ‘centre left’ establishment of PASOK or its more successful splinter party, The River; but with the Independent Greeks. They can be best described as a party of the populist right, not dissimilar from UKIP. The new coalition could hardly be described as a natural marriage, but it seems that Syriza gets a free reign in domestic policy in exchange for handing the defence ministry to their junior partners. Appointing a redneck to run the military is not the most reassuring of moves.
Within days of taking office, Syriza has reversed savaged cuts in the minimum wage, reinstated numerous sacked public sector workers, cancelled IMF-imposed privatisations, abolished fees for prescriptions and hospital visits and restored pensions. It has also made powerful symbolic gestures, sweeping away the ministerial cars and barricades that separated the Greek people from their government. Syriza feels that if a government needs protection from the public, it is doing something badly wrong.
And as if talk of nationalisation (such as of banks and hospitals); a 75% marginal income tax band; corporate tax hikes and an emergency expansion of the welfare system were not enough, Syriza is demanding reflief on Greece’s national debt, now an eye-watering 175% of GDP. (See Syriza’s 40-point manifesto here)
The markets are having a fit.
The European Union is having a fit.
The Greek public are, for once, hopeful about the future.
Angela Merkel and the cabal of neo-liberal governments who have provided, through the ‘troika’- European Union, the European Central Bank and the International Monetary Fund, bailouts totaling hundreds of billions of euros, have categorically ruled out any renegotiation of the terms of the loans. They are, rightly, fearful than any let up in the harsh terms imposed on Greece would lead to demands from other
victims debt-burdened countries. On the other hand, Greece is aware that Europe’s big threat to Greece- that the country could be forced out of the Eurozone- would be almost impossible to implement and would destabilise Europe’s (and by extension the world’s) banking system. Similarly, if the troika cancels the latest installment of loans to Greece, and the country is forced to default, the troika is hurt as much as Greece. The situation is akin to a Cold-war style pose of mutually assured destruction.
Any disruption to the convention of debt-stricken countries being asset stripped by international bankers and the costs being passed on to the weakest through the wholesale dismantling of public services and welfare systems is going to be fiercely resisted. On the other hand, Greece simply cannot pay its debts. There will be a renegotiation of sorts. Greece’s first bailout was agreed amid talk of setting interest rates to ‘punish the Greeks’. The obscenity of such talk is clear to see now, when every basis point added to the interest rate of Greek debt is a thousand homeless pensioners. It was not long before the interest rate was reduced to 3.5%.
It is a pity that the troika cannot see that intelligently designed debt relief would get the weaker EU economies back on their feet so much faster and cost lenders much less in the long run.When the internal politics of the European bloc are concerned, concepts like ‘logic’ and ‘reality’ become much harder to pin down. The EU would not survive if two countries with directly opposing interests could not both emerge from negotiations brandishing a compromise that they describe as a resounding victory for their side. This is has been called ‘Eurofudge’ , and its made the EU into what it is today.
The talks that Greece’s new government has opened now will result in an epic Eurofudge. I think another extension of the repayment period on its loans and a reduction in the interest rate to, say 2% would be the minimum concession needed. That’s what Greece will get, provided its creditors can leave talks saying that it will still repay every penny of the bailout loan.
Syriza is not waiting for a debt deal to begin rebuilding Greece. In a week, Syriza has achieved a lot more than a left government would be proud to accomplish in a year. However, only the financial certainty that a deal will allow will give Greece the space it needs to grow.