The Greek turmoil
As you probably know, Greece is marching towards new elections on January 25. The Parliament was dissolved because Prime Minister Antonis Samaras couldn’t secure a large enough parliamentary majority to support his candidate for the Greek Presidency. The Greek constitution provides that the country should go back to the ballot box if the lawmakers fail to agree on a head of state with a supermajority after three votes. Under normal circumstances, this may lead one to think that MPs would be eager to agree on a candidate, to preserve their own seat–which for some of them, won’t be safe in the new election. The fact that they did not may suggest that elections do appear seductive to many, and that the opposition parties are confident that their level of support won’t be shaken.
Lots of words have been spent on Alex Tsipras, the leader of the extreme left party Syriza. Contrary to what some have argued, Tsipras is not advocating Eurexit: but he is arguing for overcoming “Austerity” (whatever it means), raising the minimum wage, stopping any attempt to curb government spending (initially, Tsipras argued for re-hiring government employees who left the public sector, but apparently he jettisoned this particular promise) and generally renegotiate terms with the so-called “Troika” and European institutions. Tsipras’s nostalgia for a big spending bonanza could be problematic (and expensive) for all the other euro-countries.
Observers fear a new debt write off. Paul Mason has a very interesting post on the possible scenarios, which he so summarizes:
So a worst-case scenario under a Syriza victory is: short-term repayment crisis, botched negotiations with the EU, social upheaval, capital flight and default.
A best-case scenario – for Syriza – would see its EU allies force a long-term debt deal, but it would have to ride out and tactically manoeuvre on the 2015 debt repayments, as suggested above, and there would still be massive social upheaval.
When you consider these risks, and ask why the party is still – with the mainstream media warning of armageddon – 3-4 per cent ahead in the polls, the answer is clear.
There might be however other factors to be taken into consideration.
The first one is that the parties that dream to go back to looser public finances are split between left and right, and so it is difficult to imagine they will be able to build a parliamentary majority. New parties are being founded and the electoral battlefield looks rather messy. No party appears likely to achieve a decisive victory at the polls at this point. Deputy prime minister Venizelos forecasts that “pro-European democratic forces” would have to come together after the snap polls to form Greece’s next government”. Perhaps Syriza may arrive first at the elections, but be unable to form a government – or form a government that will last only a few months, because of tensions with other coalition partners, and thus won’t be particularly effective.
The second one is that, though the country is still in dire straits, Greece is forecast to grow at 2.8 % in 2015, and it had a (feeble) positive growth in 2014. Is that going to have any impact on the elections?
Third, what if Tsipras is actually more “mainstream” than we think? Enemies of fiscal consolidation are not that far from Europe’s commanding heights. In Germany the Social Democrats are part of the majority coalition, with Mrs Merkel. The French are certainly not particularly keen on lower spending themselves. In Spain the rise of the populist left wingers of “Podemos” (which is doing better than both ‘traditional’ parties in the opinion polls) may soon bring another bigger spending-friendly party at the helm of a major country. And the Italian prime minister, Mr Renzi, says he is committed to “overcoming austerity” himself. So, we may consider Syriza an outlier, but what if it is actually just the most extreme manifestation of a new trend in European politics? A solidarity of “spending nostalgics” is not such a remote scenario. German Christian Democrat MP Michael Fuchs has recently declared that “There is no potential for political blackmail anymore. Greece is no longer of systemic importance for the euro”, which led many to speculate that Mrs Merkel may actually now be in favour of Greece leaving the euro (see this article on Der Spiegel). But forces on the left may see Mr Tsipras’s blackmail as an opportunity to reap hegemony.