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Syriza Sets Europe’s Establishment Atremble

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Yesterday Greece voted for a new government. They came out in the tens of thousands: the impoverished, the unemployed, and the down-and-out. Workers who had lost their jobs and benefits; small business owners who were crushed by taxes imposed to bridge Greece’s yawning deficits; grandparents who suddenly had their children and grandchildren return to live with them because they had lost everything in the twin crises of financial contagion and fiscal austerity. They were average Greeks and they were furious. They came as if to battle: in long, patient queues rather than in serried ranks; in street clothes rather than in bronze armor; at polling stations bearing the prosaic names of local notables and saints rather than at the hallowed grounds of antiquity; yet their victory might prove as meaningful as a Marathon or a Plataea.

This mass of aggrieved Greeks has given Syriza a historic victory. With 36.3% of the vote, the party led by the charismatic Alex Tsipras trounced its “centrist” rival, New Democracy, which garnered a meager 27.8%[1]. Thanks to Greek electoral law, which grants the most voted party an extra 50 seats in the 300-seat parliament to help it form a viable government, Syriza is win a hair of the 151 seats it needs to enjoy an absolute majority. One or two defectors from another leftist party are all that Mr. Tsipras needs. Prior to the 2008 crisis, Syriza was a blip, polling 3% or less.

tsipras

Mr. Tsipras and his party have shot to fame and power for two reasons:

  • Greece’s traditional parties have been rightly accused of decades of cronyism, fiscal mismanagement, gross corruption and turning a blind eye on tax evasion by wealthy Greeks on a heroic scale;
  • Having brought Greece into complete disrepute and the brink of ruin, these same parties are believed to have sacrificed the common people on a crucifix of austerity in order to preserve their own jobs and the wealth of their rich patrons.

That is the narrative which has resonated so powerfully in the devastated suburbs of Athens and Thessaloniki. Supporters of the government would argue that they had no choice, that sacrifices had to be made, and that at least these policies had secured for Greece two bailouts and continuation in the Euro.

Mr. Tsipras doesn’t buy that argument. He questions why social services were among the first cut when the tax code and tax enforcement continued to favor the wealthy. He questions why almost no Greek politicians have been investigated, much less tried, for years of corruption. And he thunders against an austerity policy crafted in Frankfurt, approved in Brussels and delivered by the “men in black” of the IMF which has cost Greece an unimaginable 28% of its GDP in 5 years[2]. If Greece had been the cause of the financial crisis, she might be expected to take her medicine without complaint; but she was not, and this medicine appears to be as fatal as the disease it was meant to cure. The Greeks also shrewdly suspect that austerity was never meant to be a cure, but rather a punishment imposed by Berlin to sell the bailout of Southern Europe to Northern Europeans.

Syriza ran on a dual platform: ending austerity and renegotiating Greece’s national debt, which is unpayable under any credible scenario. Neither will be easy: Chancellor Merkel remains outwardly committed to austerity while Bundesbank President Jens Weidmann[3] has categorically refused to discuss renegotiation, much less cancellation, of Greek debt, much of which is in German hands. This would appear to place the newly elected Greek leader and the European establishment on a collision course, but it is not so: there is ample room for maneuver on both sides.

Earlier last week, the European Central Bank finally authorized its own quantitative easing program of bond-buying, to the tune of 60 billion euros per month until at least September 2016. That is the equivalent of 7.6% of the EU’s GDP[4]. Put another way, Greece can now run a budget deficit of 7.6% of GDP and be sure that every single bond it issues to finance that debt will be purchased by the ECB. Even a blind man can feel the sun, and the timing of this announcement – just days before the Greek elections Syriza was predicted to win – cannot possibly be coincidental. If you believe it to be so, I’m happy to play high stakes poker with you anytime.

In a stroke, Mr. Tsipras has been handed half of his platform: the means to use government pump priming to stimulate the Greek economy. It doesn’t take a PhD to think that Mrs. Merkel and Mr. Draghi are hoping that Mr. Tsipras will take that half of the deal and let debt renegotiation die a quiet death. Perhaps he may: after all, Mr. Tsipras is not anti-euro; he wishes Greece to remain in the common currency (however much of a strait jacket it proves to be for Greek exports). He also wishes to remain in power in order to remake the Greek economy and Greek society according to his vision for them. The prudent course would therefore be to take the money, spend it, and create jobs. Nothing would solidify Syriza’s primacy in politics as much as creating a bunch of jobs and refunding the tattered social safety net, all paid for by Super Mario. People care about the debt too, of course; but that is an abstract concept when you can’t feed your kids, buy grandma her medicine or live with the minimal dignity we would accord a dog.

Plunging Europe and Greece into a monetary crisis days into his Administration therefore seems self-defeating.

good cop bad cop

Debt restructuring will eventually have to be discussed; there is no way short of The Second Coming that Greece could ever pay off its debt. But in the short-term, it seems likely that it will not become the Euro-breaking issues the scaremongers have been predicting. Athens might make some noise to satisfy its electoral promise and most fervent supporters; but I would expect “protracted negotiations” that never really get off the ground, and that quietly cease once the money starts rolling out the door, hospitals and schools reopen and people go back to work. It would not even surprise me should the same mouthpieces of the European oligarchy that were vociferously painting Mr. Tsipras as a financial Attila, were to be praising his “moderation” and “statesmanship” six months from now.

There is another reason that Mr. Tsipras might prove less eager to push the EU into a crisis over debt: the Greek state cries out to be reformed and Syriza is in a position to reform it in its image. Settling scores with the opposition and securing patronage for long-time supporters takes time; that is the seedy, but inevitable truth of democratic politics. On a more hopeful and enlightened note, Mr. Tsipras might actually go through with his anti-corruption pledges: increasing transparency, prosecuting guilty public officials, reforming the public administration. He has also promised to redistribute the burden of taxation to make Greece a more equitable country, so tax reform and persecution of wealthy tax evaders ought to be a priority for the new government. These are all immensely popular measure, not to mention urgently needed; but they take a great deal of time and effort, neither of which Greece will have if it is immediately embroiled in a debt dispute or worse, forced back onto the drachma.

It is too early to tell whether Mr. Tsipras will prove to be the moderate socialist I believe he is, or whether he truly is Gozer the Gozerian, Destructor of the Euro, as his opponents claim. We can assert that his electoral victory has shaken up the European political scene, sowing greater doubt and uncertainty than before, and creating winners and losers.

The Winners

  • Alex Tsipras and Syriza, obviously.
  • Greek democracy. Whatever the consequences, the election was held, the result honored, and power will be passed peacefully to the new government. No one was assassinated, which is still an all-too-common occurrence even in the West. Just look at Argentina and Brazil if evidence is wanting.
  • The Greek people. Assuming Mr. Tsipras is the socialist I take him to be, life is about to get noticeably better for the majority of the Greek people. Thanks are also due to Super Mario, for providing the required funding. Before we write this off as mere populism, stop to consider what would have happened in the United States if Washington had agreed to eliminate Medicare and Medicaid, Social Security and food stamps, at the demand of the UN and the People’s Bank of China in order to protect their investments in US Treasuries, while unemployment was at 25% and GDP at 80% of pre-crisis levels. Armed insurrection at a minimum, and every politician in DC dangling off a rope’s end very probably.
  • Anti-austerity parties in Southern Europe. Most importantly, Spain’sPodemos, which has identified closely withSyriza since it erupted into prominence last May. Pablo Iglesias and AlexTsipras have attended each other’s rallies and spoken at each other’s party congresses. Furthermore, Spain holds BOTH municipal and general elections in 2015.Syriza’s victory is a tonic to Mr. Iglesias’ supporters and proof that ordinary citizens can vote for change: so long as Mr.Tsipras avoids a catastrophicGrexit,Podemos will ride a wave of support through 2015 and right into theMoncloa. That might be terrible news for Spain’s traditional parties, the governing Populares and the opposition Socialists, but it is good news for Spanish electoral politics, which are corrupt at a molecular level.Podemos benefits the most because it has elections the soonest; but this result may roil politics in Italy and France as well. The Five Star Movement is down,  but not out, in Renzi’s Italy. Meanwhile, Marine Le Pen, though ideologically the polar opposite of Alex Tsipras, nevertheless also speaks out against austerity as a “German imposition”. She too might be able to pick up the anti-austerity mantle that the hapless French Socialists let drop.
  • Anti-Euro parties in Northern Europe. If Southern Europeans support the rise of Syriza and Podemos in an anti-austerity alliance which could become a Mediterranean bloc should Italy and France join in, then we can predict a Northern European backlash against it. These folks already feel put upon and abused by those ingrate Southerners “whose necks we saved” from their own profligacy; and now there they are “gloating over us”. Alternative für Deutschland and the True Finns are the most outspoken parties against the continued underwriting of the South by the North; but expect UKIP to exploit turmoil in the EU as well. And there are important anti-Euro parties – they really ought to be called anti-South parties – in Austria and the Netherlands as well.
  • Russia. Anything that embroils Europe in internal squabbles and divides the EU is celebrated in Moscow. As I write this, Russian artillery rockets are falling on Ukrainian Army positions in Mariupol and the Donetsk airport was taken by “separatists”[5]. Europe is unlikely to respond aggressively to these provocations if it truly believes that the currency union is at risk.

The Losers

  •  New Democracy.
  • Greek elites. If Mr. Tsipras goes through with even a fraction of his domestic proposals, they will be squeezed very hard, and quite a few will go to jail or take themselves into exile.
  • European elites. They attempted to paint Mr. Tsipras as the boogeyman and scare the Greeks into voting for their preferred party; it backfired in a big way. It is unfortunate that people have to hit rock bottom before they stop letting themselves be manipulated by the fear mongers; but it is encouraging that it does happen. Oligarchs everywhere, take note.
  • Traditional parties in Europe. For the most part, these have become associated with the austerity formula and with the crisis itself. Some of them are on the verge of disappearing from relevance, like Spain’s PSOE. They will find it difficult to reinvent themselves; the anti-austerity ground is mostly already taken.
  • Angela Merkel: This election result is very evidently not the one she desired. It is a rebuke against her signature policy for Europe, and a foreboding of more to come. It will also complicate her internal politics by boosting conservative opponents to her policies. Expect legal challenges to Mario Draghi’s QE decision.
  • The European Project. Mr. Tsipras’s victory cannot be viewed as simply an anti-austerity vote. It was a vote against German-imposed austerity. In other words, there was a strong current of “old nationalism” which the EU has struggled to replace with a European identity. Its failure has been evident for some time; but it quickly becomes an existential issue. If the people of Europe will never become “Europeans” in the same sense that we are Americans, then that imposes severe limits on the degree of institutional reform the EU can realize. Without it, there will never be a United States of Europe, because France will not be willing to become “merely” California. That implies that Europe will remain weak, divided, crisis-prone and indecisive for the foreseeable future. That is not a good thing.

europe

“May you live in interesting times.” That is a Chinese curse, not a benediction. Times will remain interesting in Europe and European leaders seem ill-prepared to deal with them. In the meanwhile, congratulations to Mr. Tsipras and Syriza: may they serve their people and their country honestly and well.


 

Sources and Notes

[1] Greek Parliamentary Elections coverage, Ekatherini.com, 26 January 2015

[2] Greek GDP, Trading Economics

[3] “Bundesbank’s Weidmann – It’s in interest of Greek government to do reforms,” Reuters, 25 January 2015

[4] Nathan Lewis, “’Helicopter Money And Debt Cancellation’ Are The Endgame,” Forbes, 22 January 2015

[5] “Rockets kill 30 in Mariupol as rebels launch offensive,” BBC News, 24 January 2015

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2 Responses to “Syriza Sets Europe’s Establishment Atremble”

  1. If I’m not mistaken, voting in Greece is compulsory. So no wonder they massed in the poll stations.

    And, indeed, the Greek governments have been disastrous. KAKISTOCRACY is the name.

    Posted by xallue | January 26, 2015, 13:29

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