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Greek quake shakes Eurozone

Saturday, January 31st, 2015
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Syriza party leader Alexis Tsipras casts his vote in Athens on 25 January 2015. Photo by Konstantinos Tsakalidis/Corbis

Syriza party leader Alexis Tsipras casts his vote in Athens on 25 January 2015. Photo by Konstantinos Tsakalidis/Corbis

David Seddon

The results of the Greek general election on 25 January 2015 have radically transformed the balance of power and the basis for economic policy-making in Greece, and at the same time shaken to the core the assumptions – about the need for austerity and constraint – that have dominated the thinking and policies of governments across the European Union for the last five years. The next few weeks will see some tough bargaining between the new anti-austerity government and its euro-zone ‘partners’ regarding revision of the terms and conditions of Greece’s Euro 240 billion bail-out, with far wider implications for the rest of Europe.

For years, ordinary Greeks have protested against harsh euro-zone ‘disciplines’, imposed by the governments of the more powerful states at the behest of their bankers and technocrats; but a gradual head of steam has been building up, and with the vote on 25 January 2015, their acquiescence came to a dramatic end. The pro-austerity government of New Democracy was shown the door and the anti-austerity Coalition of the Radical left, known as SYRIZA, given an opportunity to develop an alternative economic and social welfare strategy in its place.

SYRIZA is a grouping of 13 left-wing parties and independent politicians, including democratic socialists, left-wing populist and green groups, as well as Maoist, Trotskyist, and euro-communist elements. They have allied themselves, controversially, for the time being, with the extreme right – because if its euro-scepticism. SYRIZA’s leader, Alexis Tsipras (formerly president of Synaspismós, the largest group in the coalition) has emphasized, however, that SYRIZA is not inherently Euro-sceptic; it simply favours an alternative to the austerity regime imposed upon it (and other European countries) as an appropriate strategy to deal with the recession and to restore sustainable growth. Additionally, despite its secular ideology, many of its members are Christians who, like their fellow atheists, are anticlerical and oppose the privileges of the conservative state-sponsored Greek Orthodox Church.

SYRIZA was formed in January 2004. In the general election that year it gained six seats in parliament with three per cent of the vote; in the general elections of October 2009, it secured about 5 per cent of the vote and 13 seats. By 2012, SYRIZA had become the second largest party in the Greek parliament, and the main opposition; it came first in Greece’s 2014 European Parliament election and mid-2014 polls showed it had become the country’s most popular party. Now in early 2015, it has defeated the ruling coalition, securing 36 per cent of the popular votes and 149 out of 300 seats in the Greek Parliament.

SYRIZA’s success is an astonishing electoral triumph. In post-war Europe, it is highly unusual for a genuinely new electoral force to move from nowhere to government in such a short time – although the recent recession has seen the rapid rise of other new electoral forces, on the right as well as on the left, as politics has, arguably become rapidly polarised. The growth of SYRIZA and other radical progressive parties, such as the Scottish National Party, the German and British Greens, Spain’s Podemos and Italy’s Lega Nord has dramatically changed the political landscape and hopes for the future on the left – as has the rise of the Front National in France, UKIP in the UK and New Dawn in Greece, on the far right.

Podemos managed to grab five seats at the Spanish European parliamentary elections in May 2014, despite being only months old as a party; the Radical Independence Campaign, as part of the Yes coalition, narrowly lost the Scottish referendum in September 2014, but managed to engage a formerly disinterested public in the vote with a turnout of nearly 85 per cent; and the Green Party in the UK managed to garner over 50,000 members to overtake the Lib-Dems and UKIP in terms of support by the end of January 2015. But none has swept to such dizzying heights as SYRIZA – and come to government.

The implications for Greece are likely to be far-reaching, but for other European countries they are not yet clear. One certainty is that SYRIZA’s victory marks a historic refusal by the Greek people to continue with the austerity to which their government had reluctantly assented in return for €240bn as bailouts in 2010 and 2012. The bailout terms were due to be assessed next month in any case; now that process will take on far greater urgency. Alexis Tsipras and his supporters have won a mandate to demand significant changes.

They will be seeking above all to cut the debt, and ease the impact of the wage and pension cuts and higher taxes with which Greeks have really struggled. The heavyweights of the euro-zone have taken a hard line to start with, but even after a week of tough negotiations between the new Greek Finance Minister, Yanis Varoufakis and his European counterparts, and high level talks between Prime Minister Tsipras and head of the euro-zone finance ministers, Jeroen Disselbloem, the outcome is by no means clear.

The overarching issue is whether the Greek government and its creditors – who are also its ‘partners’ in the Eurozone – can find enough common interest to strike a deal. This is certainly what Greeks, three-quarters of whom want to stay part of the EU, would want. SYRIZA’s clear political mandate should help to concentrate minds on finding an outcome that will satisfy both the SYRIZA coalition and the rest of the euro-zone, above all Germany, without triggering either a run on the banks or a domino effect around the euro-zone as other nations demand similar treatment.

Whether this is possible depends largely on Germany, which still maintains that the euro-zone can succeed only by continuing with the fiscal rectitude that caused the Greek political earthquake in the first place. Germany’s partners – and even the IMF – are less sure now about the value of prolonged austerity. Unless and until demand is boosted in Greece and the euro-zone generally, Europe will continue to face an up-hill task to pull itself out of recession. Euro-zone deflation accelerated in January to a record low and it is significant that the ECB decided at the end of January to embark on a quantitative easing programme involving the purchase of Euro 1.14 trillion in sovereign bonds. It is, arguably, not just the future of the Greek economy that is at stake now, but that of the euro-zone itself and beyond that of Europe as a whole.

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