Greece heads for a Euro collision
A radical Left-wing leader who has promised to end "fiscal waterboarding" is poised to win a snap election - and square up to EU moneylenders
Alexis Tsipras, leader of the Syriza party, says that Greece is being compelled to suffer 'fiscal waterboarding' Photo: AFP
4:38PM GMT 17 Jan 2015
Time and again, thousands of protesters have gathered in Syntagma Square in
the heart of Athens to march against Greece’s agony of recession and
austerity.
The streets nearby have been a theatre for so much unrest that broken windows
go unnoticed and shops and doorways are permanently stained with Left-wing
graffiti.
Yet after five years of economic crisis and countless demonstrations, Greeks
will have the chance to seize back their destiny next Sunday when they vote
in a snap general election.
This was an opportunity they were never supposed to have. Antonis Samaras, the
prime minister, had hoped to battle on and see through the austerity plan
that should reduce Greece’s public debt to a mere 110 per cent of national
income by 2020. But MPs inside the elegant sand-coloured parliament on the
eastern edge of Syntagma Square failed to choose a new president last month,
triggering an election for Jan 25.
Mr Samaras, the leader of the centre-Right New Democracy Party, has imposed
punitive cuts in exchange for a £190 billion bail-out from the European
Union and the International Monetary Fund. With all the passion of a man who
believes he is performing the Herculean task of restoring his country to
health, the prime minister argues that his policies are finally showing
results.
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Last year, Greece ran a primary budget surplus for the first time since the
onset of the eurozone crisis; the economy may even return to growth in 2015.
But the voters beg to differ. Millions of Greeks believe the price of the bail-out has been too high. Youth unemployment stands at 50 per cent and the state is busily laying off thousands of employees.
Alexis Tsipras, the leader of the hard-Left Syriza party, says that Greece is being compelled to suffer “fiscal waterboarding”. At a rally last week, he declared that it was “time for the people, not foreign interests, to decide Greece’s future”.
All the evidence shows that the message of this 40-year-old populist is striking home. Every opinion poll for the past two months has put Syriza in first place with a consistent lead of between three and five percentage points. The latest survey showed the party widening its advantage, reaching 34.5 per cent compared with 29 per cent for New Democracy.
Unless there is a shock of earthquake proportions, Syriza is set to win this election – and Mr Tsipras will then become prime minister of Greece and one of the youngest national leaders in the world.
He may fall short of an overall majority in the 300-seat parliament, but the electoral system awards an extra 50 seats to whichever party comes first in the popular vote, with the remaining 250 being handed out on a proportional basis. If the pundits are right and Syriza tops the poll, Mr Tsipras will hold the whip-hand in any coalition government.
A New Democracy party banner reading 'we tell the truth' in Athens (AFP)
And that is when his problems will begin. Mr Tsipras has promised to renegotiate the bail-out package, including by writing-off “most” of the debt.
Yet he also wants to keep Greece in the euro. Despite the trauma of the past five years, a solid majority of about 70 per cent of Greeks wants to stay in the euro. If Mr Tsipras wins this election, he will have triumphed by the simple device of telling the voters exactly what they want to hear, namely that Greece can have the euro without austerity.
“We call for the restructuring of the debt so that it can be serviced in a socially viable way,” said Mr Tsipras on television last Monday. Syriza’s plan “includes erasing most of the debt”, he added.
But the rest of the EU will have other ideas. The “troika” of lenders – the EU, the European Central Bank and the IMF – will be deeply reluctant to go back to the drawing board and renegotiate the Greek bail-out package yet again, particularly as they have already stumped up no less than £190 billion for the country’s benefit.
They will be particularly unwilling to start cancelling large chunks of debt. After all, if Greece could win that particular favour, why not every other debtor?
So all the conditions are in place for a clash between a new prime minister from the radical Left, pledged to liberate his country from austerity, and the dour moneylenders of Europe and the IMF, who feel they have already been too lenient.
The danger is that both sides miscalculate and end up with what neither wants, namely Greece leaving the euro.
Experts believe that scenario remains unlikely. Privately, European officials in Brussels expect Mr Tsipras to become more pragmatic if he wins power.
“Today we are in election mode: all sides are sending signals to get as many votes as possible,” said one Brussels official, according to Reuters news agency. “If Tsipras wants to survive, be accepted in Europe, he will have to show a degree of realism.
“The eurozone would certainly be prepared to do a maximum of what it can to meet some of the political agenda of Syriza, but there are clear limits: a debt write-off is not acceptable. And Greece has to follow reforms and financial improvement – that will be part of any deal.”
If Mr Tsipras becomes prime minister, he will have to face some harsh realities. The most immediate is that Greece’s banks are being kept afloat by the European Central Bank. If the ECB were to end that liquidity, then every cash machine in Athens and everywhere else in Greece would run dry and the entire banking sector would collapse.
In the end, experts think that Mr Tsipras will be the one who blinks, even if that means confronting the ideologues in his own party.
“It will be difficult for him but, in the end, Greeks want to stay in the euro so I think he will do what he has to do,” said Alan McQuaid, the chief economist of Merrion Capital. “Like most politicians, when they get into the palace and sit on the throne, they adapt to the realities of being in government.”
The outlines of a possible compromise are already clear. Mr Tsipras would forget about cancelling debt, but the “troika” would show some goodwill by giving Greece lower interest rates and more time to make repayments. Put simply, Brussels will probably pull off one of those deals that typify the EU, giving all sides just enough leeway to ensure their political survival.
Already, eurozone finance ministers have agreed in principle to reward Greece with slightly better terms when it achieves a primary budget surplus – as it did last year.
But Mr Tsipras has one vital card to play. Although he has promised to keep Greece in the euro, the prospect of the country leaving could be sufficiently worrying to make the “troika” pay a bigger price. If the choice becomes as stark as cancelling some Greek debt, or allowing the euro to fracture, then some in Syriza believe the EU will be the one to blink.
If Mr Tsipras gives way, however, the ultra-Left activists who cheer his every speech today will cry betrayal tomorrow. The next big protests in Syntagma Square could be directed at him.
But the voters beg to differ. Millions of Greeks believe the price of the bail-out has been too high. Youth unemployment stands at 50 per cent and the state is busily laying off thousands of employees.
Alexis Tsipras, the leader of the hard-Left Syriza party, says that Greece is being compelled to suffer “fiscal waterboarding”. At a rally last week, he declared that it was “time for the people, not foreign interests, to decide Greece’s future”.
All the evidence shows that the message of this 40-year-old populist is striking home. Every opinion poll for the past two months has put Syriza in first place with a consistent lead of between three and five percentage points. The latest survey showed the party widening its advantage, reaching 34.5 per cent compared with 29 per cent for New Democracy.
Unless there is a shock of earthquake proportions, Syriza is set to win this election – and Mr Tsipras will then become prime minister of Greece and one of the youngest national leaders in the world.
He may fall short of an overall majority in the 300-seat parliament, but the electoral system awards an extra 50 seats to whichever party comes first in the popular vote, with the remaining 250 being handed out on a proportional basis. If the pundits are right and Syriza tops the poll, Mr Tsipras will hold the whip-hand in any coalition government.
A New Democracy party banner reading 'we tell the truth' in Athens (AFP)
And that is when his problems will begin. Mr Tsipras has promised to renegotiate the bail-out package, including by writing-off “most” of the debt.
Yet he also wants to keep Greece in the euro. Despite the trauma of the past five years, a solid majority of about 70 per cent of Greeks wants to stay in the euro. If Mr Tsipras wins this election, he will have triumphed by the simple device of telling the voters exactly what they want to hear, namely that Greece can have the euro without austerity.
“We call for the restructuring of the debt so that it can be serviced in a socially viable way,” said Mr Tsipras on television last Monday. Syriza’s plan “includes erasing most of the debt”, he added.
But the rest of the EU will have other ideas. The “troika” of lenders – the EU, the European Central Bank and the IMF – will be deeply reluctant to go back to the drawing board and renegotiate the Greek bail-out package yet again, particularly as they have already stumped up no less than £190 billion for the country’s benefit.
They will be particularly unwilling to start cancelling large chunks of debt. After all, if Greece could win that particular favour, why not every other debtor?
So all the conditions are in place for a clash between a new prime minister from the radical Left, pledged to liberate his country from austerity, and the dour moneylenders of Europe and the IMF, who feel they have already been too lenient.
The danger is that both sides miscalculate and end up with what neither wants, namely Greece leaving the euro.
Experts believe that scenario remains unlikely. Privately, European officials in Brussels expect Mr Tsipras to become more pragmatic if he wins power.
“Today we are in election mode: all sides are sending signals to get as many votes as possible,” said one Brussels official, according to Reuters news agency. “If Tsipras wants to survive, be accepted in Europe, he will have to show a degree of realism.
“The eurozone would certainly be prepared to do a maximum of what it can to meet some of the political agenda of Syriza, but there are clear limits: a debt write-off is not acceptable. And Greece has to follow reforms and financial improvement – that will be part of any deal.”
If Mr Tsipras becomes prime minister, he will have to face some harsh realities. The most immediate is that Greece’s banks are being kept afloat by the European Central Bank. If the ECB were to end that liquidity, then every cash machine in Athens and everywhere else in Greece would run dry and the entire banking sector would collapse.
In the end, experts think that Mr Tsipras will be the one who blinks, even if that means confronting the ideologues in his own party.
“It will be difficult for him but, in the end, Greeks want to stay in the euro so I think he will do what he has to do,” said Alan McQuaid, the chief economist of Merrion Capital. “Like most politicians, when they get into the palace and sit on the throne, they adapt to the realities of being in government.”
The outlines of a possible compromise are already clear. Mr Tsipras would forget about cancelling debt, but the “troika” would show some goodwill by giving Greece lower interest rates and more time to make repayments. Put simply, Brussels will probably pull off one of those deals that typify the EU, giving all sides just enough leeway to ensure their political survival.
Already, eurozone finance ministers have agreed in principle to reward Greece with slightly better terms when it achieves a primary budget surplus – as it did last year.
But Mr Tsipras has one vital card to play. Although he has promised to keep Greece in the euro, the prospect of the country leaving could be sufficiently worrying to make the “troika” pay a bigger price. If the choice becomes as stark as cancelling some Greek debt, or allowing the euro to fracture, then some in Syriza believe the EU will be the one to blink.
If Mr Tsipras gives way, however, the ultra-Left activists who cheer his every speech today will cry betrayal tomorrow. The next big protests in Syntagma Square could be directed at him.
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