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The radical left has won the Greek election. Now what?

Manos Matsaganis, former visiting scholar, Center for Equitable Growth | January 29, 2015

political graffiti in Greece

The Greek people have spoken. The radical-left coalition SYRIZA of Alexis Tsipras has won the election with 36.3% of votes cast. Not exactly a landslide, but a clear victory over its main opponent, the conservative New Democracy (27.8%), senior partner in the outgoing government. And an impressive performance for a party whose share of the vote until five years ago was under 5%.

Under an electoral system of dubious rationality (not to say fairness), SYRIZA, with 149 MPs out of 300, has come within a whisker of winning an overall majority of seats in Parliament. The next government can count on the support of “Independent Greeks,” and secure a vote of confidence – at least for now.

Looking back in anger

So, what does this all mean, for Greece and for Europe?

unemployment graph

Greek unemployment rates

SYRIZA’s meteoric rise to power is incomprehensible outside the context of the country’s 2009 debt crisis and 2010 bailout. The five years of misery that followed, with GDP shrinking by 24% and unemployment rising to 27%, transformed Greek politics beyond recognition. The sudden fall in living standards was a rude awakening from the euphoria of the previous decade, when the Greek economy grew faster than the EU average.

Moreover, the humiliation of having the details of government policy dictated by unelected officials in Brussels, Frankfurt or Washington D.C. provoked a widespread sense of impotence and anger. SYRIZA deftly exploited popular feelings, becoming the leading force among anti-austerity forces, which included not only the communists and the extreme left but also the nationalist right, with the “external” support of the neonazis of Golden Dawn.

Strange bedfellows

Inevitably, all this resulted in a fair degree of contamination. “Independent Greeks,” the reactionary party of the xenophobic right that emerged as SYRIZA’s main ally, has been rewarded for its loyalty to the anti-austerity cause with cabinet seats, with party leader Panos Kammenos at Defence. Even more alarmingly, Nikos Kotzias, an ex-communist (of the pro-Soviet, anti-Gorbachev variety) who gradually reinvented himself as a strident nationalist (anti-western, pro-Putin), will be in charge of foreign affairs. Not surprisingly, the new government’s first move in Europe was to oppose EU sanctions against Russia over Ukraine.

salaries graph

Gross wages & salaries for Greece, Spain, Germany & Portugal

The overlap between leftists and nationalists reached grotesque dimensions in the case of the notorious Rachil Makrì, ex-Independent Greek, now SYRIZA. Among her many antics, her recent vitriolic attack (“Shame on him!”) to Yannis Boutaris, mayor of Thessaloniki, for daring to wear the Star of David on the Day of the Shoa, a long-delayed gesture of honour to the memory of the almost 50,000 members of the city’s once-thriving Jewish community who perished in the concentration camps. None of this prevented the good people of Kozani, in northwest Greece, from sending her to Parliament on the SYRIZA list, with far more votes than any other candidate.

Deceptive narratives

Does this matter? It probably does. SYRIZA has framed Greece’s predicament over the last five years as a struggle for national liberation from the foreign yoke. It promised voters an easy and painless return to the good old days before the bailout. And delegitimized those who challenged that view as lackeys of Angela Merkel – including progressive commentators who had the temerity to point out that perhaps some austerity and a great deal of reform may be inevitable in an economy running a budget deficit at 15% of GDP, and a current account deficit at 16% of GDP, as Greece did in 2009. SYRIZA would have none of this: it interfered with the simple narrative (“We did so well until these bloody foreigners started to meddle in our affairs”) that proved so popular and eventually paved the party’s path to power.

It is in this frame of mind that the new PM and his ministers will meet their European (and German) counterparts in talks about the future of the “Greek programme.” In a certain sense, Greece may be closer to a successful resolution of its debt problem than ever before. The wave of sympathy to the country’s plight internationally is putting pressure on Germany and other creditors to accept a deal that will lighten the burden of debt on the Greek economy.

The possible outlines of such a deal were sketched last week by celebrated economists Jeffrey Sachs in an article in The Guardian, and Nobel Laureates Joseph Stiglitz and Chris Pissarides, together with others, in a letter to The Financial Times. The deal would include a lower interest rate, an extended maturity, and a period of grace until the economy recovered.

To be sure, a large majority of German voters, and politicians, remain opposed to any debt relief for Greece, under the banner of Pacta sunt servanda. They resent what they see as “Greek blackmail,” and feel they can afford to call the Greeks’ bluff. After all, the 2010 bailout gave German banks the time they needed to reduce their exposure to Greek bonds, now mostly held by “institutional creditors” such as the European Central Bank. But the pressure is mounting. After all, as both Sachs and Stiglitz et al reminded readers, it was the 1953 debt relief of Germany that laid the groundwork for the country’s Wirtschaftswunder of the 1960s.

This is probably the best deal Greece can expect: some debt relief, plus fiscal space to engineer the recovery (and the new government’s social programme), in exchange of commitment to reform and balanced budgets, under a more benign international supervision regime.

U turn if you want

Is this likely to happen? Not very. But it is not inconceivable that a watered-down version of such a deal might indeed be offered to the Greek government.

Will it be accepted? The question is less absurd than it seems. The fact is that SYRIZA negotiators will go to the talks with a mandate to demand comprehensive debt write-off and an end to austerity. The party is allergic to reforms: it has fought tooth and nail even the most innocuous of them, defending the “right’ of some workers to retire in their 50s on a handsome pension, or the “right” of teachers not to be assessed for their performance (and not to be disciplined for not turning up at work).

The more sensible among SYRIZA negotiators probably recognise that their negotiating position is, to put it mildly, in urgent need of rethink. But their room for manoeuvre is limited. Their electorate and public opinion at home will expect no less. In the macho posturing of the last 5 years (and beyond), “compromise’ has become a dirty word. The very rhetoric that has made their political fortunes beyond their wildest expectations now risks painting them into a corner.

This is the situation we are in. On the one hand, a decisive U-turn on the part of SYRIZA would be difficult to sell to MPs, the rank and file, and the electorate. On the other hand, an “uncompromising” stance would provide German ordoliberals the pretext they need to reject Greek claims outright, even at the cost of GREXIT. Watch this space.

Comments to “The radical left has won the Greek election. Now what?

  1. The more sensible among SYRIZA negotiators probably recognise that their negotiating position is, to put it mildly, in urgent need of rethink. Agreed.

  2. The EU/IMF/ECB “bailout” was never intended to succeed as a financial re-structuring, but to prolong the pain until Greece relinquished its fiscal sovereignty to Brussels, as the next step in consolidation of a European super-state. This has never been approached as a financial matter, but as a political one. Had it been approached as a financial re-structuring, then
    (1) the debt load would have been reduced to a level the country’s cash flows could support,
    (2) the public sector’s cost structure would be have re-engineered to be competitive, and most importantly,
    (3) there would have been a “new investment” component significant enough to begin to absorb the employees rightly laid of from the public payrolls into a rejuvenated private sector, and to give Greece a chance to succeed in the 21st century economy. Instead, what we are witnessing is WW III, but without tanks.

    Tsipras must stick to his guns regarding a feasible financial deal that gives the country an honest chance, HOWEVER, he must guard against measures that punish the have’s in order to re-distribute to the have-nots. This would kill any hope of attracting foreign investment, and foster a culture of jealousy, rather than of industry. He must also establish a climate of accountability for public officials, by throwing most, if not all, of those who stole from the public coffers into jail, and taking away their money.

    Without a genuine culture of jeopardy around the administration of the public’s funds and assets, it would be impossible to separate this administration from all previous thugs, and to legitimately and credibly renounce much of the official debt as truly “odious”, under International law. Drawing a line under the past requires truly changing the game, not just the players.

    The tax code needs to be simplified and remain stable for a long enough period of time for potential investors to gain confidence in their calculations. If not, then the only calculations that render a positive result would be those that depend upon flouting the rules, or bribery. Such cultures are only promulgated by administrations intent on expanding a system of bribes and political patronage. If Tsipras wants to be taken seriously as a real reformer, then there can be no compromise here, only a draconian and thorough administration of justice to the previous crooks and stooges.

    The way forward is not about over-taxing the wealthy, but about establishing a FAIR and PREDICTABLE operating environment in which all can participate with confidence.

  3. The more sensible among SYRIZA negotiators probably recognise that their negotiating position is, to put it mildly, in urgent need of rethink. But their room for manoeuvre is limited.

  4. SYRIZA’s ultimate bargaining chip (“exit the EU”) is simply hot air. What is astonishing is that Greece only has to redirect a miniscule amount of its GDP to debt repayment:

    “…despite its 175 percent of GDP of debt, Greece only has 2.6 percent of GDP of debt payments.” (See Washington Post article

    Emotional political rhetoric will repeat endlessly “175% of GDP of debt” when in fact the rhetoric should be “only 2.6% of GDP goes to debt payments.”

    Then Greeks could realize that their economic problem is really an internal problem that they are responsible to solve because 2.6% of GDP for debt repayment is not unreasonable.

  5. Hi, Hmmm hard to say what the Greeks will do next. For sure when they choose on election day to vote for SYRIZA, they for sure do not thinck at GDP, and debt recovery… No, they are between hammer and anvil and choose something that could be like a heat for European Financial Organization. You for sure once live in Greece and you for sure know how ordinary people see the situation. The solution is that the entire nation to understand the gravity of the situation and to work hardly, to be able to make sacrifices … In the end things will be for sure …better.


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