Last weekend was the long anticipated weekend of the Greek elections. As expected, the left-wing, populist party Syriza enjoyed a landslide victory, albeit a few seats short of an absolute majority in Greek parliament.
In arguably a world-record time, Syriza formed a coalition with ANEL (i.e. Independent Greeks), a new rightwing party with a similar populist economic agenda as Syriza, and only hours after that, Syriza’s leader Alexis Tsipras was sworn in as the next Prime Minister.
With the same blistering speed Yanis Varoufakis – a seasoned, somewhat radical economist, blogger and lecturer with partial Australian roots – was chosen as the next finance minister of Greece. He will be sworn in likely this afternoon.
The European leaders – who had in advance of the elections done their share of warning and fearmongering against the consequences of a Syriza victory in Greece – licked their wounds.
They are now in anticipation of fierce negotiations with the new Greek government, which made a commitment to the population that it will try to change the harsh conditions for remaining in the Euro and repaying their massive state debt. The Dutch finance minister Jeroen Dijsselbloem, who is chairman of the Euro-group, will meet his Greek counterpart Yanis Varoufakis this Friday, January 30 and the discussions between them might be tough.
Nevertheless, the financial markets, of which the response to the left wing victory in Greece was anticipated with broad concerns, reacted totally indifferent. It was as if the whole Syriza victory event in Greece was already priced in, which it probably was. Only one day after the elections, everything seemed business as usual.
The fact that the financial markets showed such a lukewarm response to the Syriza victory, seems a good omen that the Euro is definitely not at stake after the Greek elections. Just like in the years before these elections, it will now also be possible to do business with the Greek government; even if it is established on populist left wing and right wing parties like Syriza and ANEL.
Even for the Greek anti-Euro hawks a return to the Drachme should be ruled out as a no go-area, as such a transition does not make sense at all; it is extremely expensive, very time-consuming and will yield a currency that will soon not be worth the paper it is printed on, while the debt remains quoted in Euro’s.
On top of that, as the editorial comment of Het Financieele Dagblad stated, the victory of Syriza might even offer possibilities:
The biggest concerns apply to the continuity of the economic policy. After five years of extremely painful economic restructurings and a decline of the Greek economy by 25%, the Greek economy returned to a growth path. However, the recovery is still cautious and vulnerable. That Syriza has the ambition to drastically change the direction of the restructuring policy makes sense, but seems not sensible. The Greek financial situation does not allow that, at least at the pace that Syriza desires. The treasury has not been replenished yet and the banks would come under fierce pressure, as worried citizens want to withdraw their savings’ money.
A Syriza government offers also possibilities. For the first time since the end of the Colonel’s regime in 1974 a party came into power, which does not belong to the corrupt political elite. And as necessary as it is to restructure the Greek economy, so necessary it is to radically change the all too familiar power structures. Too often the Justice department seems an extension of the people in power, only ten families dominate the whole economy, the media are not independent and the corruption did not diminish at all.
So there is definitely room for negotiations and improvements for both parties – Greece versus the Troika – as both parties have reasons for giving and taking some leeway to/from eachother.
Still, the first signals from the European Union – especially the Euro-Group – are not too encouraging. Remission of the vast Greek debt is not at all on the agenda and ‘debt hawk’ Jeroen Dijsselbloem and the Germans are probably not willing to soften the conditions for Greece one tiny bit.
Nevertheless, it is my opinion that the Troika (EU, IMF and ECB) must deploy some changes in their policy towards Greece. The Greek population has raised its voice against Europe, in a language that nobody could misunderstood.
The Greek middle and lower classes are sick and tired of the fact that their income has diminished with in average 25% during the crisis years and that many of them have been sentenced to a life in poverty, as a consequence of the European austerity measures.
They are also sick and tired that the rich, corrupt elite did only get richer during this very crisis and that nothing whatsoever has been done, to capture the vast amounts of money, coming from tax evasion, corruption and fraud, as well as from other illegal activities.
These middle and lower classes in Greece want both a domestic government and an EU that care about their rights, needs and desires and that are not only there to protect ‘the rich and shameless’ in Greece. It is my strong opinion that the troika and the Euro-group must show that they mean business, as far as that is concerned.
No rigid focus on austerity and budget responsibility anymore, but a helping hand for the poor and unemployed Greeks, who are going through very rough times currently. Better economic circumstances, better export opportunities, innovation and job creation, as well as a battle against the widespread corruption in Greece, should be the homework for both Syriza and the EU. That could be a very big lump to swallow for the North-European representatives of the Euro-group, but it is nevertheless necessary.
How big this lump could actually be, became clear from a few leaked transcripts of former US Finance Minister Timothy Geithner, which have been printed in the Financial Times. These transcripts shed a revealing light on the outrage of North-European officials against Greece, at the beginning of the Euro-crisis in 2010:
The meeting was held in February 2010, just as panic over Greece’s restating of its accounts was beginning to grip the bond market. In his book, Geithner recalls there were calls for “Old Testament justice” at the meeting. But in the transcripts, he’s a bit more explicit:
Geithner: I remember coming to the dinner and I’m looking at my Blackberry. It was a fucking disaster in Europe. French bank stocks were down 7 or 8 per cent. That was a big deal. For me it was like, you know, you were having a classic complete carnage because of people [who] were saying: crisis in Greece, who’s exposed to Greece?….
I said at that dinner, that meeting, you know, because the Europeans came into that meeting basically saying: “We’re going to teach the Greeks a lesson. They are really terrible. They lied to us. They suck and they were profligate and took advantage of the whole basic thing and we’re going to crush them,” was their basic attitude, all of them….
They were lied to by the Greeks. It was embarrassing to them because the Greeks had ended up like borrowing all this money and they were mad and angry and hey were like: “Definitely get out the bats.” They just wanted to take a bat to them. But in taking a bat to them, they were feeding a fare that was in its early stages. There were a lot of dry tinders.
Right now, we are five years ahead in time since 2010 and the Greeks are still Europe’s biggest problem zone and a peril for the recovery of the Euro-zone as a whole. The tough and aggresive approach of the Troika towards Greece has caused a lot of pain and sorrow among the middle and lower classes in that country. And not only it has failed to solve the problems of Greece yet, but on a few occasions it even brought the Euro-zone at the brink of implosion.
I think it is time to indeed swallow this big lump, with respect to Greece, and start to do real business with this country again.
How unlikely the current partners Syriza and ANEL may seem for the Euro-group and the Troika, they have a clean sheet with respect to political corruption and bear no political responsibility for the Greek behaviour during the years six years before the crisis started.
And most important: they have a firm mandate from the Greek population. Now it is time to do business…