Egmont Institute logo

How the Syriza government sank the Greek’s interests in four weeks

Post thumbnail print


If you listen to most speeches by Greek politicians, you might end up convinced that the main source of the country’s problems lies outside Greece, that the country is presently occupied by foreign powers, that democracy has been raped, and that you just 
need to print and borrow money fast enough to get out of this hole.

(Photo credit: Wikimedia Commons)


How the Syriza government sank the Greek’s interests in four weeks

If you listen to most speeches by Greek politicians, you might end up convinced that the main source of the country’s problems lies outside Greece, that the country is presently occupied by foreign powers, that democracy has been raped, and that you just need to print and borrow money fast enough to get out of this hole. (To be fair, if you listen to most German political speeches, you could be forgiven for thinking that Greece’s problems come exclusively from within, that the country has been magnificently saved from its homegrown political nitwits by wise foreign technocrats, that the euro system is the apex of democracy, and that you just need to cut spending for all eternity in order to be healthy).

The truth is somewhere in between. Greece’s crisis has been largely Greek-made, but aggravated by a dysfunctional euro system. The present drama is caused by the fact that no actor has proposed a balanced strategy based on this analysis. In the case of Greece, this could lead to a full-blown catastrophe.

From this perspective, the first weeks of the new Tsipras administration have planted all the necessary seeds for disaster. After a brilliant electoral victory, Mr. Tsipras managed to compromise his gains from day one. The first misstep was his alliance with the nationalists of ANEL (Anexartitoi Ellines or Independent Greeks). In a debate over European solidarity, bringing ANEL to power, rather than To Potami (‘The River’, a centre-left party), was a contradiction. It also will limit Syriza’s flexibility in future negotiations with European partners. Furthermore, it brought about the election of Mr. Pavlopoulos as the new president of the republic. A New Democracy minister of public administration between 2004 and 2009, he has a reputation for breaking records. He managed to create 80,000 new jobs during that administration, doubling its wage bill. His new appointment is a wonderful symbol of regime change, obviously designed to impress strongly Greece’s partners.

The second misstep was the new prime minister’s decision to immediately pay homage at the tomb of Greek resistance heroes of World War Two. Seeing this, foreign observers could have gotten the impression that the first priority of many poor and badly fed Greek pensioners was . . . to relive World War Two. After this (and other comments about Germany’s post-war debt), Mr. Tsipras may have described Mr. Schauble’s caricaturing in the Greek press as ‘regrettable’, but he obviously inspired it. A more apt symbol of European solidarity could have been found. Additionally, this foolishly transformed a global debate between creditors and debtors in the euro area into a bilateral duel between Greece and Germany. Sad.

This was bound to become one of the many symbols of a leader lost in the illusions of a long-ago past rather than immersed in the realities of the present. The third misstep was the uproar surrounding the new Greek government’s approach to Russia, and an emerging blackmail over the upholding of the sanctions. Again, for a government calling for more European solidarity, it was counterproductive.

The fourth misstep was Minister Varoufakis’ grand tour of European capitals. Mr. Varoufakis is certainly a gifted, sympathetic and attractive representative. However, this grand tour was much richer in photo-ops and incoherence than in serious proposals. For example, it is quite innovative – and counterproductive – for a finance minister to explain simultaneously that his country is broke and that investors must lend it more, money and at better conditions. The great international conference on debt reduction was obviously not prepared at all. Propositions changed as he travelled from capital to capital. On 10 February, an agreement was concluded in the Eurogroup, but quickly disavowed by the prime minister.

Finally, there has been a lot of incoherence in the general message: ‘We want more Europe, but we want a negotiation directly with the States;’ ‘We want a postponement of deadlines, but without discussing it with the Troïka;’ ‘We want to remain in the euro, but without conditionality.’ None of this could fly, and it is a source of wonder that the new Greek prime minister could not see this from the beginning (or that he did not listen to those who told him so).

What have been the results of this strategy? Internally, Greece suffered from more uncertainty and financial losses. Banks lost billions in deposits. Their shares took a beating in the stock market. Many people postponed paying uncertain taxes. Spreads rose, and the budget thus also took a beating. Investors are freezing up. Externally, the ECB shut one door of emergency credit. Many partners became irritated.

Worse still, Mr. Tsipras managed to alienate potential allies in the European Council. The French and Italian governments, like Mr. Juncker, could do nothing other than take a stance against such an unbalanced approach. Mr. Tsipras finally brilliantly succeeded, after only a few weeks, in creating unanimity against the Greek government. Hence on 20 February 2015 he had to accept more or less every term that he had previously announced he would not accept. He even managed to weaken the position of Podemos in the forthcoming elections in Spain (an important stake in the present debate). Finally, and more fundamentally, the concept of a more balanced euro area macroeconomic mix was sunk in the process (see The Economist, ‘Syriza’s scattergun’, 21 February 2015). The only real result that was reached was a strengthening of Mr. Schauble’s position. With enemies like this, one does not need friends.

It is difficult to overestimate the lethal effect of all this in the long term on public opinion in Greece. The prime minister’s new statement of 21 February is fresh proof that the new managers of the country live on another planet. ‘We took a decisive step, leaving austerity, the Memoranda and the Troika behind. A decisive step that will allow changes in the eurozone.’ In fact, conditionality remains. The previous agreement remains. Sure, the Troïka has become ‘the institutions’. Maybe Greece will see a reduced constraint in 2015 for its budget’s primary surplus, if the government presents new convincing reforms. But it would have got this anyway. Is this the fundamental change that justifies all this noise, and €20 billion in lost deposits, postponed taxes and investments? A new austerity wave is probably coming but it is due not to the Eurogroup but to the new destabilization of the economy provoked by the Syriza government. This is misinformation on a grand scale.

Same thing for the democratic argument. We are living now an essential debate about the nature of the European Union. According to the Syriza team, they have received “a democratic mandate to end austerity and renegotiate the country’s debts”. Indeed, but its partners have also a democratic mandate. And so had the EU institutions when they adopted the present framework about strengthened economic cooperation between the euro Member States.

‘We are committed to restoring our national and popular sovereignty,’ says the 21 February statement. A better start would be to explain to the voters that this sovereignty has been lost not thanks to the European Union, but to Greece’s never-ending ability since its creation in 1830 to drown repeatedly into a sea of foreign debt and bloated administration. But of course this is a more complex aspect of history. Maybe it’s much easier to replay World War Two endlessly after all.



Charles Secondat



The copyright of this commentary belongs to the Egmont Institute. It can be quoted or republished freely, as long as the original source is mentioned.?