?Alexis Tsipras’ election victory should mark a break with the past and open up a new chapter in the stormy relations between “Europe” and Greece, writes Yve Bertoncini. The EU will now have to accept the new government’s policies, while reminding Athens to stick to its bailout commitments.
Yves Bertoncini is Director at the Jacques Delors Institute, a European think tank.
Syriza’s clear win can be interpreted as an unmistakable rejection of the policies pursued in Athens under the aegis of the EU and of the IMF over the last five years. It opens a new phase in relations between Greece and “Brussels”, a phase which is unlikely to mark a break but rather a change of course – a shift whose extent is going to depend chiefly on developments in Athens’ relations with its creditors.
Dispensing with the troika also means going back to the money markets
Syriza is a Eurosceptic party but it is not a Europhobic party. Alexis Tsipras does not want to quit the euro area or the EU, any more than he wants to leave the Schengen area. Syriza is also a “Greek-sceptic” party in the sense that it is unhappy with the way in which Greece and its government have been run by the traditional parties both over the past forty years, and since they appealed for aid to the IMF and to the EU in consideration of the country’s disastrous accounts and of the markets’ lack of confidence.
Wherever the IMF is called on to help, it brings budgetary, economic and social adjustments which are often effective in the medium term but reap numerous victims and spread discontent in the immediate term. This inevitably earns a degree of unpopularity which the EU has de facto agreed to share and to bear in Greece because it has acted with and beside the IMF, offering aid in return for painful offsets.
No Greek could be happy with an austerity plan that has led to a 22% cut in the minimum wage, to a 30% cut in pensions, to hundreds of thousands of civil servants being laid off and to numerous citizens being deprived of access to health care or electricity. 36% of those citizens have now chosen to vote for Syriza in order to reject that approach.
They were all the more tempted to do so because the approach’s effectiveness has yet to be proven – despite an encouraging return to growth and a slight drop in the unemployment rate.
Syriza’s election win may be seen primarily as expressing the wish to have finished with the implementation of the aid programmes agreed on by Greece’s governments and the Troika but that was the plan of whichever party won, because only a few billion euro have yet to be paid out of the €240 billion granted. “Dispensing with the Troika” and its terms, however, presupposes being in a position to return to the markets in order to find the sums needed to fund the running of the state.
Tsipras is not King Midas. He will not be able to turn everything into gold and to shake off economic and financial reality as though by magic. His predecessors’ efforts have already allowed Greece to put behind an era marked by the country living beyond its means, given that its accounts now show a primary surplus. But it still has to cope with a huge debt (175% of GDP) and thus to the payment of very high interest rates to service that debt. Paying these interests is going to be the first down-to-earth test for the next government if it wishes to forgo the aid from the EU and the IMF.
The need for constructive dialogue between Athens and the EU
In this context, the first challenge facing the EU is to engage in constructive dialogue with the new authorities in Athens. EU needs to take on board their legitimate desire for a change of course in the policies pursued by Greece hitherto: Tsipras is not Samaras. Syriza’s victory has a sovereign side to it, which Europe’s other capitals need to take into account to avoid giving the impression that they are ignoring an expression of democratic will.
Syriza’s programme provides for a number of reforms which will make Greece more efficient and fairer, and it might be welcomed in Brussels. These include the struggle against tax evasion and fraud, the establishment of a land registry, the struggle against corruption and so forth. But they also include a review of some of the adjustments adopted in recent years, for instance by substantially raising the minimum wage again and by re-hiring a considerable number of civil servants.
The EU’s big problem is going to integrate the announced changes as a whole, while reminding Alexis Tsipras of the pledges made by his predecessors and of the need to work on reimbursing the aid provided by citizens equally deserving of a little consideration, namely the taxpayers from other member states.
Greece’s failure led Europe to agree back in 2010 to a form of financial solidarity not envisaged, and indeed only reluctantly accepted by several countries. It led banks and other creditors back in 2012 to write off €107 billion lent to Greece. From a technical standpoint, it should prompt their public-sector creditors today to show flexibility in the light of the virtually unsustainable nature of Greece’s debt. Without going as far as writing off the debt, it does not seem far-fetched to countenance an extension to repayment terms and lower interest rates.
From a political standpoint, such flexibility is going to depend on the positions of the national authorities that have become Athens’ creditors, but also on those of their grass-roots electorates. Negotiating a compromise is perfectly possible, but its outcome is going to depend on the goodwill displayed by both.
As the Troika’s departure is scheduled, an adjustment of the terms governing the repayment of Athens’ debt is a distinct possibility, and the Greek economy can pursue its return to health.