“I wouldn’t like extreme forces to come to power. I would prefer if known faces show up,” said European Commission President Jean-Claude Juncker, talking about Greece’s election. But his hopes for a quiet life will be dashed. Syriza, the radical left-wing party that leapt to prominence in the 2012 election with 27 percent of the vote, is going to win this time.
It won’t win more votes than before. It got 27 percent in last summer’s elections for the European parliament, and it’s still polling 27 percent today. But that will make Syriza the biggest party after Sunday’s election, because three more years of grinding austerity have shredded the support of the “mainstream” New Democracy (centre-right) and Pasok (centre-left) parties that formed a coalition government in 2012.
Austerity is too weak a word for what has happened to Greece. The country’s foreign debt is 319 billion euros ($368 billion), or almost twice (177 percent) its entire Gross Domestic Product. More than three-quarters of that debt is bailout loans from the European Union, the European Central Bank, and the International Monetary Fund. And the price of those emergency loans was cuts that have reduced millions of Greeks to poverty.
Greece’s economy has shrunk by a quarter in the past five years. Unemployment is 25 percent, youth unemployment is nearly 50 percent. Three million of the eleven million Greeks are living on or below the poverty line, and there has been a huge brain drain as hundreds of thousands of young professionals migrated elsewhere in the EU to find jobs.
That explains the rise of Syriza (the Greek acronym for Coalition of the Radical Left). It’s an ideological grab-bag of democratic socialists, Eurocommunists, Greens, Maoists, Trotskyists and assorted populists, but in Alexis Tsipras it has a young (40), charismatic leader who has harnessed them together and presented an alternative political vision to the endless austerity that is all the traditional parties have to offer.
27 percent of the vote is not enough to form a government even though the biggest party gets a bonus of fifty extra seats. But Syriza will probably be able to build a coalition government with other fast-growing non-traditional parties like the centrist To Potami (founded just last year) – and then we shall see what Tsipras actually does with his power.
Only five years ago he was saying that it wouldn’t bother him if Greece left the euro, or even the European Union. Now, as the prospect of real power nears, he speaks more carefully – but he still scares both the European Union and the Greek establishment.
He would start by demanding that Greece’s creditors write off at least half its foreign debt, but he no longer talks about leaving the euro. He would raise the minimum wage, stop the job cuts in the swollen public service, raise pensions, increase the salaries of public employees, and reduce taxes for most people. But rich Greeks (most of whom pay little or no tax) would face both higher taxes and very tough tax collectors.
The Greek establishment has been described by the US government (in a secret diplomatic cable revealed by WikiLeaks) as “a small group of people who have made or inherited fortunes – and who are related by blood, marriage or adultery to political and government officials and/or other media and business magnates.” few people in Greece will mind if Tsipras squeezes them until they squeak.
The real question is how the EU and the international banks will react when Tsipras demands a big write-down on the debt and ditches the extreme austerity that previous Greek governments accepted in order to get the loans. He has a good case, but they may not listen.
Greece originally got into trouble because it borrowed too much. Once Greece joined the euro in 2001, lenders assumed that the whole EU was effectively guaranteeing the loans and the money poured in. They wouldn’t have lent so much just to Greece on its own – and the Greek government even hid how big its foreign debt was getting.
Then came the crash of 2008, and it all came out. Greece couldn’t pay, but the EU dared not let a “eurozone” country default on its loans for fear that the infection would spread to other highly indebted EU countries. Besides, the loans were mostly from European (and especially German) banks that would be in deep trouble if they went bad. So the EU lent Athens another 220 billion euros ($254 billion) to keep those loans alive.
That emergency money has overwhelmingly gone to capital and interest payments on the debt (especially to German banks), not to investment or consumption in Greece. Yet there is literally no hope that the country could ever repay the loans in full: Greek foreign debt has actually grown by half in the past five years. Meanwhile, ordinary Greeks are the new poor.
Tsipras is saying that the European banks will have to “forgive” a lot of the loans so that the remaining debt is manageable and the Greek economy can begin to recover. There will be months of delicate negotiations about this once he takes office, and they could fail (in which case Greece crashes out of the euro). But Greece cannot go on like this; it has to be done.
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To shorten to 700 words, omit paragraphs 2, 6 and 9. (“It won’t…2012”; “27 percent…power”; and “The Greek…squeak”.