An Implication of the Greek Elections

Greece is nearly bankrupt, it has defaulted on one round of national debt since the global Panic of 2008, it has received two bailouts from the rest of the European Union and from the IMF in partnership with various EU institutions (one of which included that default), and it’s demanding another round of…debt relief…against which the current troika of the IMF, the European Central Bank, and the European Commission are refusing to certify that Greece is ready and able to handle another loan. This current crisis reached its fullness last fall, and the then Greek government collapsed, necessitating Sunday’s snap elections.

Against that backdrop, the Syriza party won those snap elections resoundingly, coming from being a back bench party of growing influence to winning 149 seats in the 300 seat Greek Parliament—two short of an outright majority and the ability to govern alone. Syriza has been, throughout the post-Panic crisis, very much opposed to any sort of bailout other than outright debt forgiveness (the polite word for default), while the EU has been just as opposed to any alteration of the terms beyond stretching out payments in return for the Greeks submitting to ever higher taxes and ever reduced government spending. The result of acquiescence to the prior rounds of raising taxes and cutting spending has been an economy that’s varied between stagnation and collapse—driven especially by the combination of cutting spending (which, alone, would have been beneficial) and raising taxes. Hence the appeal of Syriza.

Lacking two seats, though, the party had to form a coalition government; if no one would join, the government would collapse again, and new elections would be necessary. The party thought most likely to join was To Potami with its 16 seats, a generally centrist party, but one also generally opposed to yet more taxing and cutting. Instead, Syriza formed the needed coalition with the Independent Greeks Party, which won 13 seats Sunday.

Either coalition party would have given Syriza sufficient cushion over the 151 seats needed to govern, so why the Independent Greeks? Syriza is a far-left party of Marxists, and the Independent Greeks are far-right party formed two years ago explicitly to oppose the EU’s austerity impositions on Greece. They’re also opposed to immigration and…multiculturism…and they want Greece out of the EU altogether. To Potami, not so much on any of those accounts, and although they oppose further “austerity,” they’re not hard over on it; they’re more malleable.

Now, what happens next? The new Greek Prime Minister, who should be Syriza’s Alexis Tsipras, has said he will force renegotiation of Greece’s existing “bailouts,” worth €240 billion ($268 billion), “or else.”

The EU is just as adamant about not renegotiating. German Chancellor Angela Merkel:

We believe Greece has accepted terms that are not off the table after the election day[.]

President of the Eurogroup [of eurozone finance ministers] of the Board of Governors of the European Stability Mechanism [of financial assistance programs for eurozone members in “financial difficulty”] Jeroen Dijsselbloem on the prospect for “leniency” for Greece regarding its debt:

I don’t think there is a lot of support for that in the eurozone[.]

The most likely (the plurality of a plethora of options) “or else” from this potential impasse would be Greece’s departure from the eurozone—to use its own currency—and possibly from the EU altogether. With the Independent Greeks joining Tsipiras’ coalition, he got the political backbone to hold out for exactly that as the only alternative to debt forgiveness.

A Greek departure has been projected to be a disaster for the eurozone, the euro, and the EU. It certainly would shake them, but even in the extremity of those three falling apart, it would hardly be a disaster. And it would be, in the longer run, good for Greece, too.

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