20 May Should we fear a “Grexit” – January 2015
On the face of it you would be forgiven for asking why so many column inches have been devoted to the result of an election in Greece, given as a country, it is effectively bankrupt and has been on the periphery of Europe for some time now. Well can we draw any comparisons between the successful election of a party looking to re-negotiate its relationship with Europe and the noises coming from our own prime minister who is of course seeking election in May?
If Greek politics were surprising enough, Syriza, the Far Left winner of the Greek elections have formed a coalition with the Greek Independents, a right wing party, leading to Syriza leader Alexis Tsipras taking the oath as the country’s new Prime Minister. One would imagine that they have little common ground or shared political views, however, the one issue that has drawn them together is Anti Austerity.
The tight budgetary demands placed on Greece by the “Troika” – the EU, European Central Bank and the International Monetary Fund – in return for a huge bailout of circa 240 billion Euros, has meant that many Greeks have slipped into poverty since the financial crisis in 2008, so perhaps if anything it is a surprise that the anti-austerity coalition has only managed to capture 162 of the 300 parliamentary seats. If not a landslide vote against austerity, certainly a formal rejection of the restrictions placed on Greece in exchange for the bailout.
So it would appear that the New Prime Minister has a mandate to begin a negotiation, but can we see this leading to a break-up of the “European Experiment”. In recent days Mr Tsipras has reconfirmed his commitment to the Euro and markets appear to have taken some confidence from that, with the Euro recovering from an 11 year low against the dollar and the main markets in Europe rising on hopes that the bailout terms can be reset.
It is arguable whether Syriza can follow through on their pre-election pledges. Whilst the European Commission head Jean-Claude Juncker stated “The European Commission stands ready to continue assisting Greece in achieving these goals…………….. promoting sustainable jobs and growth”, it would appear that other leaders in Europe are less sympathetic.
Whilst there are a myriad of possible outcomes, were Syriza to be successful in the negotiations, one of the greatest concerns might be the further rise of anti-austerity nationalist parties throughout Europe, which would certainly put a strain on the Eurozone which eventually may reach breaking point.
On the reverse, perhaps the markets have taken the news so well in the belief that a Europe without the burden of Greece would be stronger and therefore any hard line stance taken in Athens may well be rebuffed in Brussels and Berlin, therefore hastening the end of Greece’s involvement.
That in itself raises many more questions than we have space to deal with here, but some comparisons can certainly be made with David Cameron’s commitments to a renegotiation of membership of Europe and the potential right wing (ish) alliances he may need to make in May.