Sanguinity & Syriza
Everybody and their mother’s managed to offer a view on Syriza’s recent election triumph and in the interest of not being left out, here’s mine:
I am, for the moment, still fairly sanguine. The Troika has reiterated its refusal to consider outright debt forgiveness, but I suspect they will achieve more or less the same thing via extending maturities and reducing rates. The big test will come when Tsipras has to implement the domestic reforms he’s promised. From Reuters:
The government, installed within 48 hours of Sunday’s win, is expected to pursue social welfare policies such as handing out free electricity and food stamps to the poor and cutting heating oil prices, alongside a crackdown on tax evasion.
On the labor front, Tsipras is expected to reverse a cut to the minimum wage and restore collective bargaining agreements abolished under the bailout out deal, as well as instituting a 5-billion-euro plan of incentives for firms to hire workers.
As well as reviewing privatization plans, Syriza officials have also promised to take on business tycoons, though in the run-up to the vote they said little about whether they will implement earlier pledges to slap new taxes on big Greek shipowners.
Tsipras has also promised that he will scrap unpopular crisis-era taxes, prompting critics to question how he will be able to afford his lavish social spending while battling depleting cash coffers and exasperated foreign lenders.
Syriza is also expected to freeze public sector layoffs as demanded under the bailout, and stop an unpopular evaluation process for civil servants.
The party claims a total cost for all this of, “about 11.5 billion euros in the medium term,” while the (now former) Samaras government suggests, “…Syriza’s pledges will cost 17.2 billion euros, triggering an immediate budget crisis, with the deficit soaring to 9 percent of GDP.” Either way, the country can’t afford any of this, and continued access to eurozone stabilization funds will be contingent in some non-trivial way on maintaining policies Tsipras has pledged to reverse and continuing to display some semblance of budget discipline. On the surface then, it doesn’t look like there’s a whole lot of wiggle room, but the entire EU response to the crisis has been to fudge things that look intractable and live to fight another day, and there isn’t a great reason to suspect that will change now.
Tsipras says he doesn’t want to exit the euro, and Greek public opinion supports staying in as well. Merkel is an output of the post-war (both Cold and Second World) pro-European political establishment and as such likely understands the Eurozone as the political project it is rather than the optimal currency area it isn’t. Add the fact that at present Greece leaving the Eurozone would also entail its leaving the EU (though one suspects that, too, could be fudged if necessary), and it seems naive to think the country’s ongoing membership in either would be sacrificed on a purely economic basis.