The campaign may have resembled a “political circus”, but Sunday’s general election in Greece could see the leftist Syriza, led by former communist Alexis Tsipras, emerge as the leading party – but in search of a partner-in-government [We’ve been there before! – Ed]. Indeed. Although, they could still achieve a majority…
In the meantime, the Irish Times highlights a report from Standard & Poor, “European Sovereign Creditworthiness Might Diminish If Eurosceptics Take Power”. From the Irish Times report
In a report assessing the rise and likely impact of euroscepticism, the agency concludes that political parties espousing an antipathy towards the EU will ultimately chose financial and macroeconomic stability over revolution. [added emphasis]
Stability will depend upon domestic banks retaining access to “lender of last resort” financing from the ECB, it said.
As a result, even a eurosceptic government is likely to compromise on its election promises, so that it could remain eligible for the ECB support.
Perhaps… The Irish Times notes of the S&P report
It suggests there are two distinct varieties of eurosceptic parties: those that oppose the fiscal compact and advocate default, and those that favour exiting the EU or EMU.
In the first category, it places Ireland’s Sinn Féin, Podemos in Spain and Syriza in Greece, which want to remain as euro zone members but advocate policies, including default, that are unlikely to be compatible with EMU membership, or with maintaining continuous access to ECB financing.
The report correlated euroscepticism in these states to the high levels of public debt; Greece (177 per cent of GDP), Ireland (119 per cent of GDP) and Spain (96 per cent of GDP). It said none of these states had yet been able to rebuild its fiscal buffers to face the next crisis.
The second group of eurosceptic parties, which include the National Front in France; Austria’s Freedom Party; Golden Dawn in Greece; the Freedom Party in The Netherlands; and UKIP in Britain, are explicitly calling from an exit from the EU or the euro zone.
S&P said if a net debtor country exited the euro zone, it would make sovereign default inevitable. The country’s debt would become foreign currency, while the economy would be redenominated in a new, and much weaker, local currency.
That assessment may be shared by the political leaders the Irish Times today reports as indicating “signs of leeway” on Greece’s debt for an incoming government.
But, as Stephen Collins notes in the Irish Times,
Capitulation to Syriza’s demands would be a shot in the arm for all of the radical left- and right-wing parties with similar policies across the continent, so a serious debt write-down of Greek debt looks unlikely, at least in the short term.
What Syriza is hoping for is that other EU bailout states such as Spain, Ireland and Portugal will see the advantages for themselves in an EU debt conference, but it looks as if the reaction will be the exact opposite. Governments in the countries that have successfully completed their bailouts or are on the point of doing so have no desire to open up the issue again, particularly as it would expose them to the charge that they failed their own citizens by accepting the terms in the first place.
What is in the realm of the practicable is that the troika could come to a deal with a Syriza government for a moderate easing of the terms of the Greek bailout.
This would involve lower interest rates and an extension of the loan terms along the lines of the promissory note deal done for Ireland.
Whether Syriza would be willing or able to conclude such a deal is a moot point. If Tsipras is willing to edge in that direction he will inevitably face difficulty bringing all his followers with him, and he could see his party’s opinion poll ratings plunge rapidly and his movement begin to fragment. [added emphasis]
The fate of PASOK, a moderate left-wing party that dominated Greek politics in a manner similar to Fianna Fáil in Ireland, will not have been lost on him. As recently as 2009, PASOK won 44 per cent of the vote in a general election but after implementing bailout terms it was wiped out in an election and it is now getting a derisory 4 per cent or so in polls.
The fall in support for the Labour Party in Ireland, which promised during the last election that it would be Labour’s way or Frankfurt’s way, is not nearly as dramatic by comparison but it does demonstrate the dangers of not fulfilling expectations about what can be achieved.
Both Tsipras and the incumbent Prime Minister, Antonis Samaras, have made their final appeals to the electorate.
As the BBC Europe editor Gavin Hewitt notes, “Europe waits on voters’ verdict“.
If Syriza wins on Sunday – and if it wins an overall majority – it will once again unsettle Europe. It will not carry the risks of 2012 when the markets feared a Greek default with contagion spreading to Spain and Italy. The ECB has removed that threat. But Brussels will fear instability.
Alexis Tsipras has said he will negotiate – but what happens if there is deadlock? Already one European prime minister has said he will resist any move to forgive Greek debt. Others are not prepared to renegotiate the bailout deals and soften the terms. The Germans have even hinted they could allow Greece to leave the eurozone. I am sceptical of that.
But negotiations will be difficult. And Greece has some big payments to make later in the year. A wrong move could pitch the country into default.
And if Europe’s leaders were to agree to bold concessions then other countries might seek an easing of their budget limits too. Germany would fear that the financial discipline it has sought to introduce into the eurozone was unravelling. [added emphasis]
The Greek electorate might still chose to stick with the status quo. Mr Samaras has warned against the left-wing Syriza by saying: “We are not going to turn into the Soviet Union here – communism won’t win.” Ultimately some may shy away from voting for the radical left, but the polls suggest austerity has left many people weary and resentful.
Sunday’s election could be a significant day for Europe when in troubled times an anti-establishment party takes power. And victory here could boost other far-left parties like Podemos in Spain. Both Greece and Europe will be watching. [added in-line link]
Update Via the BBC’s online live-coverage. Imelda Flattery, BBC News Athens, tweets
Definition of knife edge… Syriza needs 151 seats for an absolute majority.. Latest projections say 150.. (Error margin 149 – 151) #Greece
— Imelda Flattery (@Imeldaflattery) January 25, 2015
And, Nick Malkoutzis, deputy editor of Greek daily Kathimerini English edition, adds
We now seem to be heading for what opinion polls predicted: SYRIZA short of majority/with weak one & no obvious allies #Greece #ekloges2015
— Nick Malkoutzis (@NickMalkoutzis) January 25, 2015