Sunday

17th Feb 2019

Opinion

Hope and fear: Greeks after the Syriza victory

  • Athens: Will Tsipras' gamble pay off? (Photo: and641)

Almost three years ago to the day, I wrote an article noting that “the current [bailout] measures on offer are seen as simply harsh, unfair and unsustainable … and [Greece’s] creditors are not going to like the consequences that this instability will bring".

And so it has turned out to be.

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Amid deepening economic depression, the erosion of a large swathe of the middle class, and alarming social tensions (the nazi Golden Dawn party was the third most popular party following last week's elections) Greek people have said “enough is enough”.

And now the radical left Syriza is in power.

With this turn of events, many Greeks are finding a new sense of national pride in the government’s hard stance towards its creditors.

One friend noted: “I didn’t vote for Syriza, but irrespective of who you threw the ballot for, you have to support the troops!”.

Syriza, most Greeks are agreed, will usher in change.

But what kind of change? There are two views. The first expects wonderful things from the new government; the second fears outright disaster for Greece.

I am usually an optimist, but I am leaning towards the second strand of thought. Not because I am against what the new prime minister, Alexis Tsipras, says he represents but because I fear that Greece has voted into power a young, inexperienced populist who cannot possibly make good on all his promises.

Especially when he is dealing with the German chancellor, whose economic vision is diametrically opposed to Syriza’s.

Austerity

Austerity was a terrible economic policy and has had huge economic and social consequences.

The Greek economy has shrunk by 26 percent and the debt burden, which has risen in the past three years to 175 percent, is unsustainable.

This state of affairs is particularly ironic given the eurozone's stringent austerity policy has been driven by a Germany that (a) was offered a Marshall plan after WWII and (b) was offered further debt relief in London in 1953 when half its debts (including to Greece) were written off.

Significantly, repayments were only due while West Germany ran a trade surplus, and were limited to 3 percent of export earnings providing other countries with a strong incentive to import from Germany.

Germany’s recent past should indicate the benefits of debt relief. It is currently witnessing the backlash and political consequences of too much austerity.

Greek people, for their part, feel that the EU cares more for numbers than social cohesion - that it has turned from a political union to a bankers' Excel sheet.

But even if all the conditions for the rise of a party like Syriza were there in Greece, it does not mean that Syriza now has all the answers to the many questions that have arisen.

The most important being: How will it finance everyday spending?

Spending

There is an estimated €2.4 billion gap in pensions. The government has stated that pensions will be paid on time but has not clarified how.

In the meantime, Tsipras is hiring back thousands of civil servants that were laid off; has frozen plans to let thousands more go; and is rolling back on privatisation plans. This has sent the Greek stock market into a tailspin.

Syriza has also said it intends to raise the minimum wage from €518 to €715. But what effect will this have?

A business friend said to me the other day: "I will raise the salaries for everyone at my business even before it becomes law."

He added: “And I will tell them that productivity has to go up accordingly. Next month, I will sit and look at the numbers and if they don't match I will start firing people."

“After that", he went on, "I will call all the owners of the stores and tell them that because our costs have suddenly gone up 30 percent they need to reduce the rent. And I’ll get the reductions."

This is just one example of how far-left socialist economics could adversely affect the economy.

“Hope is coming”, Syriza said time and again during its election campaign. And the party has indeed raised the hopes of many.

There are few who don't want Tsipras to bring down the oligarchs, deal with corruption, create a progressive tax system and re-boot the middle-class.

But when party MPs come out saying that the solution to the problem of Greek debt is to "print more money", or when Tsipras' way of creating more jobs is to hire people back into Greece's hugely bloated civil service, it rings alarm bells.

It brings to mind the populist politics of successive socialist governments in the 1980s which brought the country to new heights of state spending and corruption.

Except that back then Greece could borrow like crazy. Now that option is closed and the time before default is tight.

Tsipras believes Greece can find the money and that the EU will bend to Greece’s will.

It’s a big gamble. And many Greeks are nervous about whether he can pull it off.

Paul Kidner leads the PRAKSIS Business Coaching Centre - an NGO supporting the creation of new businesses in Greece.

France, US support Greece in debt battle

Paris and Washington have expressed support for Athens’ attempts to renegotiate the terms of its bailout, as Germany comes under increasing pressure to reconsider its approach to austerity.

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