Many expect Syriza’s victory in the Greek elections last month to finally bring an end to austerity within the Eurozone. Yet many factors suggest that this is highly unlikely.
True, the actions of the new anti-troika government in Athens might have far-reaching consequences. This is clearly shown by the extensive and unusual media coverage given to the Greek elections and Tsipras and Finance minister Varoufakis’ tour of European capitals, even in countries like Britain and the US; a Greek default is indeed a huge threat to a fragile global economy. At the same time, a wide range of people have welcomed Syriza’s victory, from left-wingers to far-right anti-EU parties, though for different reasons. However it must not be forgotten that Greece is a tiny part of Europe and in a really precarious, if not desperate, situation. Tsipras can do very little to change what we could call the “Brussels-Berlin consensus” which has dominated the economic policies of the old continent from the onset of the crisis. And the reason is really simple: the victory of Syriza will not lead to similar results by openly anti-austerity parties in other EU countries in the near future, with the possible (and negligible) exception of Spain.
First of all, we obviously need to look at Germany. Since at least 2011, it is hard to find a day where no economist, pundit or journalist has attacked Merkel and Schauble’s flawed understanding of what should and should not be done during a depression. For example, Nobel prize-winning economists have recently launched an appeal from the prestigious Financial Times for a write-off of at least a part of Greece’s debt. What it is often forgotten however is the fact that around 70 percent of Germans share the views of their top politicians, and the percentage rises to 80 percent among supporters of the two ruling parties. Expecting a radical change of mind on the part of Berlin is therefore pure non-sense. The same can be said for Finland, the Netherlands, Austria and the Baltic countries, which indeed strongly support Merkel’s line.
Secondly, one can expect little even from the leaders of the second and third economies of the Euro-area, France and Italy. Both are governed by supposedly centre-left parties, yet despite the warm welcome they reserved to Tsipras neither Hollande nor Renzi have shown any intention to challenge Merkel’s position. What is more, both France and Italy hold a significant share of Greece’s debt and thus oppose any write-off, especially given the situation of their own public finances. Even if in the end they might concede something to Tsipras, they will not join him in his fight against austerity, and elections are quite far in both countries. And if there is no significant shift in France and Italy, the European Commission will not change its position either.
The rift between the warm welcome of Tsipras’ victory by many and the lack of real support Greece has so far received is striking. One of the best examples is Obama’s stance on the matter. While he has publicly endorsed Tsipras claims, he suggested the forgiveness of part of Greece’s debt by its European partners, and not by the IMF – another member of the troika – whose greatest shareholder is indeed the United States. While Obama’s statement is probably due to genuine beliefs, it is hard to help thinking that it is easy to show concern with other people’s money.
Greek demands are sensible and understandable in many regards. But as the debate over austerity has shown, this means little for the real chances of success of Tsipras’ plan. It must be said that a lack of agreement between Athens and the Troika would be devastating for both parties. It is true that Greece would pay the highest price, but after so many years of hardship Greeks feel they have little left to lose. In the game of chicken Tsipras and Varoufakis are playing with the Troika, this could be a considerable weapon. Yes, the number of German officials that believe that the Eurozone is now strong enough to survive “Grexit” is perilously high. However, others in the Troika will do anything to avoid such a devastating development. In particular, we can expect Draghi to do “whatever it takes” another time. While many have seen the abrupt decision by the ECB to cancel acceptance of Greek bonds in return for funding last week as a move to push Athens into a deal, it might well be that Draghi is trying to increase pressure on Berlin too.
All in all, it is hard to tell what will happen and perhaps Tsipras will obtain something in the end. Yet almost certainly this will have little influence on the rest of the Eurozone. Even if the anti-austerity Podemos wins the elections in Spain this year, the group of countries that promote or at least do not openly challenge fiscal responsibility will overwhelmingly have the upper hand. Unfortunately this makes also unlikely further integration in terms of fiscal policy and euro-wide public investment, the only way to ensure long-term growth for the monetary union. In a few words, Syriza’s victory might actually make a difference for Greece, but it means little for the rest of the continent.