In the weeks before the sweeping victory of radical left Syriza, pre-election dinner parties organized in posh Athenian neighborhoods had a mocking theme: „Let’s eat our last supper, before the commies come and take away our houses, bank accounts, etc.“ It was a repetition of the 1981 scare-rhetoric, when Pasok came to power and promised to redistribute wealth, creating similar fears among the upper classes. Nothing of that sort happened. The Greek bourgeoisie survived two decades of Pasok reign unscratched.
Many see Syriza as Pasok reborn, a new Volkspartei, which promised too much during the campaign only to be abruptly confronted with the reality after the election. The U-turn is already obvious in the words of Greece’s next prime minister, Alexis Tsipras: Once he ironically called the German chancellor “Madame Merkel“ and accused her of leading the Greek people into hell, whereas in recent comments he has attributed Ms. Merkel’s obsession with austerity to her Protestant ethic and her rigidness in observing the rules.
A German journalist I spoke with yesterday predicted the German chancellor wouldn’t have much of a hard time with Syriza’s leader: “She managed to exterminate all enemies in her own party, beginning with Helmut Kohl and ending with Karl-Theodor zu Gutenberg. She will eat Mr. Tsipras for breakfast“, he predicted.
The Greeks expect Tsipras to scale back demands
Merkel herself said that Tsipras would scale back the demands that have put him on a collision course with creditors. That’s what the majority of Greek people expect from him, and that’s why many of the voters supported him: in the expectation that he wouldn’t do what he pledged to. This Dr. Jekyll/Mr. Hyde attitude of the Greek electorate reflects the persistently high percentage of people who favor remaining in the Eurozone. It also explains the carte blanche now given to Syriza’s expensive economic program, which puts Greece at risk of a clash with the troika and paves the way for a “Grexit”.
The two-month extension of the current program (which the previous government achieved in order to finalize negotiations with the troika) expires at the end of February. Liquidity is running out, given the extensive deposit withdrawals over the last weeks due to political uncertainty (2,5 billion euros in a month). Many taxpayers refused to pay their debts to the tax authority at the prospect of a Syriza win, as the radical left pledged to scrap an unpopular property tax (ENFIA). Investors are unwilling to put their money into a fragile economy that could end up not being part of the Eurozone in a few months’ time. Unemployment remains very high (25.8% in October 2014), although there were some encouraging signs in the data last published.
The success story that the previous government tried to tell of a budget surplus is beginning to show cracks. Its timing is very unfortunate: Greece could be a breath away from recovery and find itself facing a Grexit.
The big question is how good a diplomat Mr. Tsipras is. How he can find common ground with the EU, the ECB, and the IMF without angering his electorate and the left wing of Syriza, which consists of Maoists, Trotskyists, and Eurosceptics. Yannis Varoufakis, an economics professor tipped to be the next finance minister, famously told a journalist that if ECB head Mario Draghi doesn’t give in to Syriza’s demands, Mr. Tsipras should hang up the phone on him.
But now that Syriza has seized power, a standoff with Mr. Draghi looks highly unlikely. On the contrary: His offer of a Greek participation in the QE, providing the country sticks to its bailout program, could provide the essential incentive for a future compromise by the next Greek government. Mr. Tsipras could make some symbolic gestures (by reopening ERT, the public broadcasting corporation, rehiring the 600 cleaning ladies of the Economy Minister, or increasing the tax for higher incomes) and backpedal on other issues (namely the minimum wage and the re-regulation of the labor market), which could prove a casus belli for the creditors.
Spain, France, and Italy could follow
During the election campaign, there was a cacophony of contradicting opinions coming from Syriza candidates. Nobody knows for sure who spoke the truth: the aforementioned Mr. Varoufakis, who favors a chicken game with Draghi; the left-wing hardliner, Mr. Panagiotis Lafazanis, who doesn’t consider the drachma taboo; Ms. Nadia Valavani, who could become the next minister of foreign affairs and has said that once in power, her party would ask for a program extension; or Mr. George Stathakis, a possible development minister, who finds a debt re-profiling more realistic than a haircut.
The strong mandate he got from the polls (falling short of an absolute majority at the time of writing), has put a burden on Mr. Tsipras to fulfill the great expectations he has produced. He gave hope to people that were reeling from the worst economic crisis in the post-war period, in a country that has lost a quarter of its 2008 GDP and entered its sixth year of depression. He has to live up to the pan-European hype he has created, becoming an icon for the radical left in the EU.
If he succeeds, the Spanish Podemos, the French Front National and Italy’s Bepe Grillo could all follow suit and question Berlin’s fiscal orthodoxy. The much feared domino effect, originating from Greece, could materialize in another way.