17 Dec 2014

Greece: could election of far left herald wider change in Europe?

“There are two camps in Europe,” George Stathakis tells me, in his cramped parliamentary office: “The one that wants to go on with austerity, and the one that says: use quantitative easing and fiscal expansion to boost growth. Syriza is part of that second camp.”

Mr Stathakis, an MP for the far left Syriza party and professor of economics in Crete, is currently shadow development minister. But within six weeks, if the polls are right, he could be running the Greek treasury.

Tonight the parliament failed in the first of three attempts to elect a president. The government got 160 votes but needs 180 in the final vote on 29 December. If it fails there will be a general election, which the polls say Syriza will win. For a party that had just 4 per cent five years ago that is a big leap.

You can feel how big even in the parliamentary outbuilding Mr Stathakis’ office is based in. “We keep running into dress code issues,” one staffer tells me. “The whole place is now full of people who were once activists or intellectuals. We keep forgetting we can’t wear shorts in summer.”

But Greece – and the rest of Europe – may have to get used to a government in which the far left party holds key positions. It is currently polling 24 per cent – 3 per cent ahead of the main conservative party, New Democracy, and under Greek election rules would get an additional 50 MPs to form a stable majority if it came first in the polls.

Syriza’s progamme is clear. It will ask the EU to write off half the country’s debts and the ECB to be lender of last resort for the next 60 years for Greece. “Debt servicing costs would fall from 5 per cent of GDP to 2 per cent,” says Mr Stathakis. It will try to position itself alongside the new Spanish party, Podemos, and the German Left Party, as part of a wider anti-austerity movement in the eurozone.

What if the Europeans refuse? I ask him. Overnight a report in the German newspaper Die Welt quotes a German government source saying there is a plan to cut Greece off not just from ECB lending but from all EU funding, should Syriza wins. I put that to him and he smiles.

“The EU is run by statutes and regulations. I don’t think the ECB would cease funding Greek banks for reasons of political favouritism.”

The Syriza plan sounds incoherent to some in the bond markets, and the government here is playing heavily on the fears of Greeks that, if it looks like Syriza will win, there could be a flight of capital and a run on the banks.

I put it to Anna-Michelle Asimakopoulu, spokesperson for New Democracy, that playing the fear game is not a good idea. The fear is real,” she says. “It’s not a government conspiracy to make the Financial Times, the New York Times, financial analysts and bankers worried about Syriza. When Syriza briefed the markets, in London, there was fear.”

Does she see the Die Welt report as credible?  “It’s credible that people will want to protect themselves,” she says

The Greek crisis no longer has the ability to detonate wider meltdown in Europe – because both banks and country finances have been stabilised. But it does have the power to change Europe in a different way.

Next year will see elections in Spain, where the far left party Podemos has come from nowhere to top the polls. The French Socialist party is effectively split between President Hollande, who wants to honour the country’s commitments to austerity, and others, including former economy minister Armand Montebourg, who want to break away from austerity and use tax and spend policies to expand growth.

And the global backdrop is different too. In 2012 the threat was of a bond market meltdown. Now the problem is deflation. The eurozone is stagnant, and falling oil prices will add further downward pressure on prices.

We have moved into a world where there is too little growth, too little inflation and too few jobs, and where countries are using currency and interest rate policies to fight over what little growth there is.

In that situation, Syriza’s supporters hope the election of a far left government in Greece committed to end austerity, with a much toned-down plan to reduce the debt burden, could be a catalyst for a wider change.

But that would still leave Greece with an uphill struggle to create growth and jobs – in a country which has lost 25 per cent of its GDP in five years and where more than 60 per cent of young people are unemployed.

Who would create the jobs? I ask Mr Stathakis. “The government would create the framework and expand public investment but that’s about it. The private sector would create most of the jobs,” he says.

But why would the private sector invest in a country where the finance ministry is run by Marxist professors? He told me he believed the left was the only force that could kickstart growth again in Greece. Behind the scenes Syriza has been trying to build bridges to the financial markets – and while some attempts have gone badly, Mr Stathakis is clearly trying to engineer a smooth transition between austerity and anti-austerity, not some kind of year zero moment.

For the conservative-led coalition government then this is crunch time. It has set going the process by which it might fall, gambling that Greeks will once again reel back from putting an untested and inexperienced left party in government.

But the coalition itself looks ungainly: its central bank boss, a former minister, prompted sharp intakes of breath in global markets – and reportedly also among Greek bank bosses – when he said “liquidity is draining quickly” on Monday.

If we do get a general election in January 2015, then either way the first period of austerity imposed by the IMF and EU – the so called troika – will be over. Either there will be a renewed mandate for the right, and a softer bailout programme led by the EU – or the first anti-austerity government in Europe since the crisis began.

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4 reader comments

  1. Extreme left-winger says:

    Paul you don’t understand our cause. We don’t want to change the EU. We want to destroy it and bring the Eurocrats in a new Nuremberg trial. This should be our only sacred goal right now. To give social justice back to the people. All means are acceptable. This is how tyrannies die.

  2. Philip Edwards says:

    You might have a scrap of credibility if you referred to the establishment and its capitalist economic system as “Far right profiteering and thievery run by the remaining dregs of fascism, people who would steal the bread from your mouth if they were allowed to.”

    You won’t, of course.

    Which is why you, and people like you, have the same credibility as The Sun and Daily Mail: Zero.

    It provides amusingly predictable nonsense though. Or at least it would if it didn’t promote said thieves and profiteers in their sordid business of destroying societies, hopes and aspirations everywhere.

    But I don’t expect you to understand that.

  3. yxamonakis says:

    “But why would the private sector invest in a country where the finance ministry is run by Marxist professors?” Because hopefully they know something about economics and understand how capitalism works. It is worth remembering that the Greek economy and ‘industrial’ (ha!) labour relations are more akin to the economy of a former soviet state, as created by mainstream ‘conservative’ and ‘socialist’ politicians’
    A structure that encourages new small business start ups and a fair taxation system are urgently needed if the Greek economy is to grow. As for the present growth figures, well, the old ‘dead cat bounce’ expression comes to mind when trying to explain it- and as is driven mainly by tourism and subject to the volatility of international events, it can hardly be said to be sustainable. As for being a Marxist professor, I personally see the professor bit as more of a problem than the Marxist. At the end of the day the question for the voter is: can a Syriza government be any worse than governments of ‘familiar politicians’? and to an growing number of people, the poor, the unemployed, the uninsured, the overtaxed, the answer is ‘no’.

  4. Nigel Wilson says:

    I cannot help but reflect that so-called far-left Syriza are seeking an economic policy and an attitude to the EU not too distant from that being pursued, rather than declared, by the British Conservatives.

    I know this will be hard to swallow for many but Osborne is not as austere as he pretends, has employed QE as a measure and is engaging in infrastructure spending. The Conservatives are also keen on political and economic reform within the EU.

    Perhaps what we could call `dissident Europe’ embraces real politics rather than what can only be called the parade of the chancelleries which has dominated EU politics for ages.

    There is a desperate need for change in Greece and elsewhere. The damage inflicted on the Greek people is obscene. As usual it will be left to the people to solve their problems and it will not be for the great and good in Europe to complain about it. Today we are all sans-culottes.

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