16 Dec 2014

Economic recovery in Greece, but will it mean ‘Mad Max’ in government?

“Expect Mad Max if Syriza wins” runs the headline over a comment piece in the newspaper Democratia. It’s by the prime minister’s closest adviser. Meanwhile, police have released video of what they claim is an “airborne battalion of anarchists”, who leapt across rooftops using Parkour to evade capture while hurling petrol bombs in a recent riot.

Welcome to Greece on the eve of a critical fortnight, during which its parliament has to elect a president and its people have to do Christmas.

Tsipras, leader of Greece's far-left Syriza party, leaves the Presidential palace in Athens

Syriza leader Alexis Tsipras leaves the Presidential palace in Athens

I found Athens feverish on arrival. On the streets, there are signs of the slight economic revival that the GDP figures tell us about. After losing a quarter of its GDP because of austerity, and throwing more than 60 per cent of its young people out of work, Greece has grown 1.7 per cent in the past year.

People have stopped hoarding money and started spending it, though the collapse in wages means that prices for the basics you need as an unemployed graduate are also low. It’s a kebab and long, slow coffee economy still for them.

But the main story now is not the economy. If parliament fails to elect a president between now and 29 December, there will be a general election called. With Syriza, the far-Left party, ahead four per cent in the polls, it is likely that it will form the biggest party.

Syriza is no vague left of centre party, it is rooted in the country’s communist tradition, drawing together the “Eurocommunists” who split from the hardline Stalinists in the 1970s, plus numerous Trotskyist, Maoist and New Left activists – and thousands of young people for whom all these labels are fairly retro, but who’ve flocked to the party as the only thing that looked progressive and modern and opposed austerity.

Syriza will end austerity and will demand that the European central bank (ECB) cancels half of Greek debt and buys all future debt at zero interest for 60 years. There is a chance – but a slim one – that if Syriza had a strong mandate, and if it played EU negotiations cleverly, it could achieve something close to this. But there is a bigger chance that a Left-led Greece would clash with Brussels, that money would flow out of the country and that – in the process – Greece would get forced out of the Eurozone.

Yesterday, the boss of the Greek central bank Yiannis Stournaras said: “the crisis in recent days is now taking serious dimensions, that liquidity in the market is decreasing at a fast pace … and the risk of irreparable damage for the Greek economy is now great.”

French President Francois Hollande Visits Greece

Yiannis Stournaras, right

Normally, central bankers try to calm things down in situations like this. But Stournaras is the former finance minister for the current government – and the comments sparked accusations of political interference. The Bank of Greece then had to clarify that Mr Stournaras was not saying there was a run on banks, but just a decline in “general levels of liquidity” due to the rising interest rate on government debt.

The Greek stock exchange, which slumped last week, stabilised yesterday. But, with comments like these flying around, it may not stabilise for long. Once we get to Wednesday night, with the first vote in parliament, everybody will have a clear idea of how close the government is to falling.

If it’s bad for the government there is, I think, a chance of some capital flight, because everybody here remembers Cyprus, and how the central bank nailed savers with more than €100k in the first of the new-style “bail-ins” (where savers lose money because the state can’t afford to recapitalise the banks).


Among the young, leftist clientele of the cafés in Exarchia, the famous bohemian district of Athens, they are thinking several moves ahead. A lot of people in private are discussing how the Greek state will react if Syriza wins.

The party already runs the country’s largest administrative region and is reportedly facing a tough time with civil servants there. The theory is that, once it has to run the riot police, a NATO army and whatever remnants of the Cold War secret state still exist, there could be ructions.

There were riots here last month during the commemoration of Britain’s military occupation of Athens, and the battle between the British army and the communist resistance in 1944. And riots when an anarchist bank robber on hunger strike neared death. That’s when the “flying anarchist” meme started, to which the earth-bound anarchists responded with accusations that the cops themselves had formed an agent-provocateur Black Bloc to stir things up.

Given that background, it is not unusual to hear people in the late-night bars speculating on exactly what form of “coup” – military, police, judicial or ECB – might happen when it all goes pear-shaped. As this country had a military junta within living memory, such speculation is not completely crazy.


In this situation, what you would want is a clear idea of the programme of a potential Syriza government, and its demonstrable ability to govern.

But Syriza’s leaders speak to the world in speeches and press releases – and mostly in Greek. An attempt to calm investors in the City of London ended, as I reported, in farce. Even now, there is no official nominee for the post of Treasury minister, should Syriza come to power. And, in the back channels, where mainstream parties usually have strong links to journalists, bankers and civil servants, Syriza does not.

I’ve always said with the Eurocrisis: Greece was the detonator, Spain and Italy the explosive mass. The tactic of separating the detonator off, with a bailout, was designed so that, if it went off, it would do so on its own.

Today, the Eurocrisis has become the stagnation of the core. France and Italy are the countries we need to be worried about in the long term, with their lack of growth, their high unemployment, the political fragility of the centre there. But they’re not going into meltdown if Greece does.

What happens next? A vote in parliament on Wednesday night, a vote right after Christmas and a final attempt on 29 December.

What’s at stake is clear. If Syriza wins a subsequent election, it will end the austerity imposed by the EU and International monetary fund and call Germany’s bluff. It will be a fragile, inexperienced Marxist government in an EU and Nato member state. But, if it succeeds, the EU will be in a whole new ball game.