It’s no fun to check my “Greek crisis” tag yet again for a blog post. I had hoped that the worst was over for the country, yet events to come may demonstrate that these hopes were mere wishful thinking on my part.
The ruling coalition (ND-PASOK) announced a snap presidential election on Monday. On Tuesday, Athens’ stock market plunged 13% (the worst collapse since the 1987 global stock market crash), and the yield on 10-year government bonds jumped to over 8%. The president’s role is largely ceremonial. Nevertheless, he must be elected with 180 votes by the Parliament. If that threshold cannot be reached, then snap elections must be called. In this scenario, it seems that Greece’s ragtag amalgamation of left wing parties, SYRIZA, would come out on top (they lead in polls now). This has spooked investors because Alexis Tsipras, the SYRIZA leader, has promised to throw out the austerity program, implement wide-ranging leftist reforms/policies, and force Greece’s lenders to restructure the country’s debt. Tsipras and SYRIZA make valid points when they critique the austerity program. The policies were misguided from the start and we have IMF critiques and concerns that demonstrate this; targets and projections concerning growth and debt have been wrong time and time again; and it has resulted in the widespread impoverishment of Greek society (ca. 26% unemployment rate; 1/3 of the economy has evaporated – think US Great Depression and you’re on the mark). It is also undeniable – though many continue to deny it – that Greece’s debt will need to be restructured. It’s unsustainable and cannot be repaid. To think otherwise is nothing more than wishful, arrogant thinking. Yet I simply cannot see in Tsipras and SYRIZA the type of political party that Greece needs right now. The entire political culture needs to change, and a bold structural reform program introduced (the latter has not been achieved via the austerity program, no matter what the Eurocrats say). Tsipras came up in the student factions in the universities and he’s simply too steeped in the old political culture. And when you look at the details of the SYRIZA platform (outside of debt restructuring, which every Greek party supports) it’s hard to see how these policies could provide Greece with the new foundations that it needs. Sadly, there doesn’t appear to be a political party on the scene right now which espouses an agenda of true (political) cultural and structural reform. Perhaps something will come of Potami, but it’s too early to tell.
In any case, SYRIZA polls only around 28-30%, so they’d need a governing partner, and it’s not at all clear who that would be. ND and PASOK won’t do so, and neither will KKE (the latter is too pure to associate with the “New Left”). All of this would seem to call into doubt Greece’s political stability at the worst possible time. The country has only recently experienced even a modicum of economic growth (ca. 1%) and there was real hope that next year would bring more.
The first round of the presidential election is December 17 (it’s a 3 round process – 200 votes are needed in the first two rounds and 180 in the third). For more on this story see The Economist, The Financial Times, and Bloomberg.