Is Grexit really possible?
The only thing that seems to be certain with regard to the Grexit situation seems to be the fact that Greek citizens have reached their breaking point. There is a high degree of uncertainty that characterises the situation as Grexit can come with advantages and disadvantages for all the parties involved, and the future development of events depends mainly on how the European Union, together with the other creditors, will manage them.
Also, the situation needs to be considered from two points of view: economic and political. From the first point of view, Greece’s present state is not positive, with its public debt reaching 175% of the GDP. Furthermore, the country also encounters problems when it comes to investments and employment. The city’s capital, Athens, is home to over half of the country’s total population of 12 million and has become in recent years, a case study of what is happening to a broke capital. Experts seem to agree that a relaxation of the debt, together with real measures taken to tackle structural problems, may be good for Greece, and for Europe. However, a new idea has emerged in the last week: that the Greek debt should be forgotten altogether, following the 1953 model of the London Agreement that meant a debt relief for West Germany. A relaxation of the terms is most likely to be given to Greece. But the parts involved will still have to compromise and meet half way. This is where the political point of view comes up, as this situation is an opportunity for the EU and for the winning party on the 25th (most likely Syriza, as the polls indicate), to (re)gain the hearts of the Greek citizens. The EU is aware that a Grexit would set a precedent for other members of the Eurozone and that it could also fuel the Brexit.
What would be the best way for the EU to handle this situation? It could show real support for the Greeks, even if Syriza wins the elections on Sunday. It is clear that Syriza is using the country’s crisis in order to take its turn to the government and that Greek citizens are using the only leverage left, Syriza, as a way to put pressure on the European Union and draw attention to their dead-end situation. Moreover, a vast majority of the citizens do not want to exit the Eurozone (over 74%), and are of the opinion that Syriza will not fulfil its part of the agreement.
Elections, Syriza and Grexit
Since 2012 Syriza has toned down its discourse, and has been leading the polls in the run up to the elections. Syriza is now demanding for a part of the debt to be erased, or at least a relaxation of terms, and appeals to the German citizens by stating that it does not seek quarrel, whilst coming a long way from the demand of an exit altogether.
Now, Syriza has created a beautiful discourse, shaped on the needs and demands of the Greek citizens and stating what its (potential) voters want to hear:
“My party, Syriza, guarantees a new social contract for political stability and economic security. We offer policies that will end austerity, enhance democracy and social cohesion and put the middle class back on its feet.”
“Austerity is not part of the European treaties; democracy and the principle of popular sovereignty are. If the Greek people entrust us with their votes, implementing our economic programme will not be a “unilateral” act, but a democratic obligation.”
“We have not been in government; we are a new force that owes no allegiance to the past. We will make the reforms that Greece actually needs.”
Alexis Tsipras, 22 January 2015
What does Syriza actually promise? Some objectives are:
· To offer free electricity to Greek citizens whose supplies have been cut off;
· To provide food stamps to children;
· To offer health care to those uninsured;
· To provide a roof for the homeless;
· To raise the minimum wage to €750/month (from under €500);
· To introduce a moratorium on private debt repayments to banks above 30% of disposable income.
The party seems to be aware that these are long-term objectives and they have publically stated it. But how long will it take? Economists are of the opinion that without debt relief, and at the current annual growth rate, the economy is set to recover to its 2008 level in 2030.
Who will support Syriza?
A question of ‘who will vote for Syriza and why?’ arises. It seems that many Greek citizens will be voting for Syriza or other insurgents ‘out of hopelessness and helplessness’ and as a form of protest against New Democracy and Pasok, while Syriza is still hoping to get more votes on election day from the undecided . Many of the votes will be given mainly for the reason that Syriza has not yet been to government and the party is hoping that this reason will also give them support from the younger generation that has been strongly affected by the crisis.
In the end, the elections will be important not only for the Greeks, but for all Europeans, as the results and the actions that will follow them, will have an effect on the European Union as a whole along with the very nature and future of the Union being questioned, once again.
Figure 1. Public Debt: GDP Ratio
Figure 2. Interest payment on government debt
Figure 3. Who is the debt owed to
Figure 4. Greek Elections 2015
(1) Is Greek Debt really unsustainable?, Andrew Watt, Social Europe.
(2) Greek elections: Syriza’s young radicals plot a political earthquake for Europe, Helen Smith, The Guardian.
(3) A new idea steals across Europe – should Greece’s debt be forgiven?, Heather Stewart. The Guardian.
(4) UK, Greek election anxiety may see Brexit feed Grexit, Mike Dolan, Reuters.
(5) The Era of Syriza, The Economist.
(6) For five years Greece has been like a patient slowly bleeding, Helena Smith, The Guardian.
(7) End austerity before fear kills Greek democracy, Alexis Tsipras, Social Europe.
(8) Why Greece needs Syriza to win, Philippe Legrain, Foreign Policy.
Edited by: Dina Rokic