London: What’s the story?
After joining the Euro in 2001 – and after a profligate decade that included an Euro 8 billion (Dh40 billion) Olympic Games and torrent of cheap money – Greece hit a fiscal cliff in 2010. Technically bankrupt, but without the ability to manipulate its own currency any more, it had no choice but to ask for international help. A series of bailouts agreed by the “troika” – the European commission, the European Central Bank and the International Monetary Fund – worth a record Euro 240 billion in total, rescued the state’s balance sheet, but at a steep price. An austerity programme unprecedented in postwar European history stripped back social spending, sent unemployment soaring and ushered in a recession so deep that it ravaged the popularity of the traditional parties of power – the centre-right party New Democracy and the centre-left Pasok. New Democracy squeaked an election win in 2012, but yesterday’s vote is expected to favour the anti-austerity leftists of Syriza.
How did this happen?
Greece’s startling decline, from aspiring European power capable of hosting an Olympics to a bankrupt state flirting with anarchy, has left few winners. The economy has contracted by 25 per cent since 2008.
How bad is it?
A steady stream of dismal reports have documented soup kitchens for the middle class, a surge in mental illness and suicide, a rise in abandoned children, a fall in the birthrate, and a healthcare collapse.
Bad, and it rippled across Europe
Across Europe, the Greek precedent created perhaps the biggest crisis the EU has ever faced, as markets speculated it might not have enough cash or willpower to see through the costly rescue bid, and that Greece might ultimately be left to crash out of the eurozone — an ominous precedent. Other countries with similar fiscal holes, such as Portugal, Spain, Ireland and even Italy, teetered. A war of words ensued: Greeks protested that the terms of the bailout were too punitive. The Germans orchestrating the rescue package hit back: why should fiscally sensible north Europeans pay for the profligacy of indolent Mediterraneans? National stereotyping became a European pastime: German papers castigating Greeks as tax-dodging, venal and work-shy; Greeks hitting back with Angela-Merkel-as-Adolf-Hitler posters.
Bad is new good news for Syriza
For Syriza and its leader, Alexis Tsipras, the political and economic crisis has proved an opportunity. The party surged from nowhere to take more than one quarter of votes in June 2012, and in last year’s European elections won more than 26 per cent of the vote. The political ferment has also propelled more extreme forces to the fore in the shape of Golden Dawn, an unashamedly xenophobic party which won more than 9 per cent in the European elections of 2014, and is aiming to improve on its 18 seats in parliament.
Syriza’s promises
Syriza is building its popularity on a slate of promises designed to ease the hardships that millions of Greek face. These include a pledge to provide free electricity to those whose supplies have been cut off, increase food stamps and health insurance for the needy and raise the minimum wage.
The implications for Europe
But the bigger question is how hard it will push to cut Greece’s enormous €320 billion debt load and how, when and whether it will seek to renegotiate the draconian terms of the bailout programme. Tsipras, who has long railed against the externally imposed austerity, has softened his position more recently, as power comes within his grasp. It remains to be seen how he panders to both Greece’s paymasters in Brussels and Frankfurt and to his own broad political base, which includes anti-capitalist activists deeply opposed not just to austerity but to the euro itself.
The prospect of ‘Grexit’
If Syriza does insist on terms unacceptable to its creditors, the prospect of a “Grexit” – Greece exit from the euro – will once again dominate headlines, summits and markets. Some officials have said this eventuality is not as dangerous as it might have been three years ago. But it would amount to the first time since its launch that a country has been forced out of the euro.
Bonus time
One factor in Syriza’s favour: the economy has shown tentative signs of green shoots in recent months. Sustained growth would make it easier for the new government to restore a budget surplus and gain greater international confidence. An electoral quirk might help too: the winning party automatically gets a 50-seat bonus in the 300-seat chamber, making it easier to form a government.
