2015 was a rollercoaster of emotions for Europeans. The Syriza Party’s victory in the Greek election in late January marked the beginning of an unnerving showdown over whether Greece would remain in the euro zone. The winner of the election, Alexis Tsipras, portrayed himself as Berlin’s adversary in a crucial battle over the future of Europe. But now, at the start of 2016, little remains of this revolutionary momentum. Mr. Tsipras is grudgingly implementing tough reforms, against both his declared will and that of a majority of Greeks, and in doing so he is saving his country from bankruptcy. He no longer qualifies as a leader of the anti-austerity movement.
On the other hand, the left-wing populist Podemos Party achieved a respectable result in Spain’s elections last month, although it was not nearly enough to put it in charge of the government. Still, Podemos is likely to bring about the tentative end of growth-promoting structural reforms in Spain. This would be unfortunate, because the country, with GDP growth of more than 3 percent this year, serves as a positive example of a successful reform policy. Spain has an export surplus, the budget deficit is shrinking and the situation in the labor market is beginning to improve. These successes will be jeopardized if a prolonged period of political instability begins now.
Italian Prime Minister Matteo Renzi is already interpreting the Spanish election result as a signal against an austerity policy that, as he says, primarily serves German interests.
Structural reform and fiscal consolidation, as backed by Germany, has been losing support across Europe for some time now. The message sent out by the decisions of 2015 isn’t one of continued austerity. Instead, the message is that no country will leave the euro. Lip service to the Stability and Growth Pact and a show of effort to comply with reform requirements are sufficient as quid pro quo for financial support. The most important thing is that appearances are preserved. The European Central Bank supports the protraction of the crisis with its zero interest-rate policy and its massive government bond-buying program.