Drama in Athens

Landslide Victory for Anti-Austerity Forces

Source: Handelsblatt
Excitement in Greece after Sunday's elections.
  • Why it matters

    Why it matters

    If Greece’s new government carries out its promise to end austerity in Greece, the country could default on its debts and ultimately leave the euro zone.

  • Facts

    Facts

    • Syriza has won 149 out of 300 seats in the Greek parliament.
    • It came 2 seats short of an absolute majority.
    • It is to form a coalition with a right-wing, euro-skeptic Independent Greeks party.
  • Audio

    Audio

  • Pdf

 

What many in Berlin and Brussels long feared has come to pass.

In the end, Europe’s austerity measures went too far.

Alexis Tsipras, the 40-year-old former communist, was celebrating on Monday after his anti-austerity party Syriza won an overwhelming victory in the Greek elections over the weekend.

“Today the Greek people have made history. Hope has made history,” Mr. Tsipras told supporters in a victory speech on Sunday night, and vowed to end their pain. Whether he actually can remains to be seen.

Syriza, the radical left alliance made up of an array of parties and groups, had confounded even the most optimistic of expectations, by coming within a hair’s breadth of an absolute majority.

Results show Syriza won 36.3 percent of the vote, compared to 27.8 percent for the ruling center-right New Democracy Party. Golden Dawn, a far-right party that had once appeared to pose the biggest threat to Greece’s mainstream parties, came in third with 6.3 percent of the vote.

Syriza fell just two seats short of an absolute parliamentary majority, winning 149 out of 300 seats in the Greek parliament. Monday morning, Syriza said it would form a coalition with the right-wing Independent Greeks party, which won 13 seats.

That party’s leader, Panos Kammenos said Monday that he would enter a coalition with Mr. Tsipras.

Coming out of Syrizia headquarters on Monday morning, Mr. Kammenos said: “I want to say, simply, that from this moment, there is a government. The Independent Greeks will give a vote of confidence to the Prime Minister Alexis Tsipras.”

“Today the Greek people have made history. Hope has made history.”

Alexis Tspiras, Syriza leader

Syriza won with an overwhelming message that opposed the austerity imposed on Greece by its troika of international lenders including the European Union, the European Central Bank and the International Monetary Fund.

The party had argued that the spending cuts and tax increases the troika demanded after the euro crisis as a condition for €240 billion in bailouts to Greece were counterproductive, onerous and had to end.

Syriza succeeded in winning moderate voters by ditching more radical demands such as a NATO exit and nationalization of banks.

“For the last six months, Syriza have toned down their rhetoric,” said Spyros Economides, a politics professor at the London School of Economics. “They have come up with a policy which says we are going to deal with the humanitarian dimensions off the crisis and look people after the people who have suffered the most from austerity. They said the first thing they will do is deal with fundamental issues of housing, food, medicines, making sure there is free electricity for those who need it.”

The question is what happens next. Greece is still dependent on loans from international creditors to stay afloat.

A bailout from the troika runs out at the end of February and a new one has to be negotiated to avoid bankruptcy.

Mr. Tsipiras will face the uphill battle of meeting voter expectations whilst reaching a deal with international lenders.

The time pressure is enormous. Without a new deal, Greece is projected to run out of money by July.

“The clock is ticking. By the end of February, Greece will have had to have found some kind of deal on the debt sustainability,” Julian Rappold, expert on Greece with the German Council on Foreign Relations (DGAP) in Berlin, told Handelsblatt Global Edition.

“It won’t be child’s play for either side. They both have a lot to lose. It is a classic poker game, both will have to see what kind of points in common they can find while not moving away from their maximum demands.”

In Germany in particular, there is huge resistance to giving in to Syriza’s core demand: a debt writedown.

At the same time, Germany won’t want to be so inflexible as to force Greece out of the euro zone.

“Germany is not interested in kicking Greece out of the euro. And I don’t think that the new Greek government will leave the euro either. I believe that Syriza will fail to push through with their political concept,” Philipp Missfelder, the foreign affairs spokesman for the Chancellor Merkel’s Christian Democrats told Handelsblatt Global Edition.

“The troika will remain firm and will insist on the fulfillment of the agreement. Greece has already received a lot of leniency over the past years,” Mr. Missfelder said.

Elmar Brok, a CDU European affairs expert, rejected Syriza calls for a debt haircut.

“There cannot be a debt write down now, because if there are no reforms there and the country is not more competitive, then one will have debts again in three or four years,” Mr. Brok said. “That is why they have the conditions have to be met first before there is any debt cuts.”

Hans-Peter Friedrich of the Christian Social Union, the CDU’s Bavarian sister party that has taken a tough line on Greece throughout the euro crisis, warned Greece not to veer away from its austerity program. “The Greeks have to bear the consequences themselves and cannot pass them onto the German taxpayers.”

The German Greens have, however, backed the idea of a debt deal with Greece.

“We are in favor of socially fair changes to the bailout program and for a conditional debt cut in exchange for social and economic reforms in Germany,” parliamentary leader Anton Hofreiter told the Rheinische Post.

The leftist Left Party, which is allied with Syriza, celebrated the victory on Sunday night. “The Greeks have voted out two corrupt old parties, who heaped this mess upon them,” Left Party leader Bernd Riexinger said at the party.  He said that that troika’s euro policy, which had been driven by the German government, had failed.

Germany, as the European Union’s largest and richest country, has been the biggest contributor to the two Greek bailouts.

 

 

Elections in Greece-01

 

Berlin has also spearheaded the austerity drive in Europe, which asserts that the best response to the euro crisis is to tighten belts, reduce debt and implement structural reforms — which has imposed great costs on Greece, where nearly one in three now live at or below the poverty line.

The European debt crisis hit Greece like a tsunami. In 2010 Greek borrowing costs soared to unsustainable levels, forcing Athens to turn to its European partners for help. In 2012, the country received another loan, this time from the European Stability Mechanism, the bailout fund established to help struggling euro zone members.  The ESM has a maximum lending capacity of around €500 billion. Germany provides 27 percent of the contributions to the fund.

The effects of the crisis on Greece have been enormous. The economy has nose-dived, contracting by around a quarter since 2008 and unemployment has soared to around 25 percent. Youth unemployment is around 50 percent and a generation is growing up that has never worked.

The party has pledged to strike a deal with the troika to write down the debt, currently 175 per cent of gross domestic product and to tackle tax evasion.

This time around, the party’s tone is more moderate. Mr. Tsipras has been keen to state that he will not act unilaterally and has spent the past few months seeking talks with European politicians and policymakers to reassure them that a Syriza victory would not be a disaster.

The party will be keen to point out that it is in a better position to implement reforms than its predecessors, the center-right New Democracy and center-left PASOK.

“When it comes to the judiciary, tax evasion, transparency or fighting corruption, Tspiras as an outsider, not part of the Greek political establishment, and can present himself as an honest broker, who can really push these reforms through,” Mr. Rappold said. “That could lead the lenders to ease a bit on the austerity and allow him the possibility to tackle the social crisis.”

Nevertheless, there is little willingness to meet Syriza half-way on the issue of debt.

Syriza's radical revolt is underway in Greece, as the leftist alliance pledges to end austerity.

So far the ECB and Eurogroup, the group of the 19 euro zone finance ministers, have ruled out major concessions to Greece.

“It is not up to the ECB to decide whether Greece needs debt relief. This will be a political decision. But it is absolutely clear that we cannot agree to any debt relief involving Greek bonds held by the ECB. This is not possible for legal reasons,” Benoit Coeure, an executive board member of the European Central Bank in Frankfurt, told Handelsblatt.

On Friday, Eurogroup chief Jeroen Dijsselbloem said that while there was “room to maneuver” with Greece over its adjustment program, any new government must honor existing agreements.

For Mr. Tsipras the difficulty will be in finding a deal that is acceptable to the troika, that also meets his elections pledges and is radical enough to placate the more leftist elements in Syriza.

“I fear that Tsipras will be held hostage by people in his own party,” Mr. Economides said. “There are lots of people, at the leadership level and at the base of party saying now we are in power, what’s stopping us. Let’s be more radical.”

 

 

Siobhan Dowling and Meera Selva are editors at Handelsblatt Global Edition, covering politics. Franziska Scheven is also an editor at the Handelsblatt Global Edition, covering companies and markets and contributed to this story. To contact the author: dowling@handelsblatt.com and selva@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!