With the left wing anti-austerity party Syriza gaining thirty six per cent of the vote in last week’s elections, their position on repaying creditors is being monitored closely.
After winning the Greek election on Sunday, there has been speculation over the party’s commitment to repaying its creditors. The new Greek Prime Minister, Alexis Tsipras, leads a coalition of his own party and the right-wing party, Independent Greeks. Whilst their polarity on the political spectrum makes it seem like a surprising alliance, the Independent Greeks share the anti-austerity position championed by Syriza. This further suggests that the “troika”, International Monetary Fund, European Union and European Central Bank, will be called to renegotiate the terms of austerity that were decided in 2010, in return for the bailout.
In the first cabinet meeting of this new government, Mr Tsipras used language of moderation, emphasising he was not aiming to enter a “mutually destructive clash” but instead want to form new proposals which would lead to a “viable, fair, mutually beneficial solution”. However, this tempered tone was not well received by the Athens Stock Market, which fell by eight per cent, after the new PM’s address. Moreover, this promotion of accommodation seems to be countered by the party’s actions since being sworn in on Tuesday. They have halted the privatization of the port of Piraeus and have criticized their exclusion from discussions over heightening Russian sanctions. Given the political differences between the EU leaders and the new Greek leadership, changing the terms of repayment will be a considerable task.
Whilst last week’s focus was upon the Greek electorate, the German and Eurozone electorate sentiment will be hugely important going forward. There will be a battle to ensure that any renegotiation does not appear weak in the eyes of the Eurozone electorate. This is particularly true of Germany and perhaps explains why the German Vice Chancellor, Sigmar Gabriel, said he could not “imagine a haircut”. The Netherlands and France have also expressed a desire that the Greek government stands by its obligations. Whilst the Greek government is seeking a fair solution, it is clear that what the Greek electorate and German electorate view as fair, is vastly different. This will be the main stumbling block if talks go ahead. Although, the Greek Finance Minister, Mr Varoufakis, an economist educated at British universities, seems to believe his government’s plans will be reasonable to the average German. However, they have not yet revealed these plans and therefore the likelihood of productive discussions still hangs in the balance.
Promises to provide free medical care to the jobless, 300 kWh of electricity to households below the poverty line and a reduction of taxes, mean a writing off of debt will be crucial in order to meet the expectations of those who elected them. Therefore, the political creditability of Syriza seems to be hinged on their pursuit of a write off. However, in a wider political climate, where austerity is still favoured as a method leading to eventual sustainable economic growth, this may be a challenge to achieve.
Image from https://en.wikipedia.org/wiki/Alexis_Tsipras#/media/File:Alexis_Tsipras3.jpg
