January 30, 2015 by Paul Goldsmith
There’s going to be a lot to write about Greece over the next few months. The inevitable result of a country having 25% unemployment, 60% youth unemployment and GDP that has dropped by 25% over the last five years due to the effect of policies imposed from outside sources has happened.
There is a simple explanation for the far-left Syriza party’s victory, and it is that the population had control over the politics of the country, but not the economics, and they decided to wrest back control. This is why the coalition that Alexis Tsipras, the Syriza leader, from a radical communist background, has formed with the Independent Greeks Party, a far-right party notorious for its racist views, makes perfect sense.
The priority for Tsipras is economics. Independent Greeks are opposed to austerity, like Syriza are. They are opposed to austerity for different reasons – being that they are unhappy with the infringement on sovereignty of austerity being imposed by EU dictation, whereas Syriza is unhappy with austerity for its’ human cost, but they are opposed to austerity, and therefore will support Syriza in dealing with it.
Make no mistake, there is going to be a confrontation between the Greeks and the EU. It is going to be a long confrontation, but, if this is possible, it will be a confrontation without being confrontational. The Greeks understand that the EU do not want them to leave the Union, and also don’t want them to default on their debts, so at some point, if they remain patient and peaceful, the EU will blink.
It is possible that the nature of the blinking will not be as humiliating as one might think. For instance, Tsipras has noted that the ECB has embarked on quantitative easing (printing money) in order to help deal with the demand-led deflations occurring across Europe at the moment (this contrasts which what is about to be cost-led deflation in the UK). The ECB would like Greece to use this money to pay down their debt. Tsipras argues that this should be used instead for easing the burden on the poorest families, relaxing the cuts to the welfare state and public sector that has removed the safety net in Greece to such an extent that homelessness and starvation is stalking the country to a level that Food Bank Britain could barely comprehend.
Tsipras, and his Finance Minister Yanis Varoufakis (he of the ‘austerity is financial waterboarding’ quote) can also make the point that as long as Greece is part of the Euro it lacks the ability to devalue its currency, meaning it cannot get a boost in exports that could have arisen from them becoming cheaper to foreign consumers.
This is important to understand. Britain, out of the Euro, could use monetary policies to suit their exact needs. This includes lowering interest rates early in 2009 to 0.5%, thus devaluing Sterling by 25%, and benefitting from the boost in aggregate demand from exports that led to. This also included a significant amount of quantitative easing, which gave banks money to lend to people starting new businesses and people buying homes too. This is why our version of austerity has been nothing like Greece’s and why we growing economically and have about 6% unemployment.
Greece, without any control over monetary policy, has instead been given a drastic haircut fiscally, which has cut so deep it has basically turned into a bit of a scalping. Hence the fall in growth and the unemployment that make it no surprise that the Greek population have decided to look outside the two centrist parties that got them into this mess in the first place.
So this is why Tsipras has looked beyond the divisions between Syriza and the Independent Greeks on political issues like Gay marriage and the role of Church and State, and concentrated purely on their economic consensus. This consensus is that the neo-liberal solutions of privatization and cuts to the public sector somehow bringing growth. imposed by the ‘Troika’ of ECB, EU Commission and IMF) are bringing Greece to its knees, and it is time that they stood up and did something about it.
So we get, during one of the most fascinating UK election campaigns in years, to also stand by and watch Syriza and Alexis Tsipras try and prove that there really is an alternative to austerity when a country’s finances need to be repaired.