One of the more puzzling aspects of the years of austerity most of the West has had to endure is why there have not been more protests, and even the odd socialist revolution. Instead, such political consequences as there have been were of a reactionary nature – typically blaming immigrants and “the Establishment”, as with Ukip and France’s Front National, among others.
To an extent, that was also true for a time in Greece, where Golden Dawn was once thought a potent threat to democracy. Now, on the eve of elections, it seems that Greece alone will elect a radically leftist anti-austerity party, with a mandate to end the nation’s “humiliation”, as its leader calls it. The polls suggest that Alexis Tsipras’s Syriza grouping will come to power with a clear mandate to go back to the European Union, the European Central Bank and the International Monetary Fund and demand a renegotiation of the austerity package which, ironically enough, Greece has almost completed. This means that Mr Tsipras is going to be taking on Angela Merkel and the Germans. Good luck with that, Alexis.
The Greek people should understand that no popular mandate will wipe out Greece’s debts. Only its creditors can do that, or at least only they can do so legitimately. Greece is always free to default on its international obligations, but with all the consequences that would bring – the nation would find it almost impossible to fund itself at any affordable rate of interest, and would suffer an even more calamitous reduction in living standards than has already occurred. Mr Tsipras is clearly relying on the fear of contagion to get his way with the Germans, the phenomenon that has paralysed the eurozone periodically in the past few years, and that is a more powerful threat now that deflation is taking hold across the Continent. Crucially, German growth has slowed down and its ability to withstand another round of crises spreading in the usual domino fashion across the Mediterranean to Spain and Italy is much less than it was a few years ago. How much easier just to spend a few more billion euros to keep the Greeks quiet.
Yet all the signs are that Germany, Europe and the world are ready to call Greece’s bluff. The decision by the ECB to create more money this week was especially significant in the way that Germany ensured that the risks of the operation would not be shared collectively, so that each national central bank is responsible for the liabilities of its own government. It marks a change of mood and is a tangible expression of Berlin’s frustration. If Greece left the eurozone, it might not in fact mean the sort of crazy contagion we witnessed before; we are more used to the idea, and there has been time for contingency planning. No one, in other words, would fall off their chair on the news that Greece was bringing back the drachma.
If Greece did, it would be far from an end to Greek problems. Immediately its euro debt would become foreign currency debt, to be serviced in weak and devalued new drachma. Default would probably follow in any case.
Longer term, such a radical move might be in Greek interests – if the opportunity was taken to reform and restructure its economy. The tragedy is that the years of austerity have not allowed that, and may even have fostered the fallacious idea that Greece’s problems are about bad debts and busted banks. If only. Greece’s problem, as with much of Western Europe, is its fundamental uncompetitiveness. Otherwise so volubly defiant, Mr Tsipras has little to say about that.
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