Notebook, 27 January 2015: SYRIZA’s Next Moves

For a long time, I haven’t focused on unfolding election results like I zeroed in on last Sunday’s parliamentary elections in Greece. SYRIZA’s significant not because it a leftist government, after all, socialists have ruled in Greece for a long time, but SYRIZA has posted the first anti-establishment party I can ever recall posting a win. If the definition of radical is anyone who demands structural change in the political economy, then SYRIZA qualifies. (Radical is frequently (mis)used as a synonym for militant, and most Americans haven’t grasped the difference, even though they have been electing right-wing radicals since 1980.)

Anyways, I was pleased to see a radical left victory at the polls. It took long enough. Alexis Tsipras, the new Greek Prime Minister, has chosen to put himself in a no-win position. On one hand, he must negotiate hard with the troika (the European Commission, the European Central Bank and the IMF) on behalf of a Greek electorate which insanely wishes to remain in the eurozone. As one commentator puts is:

In what universe is it a good thing to have over half of the young people in entire countries without work, without prospects, without a future? And then when they stand up and complain, threaten them with worse? How can that possibly be the best we can do? And how much worse would you like to make it? If a flood of suicides and miscarriages, plummeting birth rates and doctors turning tricks is not bad enough yet, what would be?

Source: It’s Not The Greeks Who Failed, It’s The EU

Well, that universe exists in the minds of the Finns and Bundesbank President Jens Weidmann, who, even as voting was underway, said, “I believe it’s also in the interest of the Greek government to do what is necessary to tackle the structural problems there.” Structural problems meaning things like honoring pension commitments, providing healthcare, etc. After all, that doctor mentioned above who turned to prostitution to support her children and parents isn’t apocryphal. Her name is Georgia.

At any rate, Tsipras can’t win a head-to-head battle with the troika and Greeks will be expecting some kind of progress on economic matters. So he’s between a rock an a hard place there. The thing is, a recent poll finds that 75.7% of Greeks still wish to remain in the eurozone anyways. I get why. Greek corruption is played up to be just about as bad as it gets and Greeks probably side with the troika on reform, even if they’re not quite clear that the troika doesn’t give a rat’s ass about Greek corruption. Thus far, the troika seems to care only about dismantling Greece’s social safety net. Probably as a prelude to dismantling it in Spain, France, and eventually Germany. Effectively, the troika’s position is that Greeks better forget about growing their economy until their debt is paid. Of course, this demand makes it impossible for Greece to do so:

GDP of Greece under the austerity program

Anyone recall what happened to Weimar Germany when it was forced to pay reparations?

The obvious thing for Tsipras to do is to try to harden Greek opinion against the northern block controlling finances in Europe. He should, as @billmon1 puts it:

https://twitter.com/billmon1/status/559871648997064705

After all, things aren’t going to get any better in Greece even if he follows the route taken by previous Greek governments, so why not? Nobody’s talking about what should be the sole topic of conversation: rebuilding Europe’s economies, and Tsipras should be hammering this point home, 24/7. Furthermore, Tsipras should be pointing out that the northern block they already treats Greeks like second-class Europeans anyways.

WHEN Tsipras fails, his cabinet should immediately resign, which will trigger another election, and SYRIZA should be preparing for that right now. Wars aren’t won by a side which, victorious in battle, fails for follow up on it. Happens all the time. That election, which may very well take place this spring (Greece faces a February deadline to refinance its debt, and hasn’t got the scratch to meet it.) At this point, SYRIZA should demonize Brussels, the Finns and the Germans and at the very least, demand that Greek voters let him put default and a Grexit on the table in any future negotiations. So, early elections. Again, @billmon1 gets right to the point:

https://twitter.com/billmon1/status/559861743590313986

I say, “So what?” It’s a gamble, certainly, but the reality is as I have described. Northern eurozone countries feel fine about trashing Greece:

The nut of that problem, as we will see, is that while may be a very estimable-sounding position, it may not be as pragmatic as it appears. Greece likely has better odds of winning concessions if it is less reasonable, since the Germans and the even more implacable Finns are convinced that the periphery countries are immoral beggars who deserve to be ground into the dust if they cannot or will not pay their debts. Greece is unlikely to be able to shake the perception in the North that they have the upper hand and can force Greece to heel, giving at most only fairly minor concessions.

Source: How Much Success is Syriza Likely to Have in Ending Austerity?

So Greece has little to lose in trying.

In my scenario, SYRIZA exits office early without too much blood on their hands, retains some of the momentum gained by Sunday’s victory, hits the streets and either comes back with a stronger mandate, and hopefully an absolute majority (they needed 151 seats to govern without a coalition and succeeded far beyond expectations, coming away tantalizingly close with 149 seats), or future failures can be laid at somebody else’s feet and SYRIZA lives to fight another day. Maybe the troika will deal much more leniently with another New Democracy government if they feel a radical SYRIZA waits in the wings. The EU situation is hairier than than the Finns and Germans seem to think it is. I don’t know how good this polling is, but everyone’s commenting about SYRIZA’s counterpart in Spain, Podemos (the purple line graphed below), which came out of nowhere to take a leading position in Spain’s politics:

Anti-establishment party Podemas surges in Spain

And even though Beppo Grillo’s 5 Star Movement in Italy tanked back in 2013, because of the banking cartel, euroskepticism is now nearly the dominant sentiment. In France, even the loathsome Marine Le Pen has hopped on the bandwagon.

Another thing. Even if Greece bites the bullet and lets the bankers write their budgets, that’s no guarantee they’ll let things get better. That’s exactly what Latvia did. Riga received high praise for acting “responsibly” but was screwed nonetheless:

Compare, Iceland’s GDP (red) vs Latvia’s GDP (blue)

As for the Finns, when the EU crumbles, they can go back to spreading their cheeks for Moscow. Good riddance. The Germans will probably find out too late that a lot of the market for their goods will dry up as one European country after another goes belly up, and facing Putin, Berlin may find themselves needing to bear the burden of a larger military budget as well. In truth, Greece and other periphery countries don’t have an awful lot to lose right now and when the shit hits the fan, the northern bloc have only themselves to blame.

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