The Greek Left

15 May

Attention has turned back to Greece. The results of the May 6th elections have made it difficult for any party to form a coalition. The pro-EU/IMF bail-out parties lack a majority, as do the anti-austerity parties. After attempts by the first three parties in last Sunday’s poll to form a coalition, new elections look most likely. And as polls give the radical left party, Syriza, around 27% of the vote, making a Syriza-led coalition possible, many have begun to look in detail at the modalities of a Greek exit from the Eurozone. The Financial Times is running a series of articles this week on the topic of “If Greece goes…”.

In a thoughtful piece, Paul Mason recounts the emergence of Syriza from the fragmentation of the traditional Greek left. After a definitive split between Stalinists and Eurocommunists in the early 1990s, Syriza has emerged from the combination of the latter wing with a bundle of other groups and interests. Benefiting from the radicalisation of young people during the anti-globalisation heyday of the late 1990s and early 2000s, Syriza has managed to sustain its momentum. It mobilized around anti-government protests in Athens in 2008 but its main gain has come from the crisis itself. The mainstream centre-left party in Greece, PASOK, committed itself to the EU bail-out in a way that opened up space on the left for Syriza. Something in between PASOK and Syriza was formed two years ago: the Democratic Left, a small parliamentary group that had been supported by some PASOK members and which won 19 seats in the recent elections. However, as the split between pro and anti-bailout positions deepens, Syriza is picking up the most votes.

Given this history, Syriza’s position on the current crisis is a curious one. It seems that Syriza leader, Alexis Tsipras, is not advocating a Eurozone exit for Greece. Rather, he claims that what is being demanded of Greece by its creditors is unacceptable and should be replaced with far more lenient terms. His criticism is of the austerity measures and his position does not extend to a wider criticism of the Eurozone as such. As Mason notes, many Syriza supporters are in fact strongly attached to the idea of a “social Europe”; what they are unhappy about are the measures being implemented in Greece today. Tsipras’s strategy is in essence one of calling Merkel’s bluff: rather than letting Greece leave the Eurozone, he thinks the Eurozone’s main creditors would rather soften their austerity demands and cut Greece some slack.

As a political position, there is a lot to criticize. For a start, it seems curious to be vehemently against the EU/IMF bail-out agreements and yet to support Greece’s membership of the Eurozone. The bail-out agreements are after all consistent with the underlying philosophy of the Eurozone: balance budgets, maintain competiveness through internal devaluations when necessary, and achieve long-term harmonization of the Eurozone economies through structural reform. The bail-out for Greece is thus a concentrated and speeded up version of the Eurozone’s basic principles. Secondly, there is something spineless about Tsirpas’s position. It seems that if Syriza were to come to power and form a coalition, and if it were then to fail to renegotiate the bail-out terms with the EU and the IMF, it would eventually oversee an exit from the Eurozone. But this would appear – from Syriza’s point of view – as evidence of their hand being forced. They didn’t want to leave the Eurozone but their hand was forced by evil creditors. Equally, from the side of the remaining Eurozone member states, the story would be one of Greece being given all the chances of remaining within the single currency zone but choosing in the end to jump. The Greeks would say they were pushed; the Eurozone members would say they jumped. Greek exit would thus happen rather in the manner of the Czech-Slovak divorce of the early 1990s: accidentally, with no one claiming responsibility for what happened. Or as the FT puts it, “In a game of brinkmanship, neither Athens nor the rest of the Eurozone would want to take responsibility for a Greek exit from the single currency. Recriminations would fly”.

A more consistent position for Syriza would be for it to assume fully its criticism of austerity policies. This means arguing for a Greek exit from the Eurozone and proposing a clear growth plan after the exit. At the moment, Tsirpas is playing a dangerous game of assuming that Greek membership of the Eurozone is important enough to the country’s creditors to force a revision of the bail-out terms. There is little in that position beyond opportunism and Tspirpas may find himself presiding over the consequences of his own miscalculation.

4 Responses to “The Greek Left”

  1. Arthur Goldhammer May 15, 2012 at 12:23 pm #

    You write that “it seems curious to be vehemently against the EU/IMF bail-out agreements and yet to support Greece’s membership of the Eurozone.” But consider the consequences of leaving the eurozone. One estimate I have seen suggests that a switch to the drachma would entail a devaluation of 50%, a decrease in GDP of 20%, and 20% inflation in the first year. In addition, the Greek government would lose access to external financing for at least several years, necessitating immediate cuts in government spending. The hardship imposed on the Greek population would be at least as severe as the hardship imposed by dictated austerity. Hence it makes sense to explore the possibility of a renegotiation of the terms that would allow Greece to remain on the euro. Unfortunately, this effort is likely to fail, but it’s worth a try given the costs of exit. Exit will also be costly for other countries. One estimate puts potential French losses at 66.4 billion euros, or 3% of GDP.

    • Current Moment May 15, 2012 at 1:21 pm #

      Thanks for the comment. The debate about the costs of a Greek exit from the Euro have been going on for a while. The discussion has certainly shifted: from dire and apocalyptic pessimism to a more balanced discussion. As the FT pointed out yesterday, were Greece to leave it would probably overshoot its depreciation goals initially, stabilizing only later. And it would certainly be painful. But it is a possible option and one considered by more than just a lunatic left fringe. Those on the receiving end of bail-out conditionality so far might well respond that Euro exit would hurt but staying in hurts a hell of a lot too. The point about Syriza was that they are trying to have their cake and eat it: soak up the support of those entirely disillusioned with the whole EU/IMF austerity packages and to win the support of those far more willing to accept the need for change and who want at all costs to stay in the Euro. As argued on TCM before, this is a little like the Hollande position in France: challenging austerity in a way that assumes future growth will come from more borrowing on the back of German credit worthiness. If you are going to challenge austerity, then you must have an alternative growth model that relies on more than just credit. I am not sure Hollande or Syriza really have such a model, which makes their position seem opportunistic.

  2. Alastair May 22, 2012 at 3:58 pm #

    What do you make of this argument folks?

    It suggets that the calculation of the hopes of getting a better deal is not just about how important Greece is to its creditors, but about whether the creditors have a credible means of ejecting Greece. I don’t think we should expect Syriza to worry about the philosophical consistency of the Eurozone, rather than calculating their chances of bucking its current logic.

    • Arthur Goldhammer May 22, 2012 at 4:15 pm #

      The ECB is keeping Greek banks afloat with the Emergency Lending Authority (ELA), which is providing liquidity to banks whose depositors have already run. The ELA can be cut off at any time, and Greek banks would then collapse. Greece would then have no choice but to exit. So I don’t buy the argument.

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