Thursday, January 22, 2015


I am back in the UK and Greece is back in the headlines as the Eurozone crisis refuses stubbornly to subside in line with optimistic forecasts. This time the eyes are on the early Greek election and the probable win by an improbable left coalition.

This was an election that neither Germany nor the Greek government wanted, yet that is what their actions produced. Marcus Walker and Marianna Kakounaki, writing in the Wall Street Journal, provide a superb blow-by-blow account of how it happened.

The infographic provided by the WSJ also gives an insight in why Syriza are ahead in the polls. Taxes up sevenfold from 2009; GDP down by 25% since 2008; 83.9% drop in the stock market since 2008; 25.8% unemployment; 23.1% at risk of poverty. It is true that Greece now has a primary budget surplus - in the midst of a slump - yet the result of austerity economics is that debt has risen, not fallen. Austerity has failed, as it usually does.

Syriza is a symptom of what is happening throughout Europe. The support base of traditional political parties is collapsing. Rather than being a rebellion against the political system, it marks a rejection of a model of political economy. It is an inchoate intellectual revolution that wishes to re-establish Keynesianism as the basis of economic policy making, the model that mainstream parties had abandoned.

So does Greece herald a sea-change? Syriza have little bargaining power. EMU is secured against any Greek default. Greece can be isolated or ejected without bringing down the system. What Greece needs, investment and debt relief, is not on the table. It is hard to be optimistic, except that the flaws remain; Europe is facing recession and deflation. Who knows what a crack will open up, or what will emerge from it? 


Roger McCarthy said...

Depressingly the one thing that may save Germany from deliberately destroying the Greek economy to stop the contagion spreading to Italy, Spain and Portugal may be Putin's aggression in Ukraine for which Merkel may need the maximum EU unity.

The Plump said...

The only problem with that is that TsIpras is pro Putin and has criticised the western response to the Russian actions in Ukraine.