What was the outcome of the Greek election over the weekend and why were these elections important?
The recent elections in Greece have sent shockwaves across Europe. A far-leftwing party, The Coalition of the Radical Left, commonly known as Syriza, won the most seats but not enough seats for an absolute majority.
Within hours Syriza formed a small coalition with the right-wing Independent Greeks. It is also worth pointing out that the neo-Nazi Golden Dawn party came in third place.
In terms of the future of the eurozone and European integration these elections were historical. The future of Greece in the eurozone and the pace at which economic and political integration in Europe will take place is at stake.
Why is Syriza so popular and what did it promise the Greek people?
Basically, Syriza branded itself as the anti-austerity party. During the elections it adopted populist policies that make for good campaign posters but not responsible government. For example, one of its key policies is raising minimum monthly salaries from €580 to €751. But in the current economic climate this is hardly possible.
Most importantly, Syriza promised an end to austerity measures. It has also pledged to re-negotiate the terms of the multiple bailouts Greece has received in the past few years with the hope to delay debt repayments or even have the some of the debt written off.
How will the rest of Europe respond? Does this mean that Greece might leave the eurozone?
During his victory speech Alexis Tsipras, the leader of Syriza, declared an end to the “humiliation and pain” of Greece’s austerity measures. He has pledged to re-negotiate Greece’s debt repayments to the Troika (the European Union, International Monetary Fund and the European Central Bank).
On the other hand, European leaders have said that, regardless of the electoral outcome, Greece must stick by the terms of its €240 billion bailout agreement.
What we are likely to see now is a massive game of chicken between the EU—led by Germany—and Greece. As this is uncharted territory and anything could happen—including Greece leaving the eurozone and returning to its old currency, the drachma.
What does this mean for the future of the European Union?
The election result shows the political challenges Europeans face in the coming months. Many Europeans are tired of the EU’s incessant push for deeper political and economic integration. This disenchantment has manifested itself in the rise of extreme parties across Europe. Of course, the most obvious example is Syriza and Golden Dawn in Greece, but the National Front in France, and extreme right-wing party, won the most seats during the 2014 European parliamentary elections.
This doesn’t bode well for an organization that won the Nobel Peace Prize in 2012 for bringing stability to Europe.
What about the future of the European economy?
It is unlikely the election results will bring drastic change to the eurozone. Countries in Europe’s south have not made the structural reforms needed for long term adjustment. The eurozone’s overall economic freedom is seriously undermined by the excessive government spending required to support an elaborate welfare state. Economic policies being pursued by many eurozone countries are hindering productivity growth and job creation, causing economic stagnation and rapidly increasing levels of public debt.
Regrettably, many still believe that more European integration, not prudent economic policies, is the answer to Europe’s problem.
The EU was created, in part, to help bring stability and peace to Europe but what we see in Greece is the opposite, right?
Yes, that is correct. Over the past six decades the EU has developed into one of the most undemocratic institutions in the western world. Power has been removed from sovereign-nation states and has become consolidated in obtuse decision-making institutions in Brussels. Those countries that joined the Eurozone and adapted the single currency have lost monetary control.
Not since the start of the EU experiment, have more Europeans felt so distant from the decision making processes of governance that affects their daily lives. In the case of Greece, decisions taken by the EU have had a disastrous effect on society. The unemployment in Greece is just over 25 percent. Youth unemployment is closer to 60 percent. A whole generation of young people feel lost in society. This does not bring stability, but breeds resentment.
Why should American policymakers care?
Political instability in Greece could spill over to other places in southeastern Europe—already one of Europe’s most unstable regions. It has already been reported the Russian ambassador to Greece had been seen entering the headquarters of Syriza, so who knows what influence Moscow might be able to buy—literally— in the new Greek government. Syriza has also questioned if Greece should remain in NATO.
American banks hold some eurozone debt and would take a hit in the event of any default. But the deepest effects would likely be felt through the interconnected global financial system. In a slagging European economy U.S. exports to European markets would start to fall off and would decline, for example.
