Greece – a victory for all Europe?

Hardly had the first exit polls in Greece’s latest general election appeared last night than the euro rose on currency markets and shares in Asia rallied. As far as financiers around the world were concerned, Greek voters had got it right. The conservative New Democracy party had come out in front, albeit by a narrow margin. And the threat of a Greek exit from the eurozone, with possibly dire consequences for the world economy, had been averted, at least for the time being.

Significantly, only Greece’s tiny Communist Party – which mustered about 4 per cent of the vote – actually campaigned for Greece to leave the eurozone (an option nonetheless championed by a number of British Tory MPs, whose intense euroscepticism seems to blind them to reality). Even the radical Syriza party, which came a strong second with its anti-austerity message, believes Greece is better off in than out. However, its charismatic young leader, Alexis Tsipras, rejected calls for a government of national unity. His party will be a loud and persistent opposition instead.

That means that New Democracy’s leader, Antonis Samaras, will have to seek coalition partners among the smaller parties, which includes the veteran socialist party PASOK, which garnered only 12 per cent of the vote yesterday. Mr Samaras will benefit from one oddity of Greece’s electoral system, which gives the leading party 50 extra seats in parliament on top of its proportional share. But signing up junior partners won’t be easy or necessarily quick, even though speed is of the essence.

The main problem is that whereas Mr Samaras accepts that Greece has to maintain the painful conditions imposed as part of the EU’s bailout for the country, the other parties, including PASOK, are demanding that they be eased. However, that is a non-starter as far as Germany – which is largely funding the bailout – is concerned. Foreign Minister Guido Westerwelle has already declared that the bailout programme is non-negotiable.

In order to calm nerves in Berlin and other foreign capitals, Antonis Samaras has made clear that there ‘will be no more adventures. Greece’s place in Europe will not be put in doubt.’ Indeed, he called the election results a ‘victory for all Europe’, while throwing a crumb of comfort to the Greek population by promising that the economic reforms required as part of the bailout package will go hand-in-hand with pro-growth policies.

In a joint statement, the Presidents of the European Council and European Commission, Herman Van Rompuy and José Manuel Barroso, welcomed the Greek election result and expressed the hope that a government can be put together quickly. But even if it is – which is a big ‘if’ – the saga is far from over. Greece has been pulled back from the brink, but the precipice is still there, as an ever-present danger not just for the eurozone but for the world.

* Jonathan Fryer is Chair of the Federal International Relations Committee.

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20 Comments

  • Richard Dean 18th Jun '12 - 11:20am

    Yes, but it’s only one battle in a war that is likely to be long.

    Europe is a big market and what happens in one part impacts what happens in another. What the rest of Europe now needs to do IMHO is provide as much relevant assistance as possible so that Greece’s austerity is less painful, which will in turn mean that the impacts of Greece’s austerity will also be less painful for those other parts.

    It seems astonishingly short-sighted to allow one country to be the main source of bailout funds. I suggest that the UK do its utmost to provide some. If we can lend to nthe IMF then we can do something directly for Greece too.

  • Richard Dean :: “I suggest that the UK do its utmost to provide some. If we can lend to nthe IMF then we can do something directly for Greece too.”
    Jonathan Fryer :: ” Greece’s austerity pain must be eased and Britain can’t opt out of its resposibilities, even if it is not a member of the eurozone. It is also in our interest to make things better”

    Any money we lend to the IMF, we are likely to get back. Any money handed to Greece will spiral into their black hole of debt and never be seen again. Whilst it would certainly be in our interests to make things better [ for the Greeks ], what then for Spain’s debt then Italy’s debt. Focus on this :
    Using recent data it seems that the UK indebtedness as a whole (government, banks, households, etc.), is somewhere in the region of 492% of GDP.
    With flat line growth in Britain, from here to the foreseeable future, how on earth are we going to pay that debt back let alone adding to it with our generosity?
    Stop worrying, and take a numbered ticket and wait. When the bond markets have finished with Europe, our time will come.

  • Richard Dean 18th Jun '12 - 5:20pm

    Let us not be afraid of bond markets. They are ultimately our creatures, not we theirs.

  • I don’t know enough about the minutiae of Greek politics to be sure, but New Democracy and PASOK together polled about 42% of the vote, and this seems to me to be insufficient of a mandate to be able to carry the Greek people further down the austerity road despite having the votes in parliament to defeat Syriza and the other disparate anti-bailout parties. PASOK is in a similar position to us after the 2010 election: go into coalition with your bitter enemy for the sake of the country and be destroyed in the process; or be condemned for ever more for behaving irresponsibly when the future of the country was at stake. PASOK will probably be destroyed even more completely than we will be because in Syriza there is already a dynamic new force with many of the ideals that PASOK once embraced, although Syriza is probably too disparate a coalition and too dependent on the charisma of Tsipras to be able to exist as a significant force outside a period of crisis. The Greek coalition government has to obtain significant modification of the bailout proposals if the rigged parliamentary majority is going to be able to contain the anger of the anti-bailout majority of the population. I assume that after the fall of the Colonels the politicians have made it much harder for there to be another military coup, but the recent history of Greece has shown that there is a serious risk of significant terrorist action by both right and left.

  • Andrew Suffield 18th Jun '12 - 6:51pm

    Let us not be afraid of bond markets. They are ultimately our creatures, not we theirs.

    Yes, our creatures. And as bitter complaints in the UK have shown, we are not willing to reduce our standard of living by a few percent in order to fund anything, let alone the needs of Greece.

    The bond markets are doing what they are intended to do: ensuring that we stay wealthy and people like Greece do not.

    That may not be exactly what you wanted the intention to be.

  • Richard Dean 18th Jun '12 - 7:01pm

    I don’t feel that the bond markets are helping me stay wealthy. Perhaps that is because I was never wealthy anyway. If they really were to try to function to keep Brits wealthy, they’d perhaps realize that keeping Greeks, Spaniards, Irish, and Italians – our potential markets – poor is not a way to do it.

  • Paul Murray 18th Jun '12 - 8:49pm

    Does it really matter whether the austerity programme is extended, delayed or even cancelled? Would it actually make any long-term difference if all of Greece’s debts were simply written off? I see no evidence to suggest that Greece can survive in the Euro – as currently formulated – no matter what is done.

    In fact ,I would suggest that locking the periphery nations into monetary union with Germany can only ever lead to their ruination. The euro is drastically too high in the periphery but too low in Germany. In the absence of Germanic productivity levels, the only solution available for Greece is an endless circle of wage reduction, austerity and cuts that lead to further reductions in GDP that lead to the Euro being even more over-valued which leads to the need for wage reduction…

    Jonathan characterizes support for Greece leaving the Euro as a characteristic of “British Tory MPs” whose “intense Euroscepticism blinds them to reality”.

    The reality is that this is not a matter of Euroscepticism, or communism or fascism or anything else. It is a matter of simple arithmetic. You cannot have monetary union between Greece and Germany without offsetting fiscal transfers – which they Germans are adamant they will never allow.

    In that case the only sensible choice is for Greece to leave the Euro as quickly as possible if it is to ever escape the nightmare of depression into which it is otherwise now permanently locked.

  • Simon McGrath 18th Jun '12 - 10:08pm

    @jonathan – is there anything at all which would make you accept the the Euro – brought in as it was by the unelected Brussels bureacracy by widespread lying over the state of (amongst others) the Greek economy- is a disaster ?

    “Britain can’t opt out of its resposibilities, even if it is not a member of the eurozone” If you are on our list for the next Euro elections will you be standing on a platform that we should hand over more money into the bottomless pit that is Greece?

  • Richard Dean 18th Jun '12 - 11:41pm

    I see no reason why Europe’s periphery cannot become as productive as its centre in some years time. But the changes will be major, and rules and ways need to be developed that prevent one from taking undue advantage of the other.

  • Malcolm Todd 19th Jun '12 - 12:20am

    “I see no reason why Europe’s periphery cannot become as productive as its centre in some years time. ”

    But can you see any reason for believing that it will? Certainly, currency union doesn’t guarantee it: the US has had a currency union throughout its history (I think), and still has huge discrepancies between its member states. It copes with this by having massive transfers, via the federal government, from more to less successful states. As Paul Murray says, there is no way this is going to happen in Europe in the near or foreseeable future. This is why European monetary union was a dumb idea (or, charitably, an idea so far ahead of its time that it was dumb to do it so soon) and is unlikely to last.

  • Richard Dean 19th Jun '12 - 12:44am

    “But can you see any reason for believing that it will?”

    Ok, Mr.Cynical, it will be difficult. 🙁 . Maybe if we all just hang together, whatever happens, then that hanging together willl create the kind of pressures needed to find the ideas and structures needed to fix things?

  • I often think some Liberal Democrats dont reaslise that not all Lib Dems are signed up to the European Project as defined by the European Political classes.As a Liberal Democrat I dont believe in the Euro as I believe it reduces the democratic rights of Individuals.As a Liberal Democrat although I believe in Internatioinal Government I fundamentally believe in Devolving power down not up.This is why although a Lib Dem Member and activist I wont vote Liberal Democrat in the European elections.The Greek election result only delays the inevitable because the euro enthusiasts dont want to admit the criminality of what they have forced on ordinary people.

  • Alex Macfie 19th Jun '12 - 7:50am

    @Peter: It does not make sense to single out European parliamentary elections as a place not to vote Lib Dem over the “European project”, since this is determined as much by national governments as by MEPs. The European Project is promoted just as much by a Lib Dem vote in national elections as by a Lib Dem vote in European elections. And the European constitution is only a small part of what MEPs make decisions on: mostly they vote on the same sort of things that national parliamentarians vote on. As far as I’m concerned, the reason to vote Lib Dem in European elections is to promote liberal values in Europe, and that is what the party’s European election campaign should focus on — that, and making fun of the Tories’ raving-right allies.

  • It is in Britain’s interest to ‘Keep the Greek Crisis Going’………After all, where would the coalition be if it couldn’t trot out, “If it weren’t for our policies we’d end up like Greece”?.LOL

  • Richard Dean 19th Jun '12 - 9:08am

    If Europe takes 40% of our exports, we have a BIG interest in keeping it afloat. We also have a BIG interest in remaining in it, and in jointly developing common technical standards so that our products fit their systems – which of course means theors will fit ours too. I wish we had had the courage to join the Euro. If the Euro devalues, as people are beginning to say will happen, my impression is that we will lose out, but I expect someone will correct me on that one. Our exports will be harder to sell, and their products will look more attractive in UK high streets. I suppose it will reverse the huge stealth devaluation of sterling that seems to have occurred in the Thatcher and Brown eras.

  • “shares in Asia rallied.”

    But that didn’t last very long, in the modern world you can’t pretend for very long.

    “an option nonetheless championed by a number of British Tory MPs, whose intense euroscepticism seems to blind them to reality”

    Of course, blind europhilia is the other side of the coin and has brought us to this situation. Many of those you claim to be eurosceptics were warning about the inability of the Euro to absorb shocks over a decade ago.

    Also, whilst no party may have openly campaigned on an exit there were plenty of people who thought the wrong sort of democracy would result in their departure (just read some of the foreign press e.g. Der Spiegel), a view that the great and good were willing to go with as it helped the cause of bring Greece to heel.

    “However, that is a non-starter as far as Germany – which is largely funding the bailout”

    Ah Germany, the main beneficiary of the Euro project. Germany has gained massively from the undervaluing of the Euro (brought about by allowing the Med countries to join) and is doing very well thank you. Not only that, but now that the crises is in full swing they are also benefitting from the bond markets rush to a safe haven. They now believe that they are going to be able to balance their budget by next year (http://www.spiegel.de/international/europe/euro-crisis-helps-germany-by-lowering-borrowing-costs-a-838880.html).

    Of course, the Greeks themselves aren’t getting much of the bailout at the moment, a lot of it is going to protect the banks that leant them the money (e.g. the French banks). It also being used to fund the defence imports from Germany and France to ensure that their companies do not lose out. It wasn’t that long back that on the one hand the Greeks were being told to cut back, but they were also being sold military hardware by the same people making the most noise about their debt. The figures I’ve seen indicate that Germany and France export 15% and 10% respectively of their military equipment to Greece (see http://www.independent.co.uk/news/business/analysis-and-features/less-healthcare-but-greece-is-still-buying-guns-6257753.html or http://www.guardian.co.uk/world/2012/apr/19/greece-military-spending-debt-crisis).

    All of the debate so far has been fairly technical and designed to preserve the project, but there isn’t much discussion about the people. So the question for those who won’t sort out the issue (or even criticise the project effectively) is:

    How many Greeks have to suffer or die to preserve your project? (no that isn’t really hyperbole – if Greek hospitals can’t even fund routine servicing of medical equipment or if there are problems funding drugs then people will die http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(12)60423-1/fulltext).

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