Everything Tsipras hasn’t told the Greeks
Alexis Trispras’ electoral triumph in Greece was a given. What’s less obvious are the repercussions this success might have on European politics. There are those who believe Tsipras could be the new eurozone champion, who will save it from fiscal consolidation policies. And those who, besides the gift for the catchy announcement, believe this young Greek lad has little to say. Personally, I think this latter option is the most likely.
- Monday, 26 January 2015
The truth is that Greece can’t hope to roll back the years. Athens needs support from the Troika comprised of the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission in order to avoid being ousted from the bond markets. Yet Tsipras have never reminded people that without the EU it would have been impossible to secure over 240 billion euro. He’s never pointed out that without the support of the ECB the Greek banks would have collapsed under financial marketpressure during the worst phase of the crisis. But even more importantly, he’s never reminded his electorate that renegotiating terms, or the memorandum of understanding signed with the Troika essentially means leaving the eurozone. The reason is simple. Seeing as every financial disbursement is ratified by an agreement between the country and the lender, if they default who will ever fund Greece on the bond market at current rates? No one. Because international investors fully understand the risk premium concept that applies to government bonds.The more a country is in the doldrums, without a long term perspective and lacking in credibility, the more it will have to pay to fund its debt. There’s no doubt that on the bond market the protective mantel of the Troika has been very good for Greece, seeing as the interest rates it pays on its treasurybonds have dropped significantly since the crisis. Tsipras doesn’t mention this on purpose. What’s for sure is that he’ll soon have to face the music. The longer uncertainty reigns over the fate of the country, the more the markets will be under stress. And the only safety net strong enough to counter these trends is the eurozone. That’s why Tsipras will have to come to terms with the Troika, after having attacked it for so long. There may be some concessions, but the structural reform packet to be implemented won’t change.
The message coming from Athens stems from years of crisis and indiscriminate cuts that were hard to explain to the population. More than one European official with whom I’ve spoken in the last five years agrees that Brussels has to be blamed for a deficit in communication. “We went to Greece and told them what to do, but not why”, I was told by top ranking official of the ECFIN General Directorate of the European Commission.
When a population feels they’re in the cross-hairs and senses that things are going against it, it looks for the easiest way out. Tsipras has managed to ride this gut feeling from the outset, but without explaining what the possible solution might be. In fact, he’s made inroads in Greek hearts by suggesting there’s a way back. Legitimate to say so, and understandable that many Greek citizens should lay their hope in Syriza, considered by many to be the first true political innovation since the times of the Junta.
But what did we have before the Troika? A monstrous array of public policies all focused on maintaining the status quo and personal interests. Corruption and cronyism where the main characteristics in very ministry, every public office. A trip to Athens and a quick few questions is all it takes to establish this. Tsipras is certainly no fool. Promising a return to the levels of wealth enjoyed before the crisis is a perfectly legitimate short term electoral tactic. But one has to ask whether it’s best to tell your electorate fairy tales, suggesting they can get back to where they were before, or whether it might be more advisable to be more realistic and say that no, that level of well-being is no longer on the cards because it was based on policies that are unsustainable in the long run. From our point of view, stark realism is best. Because this crisis is no passing fad, it’s not temporary. It’s the result of a development model that, at least in its most distorted form, is at the end of the line, but so far no suitable replacement has been forthcoming. Kidding oneself one can go back to 2006 is not only damaging, it’s downright silly. Yet from an electoral standpoint it works.
Tsipras’ victory is not a question of good defeating evil. It’s not the victory of the people over the austerity measures. No. It’s the victory of traditional parties over populism. Because when Tsipras fails in his intent and is incapable of keeping his electoral promises and has to come to terms with the Troika to extend the salvage program, the Syriza voters will find themselves facing a perverse alternative: having to vote for those same politicians that led the country to ruin.