Greece had its fifth election in six years on Sunday. For the second time this year, Syriza won the majority of votes and formed a coalition with the Independent Greeks. Together, the two political parties hold 155 of the 300 seats in parliament. Now Athens will focus on implementing the austerity measures that came with the third bailout package.
Polls before the Greek election last week showed a close tie between Syriza and New Democracy, but it was no surprise Syriza won. Even though Prime Minister Alexis Tsipras was not able to fulfill previous campaign promises to decrease austerity measures while keeping Greece in the euro, Greek citizens still appreciate the seven-month public battle he fought against Athens’ creditors — the European Commission, European Central Bank (ECB) and the International Monetary Fund (IMF) — in an attempt to reach a better deal for his people.
Since New Democracy is partly responsible for creating Athens’ current fiscal mess, it is no surprise it failed to attain a majority of votes, holding 75 seats. While Tsipras no longer inspires hope for citizens, he is perceived as the lesser of two evils because the other political leaders are considered toxic.
The unique aspect of this election is that a new party, Popular Unity, formed as a result of the country’s financial roller coaster. Popular Unity was founded by defectors of Syriza that abandoned the party after Tsipras accepted the third bailout package with the support of opposing parties in the summer. Popular Unity’s campaign stance is to revert back to the national currency, the drachma, and abandon the euro so that Greece can regain economic sovereignty and be able to devalue its currency to attract foreign investment.
According to Costas Isychos, Popular Unity’s spokesman, “The eurozone is a social, political and economic space designed for German surpluses and deficits in Europe’s periphery. For countries like ours it is wrong.” It is not surprising that Popular Unity did not have much support because Greeks do not want to revert back to a national currency – they want to keep the euro and have less austerity so that the economy can improve. Greeks will continue to feel that they have little power to drive the direction of their country’s future as Athens no longer possesses economic sovereignty – its creditors do.
Sadly, a political party that aligned with the majority of Greeks’ desires, to remain in the euro with no austerity, was not an option in this last election. It is impossible for Athens’ economy to improve since Greeks cannot find jobs and government spending has decreased. Combine these fiscal problems with the hundreds of thousands of refugees that will likely remain in Greece since the northern European countries have closed their borders, violating the Schengen Agreement, and Athens’ economic challenges will multiply quickly.
Under normal circumstances, it would be best for Athens to negotiate the terms of its debt with creditors. However, Greece’s creditors are not willing to find a bearable path forward for Athens with better conditions, as seen by the “state of emergency” plan creditors formed during the last round of negotiations (no set template exists to boot a member of the euro out of the currency). It is time for Greek citizens to wake up and understand that agreeing to bailout deals causes more harm than good. In reality, the agreements are just buying more time without solving the root problem: lack of growth. Hence, Greeks should have voted for Popular Unity to regain economic sovereignty and at least have a chance of improving their economic state even though they would have to endure years of depression.
After struggling for seven months, Prime Minister Tsipras was pressured to accept a third deal with intense austerity measures. If a third bailout was not agreed to, Greece would have had to revert to a national currency since the ECB capped its liquidity assistance to Greek banks. Because Greek citizens identify themselves as Europeans, they were not in favor of abandoning the euro – Tsipras’ back was against the wall. The third bailout package comes with tax hikes, pension reductions, and deep cuts to the health and social welfare systems. Greek citizens will start to feel these painful effects in October.
The new Greek government will begin to focus on new priorities. In the first hundred days wage and pension costs will be cut, early retirement will be reformed, banks will be recapitalized, a timetable will be set to lift capital controls, and more than half of the state electricity network will be privatized along with other reforms. Greece hopes to receive debt relief in January. This is important because even the IMF declared Athens’ debt unsustainable and restructuring necessary to make the debt load maintainable. This is commonsense since Athens has been borrowing money for years that has been recycling itself, going to banks to pay interest.
Athens’ creditors think cutting spending, revamping Athens’ economy with drastic measures, and borrowing money repeatedly will produce different results for Greece’s economy, but that is the definition of insanity. Greece’s unemployment is 26 percent, youth unemployment is over 50 percent, and its Gross Domestic Product has decreased by 25 percent since 2010. Athens’ creditors do not care about the future of the country, its people, or the selling of historical national assets, they just want taxpayer dollars returned that were used to bailout Greece’s private lenders.
Just because Greece has borrowed more money and the media has gone silent does not mean Athens’ fiscal house is in order – far from it. In fact, it is likely Greece will need to borrow more money in the future if it does not receive debt relief since the country’s loans are skyrocketing and its economy is not experiencing growth. Furthermore, important economic decisions that affect Greek citizens are not being made by elected representatives, but by the European Commission, ECB and the IMF. Sooner or later Greeks will become sick of having no say in economic decisions. With high unemployment and Greek youth fleeing abroad for opportunities, the Greek economy will continue to struggle as long as it remains in the euro.
This article was originally published in LexNext – The Lexington Policy Blog on September 22, 2015.