Predictably, after last week’s Greek election it has not taken long for the aggressive war of words to begin in the rightwing media’s attempts try to undermine Syriza. Today’s Economist magazine sets its stall out in no uncertain terms with this pearl of wisdom:
“This newspaper’s solution: get Mr Tsipras to junk his crazy socialism and to stick to structural reforms in exchange for debt forgiveness…A very logical dream until you remember that Mr Tsipras probably is a crazy left-winger.”
What, I wonder, is so crazy about Syriza trying to implement the policies that brought them to power? Clearly the Economist thinks that it is ridiculous that the Greek people should be allowed to have a say in their own destiny. And the type of language used adds nothing to the discussion and only serves to belittle anyone who thinks that there may be an alternative vision of European politics. Maybe its time to face the fact that if Greece were to ultimately leave the Eurozone, NOBODY knows for certain what the medium-term political and socioeconomic outcome would be. We can be sure of some of the short(er)-term economic impacts such as:
- the value of the new Greek currency (Drachma) would plummet in relation to the Euro, making foreign debt repayment even more difficult than it is now. A default would be extremely likely.
- there would likely be a mass run on Greek banks
- the depreciation of the currency would lead to higher prices of imported goods, leading to higher inflation
- exports would become cheaper boosting competitiveness
- depreciated currency would boost the tourism industry as it would become much cheaper for foreign tourists to visit
AND perhaps most importantly, no matter what anyone from the troika may say, it is highly unlikely that Greece would be completely abandoned and shunned by international financial and political institutions. The negative consequences of a ‘Grexit’ would give the people of Greece a very difficult few years as they adjust to leaving the eurozone but history suggests that no one would want to risk serious political turmoil in the Balkans. After all, countries have defaulted on debt before and as long as Syriza has the people behind it, it can try to work out a strong, post-euro recovery strategy. Don’t doubt that this has already begun.
The reason why Syriza is even in government is because the Greek people have been pushed to the wall by austerity. They have voted out of desperation and, so long as austerity is enforced, no amount of threats or posturing by international financial institutes will convince them that they have anything to gain with the status quo.
Greece is currently forced by the troika to maintain a primary surplus of over 4%, diverting billions of euros away from public spending in order to pay interest and debt. As Paul Krugman says, if you crunch the numbers,
“you find that dropping the requirement that Greece run a primary surplus of 4.5 percent of GDP would allow spending to rise by 9 percent of GDP — twice as much — and that this would raise GDP by 12 percent relative to what it would have been otherwise. Unemployment would fall by around 10 percentage points relative to no relief.”
Surely this would be good for everyone! But on the other hand:
” if Greece really does leave the euro — if it turns out that the single currency is not irreversible — do you really think there would be no contagion (within the eurozone)? Wanna bet on it? In particular, think about what happens if Greece leaves the euro and then manages to find its footing — which it probably would after a chaotic year or two. The EU could prevent that by deliberately undermining the post-euro Greek economy. But that would be a betrayal of European principles.”
So here we have a situation where it is politically, financially and morally unsustainable for Greece to continue to adhere to the austerity and debt repayment policies of the troika. And, if Greece were to leave the single currency, it would leave behind chaos in the eurozone but would have at least a fighting chance of getting itself back on its feet within a couple of years. The stakes are high for both Greece and the rest of the eurozone countries. It is disingenuous to pretend that the risk is only on the Greek side.
So no matter what the Economist and its allies say in pushing a capitalist, market-driven agenda, Syriza is in a much stronger bargaining position than most people are prepared to admit. The war of words is hotting up and it is important that the left across Europe fights back in solidarity with Syriza and the Greek people. It is crucial that the right are not allowed to dictate the debate and turn pan-European popular sentiment against this movement. The next few months will be crucial but the eurozone countries and the troika have much to lose if Greece heads for the exit.