As the UEFA Euro 2012 finals edge closer into view, it seems almost fantastical that as little as eight years ago, Greece – the winners of Euro 2004 in a victory so improbable that we still have trouble believing it happened – was something of a poster-child for economic development. Its glittering – nay, chic – Athens Metro, constantly expanding GDP and membership of the elysian eurozone all pointed to a nation-state which had attained End of History status.
Today, Greece has more of a fin de siècle vibe about it, with social, political and economic norms being upended. The legislative elections of 6th May 2012 saw a collapse in the vote for the two traditional powerhouses of Greek politics – the rightist New Democracy and its Panhellenic Socialist Movement counterpart – and a surge in support for the hitherto unknown Synaspismós Rhizospastikís Aristerás or SYRIZA, a radical leftist coalition which was, somewhat ironically, founded in 2004. With the post-election horsetrading having failed to produce a government, another election has been called for 17th June 2012 – and SYRIZA, presently the second largest entity in parliament, could end up as the biggest single representative bloc in a few weeks’ time.
This is potentially a development of great significance on a number of levels, but we at Mediolana believe that it could be particularly interesting because of SYRIZA’s stance on seeking bailout money from the European Union: it rejects such a policy, with its European policy spokesperson Yiannis Bournos claiming that there is ‘no way’ that Greece will be ejected from the eurozone; even if the EU were to cut off funding, Bournos affirms that Greece will be able to rely on a combination of its own tax revenues and alternative financing arrangements courtesy of China, Russia and the Middle East.
But for all the novelty of this perspective, is Bournos actually correct? We foresee at least three serious problems with SYRIZA’s position:
1. Risk. The assumption that the Greece would ultimately never be compelled to exit the eurozone amounts to calling the bluff of Germany, a country where bailouts of indebted southern European nations is broadly unpopular: nearly two-thirds of survey respondents were opposed to a fresh Greek bailout package in February 2012, and it seems unlikely that any German leader – even the bailout-happy Angela Merkel – would wish to risk too much political capital on this issue indefinitely.
2. Drachma ≠ Panacea! In the event of a Greek withdrawal from the eurozone, SYRIZA would be forced to rely on the good name of a new currency, presumably a variant on the former national currency of Greece, the drachma. However, with the country’s reputation for relative fiscal rectitude in tatters, the value of any new currency would be subject to severe downward pressures: Greece’s proclivity for deficit spending and current reliance on foreign capital to meet even basic expenditures is now common knowledge, and currency markets are likely to reflect this.
3. Eastern Promise? Leaning heavily on emerging markets and petromonarchies with current account surpluses is not necessarily a viable long-term strategy, either. China’s European financing strategy involves nothing less than the giving by the recipient country of rock-solid collateral, while Russia and many Middle Eastern states are likely to need their largesse to assuage domestic dissent. Root-and-branch tax reform, transparent governance and the construction of an export-defined economy is surely of greater utility – but is an avowedly anti-capitalist collective best placed to deliver these initiatives?
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