Will the Greek election of January 2015 change the direction of European politics? As I write in early May, we await the outcome of tough negotiations between Greece and its partners in the eurozone. Regardless of the outcome, the coming to power of this radical left party has raised questions not openly addressed by the European Union for decades.

What are the social consequences of austerity policies? Is sending officials to examine the public accounts of debtor countries the proper way to keep track of agreements between eurozone members? Does the European Union need, instead, growth policies fostered by its own institutions? Should the European Central Bank help solve the Greek debt crisis through its Quantitative Easing mechanism? Do we want to see the EU divided between debtor and creditor nations? Are the eurozone and European Union ready to face a “Grexit,” a full withdrawal of Greece from the eurozone and possibly the EU? What would this mean for the EU project as a whole? Does it even make sense to have a common currency uniting countries in such different economic situations?

The immediate event that raised these challenges was the victory of the radical left Syriza party in the Greek election in January. In this article, I recount the emergence of Syriza, how it was able to win the election and what its victory may mean for the future of Greece and the EU.

What is Syriza?

Syriza, the Coalition of the Radical Left, was created in 2004 from the merger of 17 left parties, becoming the successor to an older left grouping, Synaspismos. Syriza’s own origins can be found in Eurocommunism and the split that took place in 1968 in the Greek Communist Party between reformers and orthodox Communists. The successor party itself splintered in 2010, with members accusing the leadership of becoming increasingly extreme. A new, more moderate party, Dimar, was founded that year and entered the governing coalition for some months after the 2012 elections. Syriza has so far proved successful as a result of its capacity to attract and incorporate the different movements and smaller parties of the left.

This is due in good part to its 40-year-old leader, Alexis Tsipras. Tsipras is not new to politics in spite of his relative youth. He was a Synaspismos candidate in the 2006 municipal elections, rising rapidly to become President of Syriza in 2008, a move that coincided with an immediate boost in public support.

How did it happen?

Nevertheless, before 2012, Syriza, like its predecessors, had to struggle to win more than 5 per cent of the vote. Then, in the May 2012 election, the party won 17 per cent of the vote, which climbed to 27 per cent just one month later after efforts to create a coalition failed and a new election was held. These elections came in the wake of loan agreements entered into by the dominant political parties, the centre-left PASOK and centre-right New Democracy. These agreements totalled €240 billion and imposed severe austerity measures. Many Greeks blamed the old parties’ endemic corruption and administrative ineptitude for leading the country into its dire economic situation.

At this point Syriza understood it had a realistic opportunity to win power and moderated its program. Moreover, by unifying its constituents into a single party, it could take advantage of the 50-seat bonus that the Greek electoral system gives to the party that places first in an election. In the 2013 regional elections, Syriza took power in two of Greece’s 13 regions, including the largest, Attica; in the European elections that same year the party came first with 26.5 per cent. Syriza was here to stay.

In September 2014, the party adopted the Thessaloniki Program, the basis of its platform for the January 2015 election. It called for Greece to remain in the eurozone, but set out a number of measures at odds with the agreement signed by the previous government. These included a wide public investment program, a sort of New Deal to be made possible by the European Central Bank purchasing Greece’s debt, combined with the reduction of Greek and southern European debt. Syriza promised to confront the humanitarian emergency caused by the economic crisis, restart the economy, promote tax justice and implement a national plan to increase employment. There was also to be a transformation of the political system to deepen democracy.

Syriza came first in the January election with 36 per cent of the vote; the 50 added seats left it two shy of the absolute majority needed to govern alone. It formed a coalition the easiest and fastest way it could, bringing the right-wing nationalist party ANEL (Independent Greeks) into government. The decision was criticized by European parties on the left and by EU spokespersons. Martin Shultz, President of the European Parliament, called the coalition a mistake. Observers had expected a coalition with what seemed an ideal partner, Potami (the River), a liberal centrist party created shortly before the European elections whose leader, Stavros Theodorakis, is a popular former journalist. It appears that Syriza saw Potami as being too closely associated with the old regime, with many of its key figures coming from the media, a sector perceived as having benefited from corruption under previous governments. That a left party would choose to ally with an openly right-wing party instead of a more ideologically compatible one reveals just how discredited the old political order is.

Syriza’s coalition inherited a debt-to-GDP ratio of 176 per cent and an unemployment rate of 25 per cent – compared to 127 per cent debt-to-GDP and 9.6 per cent unemployment at the onset of the crisis in 2009. During the last quarter of 2014, the economy contracted by 0.4 per cent over the previous quarter. A recent report by Germany’s Macroeconomic Policy Institute shows that the nominal income of Greek families has decreased by 25 per cent since 2009 as a result of unemployment, wage cuts and tax increases.1 The tax burden on the poorest half of the population increased by 337 per cent, while the burden on the top 50 per cent of income earners increased by only 9 per cent. As a result, the poorer half lost nearly 86 per cent of their income, while the richer half lost only 17 to 20 per cent. At the same time a copayment system was introduced, leaving many without access to medical services. Syriza succeeded in part because it concretely identified with the needs of those hit hardest by the crisis, for example by instituting a “Solidarity4all” network of social clinics and community kitchens in regions it controlled.

What has Syriza’s victory meant so far?

Syriza’s “hope and dignity” campaign prevailed over its opponents’ efforts to instill fear of the consequences of a Syriza government. Its European partners, however, took a different view. For representatives of European institutions, eurozone members and a big part of the press, Greece had lost Europe’s trust. The new government was seen as undermining its credibility in the negotiations, especially through the constantly challenging positions taken by the Minister of Finance, Yanis Varoufakis. Other moves – such as the open threat from the Minister of Defence, ANEL leader Panos Kammenos, that Europe would be swamped with migrants, possible jihadists, if Greece left the eurozone – did not help Greece’s image among its eurozone colleagues.

The new government arrived at the negotiating table with a proposal to restructure the debt, linking repayment to economic growth combined with a six-month unconditional bridging loan. On February 20, the EU agreed to extend the existing program, giving Greece a four-month period to implement promised reforms while avoiding unilateral decisions and deficit-boosting measures. Moreover, Greece had to present a list of specific reform proposals by the end of April.2

What did the Greek government gain from this first agreement? First of all, the primary budget surplus (excluding debt repayment expenditure), which had been set at what Syriza considers a too-high 3 per cent of GDP for 2015 and 4.5 per cent for 2016, was not specified. And second, and also very important, there was no listing of specific measures, which apparently gave the government some latitude to delineate its own reforms without being tied to measures already promised by the previous government.

But the room to manoeuvre is limited since the economy remains fragile and relations between the negotiating partners are tense. Millions of euros have been withdrawn from Greek banks. Tax avoidance, a longstanding problem, persists. Most worrying is the calendar for debt repayment. The largest amounts have to be paid in June, July and August of this year, so that the government is trying to have appropriate financing measures in place as it prepares to meet the deadlines. However, until an agreement is reached, whether Greece will be able to make these payments is highly uncertain.

In the meantime, as negotiations went on, the government acted to relieve the humanitarian crisis, which was at the centre of its election platform. It also passed the “100 doses law” facilitating payment of tax arrears and punishing tax evasion. Several measures have been put into place, or are planned, to fight tax fraud and corruption:

  • controls for issuing receipts in small businesses;
  • measures to fight fraud in the gasoline, beverage and tobacco sectors;
  • collecting money from big debtors – the main case being that of the entrepreneur Leonidas Bobolas, who owed €2 million for money held in a Swiss bank account and paid €1,8 million after coming to an agreement with the government;
  • an amnesty for those with undeclared money in Swiss banks as long as they pay 15–20 per cent taxes, or 10 per cent if they bring the money back to Greece.

In addition, in an effort to stem tax fraud, the government is willing to make it compulsory to use a credit card to pay any amount above €70 in the larger Aegean islands where the tourist industry is concentrated. Similarly, more payments to the public sector such as taxes, water/electricity bills and the like are to be paid through bank accounts, reducing the possibility of skimming by public officials. Other enhancements have been put in place for collecting taxes and limiting tax evasion, with the General Secretary of Public Revenues transformed into an autonomous institution. New taxes and sources of revenue include a 20 per cent tax on TV and internet commercials, payment for the use of frequencies by media channels, an increase in luxury taxes and a possible tax increase for those with incomes above €50,000.

In addition, several parliamentary committees have been created. There are two which have special symbolic importance: one is to audit Greece’s debt and identify what part of the debt has been unfair (for example, money to pay illegal commissions), while another committee will study what Germany owes Greece for Second World War reparations as well as a “loan” the occupiers took from the Greek central bank.

The current negotiations

13_Table 1

The Eurogroup meeting in Latvia on April 24 marked the beginning of the most critical period of negotiations. The proposals presented by the Greek government were not accepted and the isolation of Finance Minister Varoufakis became all too evident. Soon afterward, Varoufakis was sidelined from the negotiating team and the Greek government seems to have acknowledged that it has to make compromises if it wants to resolve its liquidity problems. Some areas where it could compromise, set out in table 1, were identified in the following days.

However, certain specific measures agreed to by previous governments in the so-called “Hardouvelis email”3 (the previous Finance Minister’s list of measures accepted in November 2014), are not up for negotiation since they cross “red lines” (see table 2).

13_Table 2

In an interview on April 27, Prime Minister Tsipras said that if these proved insufficient, the government would have to call a referendum because the mandate it had from the people was clear, in terms of both its election platform and its willingness to stay in the eurozone. He added that he was confident that they would not reach this point because there would be an agreement.

Is it really likely that the institutions (European Commision, European Central Bank and International Monetary Fund) will accept the red lines set by the government? The government claims that introducing more flexibility in the labour market and facilitating layoffs will not ease its budgetary situation but will merely increase already high levels of unemployment, adding that collective bargaining is well established in Europe. However, the institutions (especially the IMF) believe that the current law inhibits investment. In terms of social benefits, they consider the system unsustainable. While agreeing that profound reform is needed, the Greek government refuses to cut benefits, at least in the short term.

But even in the unlikely event that the institutions found such concessions adequate, it is uncertain how the Eurosceptic members of the party and government will react. About one third of the members of Syriza share the position of the Left Platform that the government has already gone too far in privatization, relationship with the United States and alliances with the right. A key spokesperson is Panagiotis Lafazanis, Minister of Productive Reconstruction, Environment and Energy, who opposes all concessions. Though threatening to resign from the government, he has not gone so far as to say that he would prefer a Grexit, and he still insists that he is confident that the government will achieve its objectives.

13_Table 3

Finally, where does this leave the Greek voter? As we can see in table 3, the government can still count on the support of those who took it to victory. But support for its negotiating position is softening. According to the last survey, carried out by the University of Macedonia in mid-April, 45.5 per cent support the negotiating strategy of the government, down from February’s level of 72 per cent. Prime Minister Tsipras is still very popular, with a 55 per cent favourable rating, though this has also gone down from 70 per cent. A similar proportion (52.5 per cent) trust the government to implement its election platform, compared to 75 per cent in February. Fears of a Grexit have gone up (56 per cent compared to 45.5 per cent in March), while an unchanged 80 per cent want an agreement with the Eurogroup. Indeed, 75 per cent say that Greece should stay in the eurozone at any cost, 60 per cent are against calling a referendum and 70 per cent oppose calling new elections.4

An uncertain future

So far, Greece has been able to pay the IMF but it is undeniable that the country is facing serious liquidity problems. Cut off from normal lending mechanisms, it depends on its partners but has not received any money from them since August 2014. The current bailout program must be renewed or replaced by June 20. Greece continues to deny that it will ask for a third loan agreement and insists that there will be a deal more in line with its initial position. But money is expected to run out before June, which poses a huge burden for the Syriza government. It has made it clear that it will give priority to paying salaries and pensions over interest payments due, which could mean a Grexit. This puts in jeopardy not just the future of Greece but that of the eurozone itself: the relevant treaties did not foresee a country abandoning the euro while staying in the EU.

Syriza has tried to remain faithful to its campaign promises, but Greece’s dependence on funding from the European Central Bank, the European Commission and the International Monetary Fund has forced it to pull back. The Greek government now faces opposition from all sides, both internally and externally. Its concessions have not won it support within the Eurogroup where there is consensus that Greece must be held to its commitments – even among those most affected by austerity, such as Spain and Portugal, both of which face fall elections that will affect their relationship with the Eurogroup. Especially in Spain, the government has been facing harsh competition from the left, in the form of Podemos, a new party that is Syriza’s ally in Madrid.5 Podemos has been careful not to overstress its support for Syriza in case a Grexit occurs, but it clearly shares the positions of the Greek government. Now Spanish politics faces added uncertainty as a second new competitor has entered the ranks. Ciudadanos, a party founded in 2006, is posing a serious threat to both the ruling centre-right PP and Podemos, apparently pushing Podemos toward the centre and, overall, reducing the already weak support for Syriza in Europe.

In Greece itself, Syriza faces constant opposition in parliament, as well as from the extraparliamentary far left and anarchist groups. It must rely on its supporters and the trust of other citizens seeking an end to austerity and a restoration of Greeks’ dignity and sovereignty. Politically, there is really no alternative to Syriza, as we can see in table 3: the second-place party, New Democracy, led by former Prime Minister Antonis Samarás, is 15 percentage points behind. What then will happen if the government is unable to implement its key election promises? The instability this portends is not good news either for Greece or for the EU.

Finally, we should note that important voices, including Nobel laureate economists Joseph Stiglitz and Paul Krugman, have come out in support of the position of the Greek government. They too think that the EU needs to be reformed urgently if such dire situations are not to recur. Above and beyond what happens to Greece, has the EU taken note?