Merkel's Unintended Creation: Could Tsipras' Win Upset Balance of Power in
Europe?
By SPIEGEL Staff
Spiegel Online International, January 30, 2015
[...]
It is already clear that Greece would be unable to meet its liquidity needs on
the open market. "Greece would not yet be able to establish complete and regular
access to international capital markets at acceptable conditions," reads an
internal assessment compiled by the German Finance Ministry. "The country
continues to be sensitive to changing market conditions and investor moods."
Yet the EU aid program expires on Feb. 28, with just EUR 1.8 billion left to be
paid out. Tsipras himself would have to apply for an extension, which would be
humiliation following the campaign he just ran. Should he not do so, however,
the country would be faced with a disorderly insolvency. Furthermore, partner
countries would be unable to give him more money from the emergency backstop
fund because without a formal request for aid, his departure would be seen as
being unilateral. Not long later, Tsipras would run out of money and be unable
to pay pensions or civil servant salaries. He would also be unable to service
the EUR 20 billion in debt that Greece currently has with the ECB, meaning the
European Central Bank would be forced to stop lending Athens money. The Grexit
would be complete.
A Game of Chicken
Merkel doesn't want things to get that far. She's prepared to grant the Greeks a
further aid program, even if it requires approval from the Bundestag. However,
the EUR 10 billion that was being considered only weeks ago will not suffice.
Berlin government experts believe Greece will require up to EUR 20 billion
considering that tax revenues are plummeting and privatizations haven't
happened. The money would have to come from the ESM -- no one else would be
prepared to lend the country money. The precondition for the new aid is that
Tsipras must accept the reform requirements and subject the country to the
supervision of the hated troika. That, though, seems unlikely. On Friday, new
Greek Finance Minister Gianis Varoufakis said Athens would no longer work with
the troika. The game of chicken has begun.
"The last two weeks weren't good ones for us," concedes one high-ranking
government official in Berlin. An inexperienced but very self-confident
anti-Merkel government is now steering the ship in Greece. The European Central
Bank made the decision to purchase over a trillion euros in government bonds and
other assets in the euro zone against Germany's will. And now, EU Commission
President Jean-Claude Juncker, with the help of France and Italy, is seeking to
loosen the euro Stability and Growth Pact. "Could it be that we're losing
control right now?" asks one senior government official.
Perhaps. The Syriza election victory sends a message to the rest of Europe. It
arouses hope in movements with similar political platforms in many European
countries, including the Front National in France and Podemos in Spain.
In Portugal, the leftists parties -- the Socialist PS, the communist PC and the
Marxist Bloco de Esquerda BE -- all celebrated Syriza's election victory. Many
there hope it will alter the discourse in Europe and that proposals for a debt
conference for the Southern European countries and for reconstruction plans for
those countries worst hit by the debt crisis will be debated in Brussels.
At the same time, Tsipras' success could also strengthen the European leaders
who hope to change current EU policies, even if they aren't interested in
fulfilling Syriza's demands for a debt cut. Leading the pack are French
President Hollande and Italian Prime Minister Renzi. Indeed, during Hollande's
2011 campaign, he at times sounded a lot like Tsipras. He said he wanted to
"reorient Europe" and to liberate the people of Europe from "austerity".
A Conflict Between Two Mentalities
The dispute between Berlin and Paris was of a fundamental nature -- a conflict
between two mentalities, but also between two schools of economic thought.
Whereas the Germans were of the opinion that the supply side had to be
strengthened and conditions for investment improved through reforms, the French
called for buttressing the demand side. In times of recession, the French
argued, the state must invest.
Although the Germans called it savings, a term with positive connotations,
across the rest of Europe, many considered it to be the specter of "austerity,"
a cold-blooded, anti-growth policy. "The Body Economic: Why Austerity Kills," a
book by Oxford Professor David Stuckler, has become a kind of bible for
opponents of austerity. It's a brand of thinking that really hasn't taken hold
in Germany, even though it is dominating the public debate in large swaths of
Europe. It also shows just how far apart the Europeans really are from each
other, despite being linked by a common currency.
Hollande and Renzi have been seeking for some time now to change the current
policies, and recently they have also enjoyed support from Commission President
Juncker and ECB head Mario Draghi. They note that there has been little economic
recovery in the euro zone since the crisis in 2009 and are calling for policies
modelled after those of the United States, which is now experiencing strong
growth following the financial crisis. When Juncker decides this spring how he
intends to address France's budget deficit, that shift in political course could
become visible.
Merkel's critics in Paris and Rome argue that the lesson from the Greek election
is that you can't force austerity on the people of a democratic country, all in
the name of an overarching aim -- at least not in the long run. Senior
politicians in France and Italy fear that they too could be driven out of office
by protest parties in the same way that an entire generation of Greek
politicians has been pushed aside.
Since it began its term, Hollande's government hasn't committed to any
significant savings or undergone massive reforms. Yet that hasn't stopped
representatives of the left-wing of the Socialist Party from constantly
complaining about the "austerity" Berlin has imposed on Paris. The left-wing
populist Front de gauche (Left Front) party alliance and especially Marine Le
Pen's Front National are singing the same hymn. In contrast to Syriza, her party
wants to abolish the euro in order to end "the submission" of France.
The Hour of the Anti-Establishment
Indeed, this is fast becoming the hour of the anti-establishment forces. The
fact that all centrist parties in Europe have thrown their support behind
policies that, in large part, have been prescribed by Angela Merkel and her
allies, has led to the formation of new parties on the margins.
Often, it's very difficult to categorize these parties according to the
classical political labels of liberal or conservative. The Front National, for
example, pursues anti-foreigner policies, but its economic policies are inspired
by the radical left. In Europe today, the political fault lines no longer run
between left and right. They run between mainstream and the anti-establishment.
In many countries this translates to people being either for or against Angela
Merkel.
In Berlin, politicians are fond of citing Spain, with its conservative
government, as a positive example. After tough reforms, the economy there is
growing once again. Last year the it grew by 1.4 percent and this year the
forecast is for 2 percent growth. Wages have increased, albeit slightly, and the
Spanish are now buying more. The unemployment rate is dropping, but it is still
at around 24 percent, and per capita income is still far below the pre-crisis
level in 2007. These are all reasons that Mariano Rajoy's governing People's
Party could still face defeat in parliamentary elections this fall.
It's likely that the Spanish protest party Podemos ("We can") will repeat
Syriza's success in parliamentary elections. "Hope is coming, fear is fleeing.
Syriza, Podemos, we will win," party boss Pablo Iglesias said this week. "Tick
tock, tick tock," he went on, the clock is ticking for the ruling People's Party
and the Socialists. The political science professor founded Podemos just under a
year ago. In the latest survey taken at the beginning of January by Spanish
pollster Metroscopia, the party landed in first place, with 28 percent.
But it is precisely movements like Podemos that may keep Angela Merkel from
making too many concessions to Greece. The worry is that, were she to do so, it
might signal to voters in Southern Europe that parties with extreme demands can
ultimately prevail.
Fundamental Conflicts Unresolved
[...]
full:
http://www.spiegel.de/international/europe/greek-election-makes-euro-zone-exit-real-possibility-a-1015907.html
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