speri.comment: the political economy blog

Evaluating the first three months of the Syriza government in Greece

‘Politics is not the art of the possible.  It consists in choosing between the disastrous and the unpalatable.’ – J. K. Galbraith

Pavlos Gkasis, Associate Fellow of SPERI & Lecturer in Economics, International Faculty of the University of Sheffield-CITY College, Thessaloniki

pavlos_gkasis_100The Syriza-led coalition government, which was the outcome of the Greek national elections on 25 January 2015, has just completed three months in office.  As its deliberations with the institutions (the so-called troika) are now entering their most critical phase, it is timely to evaluate its progress thus far in carrying through its strategies for the political, economic and foreign relations agenda of Greece.

The essence of Syriza’s thinking during this period has been the attempt to open up every possible issue in order to explore the ground for different alliances it might be able to form inside and outside the European Union.  This task was never going to be easy for a new and inexperienced government to pursue.  It demands the most delicate of diplomatic manipulations, given that Greece is a small country that also bears the burden of a huge public debt which, in itself, puts its very independence and autonomy in question.  What makes the task even more difficult is that Greece’s government cannot be expected to prevail on every issue that is thereby opened up – no government could – which means that it needs to be prepared for important and (sometimes) painful compromises.  These are bound, in turn, to have an effect on both its internal and external balance of power, perhaps even putting its willingness to carry out reforms and therefore its fundamental credibility at risk.

The Greek government opened the politico-economic agenda by declaring a renegotiation of the terms under which the first and second memorandums had been signed by preceding governments.  With unemployment well over 26% in the fourth quarter of 2014 (41.1% in the age group 25-29 years and 24.7% in the age group 30-44 years), with a trade balance that is decreasing but is still negative, and with GDP (quarterly and  annual) depicting the continuing depression of the Greek economy, it is certainly plausible to conclude that the adjustment programmes have put most fiscal goals back on track.  But it’s equally obvious that these policies, which aimed in effect to ‘devalue’ the whole of the Greek economy (since a devaluation of the currency was impossible inside EMU), have had the gravest effect on the productive basis of the economy.  This has resulted in a reduction of the country’s ability to grow, which is the key problem being experienced today.

Based on these arguments, the Syriza government’s main goal was to shift the focus of deliberations to macroeconomic policies and models, and indeed political approaches more broadly, attempting to rise above technical issues mostly expressed previously in accounting terms.

Seeking to put extra pressure on its main protagonists in the troika, the Greek government demanded reparations from the German state for the occupation of and atrocities done to Greece by the German army during the Second World War and sought assertively to promote its pre-election agenda and its determination to stick to its pre-election declarations.  The problem with this maximalist approach was that it significantly weakened the trust that other EMU member-states felt they could have in the Greek government.  It also damaged the perception held internationally that Syriza would be willing to tackle the extended corruption that has surrounded the Greek state for decades and rendered other EMU member-states more than somewhat sceptical of the willingness of the government to create a functioning state characterised by efficiency, effectiveness and a friendlier business environment.  In effect, Syriza sent mixed signals by employing both reformist and populist rhetorics and policies, thereby magnifying the unease (and exaggeration) of global opinion-makers and the global media, including a large part of the Greek media.  For all of the zeal with which the government declared (righteously) the failure of the rescue programmes, it did not express or exert the same decisiveness in relation to beginning to solve, once and for all, the diachronic predicaments of the Greek state.

Further scepticism about Syriza was also aggravated throughout the EU by the rapprochement between Greece and Russia.  As we know, the turmoil and hostilities in Ukraine led the EU to impose sanctions on Russia, which responded immediately by imposing an embargo on EU agricultural products among others.  Syriza’s leader, Alexis Tsipras, moved to negotiate the exclusion of Greek products from the embargo (which had significantly damaged Greek exports in Russia), a discount on the price of natural gas (which is one of the highest in the EU) and the signing of an agreement for the ‘Turkish Stream’ natural gas pipeline project.  Russia has in turn been accused of using the promise of future profits from this pipeline as a ‘Trojan horse’ with which to destabilise the EU and, more generally, of taking advantage of the dire situation of the Greek economy to achieve a fracture in the EU’s hitherto solid foreign-policy front against Russia.  Given that Russia has sought historically to gain access to the Mediterranean, its recent engagement with Greece appears to many in the EU and in NATO to threaten longstanding policy commitments and well-understood rules of the game.

A greater unease has also developed of late in the bilateral relations between Greece and the United States.  Despite the fact that the US has generally kept a neutral stance throughout this period, urging all parties to come to an agreement beneficial for all participants, recent changes in Greek legislation regarding the rules of detention of the imprisoned proposed by the Syriza government have caused something of an outcry in the US and indeed also in the UK, some of whose official representatives have been executed in the past in terrorist attacks on Greek territory.  Many of these moves by the Greek government can be explained as attempts to try to satisfy some of the more radical opinions within the electoral basis of both of the political parties that comprise the Syriza-led coalition.  Nevertheless, they have served to exacerbate tensions and promote scepticism about the real intentions of the new government.

What does all this suggest by way of an interim reading of Syriza?  It surely points to a pressing need for the Greek government to restructure its strategy in terms of the key political, economic and foreign policy goals it wants above all to achieve.  Clear, as opposed to muddled or contradictory, lines need to be drawn on the stances that Greece takes in all aspects of the ongoing debate.  Following a difficult period of constant and strenuous negotiations with perhaps too many parties and countries, it is now time for decisions and choices to be made.

Fortunately, Greece is not a tabula rasa.  It is a member of both the EU and EMU and has long enjoyed peaceful and productive relations with both the US and Russia.  What Greece needs urgently to do is to formulate a more coherent framework in relation to its political economy and its foreign policy goals.  Even after this is done, there will still exist a requirement for a more subtle manipulation of the diplomatic arena than we have seen from the Syriza government thus far.  Otherwise, there is the unfortunate possibility that Greece will run out of allies.

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Categories: Employment, Europe and the EU, Finance, Inequality, SPERI Comment, Tax, Welfare | Tags: , , , | Leave a comment

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