A Syriza win could put the eurozone back into crisis – and push the economy back to the top of the UK agenda
By
Before the eurozone crisis, Greek elections didn’t receive much attention in Westminster. At the moment, however, the polls from Athens are being studied by every politico from the Prime Minister down.
How Greece votes on the 25 January could determine the result of our election. If anti-austerity Syriza triumphs, the eurozone crisis will move from a chronic phase into another acute one. For the second election in a row, the backdrop to a British poll and possible coalition negotiation would be talk of debt defaults and bank runs, as Athens struggles with the eurozone straitjacket.
Syriza does not want Greece to leave the euro. But it does want the ‘fiscal waterboarding’ to stop, as its leader Alexis Tsipras puts it. Tsipras wants a restructuring of Greece’s debts and an end to the most aggressive cuts. But the powers that be in Europe are determined not to grant him this. Berlin, Frankfurt and Brussels are all adamant that there will be no changes to the terms of the Greek bailout deal. The irresistible force is about to meet the immovable object.
As so often with Greece and the euro, this isn’t about a small economy on Europe’s south-eastern edge. Rather, the European establishment is worried that if Syriza succeeds in winning concessions it will prompt voters in other peripheral countries to vote for radical leftist parties in the belief that will lead to a loosening of fiscal discipline. Already, polls in Spain show Podemos – a party founded less than 12 months ago – in the lead, ahead of a general election this year. There are also concerns that vindication for Syriza could make French voters more inclined to back the anti-single currency Front National in the 2017 elections. A victory for the Marine Le Pen, a horribly real prospect, is described by one senior diplomatic source as the ‘ultimate nightmare for German policy’.
The hope of European governments is that the EU’s unbending line will make the Greek electorate conclude that backing Syriza is simply too much of a risk because it brings with it the danger of expulsion from the euro. David Cameron seems to think that this fear strategy will work. When he was asked about the situation in Greece at a meeting with the executive of the Tories’ 1922 Committee on Monday, he replied with a detailed analysis of the polls. He pointed out that Syriza’s advantage is small and has narrowed since the start of the campaign. Cameron is right that Syriza’s lead isn’t huge. But it is consistent. There were ten polls published in the Greek press last weekend and all had Syriza ahead, with the smallest lead being 2.7 per cent.
Under the Greek electoral system, the party that wins the most votes is given an additional 50 seats alongside its proportional share. If Syriza can hold on to its lead it should be able to form some kind of coalition government. However, some suspect that – as in 2012 – no viable government will be on offer in Athens and the country will have to vote again later in the year.
But if Tsipras does end up as Prime Minister, a game of chicken will commence between him and other EU leaders. Having based his entire campaign on the promise that he can improve Greece’s bailout conditions, he can hardly change course. But the Germans, the Finns, the Dutch and the other structural hawks won’t accept any backsliding on reform.
The Germans are more prepared to let Greece go than they have been at any previous point in the euro crisis. They believe, in a way that they simply did not in 2011, that a Greek exit from the single currency is containable. There is confidence, possibly misplaced, that the rest of the eurozone’s banking system would be able to cope with ‘Grexit’. There are also domestic political reasons for Angela Merkel’s CDU and its sister party, the CSU, taking a tougher line. They are concerned about the rise of the anti-euro Alternative für Deutschland, which is hitting seven per cent in the opinion polls. Any concessions to Athens would put rocket boosters under AFD.
There will be no quick resolution to this issue. It is unclear how any state could be kicked out of the single currency. There is no legal mechanism for doing it. But if the problems of the eurozone do become acute once more, that would have a profound effect on UK politics. The backdrop to the general election campaign would be economic uncertainty on the Continent. There would again be talk of sovereign debt defaults, bank runs and the like. The result would be to push the economy up the political agenda and to give more credence to warnings about the dangers of the government borrowing even more money. Both of these things would be to the Tories’ benefit. As one backbencher says, ‘On the economy, what helps us is either very good news or very bad news.’
Some Tories are not so sanguine about the prospect of the eurozone’s problems returning to the front page. They fret that it would boost Ukip by making Europe an election issue; that Nigel Farage would use this moment to bolster his argument that Britain’s membership of a declining trading bloc held it back. Nevertheless, it seems reasonable to calculate that the overall effect of a return of the eurozone crisis would be to help the Tories. In these circumstances, Cameron and Osborne’s achievement in stabilising the British economy would look more impressive by comparison. Voters might also conclude, to borrow a phrase that Gordon Brown came up with to see off David Miliband, that this is no time for a novice.
Far more important than the effect that a Syriza win would have on our politics is what it might do to the eurozone. It is very hard to see how Greece can ever prosper inside the single currency as it is currently constructed; monetary policy alone won’t turn Greeks into Germans. If a Syriza victory brought this crisis to a head and led to Athens being forced out, or Berlin accepting that the eurozone has to become a full fiscal union to succeed, it would be a good thing.
The one thing that is certain is that the last thing that Greece needs is more of the same; four years nailed to a euro cross is long enough for any country. It is time for the Greeks to roll the dice.
This article first appeared in the print edition of The Spectator magazine, dated 17 January 2015
