With the radical left party Syriza taking power in Greece — winning 36 percent of the vote and 149 out of 300 seats in the Greek parliament — speculation has begun anew on whether Greece will leave the Eurozone as the sovereign debt crisis there roils on.
Call them Occupy Athens. But, as it turns out, the victory was not purely a left-wing affair.
Sidestepping the traditional center-right New Democracy and now-annihilated socialist party, Syriza, also known as the Coalition of the Radical Left, has formed a coalition with the conservative Independent Greeks Party, which won 4.8 percent of the vote and 13 seats.
Syriza improved on its 2012 showing, when it won 27 percent of the vote.
The party’s rise to power has been predicated on not implementing the terms of the bailout agreement. It ran a €22 billion deficit in excess of 12 percent of GDP in 2013.
Here’s the truth. Greece never has followed the Eurozone’s budget rules, and it never will. The government has depended on the low-cost financing that the euro provided as a subsidy. Now those days are gone. And after a brief lull in 2014, interest rates are again rising in Greece, now above 9 percent on 10-year treasuries.
On top of it all, newly sworn in Prime Minister Alexis Tsipras wants to renegotiate the terms of that debt.
That is, to default on part of its remaining €240 billion of obligations. Readers will recall that Greece has already defaulted on €100 billion of its debt in 2012.
Tsipras says he wants to stay in the euro, but major Eurozone players like Germany are already signaling there will be no more deals on Greek debt. “We believe Greece has accepted terms that are not off the table after the election day,” spokesman for German Chancellor Angela Merkel, Steffen Seibert, said.
So, if Tsipras cannot default by staying in the Eurozone — that is, if he cannot muscle Germany and the rest of Europe into a debt deal — his only alternative would be to default by leaving the monetary union.
The way that would work is by returning to the drachma, and then Greece’s debt would be revalued into the new currency. From there, the drachma certainly would sink relative to the euro, thereby relieving Greece’s debt burden in absolute terms.
The truth is that is probably Greece’s only salvation. The debt cannot be repaid. Even the partial default — which was one-third of Greece’s total debt — has not been enough to turn things around. Unemployment stands at 29 percent almost five years after the crisis began. What have they got to lose now?
Germany and the Eurozone are stuck between a rock and a hard place. A debt deal with Greece would force Berlin and Brussels to also accommodate Italy, Spain, Ireland, and others, which combined have more than €3 trillion of debt, who would come looking for the same deal.
A Greek euro exit might have a similar effect.
Either way, the success of Syriza could foreshadow a coming collapse of the Eurozone. It follows the remarkable success of the Five Star Movement in Italy, the M15 movement in Spain, Marine Le Pen in France, the True Finns in Finland, the Independence Party in the United Kingdom (UKIP), and the rejection by Iceland of bank bailouts — Euroskeptic parties all.
The conservative Le Pen hailed Syriza’s victory, asking her countrymen, “Do we want to be free? With the European Union, we are not… Neither our immigration policy, nor our monetary policy or agriculture,” saying the election was “opening the trial of the ‘euro-austerity.’”
“When we try to avoid democracy, the boomerang always returns with increased speed,” Le Pen added.
Meanwhile, in Italy, Beppe Grillo’s Five Star Movement already has collected 50,000 signatures for a petition of Italians wanting to leave the euro.
In the United Kingdom, Nigel Farage is poised to run for prime minister on an anti-European Union message. He called Syriza’s win “a desperate cry for help from the Greek people, millions of whom have been impoverished by the euro experiment.”
The visceral reaction against Europe has as much to do with the sorry state of the economy there as anything else. For that reason, it is not purely a left- or right-wing movement politically. What is happening is the depression in Europe is shaking up the power structure. And rightly so.
A warning, if you will, from across the pond to the U.S. The establishment parties in Washington, D.C. will either turn the economy around, or one day, the voters might turn them out on their ears.
Robert Romano is the senior editor of Americans for Limited Government.
