SYRIZA wins Greek election

The pro-EU, anti-austerity SYRIZA party headed by Alexis Tsipras won the Greek election on Sunday.

The Greek Parliament has 300 seats, so a majority of at least 151 is needed to form a government. As of this writing, SYRIZA has 149 seats. (Parlamentswahl in Griechenland: Die Ergebnisse im Überblick Spiegel Online 25.01.2015)

Angela Merkel had a very, very bad day on Sunday.

Tony Barber and Kerin Hope report for the Financial Times (Syriza win throws down challenge to Europe 01/25/2015):

With 80 per cent of votes counted, Syriza led New Democrcy [sic], the ruling centre-right party, by 36.2 per cent to 28.0 per cent, giving Syriza a projected 149 seats — two short of an absolute majority. The far-right Golden Dawn party was third with 6.3 per cent, and the centre-left To Potami (“The River”) fourth with 6 per cent.

A Syriza government free of the need for coalition allies would strengthen the leverage of the party’s militant far-left wing — and see the eurozone’s most explicitly anti-austerity government in power since the financial crisis erupted in 2008. Led by Alexis Tsipras, the party’s 40-year-old leader, it would also give Greece one of the most leftwing governments seen in a European democracy since the second world war.

The Syriza leader said on Sunday evening: “Greece is turning a page, it’s leaving behind five years of humiliation and misery … We are putting together a government of social deliverance to carry out our programme and negotiate with Europe.”

Their first task will be to form a government. Their first major challenge is expected to be renegotiating their financial agreements with the Troika (EU, ECB IMF) - or, in short, Angela Merkel.

The left parties in Spain, of which the biggest in terms of public support in opinion polls at the moment is Podemos, are celebrating SYRIZA' win. Podemos' Secretary General Pablo Iglesias, Prime Minister candidate Alberto Garzón of Izquierda Unida (IU) and National Coordinator Joan Herrera of Iniciativa per Catalunya Verds (ICV) all applauded the victory of Tsipras and SYRIZA in Greece. (La izquierda espera la derrota de la troika también en España tras el giro en Grecia Público 26.01.2015)

Spain has a series of municipal, autonomous and national parliamentary elections, though the latter could be postponed until January of 2016. (El calendario electoral de 2015 El Mundo 15.01.2015) One of the most interesting developments to watch in Spanish politics is whether the social-democratic party, the PSOE, will abandon austerity policies and position itself as a potential junior partner to Podemos.

Economist Yanis Varoufakis, who is presumably now a Member of the Greek Parliament on the SYRIZA ticket and possibly a senior economic official in a new government, discusses one of the negotiating points for the upcoming diplomatic battle with Merkel and Germany: a never-repaid loan the German occupation authorities took from the Greek central bank during the Second World War. He explains in Biblical economics leave everybody blind and toothless – Interviewed by Johanna Jaufer 01/25/2015 (interviewer questions in bold as in original):

Something that has been brought up quite a few times in Germany and in Austria as well, is the thing about the reparation payments – because Germany had been chickening out of paying proper reparations after World War 2 – how, in your opinion, did that happen? Was it because they said „oh, Germany is split, we will wait until it will be reunited again“, or was it also the Americans saying „ah, now we need Germany to build our military bases as well, so we will let you off the hook“ – or was it a combination?

It was a combination. Back in the 1940s, the Allies had decided to turn Germany into a peasant country again. They were about to dismantle 700 industrial plants and it was the Americans who stopped that plan – so, they did destroy 700, but then they changed their mind. They changed their mind for reasons that had to do with the way that the United States was designing global capitalism and they needed a strong currency in Europe and a strong currency in Asia – it was going to be the Deutsche Mark and the Yen – and the whole of the European union project was built around that plan. We in Europe like to think that the European union was our own creation. It wasn’t. It was an American design which then we adopted and which of course was consistent with what we wanted, our aspirations. Part of that design meant bolstering the German economy, bringing it out of depression, bringing it out of the mire in which it found itself in the 40s, and, as always, one important component of such an attempt to revive an economy includes debt relief, a serious haircut of debt, debt write off. So in 1953 there was the debt conference in London which savagely cut the debt of Germany to many nations including Greece. But Greece is a special case, because there was another debt that Germany didn’t have to any other country, because in 1943, the Kommandantur here in Athens imposed upon the Bank of Greece a deal according to which the Bank of Greece will print a lot of Drachmes – war time Drachmes – and provide them to the German authorities so the German authorities could buy materials and finance their war efforts and stock up on agricultural goods for the Wehrmacht and so on. But interestingly, the German authorities wrote a contract up. So they actually wrote down the sum of money that they borrowed. They promised to pay interest. So it was a formal loan. The document exists until this day in the (Central) Bank of Greece. That never happened with any other country. So, this is like an official debt, like in a bond, of the wartime German Nazi state towards Greece.

You can really trace it down to exact numbers?

Exact numbers. Of course, the difficulty is to translate that wartime currency which became absolutely inflationary very soon because so many Drachmes were printed. So, effectively, the German authorities, buy accepting that loan from the Bank of Greece, debased the currency, and that had secondary huge social costs throughout Greece. So, it is very difficult to compute exactly what this loan means in today’s terms, how do you compound the interest, how do you convert, how do you count the cost of the hyper-inflation that was created. I mean, supposedly, our German friends are very sensitive to hyper-inflation, so they should understand that their own authorities created one in Greece as a result of that debt. My view is that we are partners, we should stop moralizing, we should stop pointing fingers at each other. Biblical economics, „an eye for an eye, a tooth for a tooth“, leave everybody blind and toothless. We should simply sit down in exact the same spirit as the United States sat down in 1953 and didn’t ask the question, „do the Germans deserve to be punished?“, „is it guilt or is it sin?“, whereas debt, I know that in German there is a conflation of these words – it’s the same word, sin and debt – as opposed to credit, for instance. We should just ask the very simple question, „how can we render the Greek social economy sustainable again so that the costs to the average German, to the average Austrian, to the average European, of the Greek crisis are minimized. [my emphasis in italics]

This is going to be an exceptionally interesting week in European politics.

Merkel can bring a lot of pressure to bear against Greece. But at the same time, she's walking a tightrope. And Greece has plenty of leverage if they are willing to insist on their position. In political terms, Merkel has far more to lose than Tsipras and SYRIZA.

SYRIZA's election victory in itself is blow against neoliberalism and specifically against Merkel's cruel and destructive Herber Hoover/Heinrich Brüning version of it. The coming weeks and months will determine how effective a challenge it is.

Chief editor Michael Bröcker of the Rheinische Post writes about the challenge facing Merkel in Wahlerfolg von Syriza: Wir müssen sparen für Griechenland 25.01.2015. He recognizes that Greece has disproportionate bargaining power in this situation. But he doesn't seem to be so happy about it: "Deutschland sollte anfangen, Geld für die Griechenland-Rettung auf die Seite zu legen. Viel Geld." ("Germany will have to start putting aside money for the Greek rescue. A lot of money.")

A lot of Europeans in the eurozone periphery countries would no doubt feel a lot like this hearing Bröcker's lament:

The Guardian headlined their story by Ian Traynor on the election results, Syriza’s historic win puts Greece on collision course with Europe 01/25/2015:

The damning popular verdict on Europe’s response to financial meltdown is a haunting outcome for the EU’s political elite. For the first time, power has been handed to populist outsiders deeply opposed to Brussels and Berlin, albeit not anti-European, unlike their counterparts on the far right across the EU. For the first time a child of the European crisis, an explicitly anti-austerity party, will take office in the EU. ...

The result throws into question whether Greece will remain in the eurozone and the union overall, sets a precedent for anti-austerity insurgents elsewhere in Europe – notably in Spain, which will hold elections this year – and underlines public rejection of the policies prescribed mainly if not exclusively by Berlin in recent years.

Tsipras now holds Greece’s European fate in his hands. ...

Neither side wants Greece to crash out of the currency. But positions are very far apart, and currently unbridgeable. While the German central bank promptly declared that Greece needed more loans but only on eurozone terms, senior Syriza figures announced that the bailout diktat was “dead”.

“Grexit is unthinkable,” said a second senior Brussels policymaker involved in the negotiations. “It would be extremely bad. Europe is about irreversibility. If you start doubting that, you start pricing in the risk of fragmentation and soon you have no monetary union. The only chance of Grexit is if Greece defaults on its payments. Morally, that would be saying they want to leave.” A default would trigger a run on the banks, capital flight and capital controls. [my emphasis]

That calculation about "irreversibility" and what a default would trigger are what gives Greece such outsized bargaining power in this situation.