The uncertainty shrouding the Greek economy continues with as much zeal as ever as the seemingly hapless state embarks upon a New Year. With the failure of the Greek parliament to elect a new president on December 19, snap elections have been scheduled for January 25. Incumbent Prime Minister, Antonis Samaras, plans to maintain the austerity measures stipulated by Greece’s bailouts conditions. Conversely, Alexis Tsipras, premier of the leading opposition party, Syriza, is gaining increasing popularity with promises for an immediate end to austerity.
Appealing to millions of Greeks who have suffered immeasurably from the recession, Tsipras pledges to introduce a host of drastic social benefits in order to alleviate the current “humanitarian crisis”. For those facing enduring periods of unpaid wages and a heavy reliance on food donations, they are now being offered the Golden Fleece after an arduous journey. If Tsipras fulfils the promises made during his campaign, this would cause Greece to default, swiftly exit the Eurozone and plunge the country further into economic chaos. Yiannis Milios, leading economic advisor for Syriza argues that “no disaster will happen if Syriza come to power, but a disaster is going forward with extreme austerity measures.”
The EU has warned that the social programme outlined by Tsipras is an unrealistic set of false promises
In a somewhat inconsistent pre-election campaign message, Milios says that “in no case” will Syriza leave the Eurozone. He is correct. Despite recent commentary, if Syriza wins the upcoming elections, the Eurozone cannot be abandoned. The new regime will be tied to complying with austerity measures and the agreements signed by their predecessors. An extension or freeze of repayments due in 2015 may occur if successfully negotiated by Tsipras. Doing so will keep the various factions of Syriza and the electorate itself appeased. If not achieved, the risk of destabilisation is high and is likely to result in re-elections. According to Professor Kokkoris, Chair in Law and Economics at Queen Mary University, “Tsipras has to try to win something more from the Troika if he wins the election, otherwise the situation will never stabilize.”
The EU has warned that the social programme outlined by Tsipras is an unrealistic set of false promises; the Greek economy is not able to fund such an unapproved increase in government expenditure. Tsipras may indeed introduce some of the promises made during his pre-election campaign, which will only be possible over a lengthy timescale. “Syriza will not be able to achieve everything they have promised as fast as they would like to; the numbers do not add up,” concludes Professor Kokkoris.
Adding to the uncertainty of the Greek economic landscape in 2015 is the plan outlined by ECB President Draghi for mass purchases of government bonds with new money. This decision is due on January 22, just three tense days before the snap elections. If quantitative easing is introduced, then this will help to ease pressure for the Greek economy. Much to the exasperation of Berlin, the possibility of this initiative could cause a false sense of security, leading to a lax in reforms and an unravelling of the progress made thus far.
The Greek economic crisis is beginning to alleviate, despite persisting hardships and an overlooked humanitarian crisis. Greece may not make all the repayments scheduled for this year, yet it is financially capable of making a strong headway in reaching these goals. Whichever party wins the election cannot withdraw from the Eurozone and its commitments, nor can it implement radical social reforms at this stage. Greece is on a set pathway, as laid out in writing with the Troika. Despite auspicious assurances made during Syriza’s pre-election campaign, the Greek population has to hold out a little longer. Only with long-term stabilisation can desperately needed and far-reaching social benefits be implemented, an unlikely feat for 2015.