By Mike Andrew
“Hope has arrived!” an exultant Alexis Tsipras told a huge election night rally in downtown Athens. His SYRIZA party – the Coalition of the Radical Left – had just swept to power, upsetting an entrenched right-wing government that had ruled Greece since 2012.
“Hope is on the way!” was SYRIZA’s campaign slogan, and on the night of January 25 Tsipras was able to tell his supporters that the expected hope was finally a reality.
“Today we celebrate, tomorrow we start the hard work,” Tsipras added. “Today was a defeat for Greece of the elites and the oligarchs. The Greece that works and hopes has won.
“We are regaining our dignity, our sovereignty again…The mandate of the Greek people today cancels, in an indisputable way, the memorandums. It makes the troika a thing of the past.”
The troika – the European Commission, the European Central Bank, and the International Monetary Fund – forced Greece to sign a series of memorandums agreeing to austerity measures in order to qualify for “bailout” loans after its 2008 fiscal collapse.
To understand the joy of Greek voters on election night, and the shock felt by European bankers, we have to be clear about one central fact – the “bailout” was not a bailout of Greece or the Greeks, but a bailout of the banks that had invested in Greek bonds and stood to lose billions of dollars if the country defaulted.
The terms imposed on Greece by the troika were savage – cut social spending, cut wages, cut pensions, increase working hours, privatize public assets. The effect on Greek workers was catastrophic.
Money stopped flowing into the Greek economy, and the GDP fell by 25%. One in four Greek workers is unemployed, as are over half of workers under 25. The average wage fell to 600 Euros ($690) a month, well below the 2008 minimum wage.
Greece is now more in debt than ever, owing the troika 240 billion Euros ($270 billion). Its debt-to-GDP ratio is also the highest ever, 175%. “What have five years of sacrifice got us? In a word: Nothing,” Tsipras wrote in a pre-election article. “All we got is despair: 1.3 million unemployed, 3 million without health insurance, and pensioners who cannot afford to buy medicine.”
To restore the Greek economy SYRIZA wants to bring back social programs that were cancelled at the troika’s insistence.
- They promise to raise the minimum wage to the pre-2008 level of 751 Euros ($840) a month.
- For those with monthly pensions less than 700 Euros, SYRIZA will restore the “13th month” bonus, giving the poorest Greeks an extra payment every year.
- Some 300,000 households would get food and electricity coupons.
- The new government will repeal the tax on heating fuel.
- People’s primary residences would be protected from foreclosure.
SYRIZA estimates that this stimulus program will cost some 12 billion Euros ($13.5 billion), which Greece will pay for by reducing exorbitant payments on the national debt, redirecting EU funds to social spending, and making the richest Greeks pay a fair share of taxes.
Tsipras has also promised to renegotiate the terms of the troika’s loans to Greece, getting them to reduce the country’s debt by half. Needless to say, this has not gone down well with European bankers.
Less than 24 hours after SYRIZA won the election, the EU issued a stern warning to Greece that its place in the Eurozone is at risk if the new government fails to comply with the troika’s austerity and debt requirements.
But nothing worries the troika more than the SYRIZA’s pledge of an international conference on debt relief involving all debtor nations.
According to Reuters, German commercial banks still own $28 billion worth of Greek bonds, and French banks another $5.6 billion. While banks worth hundreds of billions if not trillions of dollars could probably withstand losses like that, they could not withstand the domino effect of many debtors following Greece’s lead.
Tsipras has promised that Greece will remain within the Eurozone as long as the county’s debt burden is reduced, but if the troika digs in their heels, it may come to what international observers have come to call a “Grexit” – Greek exit from the European common currency – followed by unilateral revision of Greece’s national debt.