Election offers no solution to Greece’s economic problems

What are we to make of Syriza’s victory in the Greek election on Sunday? As in January, Syriza’s Alexis Tsipras will be able to form a parliamentary majority in coalition with the right-wing populist Independent Greeks party. On the other hand, Syriza is now committed to implementing a harsh, deeply unpopular austerity program that even its advocates among the European authorities acknowledge will keep the Greek economy in depression through the end of this year and next.

Does this mean that the battle for Greece’s future is over and that those who claimed that there was no alternative to prolonged depression, mass unemployment and a more unequal and, frankly, uglier society have won?

There is no question that the European authorities — the European Central Bank, the European Commission and Eurogroup of finance ministers (led by Germany) — and the International Monetary Fund have, for now, succeeded in imposing their will on Greece. On July 5, the vast majority of Greeks voted to reject their economic plan, including further austerity. But the European Central Bank did something that perhaps no central bank had ever done: It forced a shutdown of the Greek banking system. This caused economic havoc that pushed the economy back into recession and threated to prolong and deepen the depression that Greeks have suffered for six years. This act of financial terrorism worked: Syriza made a U-turn after the referendum, accepting the European officials’ plan, and told the Greek people that there was no choice.

It is not surprising that, aside from the record-low voter turnout, Syriza was able to win this appeal. In most countries, when the most important political leaders of the biggest parties and the vast majority of the media all agree that something is a fact, it becomes a “fact” even if it is not. Within the context of this “fact” that there was no choice but to submit to the will of the European authorities, it makes sense that most of Syriza’s voters would return it to power. Syriza is more likely than its biggest rival, the right-wing New Democracy, to use whatever breathing space there is to soften the impact of austerity on the poorest Greeks and to make the rich pay more of the taxes that they owe the public treasury.

But the election will not solve the country’s most pressing problems, because the conditions that Syriza has signed on to will not allow the economy to recover.  Unemployment remained at 24.6 percent for the second quarter of this year. The International Monetary Fund has acknowledged that Greece’s public debt — expected to peak at 200 percent of GDP in the next two years — is unsustainable and has refused to participate in the current 86 billion euro bailout program unless there is some kind of debt relief. These gigantic storm clouds over the economy will discourage investment and even consumption and could easily make the official projections of an eventual recovery in 2017 overly optimistic, as they have been for almost every year since 2010.

The right-wing narrative claims that if only Greece makes more structural reforms — privatizations, pension cuts, deregulation and labor law reforms that weaken collective bargaining — the economy will recover. It is true that some reforms (e.g., increasing use of generic drugs and increasing tax collection on wealthy tax avoiders) can improve efficiency as well as the fiscal situation. But these will not be enough to revive the economy in the face of budget tightening that shrinks it and an unsustainable debt overhang. Greece’s Great Depression, like all such prolonged depressions, is a manufactured product. It is not the result of any distortions in the economy or anything that happened prior to 2008.

And in this case the depression is the result of not only economic incompetence by its manufacturers — the European authorities — but also a certain amount of political calculation and ill will. As the former Finance Minister Yanis Varoufakis said in a recent interview, “They needed a demonstration effect for other countries like Spain, Italy, Portugal, Ireland, even France … that will demonstrate to those peoples that if you dare vote in a government that turns against us, you will be crushed.”  

The European authorities have shown how little democracy there is left in Greece, and reports on the election carried comments by voters and nonvoters alike expressing their despair that the country’s future was decided before the first vote was cast. But there is always a practical alternative to prolonged economic failure and depression. That is, unfortunately, the part of the debate that remains missing, and so there is a lot of confusion. Many people believe that if Greece did not accept the European authorities’ conditions, it would have had to leave the European Union or that it would suffer years of depression and economic chaos. But there would be far less unemployment and misery in Greece today if the Greeks had said no to austerity six years ago, even if it meant being forced out of the euro. This is the discussion that still needs to happen, and the continuing depression that is built into Greece’s agreement with the European authorities may yet force that discussion.