Consequences of Syriza’s election and economic program

Right now Syriza is neck and neck with New Democracy in Greece for the upcoming elections in Greece. So it is worthwhile to take a look at what Syriza is actually saying and what the consequences of their program would be. I have a copy of their policy platform translated into English and want to give you a sense of what Syriza is saying.

Here are the five main bullet points to remember regarding their political positioning (highlighting added):

• "We reject the theory of the ‘collective guilt’ of the Greek people for the policies implemented by Greek and European governments. We reject perceptions that deliberately conceal the responsibilities of the policies applied and the interests that benefited from these. It is not the ‘genetic makeup’ of the Greek people that is responsible for the fact that we do not have a decent taxation system or an effective social state.Specific policies and interests are responsible for that. It is precisely those policies which must be overturned."
• "The crisis in Greece does not constitute a ‘national peculiarity’, but is part of a broader European crisis, with both endogenous and external causes. It is only within a framework of a common European solution that the particular and existing problems of Greece can be dealt with"
• "Fiscal consolidation and sustainable public debt cannot be achieved in an environment of austerity. It is only under conditions of economic recovery that the necessary reforms can be attempted and sustainable solutions found."
• "Development presupposes environmental reform, developmental redistribution, and the fighting-off of poverty, unemployment and social inequalities as components of its content."
• "The ‘structural adjustments’ of neoliberal persuasion do not solve social problems, they simply redistribute assets and rights to the detriment of the weak. Exit from the crisis requires overthrows, a new type of structural changes, radical reforms and restructuring of the state, the economy and the political system, such that will tackle the roots of the problems, reduce inequalities and release idle resources within society, opening new paths and prospects."

Reading this platform, it is very apparent how threatening Syriza is to the existing neoliberal economic paradigm. Essentially what Syriza is saying is they reject this economic paradigm outright. Francoise Hollande in France, on the other hand does not do this. In fact he has made an unusual intervention into the election cycle in Greece, warning voters that they risk expulsion from the euro zone if they vote for Syriza. So, Hollande, while taking a socialist turn in France, basically accepts the neoliberal paradigm while Syriza rejects it outright.

What are Syriza’s overarching goals 9highlighting added):

• The freezing of all measures that concern reductions in wages and social expenditure,the forceful re-distribution of income to the detriment of the weak, and all other measures deepening the recession.
• Through an array of measures aimed at the recovery of the economy, public investment,employment and incomes, from the bottom up.
• Re-instating the fundamental right of the Greek people to determine their own future.
• The replacement of the Memoranda with a new plan for social recovery, economic reconstruction and just fiscal stabilisation.
• Adjust the accumulated debt and the conditions for future funding of development, by writing off a large portion of the accumulated debt, with provisions for servicing of the remaining debt to be linked to the rate of development, and suspensions of payments on the interest until the economy rebounds. This adjustment will be pursued within the framework of a common European solution for the public debt of all EU countries, and in the event that this does not prove feasible, on the basis of bilateral negotiations.
• The implementation of a program of radical reforms and transformations of the state,public administration and the economy, aiming to create a new, sustainable, just and ecologically sound paradigm of development.

This agenda won’t fly with Greece’s European overlords. So, if Syriza comes to power with a mandate to fulfill this agenda, there will be problems. The questions then are two fold:

• A – Will Syriza win the elections and if they do will they even be able to form a government? It is not clear that the answer to this question is yes. New Democracy and Pasok are not going to go with this agenda and so it may be that we get another failed election. We can’t rule this out. What happens then regarding the existing bailout is not clear.
• B – If Syriza does form a government, how much will they have to amend their policy goals to do so? My previous take on the situation was that Tsipras had not ruled out austerity but that he wanted to restructure debts and bring in a reflationary policy to stabilise the economy. Does this mean he rejects any austerity or rejects front-loading it? And how much room for negotiation would his government have? Again, no one knows here. The situation is very unpredictable but I am increasingly pessimistic.

I think that if Syriza wins, we have to imagine Greece could be ejected from the euro zone.

I suggest you read the article in Les Echos about Goldman’s Chief Economist’s view on the election. He runs through some reasonable scenarios based on the Greek elections including anticipated contagion to Portugal, deposit guarantees and the like. But keep in mind that while these scenarios sound orderly, they will not be. If Greece is ejected now, all hell will break loose.