Greeks Head to the Polls

BY JOHN NIKITAS

Greece’s unemployment rate has fallen by more than two full percentage points, nation-wide strikes and protests have subsided, and the unpopular bailout program is set to end in less than two months. The country’s six year recession is finally over. It would appear as if the Greek prime minister should be on solid ground in the upcoming legislative elections on January 25th. However, it has been nine months since Prime Minister Antonis Samaras led in an opinion poll. His center-right New Democracy party has been trailing the Coalition of the Radical Left, better known as Syriza, between 2.5 to 8 percentage points. Even though momentum seemed to have shifted towards New Democracy during late December, Syriza has regained the lead and is heavily favored to win the upcoming elections.

These legislative elections weren’t supposed to be held until the summer of 2016. However, with the final negotiations with the European Union over Greece’s exit from the bailout program coming in February, Samaras called the spring Presidential elections early to ensure there was no political uncertainty interfering with negotiations. The parliament had three tries to elect a president, a largely ceremonial position. When they fell short of the three-fifths supermajority by 12 votes on the third and final round of voting on December 29th, the Hellenic Parliament dissolved, triggering snap elections. By refusing to nominate or vote for any presidential candidate, the opposition parties succeeded in forcing the legislative elections they have been demanding since New Democracy lost in the European parliamentary elections last May, a sign that they lost their electoral mandate.

A key issue in these elections are the upcoming negotiations over the terms of Greece’s exit from its bailout program, which has been an utter failure. Rather than help bring Greece’s debt under control and stabilize its economy, austerity caused the unemployment rate to skyrocket to 28%, far higher than the maximum unemployment rate of 15% the IMF had forecasted. Additionally, the poverty rate increased to 44%, the economy has contracted by nearly one third, and the national debt has ballooned to an all-time high of 177% of GDP, even after a 74% debt haircut of privately-held bonds. Greeks have been suffering for years from layoffs, wage and pension cuts, a scaling back of the safety net, VAT tax and income tax increases, and all new property taxes. Millions of Greeks became economically insecure. Austerity policies clearly weakened rather than strengthened the economy, while creating an unsustainable debt level Greece may never be able to control. Clearly Greece needs to change policies, something the European Union and the European Central Bank have refused to even consider. In return for allowing Greece to secure a credit line from the European Stability Mechanism later this year, they are demanding additional austerity measures, which Samaras has indicated he would accept.

Alexis Tsipras, the leader of Syriza who helped propel the party from 4% of the vote to a forecasted 30-35% in the next elections, is promising to end the austerity measures imposed by the EU and the IMF. He has promised renewed government spending on poverty relief and he demands a debt renegotiation to make the national debt sustainable. However, both the EU and the European Central Bank are threatening that if Greece pursues such a policy, they will cut off any financial aid to the country, precipitating Greece’s exit from the eurozone and a likely default. This would be catastrophic for Greece. It would also not be in the interest of the eurozone, which would lose hundreds of billions of euros they invested to bailout Greece. Therein lies Greece’s only chance to negotiate more favorable terms. If Alexis Tsipras threatens to default on the country’s more than €400 billion debt unless international creditors ease the austerity measures imposed on Greeks, Greece may have a chance to end the crushing austerity regime. Greece’s creditors may accept a partial write-off of Greece’s debt to avoid a default on their loans. On the other hand, such a bluff may fail and Syriza may have no choice but to agree to the measures or face default. Either way, this is Greece’s last chance for change since Samaras has made it very clear that he will not attempt to renegotiate the terms of Greece’s austerity program if he remains in power. The only chance for Greece to move forward is to elect Alexis Tsipras and hope that his brinksmanship with Greece’s creditors can finally put an end to austerity.