Greece is screwed
Greece is back in the news, and it looks just as bad as it did four years ago. With the election of the Syriza—a far left, anti-austerity, anti-Germany party—the Greek people have doomed the nation, along with the rest of Europe, to many months of political and economic uncertainty. Syriza, led by Alexis Tsipras, intends to defy both the austerity conditions of the Greek bailout and the German government that called for these stipulations. An overabundance of high energy, misdirected. Syriza’s victory comes as no surprise—rather, it’s surprising that it took this long for such a party to gain power. Tsipras simply exploited a narrative that has grown in Greece since 2010. Greece is the victim; Germany is the oppressor. When you live in an economy that looks as defective as Depression-era America, this kind of narrative makes sense.
It’s hard not to relate to Syriza’s narrative of victimization. Things were substandard in 2011. Greek debt was 355 billion euros, 171 percent of gross domestic product, and unemployment was above 18 percent. The band-aid slapped on the wound seemed only to make things worse. Germany, a key player in European politics, required austerity measures for any Greek bailout. The bailout helped the debt, but the austerity hurt the economy. Since 2011, unemployment in Greece has continued to increase to the current level of 26 percent. The message of Syriza—that there is a dire problem, but also a solution, in Greece—couldn’t be more compelling.
Syriza’s story might be compelling, but its practices will run the country into the ground. Consider two of the party’s goals. First, Syriza wants to stick it to Germany by renegotiating the conditions of the bailout and trying to get Merkel to write off large chunks of Greek debt. This will likely cause more conflict and could easily end with a repeat of the long, chaotic negotiations we saw during the euro crisis.
Second, Syriza intends to act like the crisis never happened. Tsipras has already promised to reinstate minimum monthly wages at their pre-crisis rate, a hefty $1,050 per month. The austerity measures forced Greece to privatize certain public industries; Tsipras wants to renationalize. At every step, Syriza seems to embrace the policy that got Greece into its mess in the first place.
Already, Alexis Tsipras has resorted to antagonism. In his first official act as prime minister, Tsipras placed a wreath on the tomb of 200 communist Greeks who died in World War II—a provocative move, most likely aimed at Germany. But even more troubling is Syriza's announcement that it does not support European sanctions against Russia—even as Russian thugs invade Ukraine. This spells bad news for Germany, which has been trying to push back against the onslaught of Russian power.
Syriza is poison for the Greek system. Not only does the party neglect the primary economic problem in Greece, irresponsible government, but it insists on kindling new international instability. Austerity is miserable, and we should not undersell the sufferings of the Greek people in an underwhelming economy. But the answer to austerity is not antagonism, and the actions of Syriza will likely hurt the Greek economy, for two primary reasons.
First, the fundamental problem with the Greek economy is not Germany; it is Greece. Tragically, the “elites” who played a role in starting this whole debacle have paid very little, despite evading taxes and encouraging wasteful spending. While 20 percent of Greek children live in poverty, the wealthy still receive taxpayer funded healthcare and retirement pension. Over 90 percent of unemployed Greeks receive no government help at all. Until Greece addresses these internal issues, the insolvency will continue. As Syriza now demonizes Germany, the Greek oligarchs win.
Second, Greece’s move will almost definitely create instability. If investors don’t know whether Greece will turn back on the old bailout conditions, they’ll get spooked. If Angela Merkel decides that she doesn’t want to pay a country that hates Germany, Greece loses everything. If Greece decides to cozy up with Russia to solve its problems, the issue will only get more political—and political power play drastically increases economic uncertainty. None of this is conducive to growth; even the possibility is bad enough to stall any progress.
If you want true solutions, locate the true problems. Because Syriza has failed to do this, it could soon become the biggest problem.