Greece: The new government and the shape of new social and geopolitical scenarios

Tsipras’ electoral victory opened the window to new social and political scenarios in Greece. Falling short of an outright majority, the new political spectrum brought to the formation of an unusual coalition formed by radical left and centre-of-right parties, having in common mostly anti-austerity plans. At the same time the expectations of the populations are high, while the international bodies’ fears of uncertainty are deep.

Greece: The new government and the shape of new social and geopolitical scenarios - Geopolitica.info

The long predicted electoral victory of Alexis Tsipras’ party Syriza has opened new scenarios on the domestic political front and in the relations between Greece and the financial international bodies. The overwhelming victory obtained by Syriza fell short of two seats to reach an outright majority, leading to the shaping of an unusual coalition formed by the radical left party Syriza (Συνασπισμός Ριζοσπαστικής Αριστεράς, Synaspismós Rizospastikís Aristerás – Coalition of the Radical Left) and the centre-of-right anti-austerity party Anel (Ανεξάρτητοι Έλληνες, Anexàrtitoi Éllines – Independent Greeks).

The agreement on the programme is mainly found on anti-austerity and social issues, leverage on the Greek pride felt deprived by the international financial community – formed by the European Union (EU), the European Central Bank (ECB), and the International Monetary Fund (IMF), commonly referred to as Troika – and the economic rules set for the Greek bailout, and giving Greece a new and more respected position in the international arena. The main figures of this government are Tsipras (Syriza) as Prime Minister (PM), Panos Kammenos (ANEL) as defence minister, and Yanis Varoufakis (Syriza) as finance minister.

During Tsipras’ first policy speech to the Parliament, held on Sunday, February 8, the new PM pointed his attention on social welfare programmes, in particular for what concerns the jobless, on belt-tightening measures concerning Members of the Parliament (MPs) and government, and on achieving a new deal with international creditors. His speech has been considered defiant by some of the international creditors, and very appreciated by the population, right now in search of a new trend of personal and national pride.

Reasons for Syriza’s victory and the expectations laid ahead

Syriza’s electoral victory has been perceived by the main notch of the Greek population as a breath of relief. Two trends faced each other: the first (a minority) formed by those who, despite the hard measures, preferred to keep the grasp with the international financial institutions and that at the ballot box voted for Nea Dimokrateìa and Pasok, and those instead who despised the international community and preferred to claim Greeks’ rights in a radical way, casting their votes for Syriza and Anel.

The Greek population has always had a suspicious relation with the international community, feeling often betrayed, therefore the electoral victory is not surprising. Syriza and Anel “played” on the belly of people, on their gut feelings, on the supposed difference between technocracy (as austerity is perceived and portrayed) and democracy, on their daily needs, on the promise that salaries and pensions will be raised, and eventually on Samaras’ “betrayal and corruption”, as such was perceived his appeasement with the financial demands of the international community.

The expectations on Tsipras concern both domestic issues and international ones. The domestic issues concern the amelioration of the national socio-economic and employment situation, while the international ones concern mainly the possibility of dealing on a peer-to-peer basis with the international institutions. In the first few days of the newly born government measures to raise salaries and pensions have been enacted, while on the international front a strong position has been taken on the Greek debt and the negotiations for future international loans. In both cases a breath of new hopes has blown on Greece. What is still in doubt is the sustainability of these positions and measures.

The economic crisis and its social effects

The effects of the economic crisis and its following austerity policies hit hard on the middle and low classes of the Greek population.

Greece is a country of a population of growing median age and low fertility rates, which means that youngsters will face difficulties in entering the job market, but also that there is a heavy burden on younger generation to contribute to national funds for delivering pension services.

Through the years, the first effect of the financial and economic was the loss of jobs, with an unemployment rate shifting from 8.7% in December 2008 to 25.8% in October 2014, with a peak of 28% in September 2013.  At the moment, on a population of over 11 million inhabitants, the labour active force is less than 5 million, therefore leaving a large proportion of the population on national and non-for-profit welfare programmes. The labour force is mostly employed in services (70.3%), industry (16.7%), and agriculture: 13% (2012 est.)

Some of the economic and labour related problems are to be found in the structure of its labour force: about a third of it is actually employed in public administration jobs, while the private sector suffers of the inefficiencies of public administrations themselves. When the crisis heavily hit Greece, the private sector was the first to succumb, followed by the public sector shortly after. Unemployment grew dramatically, leading the governments to enact austerity policies that included the cut of public labour force, the increase of tax rates on salaries, therefore reducing net salaries, cut on pensions, allowances and social benefits, and ultimately the cut of social and health programmes. In particular, the cut of social and health programmes had devastating impacts on the population, increasing the number of homeless and people seeking for help from charities and soup kitchens.

Another effect has been the reformulation of the public sector, which lead to outsourcing to the private sector functions which were usually fulfilled by the public sector. One of the most known cases concerned the Hellenic Broadcasting Corporation (ERT – Ελληνική Ραδιοφωνία Τηλεόραση), which was dismantled to outsource its work and services. In this case, as in other similar to it, the question the population asked themselves concern the real financial benefits of these policies. Many Greek non-for-profit organizations have pointed out that to outsource to the private sector did not bring any real benefit to the state financial assets as the costs turned out to be higher than keeping all under the public umbrella. In this sense many have accused the central government of enacting deregulation policies to the sole benefit of “its cronies”.

The real estate market has been hit as well by the crisis: the shut down of many shops left not-rented and unsold many facilities and buildings, therefore prompting owners to dramatically lower the price. This trend is true also for private homes, where families facing difficulties in paying mortgages or meeting their daily needs because of loss of jobs just decided to sell their houses at very low prices.

Greece’s main industries include shipping, tourism, food and tobacco processing, textiles, chemicals, metal products, mining, and petroleum, but also on this side the crisis has strongly hit these sectors. The shipping sector is the one that has hit the most: the services provided by the Pireus harbour have slowly slowly outsourced to foreign companies, particularly Chinese, leaving many Greek workers out of job or employing these same workers with far lower salaries.

In general, Greece has always been a country with a negative international trade deficit. According to the data provided by the National Statistical Service of Greece, as of November 2014, the import was equal to 3776.60 EUR Million, while export 2318.60 EUR Million, therefore showing how the country is mostly unable to meet its needs in a self-reliant manner.

Due to governments’ efforts to attract foreign investments, in the past few years there has been a slight increase in the number of foreign companies investing in Greece, mostly working in the services sector. This trend is mainly due to cheaper labour costs that are being applied to these kind of foreign investments and business projects.

An additional effect has concerned the Greek emigration abroad: according to the International Organization of Migration, with the crisis, Greece has experienced the emigration abroad of about 10 thousands people per year, mostly young people, particularly to European and overseas countries such as the UK, Germany, Australia, and Canada. At the same time, though, it has experienced an emigration of capital assets towards “safer financial and fiscal” countries, such as the UK and Switzerland.

At the moment the Greek society is experiencing an uncertain time as on one side hopes and expectations are high, while on the other questions concerning “where will Tsipras find money for keeping his promises” are widespread in the minority of the population. In particular this part of the population wonders what will be of all the sacrifices done so far if Tsipras falls short his promises. The fear is that Greece will fall in a deeper economic decline. At the same time, though, the population feels Tsipras is “a new face” for the Greek political spectrum, leading to have a new kind of confidence in the political authorities felt now of “a different kind” if compared to the previous ones.

The fears of the international financial bodies

While the Greek population is experiencing new hopes, the international financial bodies and the countries that contributed to Greece’s bailout are experiencing fears about the new government’s intentions to keep up to the pledges of previous governments.

Shortly after being appointed as finance minister, Mr Varoufakis set the new government’s international financial position, particularly openly claiming that Greece will not ask for new loans on the conditions set so far and that, on the contrary, will seek for a new assessment of the Greek debt. Mr Varoufakis started his official visits to international institutions and European capitals during the first week of February: while the financial bodies, the European Commission, and the EU member states, in particular Germany, openly stated that the new government has to keep the promises and continue on the reforms agreed upon, at the same time have expressed the hope of a fruitful cooperation with Greece, hinting off the records that some would be available on discussing the eventuality of a re-negotiation of the repayment schedule.

In this sense there are therefore those who stick to the austerity plan, and those instead who try to see the sustainability of the European and Greek systems as more important than austerity itself. In this case the long term view is considered more important than the short one. Among those that opposed Greece’s requests is Germany, that through its finance minister Schäuble publicly dismissed any possibilities for renegotiation.

In general there is an economic intellectual trend in Europe that advocate for Greece to leave the Single Euro Currency Zone (Eurozone): these positions are mainly linked to the distrust in the ability of Greece ‘s political authorities to really shape a new socio-economic system and live up to the expectations.

On this front the advocates of these positions point out that previous governments never really kept up their promises, and that the expectations on the reforms promised by Samaras, at the end, were not met by real improvements. While on the new government, the positions state that Tsipras is just another side of the same Greek coin, therefore questioning his ability to really change the face of the country, or to “save Greece from itself.” Along with these opinions, there also those that have a harder stand due to the “necessity” to somehow punish the Greeks for “being used to live above their incomes”, having other countries “pay for their failures.”

Greece v Germany: the social and political reasons that stand behind the battle over the debt

The arm wrestle over financial issues and national debt between Greece and Germany is not something new in the relations between the two countries, nor is something that happened with the Greek financial crisis and its bailout, but is actually dated to the aftermath of the Second World War (WWII).

Germany faced two defaults during the Twentieth century: in 1923 and in 1953. In 1953, in order to avoid Germany’s financial default, most of the countries that had to be reimbursed for Nazi’s activities during WWII agreed to cut of the 50% the German debt. A new treaty was therefore signed during the summer 1953, called Agreement on German External Debts, also known as London Debt Agreement. Among these countries that signed this treaty there was Greece. The agreement set also new interest rates for the debt, lower than the previous agreement, that would allow the sustainability of German economic system and the payment of that part of the debt that had been cut once Germany was unified again, after agreeing upon a new treaty. In 1990 though, the German chancellor Helmut Kohl refused to renegotiate that part of the debt as it would have led to a new default.

Considering these issues, the Greek political authorities, but even more the population, are particularly upset with Germany’s financial and austerity demands as they consider failing on the financial system as not as serious as the Nazi crimes during WWII.

An anti-austerity voice in Germany has loudly spoken against the austerity imposed on Southern Europe countries by German and other countries’ demands. In a recent book published in Germany («Scheitert Europa?», «Europe about the fail?»), the former minister of foreign affairs of Germany Joschka Fischer accuses the German chancellor Angela Merkel and the finance minister Wolfgang Schäuble of short sight views concerning economic development and sustainability, but also of short memory forgetting how Germany has been financially saved by those countries that agreed to cut its debt. In this sense, Fischer’s words are part of a strong discussion in Germany between those that want Germany to have a stronger hegemonic position in the EU, and those on the contrary that push for a more integrated Europe, leaving no one behind.

Greek authorities have often threatened to sue Germany for that part of the debt that in their opinion has not been paid yet (on this front there is a dispute on the amount due), but these threats will hardly turn in reality mainly because of legal reasons: when Greece agreed to remit German’s debt over WWII, it did it through an agreement, therefore because of the legal principal of estoppel, a sue by Greece would hardly be accepted in court. While for political reason the dispute over the amounts due will hardly ever really be addressed.