Greece’s New Government

An eventuality that was long feared is now reality. The Greek electorate no longer appears willing to accept budget cuts and economic policy reforms. Voting in droves for Syriza, the Greeks have chosen a party promising radical change.

During the electoral campaign, the new Greek prime minister Alexis Tsipras made clear that he would expel the ‘troika’ from the country, stop servicing Greece’s sovereign debt, and reverse painful reforms, including reductions to the minimum wage and downsizing of the public sector. Instead of privatising public enterprises, he proposes nationalising private firms; he has also vowed to scrub the labour market reforms negotiated with the troika. What does the election mean for the future of the eurozone and for Greece’s continued membership?

Of course, we should not lend absolute credence to everything that politicians claim during an electoral campaign. Nevertheless, Alexis Tsipras has made enormous promises, and far-reaching changes seem inevitable. What might they look like? Two scenarios are conceivable.

One possibility is that the new Greek government will assume that fears of a disorganised Greek bankruptcy will make other governments in the eurozone susceptible to blackmail. In such a case, Alexis Tsipras could press for a new round of debt relief and an end to the reform programme overseen by the troika. If he were successful, dire consequences would result for the eurozone. Greece would remain permanently dependent on help from the rest of Europe, and the country would become a bottomless money pit.

The only lesson that voters in Italy, Spain, and Portugal could draw from this development is that radical and populist parties are better at securing foreign assistance than moderate forces that rely on cooperation with European partners. Accordingly, Europe must steel itself against such blackmail and take precautions to mitigate the costs of Greece’s possible exit from the eurozone. For example, there needs to be a plan to recapitalise banks that would find themselves in trouble in the event of Greece’s departure.

The aim of such measures would not be to bring about Greece’s exit. Rather, they would be directed at preventing the destabilisation of the eurozone that could result from a collapse of cooperation between member states and abandonment of economic policy reforms.

Another scenario is also conceivable: during the electoral campaign, Syriza not only criticised European crisis management but also denounced deficiencies in Greece, especially corruption and cronyism, as well as the unfair distribution of the burdens of the crisis. The parties that have ruled Greece for decades failed to address these issues.

Insofar as the new government places the elimination of these shortcomings at the centre of its policies and, for example, seeks more effective taxation of well-heeled Greeks or ramps up the fight against corruption, it will deserve support. In order to set new priorities in these areas, it is entirely possible that the programme of reform negotiated with the troika could be modified.

As for any democratically elected political leader, Alexis Tsipras deserves the chance to be judged not merely by his words – let alone words from an electoral campaign – but rather by his (hopefully) well-considered actions.