With apologies to Wisconsin, we’re a little less than two weeks away from the most important election of the year. It’s happening in Greece, where you have a contest that will likely determine the future of that country, and by proxy the future of Europe.
The far-left Syriza party and the center-right New Democracy have been locked in a tight struggle for weeks in this second-round Parliamentary election. And there are real consequences at stake. New Democracy will probably go along with the bailout terms they helped structure, and pursue more austerity in exchange for timely debt payments from European leaders. In recent weeks, New Democracy has said they want to renegotiate parts of the bailout deal, but I suspect they’re just looking for a fig leaf. But Syriza will seek a full renegotiation on the bailout, daring Europe to try and kick Greece out of the euro.
In an hourlong news conference, (Syriza leader Alexis Tsipras) described a dozen measures he would take if elected, ranging from extending unemployment benefits to nationalizing banks and delaying payments to creditors. He said he would replace the bailout plan with “a national regeneration plan,” adding that the goal was to reach a “just and viable European solution.”
“We don’t claim that there is plenty of money,” he said. “Greek people are not asking for money. They are asking for work and the ability to make a living.”
Three new polls were published on Friday in Athens newspapers. Two showed Mr. Tsipras’s party, Syriza, and the New Democracy party basically tied, while one put Syriza slightly ahead of the conservatives. In the Public Issue poll, published in Kathimerini, Syriza is backed by about 32 percent of the voters and New Democracy by 26 percent. In contrast, according to the poll conducted by Kapa Research for Ta Nea, 26 percent said they would vote for New Democracy, statistically insignificant from the 24 percent for Syriza. Similarly, the Rass poll conducted for Eleftheros Typos found the voters closely divided: about 27 percent for New Democracy and 24 percent for Syriza.
Greek law prohibits polls in the last two weeks of an election, so this is all the direction we’re going to get. If you average everything together, you have what amounts to a dead heat: 26.6 for New Democracy, 26.6 for Syriza. New Democracy’s ceiling is 26-27%, while Syriza jumps ahead or behind that point.
It’s notable that New Democracy and Pasok, the center-left legacy party, are both edging more toward Syriza’s way of thinking, not only on renegotiation of the bailout terms but other issues like unemployment benefits and minimum wage. That, more than polls, shows who has control of the election at this stage.
Tsipras is still the only one talking about an annulment of the bailout deal, however. And he wants to increase public spending by 7% over the demands of Eurozone leaders. What’s more, rather than just looking at the balance sheet and trying to get to numbers, he wants to reverse programs that strip wealth from the lower classes because the revenue is easier to collect. He wants to lower the value-added tax, for example, saying that “We must stop taxing poverty in this country and start taxing the wealthy who evade tax.”
This is an inevitable consequence of an outside actor forcing what amounts to a depression on a sovereign nation. George Soros outlined brilliantly this weekend at the Festival of Economics how the European monetary union without a political union was always doomed to failure. The European Central Bank controls the money supply, and the member countries must live under those terms. This creates a crisis when countries in the Eurozone have different monetary needs.
Then came the crash of 2008 which created conditions that were far removed from those prescribed by the Maastricht Treaty. Many governments had to shift bank liabilities on to their own balance sheets and engage in massive deficit spending. These countries found themselves in the position of a third world country that had become heavily indebted in a currency that it did not control. Due to the divergence in economic performance Europe became divided between creditor and debtor countries. This is having far reaching political implications to which I will revert.
It took some time for the financial markets to discover that government bonds which had been considered riskless are subject to speculative attack and may actually default; but when they did, risk premiums rose dramatically. This rendered commercial banks whose balance sheets were loaded with those bonds potentially insolvent. And that constituted the two main components of the problem confronting us today: a sovereign debt crisis and a banking crisis which are closely interlinked.
Soros believes that the Greek people will become “sufficiently frightened” by the prospect of a Eurozone exit that they will vote in the legacy parties. But he adds that the terms of the bailout are so onerous that “the Greek crisis is liable to come to a climax in the fall.” He says Europe, and really Germany, has three months to find a solution. In this sense, the outcome of the elections matter less. However, I’m not so sure that Greeks will find themselves that afraid. They already sit in depression. It’s hard to threaten the man who has nothing.




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The Irish succumbed to the Big Fear campaign and voted to go continue down the austerity road to destruction.
Emigration will continue, by the plane load.
The EU Big Money and its minions are working overtime to instill dread into the Greeks. Big Fear of excommunication will probably win there as well.
I agree with Ian.
Thanks for this update. So, when this all is played out, will neoliberal policy makers realize that austerity budgets will only create mayhem? Or, are they trying to replicate the Irish example with Greece to precipitate similar crises in Spain, Italy, etc? Is the bank bailout mentioned in a previous post gelling into an effort?
I think the propaganda forces must be pushing into overdrive in Greece. I hope the Greek voting public can see through the smoke and mirrors to a different future.
There are two resources that are very useful for understanding what’s going on in Greece at present, with perspectives that cannot be found in the American media. The first is Tariq Ali’s talk to Syriza supporters, a video of which which can be found here; the second Slavoj Zizek’s talk to a broad based audience yesterday along with Tsipras’ comments (unfortunately not translated). That can be found here (Zizek’s remarks, in English, begin at about 30 minutes into the video).
If austerity is abandoned and stimulus is adopted as sound financial policy where will the funds come from. I know we just print money in USA but is there a FED in Europe? Short term Europe will fail no matter how the votes come out. Austerity won’t work and greed and fear amongst the uber wealthy will not be converted to optimism and compassion or common sense. I just don’t see an upside and I really want to. Anyone?
What is minimum wage in Greece?
What is the comparable price for gasoline in Greece vs US?
What does the Greek Government pay Goldman Sachs on loans?
https://www.cia.gov/library/publications/the-world-factbook/geos/gr.html
A peeling away of the layered onion reveals at its core “servitude” for the people of Greece to powerful corporate interests. America in one year’s time will blow out our car’s tailpipes over $350,000,000,000 in wasted heat energy just going to work. Nothing in life can waste so much potential energy, economic value and liberty without having consequences in what is essentially a closed system, Planet Earth.
Who are those creditors anyways? GS? Sounds like something I’ve heard before, here in America…… Oh yes the Ryan Plan???
We are really just discussing HOW the Euro will die aren’t we? Either by a slow “austerity” death or a quick “every man for himself” death. There is not a viable proposal out there to save the Euro; austerity is just kick the can down the road BS.
I’m surprised Soros is giving the PTB until fall to come to their senses.
So he wants a centralized political union, a United States of Europe. If that’s the only way to prevent an EZ breakup (or even just prevent Greece from leaving), it seems a pretty thin reed.
How does Soros think that would come about even in the long term not to mention just three or four months hence? For generations Europeans have passed along bad memories of big, centralized authority from Napoleon to Hitler, and with Stalin not too far away. Otherwise, from the gitgo the EU might have been tailored as Soros now hopes.
Maybe Soros is inadvertently arguing for an EZ breakup by offering an impossibility as the only alternative. Maybe the euroskeptics were right all along.
There is no Nationalism among uber wealthy people. They call the shots, own the banks and the governments. There is also no Unity amongst the uber wealthy and they can’t come to a compassionate conservative solution to the worlds economic problems. Social Darwinism and the Narcissistic invidious philosophy on Ayn Rand are controlling here.
Thanks, David, for this post – excellent analysis.
I note that the Bundesbank published a “terms of Trade” by year versus after VAT trade surplus data sheet.
It shows the expected – Germany just started importing a bit more year over year – the increase in imports only a little less than the increase in exports – but of course it is not more than it exports as exports and the trade surplus have reached new highs, as the PIGS went into recession over the last 4 years.
Germany loses over a trillion on a Greek default exit (France and the Brits lose about the same amount) – all over a 300 billion debt). Logic says there is a “far left” redo of the agreement with the EU State banks taking the same deal as the private investors in Greek bonds – indeed now that the Greeks have taxes in excess of spending if one excludes interest and principal payments on the debt, this seems the time to redo the tax system from “easy to collect taxes” that screw the poor to taxes on the assets and income of the rich.
But politics is local – and a certain loss that in involuntary is better an an agreement to take a loss – even if the involuntary loss is bigger. You have to be tough against those not in your tribe.
I do not expect a good ending. It will be interesting to see how Germany reacts to its 200 billion trade surplus becoming a 200 billion trade deficit.
“. . .time to redo the tax system from “easy to collect taxes” that screw the poor to taxes on the assets and income of the rich. . .”
——————–
Well, that’s the ticket!
But doesn’t it presuppose that Greece has an effective, efficient tax collection system which can identify enough hidden wealth to make the necessary difference?
The Tax collectors where on an Ottoman bribe system relative to both the rich and middle and upper “middle-class”.
An example is the real estate tax that is higher if you have a pool. A good neighborhood in Athens was flown over by a media fellow and photos taken and the pool count compared to tax records – out of 16,000 pools only a dozen where on the tax rolls.
The EU forced law changes on tax collection – and new computers/programs – and lent experts and trainers – so while the job is not done, I believe the corruption level is way down and the process more or less changed – and given current needs there would be a clean system if the State wanted it.
I should note that all of the EU is on a system similar to the system Simpson/Bowles/Obama want of single country taxation rather then the US’s world-wide corporate income less credit for taxes paid elsewhere, and use I-E (investment income less operating expenses) as a simple tax system for financials, with the usual trust and partnership hide the asset/income game, so taxing the rich is not easy. It makes the wealth tax seem the only way to go if we are to get a proper tax from the rich – but until then for the Greeks, the Greek Very Rich will hide much outside of Greece, the same way the US very rich hide their assets/income (in this I am not talking about the very well off with a few tens of millions – the very rich count in 100rds of millions their wealth/income).
I think it was last August WSJ had a piece about Athens’ pools. Part of the underground economy, where money which should have gone to the gov’t was diverted elsewhere (in this case, contractors). It’s not hard to map pools, but other aspects of an underground economy may be very difficult to tackle.
Shortly after the pools piece, there was another piece about kickbacks in the constitutionally guaranteed medical care arena. Pay up in cash to get an appointment. Concealing income is an art there. The doctor’s cash gets hidden under floor boards in a relative’s house, and is spirited overseas once or twice a year. The doctor leaves the country in his mid 30s to retire on such in Central America.
There must be a tremendous amount of this going on in the upper middle class, professionals. But the uber wealthy. . . hasn’t their money already been long gone and out of reach from Greece’s taxation? What’s left?