The way the Greek election worked is that Syriza, the far-left party, said they would completely renegotiate the bailout terms that forced austerity on the country. New Democracy, the center-right legacy party that was part of the grand coalition that negotiated the bailout in the first place, countered that they too would seek a renegotiation, muddying the contrast between the two parties. New Democracy claimed that their terms would be responsible, while Syriza’s intransigence would get Greece tossed out of the euro. A spooked public then narrowly chose New Democracy, based at least in part on these points.
Just a few weeks after the election, it turns out it was all a game. New Democracy dropped their demand to renegotiate the bailout terms.
Greece has dropped plans to ask for easier terms for its second bailout, after being warned the plea would be turned down, the country’s finance minister said.
The country is “off-track” in carrying out structural changes demanded by lenders — the European Commission, the International Monetary Fund and the European Central Bank — Yannis Stournaras told reporters after a 50-minute meeting in Athens with the lenders, known as the troika.
“We can’t ask for anything from our creditors before we get it back on course,” said Stournaras, who was sworn in hours before the meeting.
“There is light at the end of the tunnel but it is a long tunnel,” he separately told the Financial Times.
New Democracy leaders would tell you that this is merely a reaction to the troika rejecting its offer, but of course the troika had plenty of reason to believe New Democracy would back down, since they negotiated the bailout originally.
So now New Democracy will try to “get back on course,” which is impossible, as the austerity called for in the bailout will crush the economy even further, and in all likelihood increase national deficits. Syriza can point to the broken promise, and the center-left Pasok, part of the governing coalition, can say little about it. Syriza is poised to gain during the next elections, but who knows what kind of a country they will inherit by then.
Matt Yglesias also wonders whether this represents an effort on the part of the troika to create designed failure for Greece, by giving Syriza this upper hand, and putting Greece in a position to reject the bailout totally, and thusly be cut off by their creditors and forced to exit the euro themselves. I’m not sure I buy that, but Europe does seem to be washing their hands of Greece of late.
More from the Financial Times.