Reaching the climax of the Greek drama and then what? Prof. Thanos Skouras* writes:
There is little doubt that the pre-electoral pledges of the Greek government are not realizable. The long period, which was requested by Greece in order to finalize negotiations with its lenders, comes to an end on June 30 and, quite likely, the Summit of June 22 is the crucial moment by which it will become evident whether an agreement is at all possible. The differences between the two sides have drawn closer and, even if the remaining differences are all bridged according to Greece’s wishes, the resulting agreement will be a long way off the promises on which the Greek government was elected 5 months ago. Most importantly, it guarantees the running of primary budget surpluses, albeit significantly smaller than before, and continues the policy of fiscal austerity.
Given the present state of affairs, what are the prospects facing the Greek government? Let us examine the two possibilities, reaching or failing to reach an agreement. If an agreement is reached, the government will need to get it through Parliament. Though approval by Parliament is practically assured, since a sufficiently large part of the opposition will support it in case of need, it is highly probable that it will cause a break in the government’s ranks.
The likely dissenters, who have already expressed skepticism if not open hostility towards Europe, represent mostly the neo-bolshevik hard core of Syriza and consider themselves the party’s conscience. For them any agreement, which recognizes the legality of debt and perpetuates austerity, is a clear betrayal of the party principles. Moreover, it is a strategic mistake to miss the present opportunity, whilst there is considerable popular support for Syriza and the anti-European sentiment is unusually high, in order to break with Europe and leave the euro. And controlling one’s own money is an essential prerequisite to be able to proceed with the creation of a neo-communist state.
It would seem then that the government’s dilemma is a break with Europe or a breakup of the party. The breakup of Syriza may be avoided only if those opposed to Europe are convinced by the leadership’s likely argument that an agreement today is not a betrayal of the party cause but just a tactical temporary retreat in order to attain the more propitious time and conditions for revolution, which are discernible in the not too distant horizon. If this assurance fails to be convincing, the government’s parliamentary majority will be lost and the government will have two options: either call elections or take on a new partner (most likely, To Potami). In the latter case, collaboration with the new partner is unlikely to be smooth and both sides will act with their eyes on their chances in the next elections, which will not be long in coming. Consequently, early elections are inevitable and Syriza will have every interest to hold them the earliest possible before the collection of income and property taxes, which begins in earnest from the summer onwards, makes itself felt in the voters’ pockets.
In the run-up to these elections, the opposition will no doubt argue that the agreement signed by Syriza is no better than the previous one and that the long negotiation in order to reach it only managed to seriously weaken the economy, which had begun to recover in 2014. Nevertheless, it is very doubtful whether it will be able to stop Syriza from being the party with the highest number of votes. Given that the first party is entitled to 50 extra parliamentary seats (out of a 300 total), Syriza will again be in government, albeit without its revolutionary wing. The road will then be open for its transformation into a European-style social democratic party, which will be judged mainly on its success in improving the economy’s competitiveness and growth rate. Whether this road will be followed and such transformation achieved without loss in popularity is, of course, an open question that only the future can answer.
Let us now briefly consider the possibility that no agreement is reached. This will happen if the government’s dilemma is resolved in favour of preserving party unity. It will mean that the neo-bolshevik wing of Syriza has gained the upper hand, with the support of the largely parasitic state-dependent social strata that oppose the structural reforms, which threaten their state-provided privileges.
There should be no doubt that the consequences of Grexit will be catastrophic. Although there is general agreement that this will be the case in the short-run, there are some commentators, who believe that in the longer-run regaining control over its monetary policy and exchange rate will enable Greece to escape austerity and restart economic growth. They are wrong. Without structural reforms that improve essential competitiveness and overall productivity, there can be no economic growth. The government that decides on Grexit will do so precisely to avoid making such reforms. It will immediately expand the state and embark on the path of constructing a neo-communist regime. It will run budget deficits that buttress its sources of support, stoke inflation in the absence of productivity growth, and impoverish Greece by continuously devaluing the new currency’s exchange rate.
It is evident that Greece is at a critical juncture and the momentous decision about the road to be taken is largely in the hands of Syriza’s leader. His inclination would be to ask for more time, even though this will further depress the economy. Beyond that, Alexis Tsipras’ mind is not easy to read. Any superficial similarities with Andreas Papandreou are deceptive and he does not resemble in education, experiences and possibly character any of the prime ministers in recent Greek history. The recent reporting by The Times of his statement that “his wife will abandon him if he surrenders to Europe” possibly provides a rare glimpse into his psyche. It is well known that she is the person who has initiated him into communism and leftist party politics. This is the environment in which he has been socialized and has been the formative influence in the development of his personality. How likely is it that he will renounce his beliefs, betray his friends and comrades, and estrange his wife by signing a definite agreement with Europe?
*Dr Skouras studied economics at Durham University (BA 1965) and at the London School of Economics (MSc 1967, PhD 1975). He taught between 1967 and 1986 at a number of UK institutions, including Cambridge University and the Architectural Association School, and has been Head of Economics Division at Greenwich University 1973-77 and Head of the Department of Applied Economic Studies at the University of East London 1978-86. Dr Skouras has been editor of the Thames Papers in Political Economy and the British Review of Economic Issues, associate editor of the Greek Economic Review and member of the editorial advisory board of the International Review of Applied Economics. He was a Fellow of the British Institute of Management for over 10 years and an Honorary Research Fellow of the Polytechnic of East London. Dr Skouras has served, in England, as a Councillor of the Royal Economic Society and a member of both the Economics and the Social Science Committees of the Council for National Academic Awards.
Since his return to Greece in 1986, Dr Skouras has been Professor at the Athens University of Economics and Business and Vice Rector and Chairman of the University Research Centre 1989-92. His other administrative posts include the Deputy Chairmanship of the Economics Department as well as the Operations Research and Marketing Department and, more recently, the Chairmanship of the Marketing and Communication Department. He has served on the governing board of the Centre of Planning and Economic Research and was a member of the first Council of Economic Experts, in which capacity he represented the Ministry of National Economy at meetings with the OECD, the IMF and the European Commission. In a leave of absence, during the period 1992-94, he was a consultant intramuros to the Directorate General for Regional Policy of the European Commission. At the European Commission, Dr Skouras worked in various aspects of evaluation practice and since then he has been involved as specialist consultant on numerous evaluation issues and studies. Dr Skouras has also served as member and chairman on many boards of both public and private organisations. His research work extends over a wide range of economic fields and has appeared in a large number of articles published by well-known international journals.