February 14th 2015

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Articles from this issue:

QUEENSLAND STATE ELECTION Governments want belt-tightening, but voters want jobs

CANBERRA OBSERVED The Coalition government's self-inflicted troubles

SOCIETY Joblessness drives the retreat from marriage

EDITORIAL IPCC pushes for new binding climate treaty

NATIONAL AFFAIRS What's behind the Australian Liberty Alliance?

ISLAM Middle East's bishops urge Christians to work with Muslims

NATIONAL AFFAIRS Productivity Commission's IR inquiry doomed before it starts

POLITICAL PARTIES Why Victoria's Liberals are perennial losers

INTERNATIONAL AFFAIRS Greece launches diplomatic offensive against EU austerity program

INTERNATIONAL AFFAIRS UK-US special relationship 'hanging by a thread'

CULTURE Further inquiries into the case of Sherlock Holmes


BOOK REVIEW Chronicle of a world we have lost

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Greece launches diplomatic offensive against EU austerity program

by Peter Westmore

News Weekly, February 14, 2015

Following its decisive recent victory in Greece’s national elections, the far-left Syriza government has quickly foreshadowed measures to end the austerity program imposed on Greece and other EU countries since the global financial crisis began in 2008.

Greek finance minister,

Yanis Varoufakis (centre),

travelling economy-class to London

Greece’s election was held earlier than scheduled owing to the failure of the country’s parliament to elect a new president on December 29, 2014. The 300 seats were subsequently contested by 18 separate parties.

Syriza, the left-wing party led by former communist Alexis Tsipras, with over 36 per cent of the national vote, secured 149 out of the 300 seats, two seats short of an absolute majority — far more than any other party.

On the other hand, the former ruling party, New Democracy, lost 53 seats and obtained its worst result ever in terms of seats won. 

The former left-wing governing party, the Panhellenic Socialist Party (PASOK), New Democracy’s coalition partner, was reduced to just 13 seats (from 33 in 2012), falling to seventh place and becoming the last party to exceed the 3 per cent threshold.

Since the global financial crisis began seven years ago, the deeply indebted Greek government, whose debts exceed the country’s gross domestic product, has been bailed out by the European Union and the European Central Bank.

In exchange for this, successive Greek governments of both the right and the left have had to accept the wholesale sell-off of government assets, cuts to wages and pensions, substantial cuts to the number of government employees, and tight restrictions on the operations of Greece’s banks.

These measures plunged Greece into an economic slump, from which it has still not emerged. Currently, its national unemployment rate is about 26 per cent, and, among young people, over 50 per cent.

The central issue in the elections was whether Greece should continue to accept the EU-imposed austerity program. A decisive majority of Greeks decided that they had suffered enough, and elected a government which promised to refuse to comply with EU restraints on government spending, or to pay back Greece’s debts.

When Syriza obtained parliamentary representation a little short of a majority, it quickly formed a coalition with a right-wing Christian party, the party of Independent Greeks, which opposes the EU austerity program and which won 13 seats. Other minor parties promised to support the coalition in parliament.

Within days of the election, Syriza had formed a new government, and embarked on a multi-faceted campaign to put its election promises into effect.

With the support of the new prime minister, a succession of ministers made remarkable announcements while taking office: reversal of electricity and oil privatisations, the re-employment of sacked public sector workers, the scrapping of labour deregulation, raising the minimum wage, and more.

Meanwhile, the new minister of finance, Yanis Varoufakis, declared that the country would no longer negotiate with the troika of the European Commission, the European Central Bank and the International Monetary Fund.

He also said that Greece would not submit to the planned assessment of its bail-out program, even if that means not receiving a further €7.2 billion of bail-out funding this year. Indeed, the country no longer considers the troika to have a valid institutional status.

Dr Varoufakis is a Greek-Australian, and former lecturer at Sydney University and professor of economic theory at Athens University, and author of many books criticising the global economic orthodoxy.

He immediately set out for other European countries, Italy, Spain and France, where he received support for a renegotiation of Greece’s bail-out terms, because all these countries are privately very critical of the German-backed austerity plan.

He then flew economy class to the United Kingdom, where he met Britain’s Chancellor of the Exchequer, George Osborne.

Still ahead is a meeting with Germany’s formidable Chancellor, Angela Merkel. In her response to the election of Syriza, the German leader said she accepted the result and said she would work with the incoming government if it accepted the existing bail-out plan.

The problems the new government faces are formidable.

The EU has substantial leverage over Greece. The country has major debt repayments in the coming period, the largest due in early summer, which will be impossible to meet without fresh funding.

The domestic program of Syriza, moreover, remains insecurely funded, even if the government aims simply to achieve a balanced budget. Income tax revenue has been falling, partly because of the extraordinary tax pressure imposed by the troika, and partly because of the disruption of the election.

It will take a major and rapid reorganisation of tax collection to secure funding for the government’s planned measures to assist those worst hit by the crisis. And the banks continue to be absolutely dependent on liquidity provided by the European Central Bank and are susceptible to deposit flight.

The battle-lines have been drawn.

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