Monday, January 26, 2015
Greek Election Turmoil for Europe
January 26, 2015
Europe is in for months of turmoil after Sunday’s Greek election results. The strongly left-wing Syriza Party (roughly translated as the “Coalition of the Radical Left”) won the most votes (36% of the total versus 28% for New Democracy, a center-right party). This brought them the 50 seat bonus that goes to the largest party, raising their total to 149, just shy of the 151 they needed for an absolute majority. Within hours, they announced a coalition with the Independent Greeks, a right wing anti-austerity party, giving their government a clear majority.
From a U.S. perspective, the key question is whether the election results will reignite the euro crisis, producing recession in Europe and some level of financial instability and slower growth here. This remains unlikely, although still possible. However, Sunday’s election results were almost the worst possible outcome from the point of view of the rest of Europe, and there will be considerable turmoil in the months to come, even though terrible outcomes will likely be avoided.
This large a victory leaves Syriza with few internal political constraints on its negotiations with Greece’s European funders. (An absolute Syriza majority would have been even less constraining, although perhaps not by much.) Alexis Tsipras, Syriza’s leader, will face very difficult pressures from within his party once he begins to confront the challenging external and economic constraints. Syriza has committed to rejecting key elements of the deals negotiated by the previous government with the so-called “Troika” that has provided massive funding to Greece in exchange for commitments to economic and institutional changes. (The troika consists of the European Commission, the European Central Bank and the International Monetary Fund.) The Troika, and the national governments in the rest of Europe that stand behind it, want to reach a mutually acceptable agreement with Greece on next steps. However, they are not prepared to accept radical revisions of the actions taken or committed to under the previous agreements, as Syriza demands.