WASHINGTON – As expected, Alexis Tsipras and his Leftist Syriza party won the Greek elections for a new parliament. After having struck a coalition agreement with the much smaller Independent Greeks (Anel) party, Syriza has a clear majority. Tsipras is now the new Prime Minister.
Fine. Voters get to choose their leaders. What is not at all clear is what will come next. Syriza campaign was all about rejecting the EU-imposed austerity packages that Greece was forced to accept in exchange for a gigantic $ 270 billion (240 billion Euro) bailout package put together by the EU, the European Central Bank, and the International Monetary Fund, (the “troika”).
Not without cause, Tsipras and his allies complained loudly that austerity alone will not give Greece a chance to regain its strength and chart a course back to economic growth.
Austerity alone will not do
All right. Austerity alone is bad medicine. But then what is the right mix? This is not at all clear. For the moment we can expect that the new Greek leadership will try to renegotiate the terms of the bailout packages in order to get more flexibility and therefore more breathing room.
And they may get this from Brussels. Or at least some of it. But the real test for a leftist, populist political force is to concoct a credible, sustainable economic growth plan. And I doubt that Syriza has even the slightest idea of how to do this.
Which way to economic growth ?
If this or any other Greek government could convince German Chancellor Angela Merkel, the ECB, the EU and the IMF that less austerity would allow Athens to launch a successful economic growth strategy, they would all support a renegotiation. After all, if the Greek economy starts growing again, the chances of Greece actually paying back its debt improve.
No real changes
The problem is that the Greeks most likely will pocket concessions from their creditors and then prove unable to change the country’s economic fundamentals.
Unfortunately in Greece there is a bad combination of strong trade unions that usually push for protecting the status quo, entrenched special interests, crony capitalism, corruption and lack of venture capital that will support new enterprises. In good times, this means economic stagnation. In bad times (and these are horrible times) this means decline.
If the Greeks now believe that by changing government they have voted themselves out of debt and into prosperity, they will soon realize that it is not so.