Greek economy woes could help Ireland cause
Most if not all governments in the eurozone will not want to see the Syriza government emerge victorious from its spat with the power that be, in Europe.
If Syriza wins, it will render stupid the policy platform that has been pursued by many governments since the global crisis erupted in 2007, particularly the governments of Ireland, Italy, Spain and Portugal.
It would also convince voters in those countries that the election of the more radical left-wing parties might not be such a bad thing and in one fell swoop, the political complexion of Europe could be changed dramatically.
To date, life for the Syriza government has not been easy. European policy makers are playing hardball with the new Greek government. They have totally ruled out any debt write-off; have cut off one channel of funding for the beleaguered Greek banking system and have stood firm on the need for the terms of the bailout to be adhered to.
It is now being claimed by some on the left in Greece and by many on the left in this country that Syriza never promised to default on its debt. That is blatantly incorrect. In pre-election literature, published by Syriza and signed off by Alexis Tsipras on September 15 last, a clear goal was stated to ‘Write-off the greater part of public debt’s nominal value so that it becomes sustainable in the context of a European Debt Conference. It happened for Germany in 1953. It can also happen in the south of Europe and Greece’.
To me that looks clear-cut, but the denials represent an attempt to preserve credibility for a government that was elected on the promise of radical action.
However, it is discovering, as our government has done since 2011, that being in power is a much more difficult place to be than in opposition where all sorts of populist but undeliverable promises can be made.
Aside from the politics of the situation, it is blatantly obvious that, from an economic and social perspective, the debt burden in Greece is totally unsustainable.
The same thing can be said for Ireland, but Greece is in a somewhat worse place than this country. At least here, some semblance of a sustainable economic recovery is taking hold, although one needs to caution that ‘contract manufacturing’ is exaggerating growth, the personal sector is still under significant pressure, demand conditions for SMEs are still very challenging, and public services are crumbling in many instances.
Greece, on the other hand, is still in a very bad place. The Greek government is seeking an extension of its loans for up to six months, which would provide a financial lifeline while avoiding the tough austerity measures in the EU/IMF programme.
It remains to be seen how acceptable this is to the EU, particularly Germany which is still rigid in its view that the Greeks must adhere to the terms of the bailout.
The problem on the EU side is if any agreement is seen as a capitulation to Greek demands, then countries who were the victims of major wrongs would expect and be entitled to some relief. Ireland would have particularly strong ground to stand on, given the despicable manner in which we were treated in relation to the capital injection into Anglo Irish Bank and Irish Nationwide.
It is not clear how the situation will unfold, but the logical conclusion is Greece should not remain part of the deeply flawed political construct that is EMU.
Greece would ultimately be much better off getting out, and the eurozone would be somewhat more sustainable for a while at any rate, although one senses that, in its current form, EMU will eventually implode.
However, logic rarely applies to eurozone issues, and the most likely outcome is some form of compromise will be achieved.
Meanwhile, the markets are unmoved by the debacle, although the weakness of the euro against the dollar and sterling will give much-needed help to Irish exporters, and may result in some UK import substitution in particular. It is an ill wind.
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