The PJ Tatler

The Kids are Back in Charge in Greece

The logic of the Greek voter escapes me. Their economy and debt spun out of control because of their reliance on runaway socialism. So, in order to fix it, they elect a party that promises…runaway socialism.

The radical socialist party Syriza has won a decisive victory in Greece today. They ran on a platform promising to end responsible spending, renege on their debt, and give all citizens the “dignity” of a free ride once again.

The adults have been overthrown and the children have been put back in charge.

Free ice cream for everyone!

Alexis Tsipras’s Syriza brushed aside Prime Minister Antonis Samaras’s party to record a decisive victory in Greece’s elections, after riding a public backlash against years of budget cuts demanded by international creditors.

Tsipras’s Coalition of the Radical Left, known by its Greek acronym, took 36.5 percent compared with 27.7 percent for Samaras’s New Democracy in Sunday’s election, according to official projections. The far-right Golden Dawn placed third with 6.3 percent followed by To Potami, a potential Syriza coalition partner, with 5.9 percent.

While the projected victory was by a wider margin than polls predicted, it remains unclear whether Syriza will be able to govern alone. Even with a razor-thin majority or in a fragile coalition, the result still hands Tsipras, 40, a clear mandate to confront Greece’s program of austerity imposed in return for pledges of 240 billion euros ($269 billion) in aid since May 2010. The challenge for him now is to strike a balance between keeping his election pledges including a writedown of Greek debt and avoiding what Samaras repeatedly warned was the risk of an accidental exit from the euro.

“The Greek people punished New Democracy for governing in the petty manner of the old regime’s political parties,” Aristides Hatzis, an associate professor of law and economics at the University of Athens, said by phone. “Most Greeks voting Syriza don’t expect a spectacular change but a marginal one. A marginal one would be significant for them.”

European policy makers including German Finance Minister Wolfgang Schaeuble and his Dutch counterpart, Jeroen Dijsselbloem, warned Greece against diverting from its agreed bailout program. Finance ministers from the 19 countries that share the euro are due to discuss Greece when they meet in Brussels on Monday. Germany’s Finance Ministry said in a statement that Schaeuble’s position was unchanged after the result and “the agreements reached with Greece remain valid.”

How badly does the rest of Europe want Greece to remain in the eurozone? Not as much as 4 years ago when dire predictions of Armageddon were made if Greece defaulted. This time, the dominoes aren’t lined up so neatly. Spain, Portugal, and Ireland are doing better, and Italy is also on sounder fiscal footing.

The problem for Greece and her EU creditors is that any alteration through negotiations in the terms of the bailout will draw instant whines from Ireland, Spain, and Portugal for a similar restructuring. No doubt there would be a willingness to alter the bailout terms at the margins, but wholesale changes would be out of the question.

This is what Samaras meant when he spoke of an “accidental” exit from the EU for Greece. Tsipras’s actions may initiate another financial crisis that would see bond holders flee and ordinary Greeks running for the banks.

The markets assume that the risk of Greece exiting the euro is small, but officials close to the situation are not complacent. Some fear that the compromises required on both sides may prove too difficult.

These people believe that debt relief for Greece is now a political necessity. They argue that the eurozone can’t demand that Syriza leader Alexis Tsipras abandon his campaign promises and respect Greece’s existing commitments without offering something in return.

Indeed, some officials fear that the eurozone poses the bigger risk to a deal. It is not just rich Northern European countries such as Germany and Finland that are opposed to debt relief for Greece; so too are Eastern countries such as Slovakia and Estonia, whose citizens are less well off than those of Greece, and the governments of crisis countries such as Spain, Portugal and Ireland, whose leaders are paying a high political price for complying with the terms of their bailout programs.

There are risks whatever the eurozone does. Policy makers are privately in little doubt that failure to agree a deal with Greece would catastrophically destabilize the eurozone, playing into the hands of anti-EU fringe parties. But a deal that delivers Mr. Tsipras a big dividend for his years of opposition to reform and fiscal discipline in Greece risks sowing the seeds for future instability by undermining support for pro-reform governments.

Syriza’s victory is a warning for the rest of the EU. It is painfully obvious that the free citizens of Europe, when given the choice of doing what is right, but at a painful cost, and doing what is easy by listening to politicians who play on their emotions, will choose easy every time. It’s always more fun to be an irresponsible teenager than a responsible adult and the adolescents who will be running Greece will now be able to deliver their “radical” reform — a return to the good old days when no one cared about the budget deficit or how much debt they were piling up.

Always appearing on the verge of breaking up, the idea of a United Europe has survived every attempt to kill it over the last few decades. The next few months will show just how bulletproof the EU really is.