Uncategorized

Alex Tsipras: The Modern Dambuster

Check out our article on the Greek crisis and whether the deal reached will take the economy in the right direction.

Adam Smith 

Naked Politics Blogger

In January 2015 Greece decided in a snap election to support Alexis Tsipras and the anti-austerity Syriza party. Tsipras claimed his victory had begun ‘a river of political change that would flow through Europe’ and ‘nothing could prevent its flow’. However in the past month Greek creditors led by Germany have put up a dam of economic measures, putting doubt to the strength of anti-austerity politics. Since his election, Tsipras has condemned the previous austerity measures, declared a humanitarian crisis in Greece, proven overwhelming opposition to the demands of creditors by means of a referendum and then reached a bailout agreement that consequentially imposed harsh austerity measures on Greece. Despite these contradictory actions, he remains incredibly popular with the Greek people maintaining an approval rating of 60%. But is he really the leader that can drag them from a financial crisis as deep as the Wall Street Crash in 1929 and allow his anti-austerity river to flow?

Tsipras very much has the reputation as the peoples’ Prime Minister, however he does not shy away from talking about his personal life including his ‘escapes’ with his wife to their summerhouse in Aegina, a luxury that of course many Greeks would certainly not be able to enjoy. However, he also has characteristics that make him very accessible to the ‘common man’. He is a big Panathinaikos FC fan and has proven on multiple occasions that he can remember the team he supports, unlike other world leaders. His ability to converse with members of the public with smoothness and sincerity adds to this reputation and the people of Greece in their time of need have placed their trust in Tsipras over anyone else.

Immediately after his election as Greek Prime Minister, Tsipras declared that it was essential for austerity measures set by the Eurozone to be eased, as it had caused a humanitarian crisis in the country. The level of unemployment was around 25% and nearly 50% of under-25s were out of work, so Syriza promised to produce 300,000 new jobs and to raise the minimum monthly wage by nearly 30%. Finance minister Yanis Varoufakis claimed this would make for a more sustainable economy. However, Syriza have found it very difficult to keep to their promises, as the country’s debt grew. Although the party managed to get elected as the anti-austerity representatives in government, it became evident that they couldn’t simply abandon their debt responsibilities or their links with the EU.

The Greek people’s support in Syriza and Alexis Tsipras’ aims was confirmed in the July referendum, 61.3% voted against the austerity measures suggested by Greek creditors. Tsipras knew that Greece had almost no leverage, with debt at a projected 180% GDP and the European Central Bank giving money to keep Greek banks from closing, Tsipras had inevitably run out of time. Ultimately they needed Germany and other European countries to help structuralise the economy and prevent them defaulting.

Only days later, finance minister Varoufakis had resigned and Tsipras had agreed a deal with creditors. Tsipras required the backing of opposition MPs in order to pass through the bailout deal worth €86 billion, which many Syriza MPs (including Varoufakis) rebelled against. George Katrougalosa, a Syriza minister, exclaimed that ‘clearly the Europe of austerity has won’. Greece now needed to reform its incredibly complicated tax system, increasing VAT on many items and abolishing the tax discount on the Greek Islands. Corporation tax was also increased and many government owned services are to be sold off to private investors in order to reduce the budget deficit. Small businesses may suffer from the increase in tax and may be less likely to employ people, which affects in particular the unemployed youth. However of the €50 billion raised from the sale of government assets, €12.5 billion has been sidelined by Merkel to invest in Greece in an attempt to recover the economy and help it grow, other economists have suggested that the country will be forced to live through austerity while in recession.

It is difficult to conclude whether agreeing the bailout terms was ultimately beneficial, and Greece will certainly have a few tough years ahead of them. It is unlikely that Tsipras will maintain a 60% approval rating through the difficult future Greece face, especially when austerity measures start to take effect. However, he has managed to pull together morality and economics in his party’s approach and at present seems have negotiated a slightly more acceptable deal than previously in place, with little concession in economic responsibilities but an acceptance of the humanitarian crisis. But in terms of dethroning the German approach not much seems to have changed. Varoufakis himself said that his German counterpart Wolfgang Schäuble dominated talks and was the driving force in deciding the July bailout terms. It is clear Tsipras hasn’t broken down any metaphorical dams, but only time will tell if similar political movements arise in Spain and Italy as Varoufakis predicted, truly allowing the river of change to flow through Europe.

 

Advertisements

Leave a Reply