Syriza party wins big in Greek election. What does it mean for Europe?
The left-wing party's anti-austerity platform has resonated widely across Greece. But European creditors, especially Germany, remain wary of its implications as they head into a new round of negotiations over the country's bailout.
Alexis Tsipras, the leader of Greece's left-wing Syriza party, was sworn in as the new prime minister Monday after forming a coalition government with the small, right-wing Independent Greeks party. He plans to now take on European creditors in his push to end austerity in the debt-ridden country.
Mr. Tsipras seeks to end what he calls a humanitarian crisis, with a quarter of Greeks out of work and millions living in poverty. But is his agenda compatible with membership in the eurozone?
Here is a look at what the election results means for Europe and how big of a risk the continent really faces.
Does Syriza want to stay in the eurozone?
Yes, and that is a key reason markets aren’t widely shaken by Syriza's resounding victory. Having toned down his rhetoric from earlier days, Tsipras says he wants Greece to stay in the economic bloc – as do the far majority of Greeks.
But he wants to renegotiate the country's bailout terms with the European Commission, European Central Bank, and International Monetary Fund, in addition to writing off much of its debt. Those discussions will start immediately. An extension of the bailout is due to be implemented when the current terms expire at the end of February.
With better terms, Tsipras says he’d use new funding to bolster the minimum wage and create thousands of new jobs, putting an end to the age of austerity in Europe.
How easy are those pledges to fulfill?
"The upcoming elections will not change Greek debt. Every new government needs to fulfill the contractual agreements of its predecessors," German Finance Minister Wolfgang Schäuble said in December. "If Greece chooses another direction, it will result in a difficult situation.” Mr. Schäuble also warned over the weekend that Greece would not be eligible for a massive stimulus plan announced by the European Central Bank Thursday if it decided to ditch its reform program.
Roland Freudenstein, a deputy director of the Wilfried Martens Center for European Studies in Brussels, says that Germany, which is the powerbroker on economic policy in Europe, will not be swayed by Syriza rhetoric. “You can’t bully Germany into anything here,” he says.
Why isn’t the EU in a panic over this?
There are several reasons. The first is that the EU, in the wake of eurozone crisis, has put in many mechanisms that will safeguard it even in the worst case scenario of Greece defaulting on its debt and ditching the euro for the drachma. In fact, the main difference between Sunday's election and the one in 2012 is that the current outcome is viewed as a political and social test for the EU, rather than the economic test it was before.
But Spyros Economides, the deputy director of the Hellenic Observatory at the London School of Economics, also says that many leaders are counting on Tsipras to moderate his message now that he is off the campaign trail.
The EU does have the upper hand. Without an infusion of cash from creditors, Greece is expected to run out of money by summer.
Should the EU be so complacent?
Probably not. While the prospect of a Greek exit doesn’t rattle markets like it did in 2011 and 2012, Syriza is not an outlier. From Spain to Italy, France to Ireland, the austerity prescription is increasingly being rejected.
“This can become the spark that allows those who’ve kept silent in Europe to push for a new equilibrium in the eurozone,” says Romolo Gandolfo, an Italian expert on Greek politics in Athens.
The election also comes at a time when Europe faces direct and indirect threats that require cohesion. “With jihadism and the Russian crisis, and the conflict across Arab territories, can Europe afford a big political, economic, and social crisis?” asks Dimitris Charalambis, a political science professor at the University of Athens. “The answer is, probably not.”
So how can Europe stay together on this?
That is the toughest question of all. If the EU cuts Greece some slack, protests in places like Berlin will happen immediately. Many Germans firmly believe they have gone out of their way to help Greece and that the country must continue to pay the price of its past mistakes.
If Syriza is forced to back down from its promises, however, there will be a revolt at home among those who see the party as their “last hope.”
Even though all parties involved have the same goal, there is the chance of negotiations backfiring and Greece facing default and possibly the exit door of the eurozone. It's the kind of uncertainty Syriza opponents warned of leading into the race.
In the weeks ahead, says Mr. Economides, “there will be a tremendous amount of pressure on Syriza."