EKIP– Expert Club for Economics and Politics A Different Opinion
Undoubtedly the most important event on the European political scene at the end of January was the decisive victory of the far-left party SYRIZA in the early parliamentary elections in Greece. Although it fell two seats short of an outright majority, the equally extremist (but at the other end of the spectrum) Independent Greeks came to the rescue, allowing Alexis Tsipras to form a cabinet and take the post of prime minister himself.
Most analyses of the events surrounding and following the elections focus on the likelihood that the new government in Athens will pull the country out of the eurozone and the possible consequences of such a move for Greece and the EU as a whole. Cameras and microphones are focused on the cabinet's first meetings with key leaders of countries and international organizations.
Relatively less attention is paid to SYRIZA's domestic policy, which - if the party's election promises are fulfilled - could lead to serious trouble for Greece. Nationalizations, high taxes and generous state spending, artificially increasing wages and social benefits can shake and bring to its knees even a strong economy that is not burdened with 175% public debt and nearly 26% unemployment.
Many expected that the loud statements of SYRIZA leaders were mostly aimed at attracting voters, and after the elections the party would follow the policies set by the previous New Democracy government, which achieved some success in attracting foreign investment, privatization and stabilizing the main economic indicators.
However, the first week of the far-left party’s rule suggests the opposite – we have every reason to believe that the Tsipras government intends to implement its program as long as it remains in power. In just a week, SYRIZA managed to block the privatization of the electricity distribution company PPC and the country’s largest port, Piraeus, close the agency that deals with the privatization of other state assets, ban all-inclusive tourism and threaten one of the country’s largest investors – the Canadian Eldorado Gold, which is expected to bring $1 billion into the country.
However, this is just the tip of the iceberg of economic policies that we can expect from SYRIZA. Their program review and promises include a number of measures that, if implemented, will return Greece to the worst days of the economic crisis and postpone recovery and economic growth.
The far-left party plans to increase taxes in a number of areas, thanks to which it will be able to raise sufficient funding for its social programs. Among the most severe increases are the increase in corporate tax to 45% and the tax on high incomes to 75% (we saw how well this worked in France), as well as taxation of financial transactions, “luxury goods”, etc. For better collection, SYRIZA wants to effectively abolish bank secrecy and ban transactions by offshore companies, as well as a ban on operations with financial derivatives.
In a sense, the party is right – raising taxes is the only way to raise fresh resources, given the planned confrontation with Athens’ creditors, the intentions of rating agencies to further downgrade the country, and the absurd interest rates of almost 17% on short-term debt. However, it will lead to a further slowdown in the already weakened economic activity, especially in combination with the suspension of privatization and the reduction of investments to companies “acceptable” to SYRIZA. The party’s original program assumes that a large part of Greece’s financing will come from the EU and even that the function of the ECB will be changed so that it can finance state investment programs in EU countries. However, the reaction of the leading political figures on the continent has made it clear that such a scenario is unlikely.
SYRIZA believes that in the long term, nationalizing banks and “creating a public banking system” is the right approach. It is no coincidence that the large Greek state-owned banks Pireaus and the National Bank of Greece were among the companies whose shares collapsed the most after the party’s victory. The same applies to all “strategic enterprises,” which should be placed under state control and managed through “democratic planning.” SYRIZA does not explain exactly what this type of planning is, but the parallels with the central planning of communist economies are obvious.
The social measures proposed by the far-left are no less comprehensive. They suggest making electricity free, opening a huge number of public kitchens, families who cannot pay their mortgages receiving a reduction of up to 30% of their payments, the unemployed receiving 80% of their previous income as state aid, and the state providing free healthcare. It is not clear how all of these activities will be financed, except through the aforementioned tax increases.
Among SYRIZA's more dangerous proposals is a 100 euro increase in the minimum wage - even in 2014, youth unemployment in the country was just over 50%, and an increase in the minimum wage would effectively close the job market to young people. Tsipras' party wants to solve the unemployment problem with a comprehensive job creation program, financed by the ECB, which is by no means guaranteed.
Although one of the main sources of fresh funds is the EU and Greece's previous creditors, SYRIZA wants to renegotiate its relations with the union's institutions, and where they do not correspond to the party's ideas (the ECB, for example), their functioning to be changed.
If Greece were an isolated, “unimportant” country, SYRIZA’s rule – which, given the state to which the presented combination of policies will lead the country’s economy, will not last very long – would serve as another good example of why socialist/communist policies do not work. Within the EU, however, the victory of Tsipras’ party sent a signal to a number of other radical nationalist and socialist parties (the French National Front, the Spanish Podemos, the German AfD, and even the Bulgarian ATAKA declared their support for the new government) that taking power and implementing policies typical of the totalitarian states of the 20th century is not only possible, but also achievable. For this reason, SYRIZA’s victory is a threat to reasonable and restrained economic policy, insofar as it remains in Europe, and after it, the victorious march of radicals and populists will most likely continue, with even greater force.
It's time to create a Greek Welcome Package - with bonus points if companies come to economically backward regions.
Whichever region they come for 🙂
Those who have a problem with democracy in general are clearly very afraid of Syriza...
Is it possible for you to explain to me why, within 5 years of strict monitoring by the troika, the debt from 120% of GDP (in 2009) is currently 185%? Who did the money go to? Do you know anything about the world's usurers, how and how much they earn from the government bonds of any country? Can you say something about the role of Siemens, for example, and its participation in the largest corrupt scheme with local politicians and what billions are involved? And on what basis do you define a democratically elected government as far-left that entered into a coalition with an extreme far-right party. Would ATAKA have congratulated them just because of that? And when you write, for example, about free electricity, can you add to which and how many families this applies? Can you write to whom it is not convenient for banking secrecy to be lifted? And again, do not count on large Greek capitals that will already be entering Bulgaria. These very capitals have long been in other, more exotic places. And one more thing, a democratically elected government cannot be defined as totalitarian.