Victory in the Greek general election has been taken by Syriza, which used the slogan “hope is on its way” to define its election campaign. Syriza is an anti-austerity party which has made a pledge to renegotiate the bailouts that Greece has received, and this has led many in the international community wondering what this result might mean for the troubled Euro.
As Greece is just beginning to come out of the recession that has troubled it for six years, it may seem surprising that the public chose to turn against the policies of the New Democracy, which will now form the opposition. However, with 25.5% (almost 50% in the 25-35 age bracket) and ordinary people feeling the effects of pension and public service cuts as well as emergency taxes, an optimistic new direction has proved decidedly attractive to voters.
In this situation, it is certainly not surprising that Syriza’s policies and pledges have a heavy economic focus, and for this reason the change of direction in Greece has strong potential to impact on the Eurozone. The party aims to bring down the cost of living, raise wages, and reinvigorate Greece’s lacklustre economy. As part of this, it intends to write off a large part of the considerable debt Greece has amassed through bailouts in recent years from the likes of the European Central Bank, International Monetary Fund, and European Commission. A sum of almost €240 billion (around £185 billion) has been borrowed by Greece in total, and a further €7.2 billion is still to be negotiated. All in all, Greece’s debt stands at around 175% of its GDP.
As well as intending to write off a significant portion of Greece’s debt, the party wants a conference to establish a more sustainable schedule for repayment. This part of the plan is likely to be better-received by creditors, who have previously stated that there will be no write-off.
A further concern is that Greece might leave the Eurozone under Syriza’s leadership. While the party has currently stated that this is not their intention and German Chancellor Angela Merkel has encouraged Greece to continue to form “part of our story,” many believe that Greece’s future in the Eurozone is still not entirely certain.
The greatest fear is that the situation could ultimately go so far as to cause a meltdown in the Eurozone. Thankfully, many experts do not believe this is likely. In 2012, when the last Greek election was held, there were concerns that if Greece defaulted this could lead to similar problems following in Italy and Spain, but the European Central Bank has largely managed to eliminate this danger. Furthermore, many analysts believe the new Greek government may be able to reach some sort of deal, perhaps involving a pause in repayments.
Nonetheless, with Greek debt obligations for the next two months alone totalling €4 billion and bonds worth €6 billion due to expire soon, many are watching closely to see how the new government will cope.