Can Tsipras’ election victory lead Greece back to economic prosperity?
The electoral gamble by Alexis Tsipras eventually paid off, if we are to judge by last Sunday’s electoral result when his radical left Syriza party claimed an easy victory with 145 seats and 35.46% of the votes, 7.4% ahead of its main rival the New Democracy party. The September 20 snap election was called by Tsipras in an effort to restore his party’s unity by getting rid of its extreme left wing hard core communist fraction, following a split during parliamentary voting for the new bailout programme last July and August.
Results confirmed that Tsipras, who was sworn in as Greece’s Prime Minister on Monday evening, was able to renew the coalition he previously had formed, when he first came to power last January, with the “Independent Greeks”, a right wing nationalist party, which although attracted only 4.3% of the vote and won ten parliamentary seats was enough to supplement Syriza’s presence thus giving the coalition a clear majority of 155 seats in the 300-seat parliament.
The re-election, with almost the same strength as in January, of a party which because of its amateurish handling of the economy brought the country to a standstill, closed the banks and introduced wide ranging capital controls, still in strength, can only be interpreted in psychological terms, according to political scientists in Athens.
For Syriza’s re-election, note the above sources, certainly reflects some deep underlying changes in Greeks’ societal behaviour and anticipatory thinking. For the return to power of Syriza, which actually bankrupted the country last July by calling an ill-conceived referendum just to demonstrate its opposition to Europe, while at the same time was seeking a huge financial bailout, shows the ill placed political priorities of a large faction of society. A faction which places its trust in an inexperienced government only because it showed its resistance to previous bailout programmes, only to introduce, in order to prevent one more bankruptcy, a new more austere and far more costly bailout programme.
Psychology and changes in social behaviour apart, the new Syriza government will now have to face a reality check as it will have to handle some tough economic and political challenges. Top priorities for the newly elected government, as stated by the Prime Minister, remain the stabilisation of the economy, the regaining of trust in the country’s financial system followed by bank recapitalisation and the lifting of capital controls. In this respect, the previous finance and economy ministers, Eucleides Tsakalotos and George Stathakis respectively, will retain their old posts while George Chouliarakis, the government’s top negotiator with the EU is expected to be appointed junior minister in charge of overseeing the implementation of the bailout programme.
Analysts in rating agencies believe that the election result reduces political uncertainty, but dangers still loom large concerning the new government’s ability to implement the bailout agreement with the creditors reached on July 13 and approved by a large parliamentary majority of Greece’s parliament last August. In sharp contrast to his previous tenure as Prime Minister, during the traumatic period from the end of January until late August, Alexis Tsipras now appears to be more reconciled with economic and market reality and certainly with EU governance requirements.
“We have difficulties ahead,” Tsipras told his supporters immediately upon learning the election results. “Recovery cannot come through magic but through lots of work, stubbornness and struggle,” he said.
Although market sentiment appears at first mildly positive as business leaders are relieved that a new government managed to be formed quickly, serious doubts linger as to the government’s ability to reverse the economy’s downturn. Many thousands of workers have been laid off over the last 34 months while the economy is set to contract by an estimated 3.0% y-o-y, by the end of this year.
Anthimos Thomopoulos, chief executive of Piraeus Bank, the country’s largest, although appeared hopeful he observed, as quoted by the Financial Times, that “essentially we are where we were some five years ago in terms of the things that need to be done. Except now, we have an enthusiastic, dynamic prime minister with a popular mandate to do it. And its positive”.
Mathios Rigas, CEO of Greece’s only oil producing company, also sounded positive when he said “that in the sense that we now have a government with a fresh mandate and a clear mission and without its previous extreme left faction, that can only be good for business. It remains to be seen, though, whether they will be able to handle everyday matters that often make running a business in Greece a nightmare”.
However, many EU officials remain deeply skeptical that a renewed Syriza-led government can deliver in implementing the three year EUR 86 bln bailout programme, restore business confidence and return Greece to an economic growth path. Part of this skepticism stems from the attitudes expressed by some factions within the Syriza party which, in spite of electoral success, are questioning the lack of consensus within the party and appear determined to slow the fast pace of reform which the bailout programme implies.