Perfect European storm approaches from Greece

The Greek elections threaten to send the Euro crisis into overdrive as the structural flaws in the whole project of monetary and political union risk an epic row. Can the project survive?

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Alexis Tsipras may decide the fate of Europe
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Tom Gallagher
On 23 January 2015 08:40

The left-leaning British commentariat has been in the vanguard of the European effort to invest someone who was an agitator at secondary school, in university and into middle age  as a redeemer who can rescue Europe from bankrupt elites and place it on a new path of social justice and economic recovery.

The new messiah is 40-year-old Alexis Tsipras. His Syriza party, a coalition of 12 radical left- factions appears poised to win Sunday’s Greek elections. Channel 4’s Paul Mason ,now with Channel 4 after a long stint at BBC’s Newsnight is the high priest of the Tsipras cult.

True to his far-left politics, his heroic description of Alexis Tsipras makes him appear as someone who is a cross between Lawrence of Arabia and Marshall Tito of once united Yugoslavia.

He seems  poised to lead a Mediterranean revolt, possibly as momentous in geopolitical terms as Lawrence’s World War 1 Arab revolt or Tito’s Balkan exploits in world War II. From being an irrepressible agitator, he is evolving into a national champion who demands that Greece be released from crippling so-called rescue programme of the EU and be allowed to find its own path to recovery.

Tsipras wants to cut a deal with Brussels, enabling much of its debt to be written off and the austerity programme to be ended. Radicals in his unwieldy party simply wish to cancel the debt and undo the reforms that were demanded by creditor countries.

Taming the Syriza militants who dream of going down the Hugo Chavez or Che Guevara road of full-throated revolution could be a bigger challenge for him  than facing down the grey politicians in Brussels and the core EU states.

To save the Eurozone from deflation, the European Central Bank this week unveiled a programme of massive bond buying. But German pressure will ensure that losses occurred on other countries debt will be spread across the Eurozone and not be met by its richest member.

It looks to some as if Germany will face Tsipras down. Chancellor Merkel has been reported as thinking that enough work has been done to ensure that any Greek exit from the Eurozone would not plunge it into upheaval.

Christine Lagrade, the head of the IMF, has poured cold water on Syriza’s call for a debt conference to consider a restructuring of sovereign debt in the euro zone, similar to the 1953 London Conference that wrote off half of Germany’s post-war debt and facilitated the country’s return to economic prosperity

Germany’s ability to sound European and manage the extended Eurozone crisis with its own national interests firmly in mind is fast eroding. Its policy of chronic austerity in order to flush the debt out of stricken countries and allow recovery to occur is working nowhere as debt imbalances grow.

Quick fixes and improvisations, leading to the creation of a banking union with no teeth and a refusal to contemplate any meaningful risk-sharing strategy have reinforced the fault-lines in the Eurozone.

Tim Geithner, US Treasury Secretary at the height of the eurozone crisis, said of the European approach: ‘I completely underweighted the possibility they would flail around for three years. I thought it was just inconceivable to me they would let it get as bad as they ultimately did’.

He was talking about the mercantilist approach of Merkel and her finance minister Schauble which has allowed Germany to pile up surpluses and grow 23,000 jobs in December.

It has the lowest unemployment rate in over two decades while deflation  intensifies the depression conditions across the north Mediterranean.

Political pressures from the European left are  making her Social democrat coalition colleagues squirm. She herself will be gone from German politics in two years. If the rumours are true, she is setting her sights on running the United Nations. So as well as embracing multiculturalism as its baleful legacies shake Europe, she may also see the need to  go easy on  austerity.

In public both she and Tsipras are for the continuation of the Euro. A controlled  break-up separating Germany from the Mediterranean states whose economic needs, even in benign times, differ greatly from Germany’s would pave the way for a fresh start for countries crushed by meaningless austerity.

Tsipras will likely soon be confronting a series of low-grade EU decision-makers. Without their academic degrees or their connections and institutional support, he is far more self-confident than they. And he may have cause to be. The Euro-elite fears  being supplanted by forces, far more radical than even Syriza.

The fear is particularly acute in Spain where Podemos wants to abandon the post-Franco dictatorship settlement, abolish the monarchy and allow Spain’s historic regions full independence.

After years of behaving with arrogance and short-sightedness that would have even caused  Bourbon monarchs to despair,  the less blinkered Eurocrats may think that a fudge, giving Tsipras some of what he wants, may be the lesser of two evils. Further intransigence only risks a Greek exit from the Eurozone.

If, as seasoned financial experts like Roger Bootle and Hans-Werner Sinn suggest, Greece quits the Euro and pulls through economically, growth picking up in less than  a year, it would be a crushing indictment on the crisis policy of the last 5 years. Then other countries might follow the Greek model and soon the Euro would be history.

Besides, Tsipras shows signs of mellowing. This declared atheist had harsh words for the orthodox church, one of Greece’s biggest landowners and enjoying huge tax privileges from the state when Syriza was getting 3 percent of the vote.

But on 5 January, the feast of the Epiphany, not only did he attend church, he even volunteered to play a part in the church ceremony, freeing a white pigeon, a representation of the Holy spirit.

Perhaps Paul Mason, and  Myrto Tsakatika, a Senior Lecturer in Politics at University of Glasgow, who believes his rise signifies a belated triumph for Eurocommunism, have misread their man.

Expropriations and disgrace may not after all await the Greek oligarchy which they depict as an insatiable octopus. His rise may even allow  a left-wing project to rise in the EU which gives it another short-term reprieve.

But at least he is sound on the Greek Marbles, for long a prize exhibit of the British Museum. He definitely wants them back.  

A close analysis of the Greek dimension of the Eurozone crisis can be found in Tom Gallagher’s Europe’s Path to Crisis, published in paperback by Manchester University Press last October

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