Whatever the outcome of tomorrow’s election in Greece, true sovereignty and democratic control over its national finances isn’t in the cards for the Greeks, as it isn’t for any other states of Europe’s so-called periphery. By Benjamin Zeeb
When Greece votes tomorrow, many Greeks hope for a new beginning. The man who they hope (or at least 35% of them, according to latest polls) can bring about such a fresh start is Alexis Tsipras, leader of the radical left Syriza party, and likely the next Prime Minister of Greece. Tsipras started out at the height of the European crisis as a populist leader who squarely rejected the policy of austerity imposed on Athens by the Troika. Now that power seems to be within arm’s reach, he has refashioned himself as a kind of negotiator in chief. Giving up, or at least toning down some of Syriza’s most radical demands, he now wants to be the man Greeks entrust with the task to sit down opposite Angela Merkel to negotiate a deal that would return sovereignty and prosperity to the country.
Unlucky for him; however, this deal has already been made in his absence. It has been sealed between Germany and the ECB just two days before the election and its results for Greece are mixed: Prosperity maybe, sovereignty, probably not.
For Mario Draghi, who had been very vocal about his desire to start a large scale program of quantitative easing (QE) in the Eurozone sooner rather than later ever since his speech at Jackson Hole last year, the Greek elections came as a godsend.
Over months, the ECB’s chairman had campaigned with varying success to gain interpretational sovereignty over the phenomenon of low inflation (he basically sees it as a less severe form of deflation). While his arguments gained some traction during the second half of 2014, the Germans proved harder to convince than most of their neighbors. The prospect of a Syriza win in Greece meant that action would now become necessary. Despite years of continued crisis, however, the Eurozone’s governments were still in no position to act credibly. So although it is clear to all that QE won’t solve our problems, that it won’t help to complete the single market, won’t return democratic representation to the peoples of Europe, won’t help tackle the huge economic imbalances in the Eurozone; the Germans finally relented.
Only a few weeks back, shortly after the failed presidential vote in the Greek parliament and the announcement of snap elections, Berlin still thought it possible to scare the Greeks into compliance by breaking a taboo. No longer, Mrs. Merkel announced then, was an exit of Greece from the Eurozone unthinkable. The effect on the Greek election polls; however, where Syriza continued to climb unperturbedly in the voter’s favor, was at best neutral. Stock markets started to slide and investors started to fear a repeat of 2011’s crisis. It was then that Mario Draghi saw his opening. Quickly he managed to change the story and all everybody started to talk about was the possibility of a new and substantial round of easing by the ECB. Greece had almost become a side note in public perception, but clearly could again become a problem, if the ECB were not to follow through with QE.
The program then devised and announced on Thursday is basically an open ended commitment by the central bank to pump an extra 50 billion Euros into the European economy until inflation climbs closer to the ECB’s 2% target.
From mid 2015, Draghi said, Greece might also profit from bond buys by the European and national central banks. This provision is of course intended to give Greece’s new negotiator in chief and his European partners enough time to figure out how to deal with many of the open questions ranging from the possibility of some debt forgiveness to the exact shape and form of structural reforms Greece will be expected to implement this year. But the most decisive feature of the QE program is already set in stone: Debt mutualisation will be capped somewhere around 20%, which means that most of the buying of sovereign debt, or around 80%, will be done by the respective national central banks. This of course means that Greece will remain dependent on other Eurozone countries for liquidity and Berlin and Brussels will remain in a position to dictate terms. True sovereignty and democratic control over its national finances isn’t in the cards for the Greeks, as it isn’t for any other states of Europe’s so-called periphery.
Still, QE and a falling Euro might bring some relief to Greece for now, and if Mr. Tsipras gets handed some minor face saving wins in his negotiations with Germany, the Eurozone will be saved once again. Until Spain votes in December that is.
Image: “Alexis Tsipras”, by GUE/NGL via Flickr, published under Creative Commons license 2.0.