European leaders last night reacted warily to the election of Greek anti-austerity party Syriza, ahead of Alexis Tsipras’s expected effort to exit bailout agreements.
Jens Weidmann, president of the Bundesbank, the German central bank, warned that Greece would remain dependent on outside financial support and that the new Greek government “should not make promises that the country cannot afford.”
“I hope the new government won’t call into question what is expected and what has already been achieved,” he said.
French President Francois Hollande urged Tsipras to “pursue the close cooperation between our two countries in service of growth and the stability of the Eurozone, in a spirit of progress, solidarity and responsibility that is at the heart of the European values we share.”
Despite Syriza’s election triumph, analysts remain convinced Syriza will pose little threat of a “Grexit” – Greek exit from the Eurozone – due to its weak bargaining power.
“If and when it [Syriza] forms a government, it faces very difficult challenges to meet all of its three objectives of ending austerity, restructuring its EU and IMF loan debt, and keeping Greece in the euro area,” said economist Robert Kuenzel from Daiwa Capital Markets.
Doing all three is seemingly impossible. Ending austerity would mean Greece would no longer be able to get financing from the EU and the IMF, resulting in a likely default on some its debt. A default may mean that Greece is forced to leave the euro so its own central bank can fund basic state functions.
“The short-term costs and risks for Greece attached to a ‘Grexit’ are enormous, especially for the fragile Greek banking sector, while the benefits of improved competitiveness (mainly of the Greek tourism industry) are likely modest,” Kuenzel said.
WAS GREECE ON THE ROAD TO RECOVERY?
Greeks have faced an incredibly tough time, with Greece’s recession on par with the US great depression. However, data from Greece appears to show its economy is in the early stages of recovery. Though still at elevated levels, unemployment and youth unemployment had levelled off and were beginning to edge down. Meanwhile, the government’s austerity programme has been “successful” in terms of getting borrowing under control. GDP was also starting to tick up, although only very slowly.
PROFILE: Alexis Tsipras
■ Born in Athens 1974.
■ Became a member of the Communist Youth of Greece while in High School.
■ Holds a degree in Civil Engineering from the National Technical University of Athens. Conducted post graduate studies in Land Surveying and Planning.
■ Was a member of the Central Council of the National Students Union of Greece (EFEE) from 1995 to 1997.
■ After finishing his studies, he worked as a civil engineer.
■ In 1999 he was elected secretary of Synaspismos Youth – one of the parties that would later combine to form Syriza.
■ In December 2004 he was elected to the Central Political Committee of the party and consequently political secretariat where he was responsible for educational and youth issues.
■ In 2008, Tsipras was elected as the president of Synaspismos.
■ He was elected member parliament in the national elections of 2009 and has since then headed Syriza.
■ Syriza has been a coalition of 13 separate parties since 2004 but ran for parliament as a single party for the first time in May 2012.
■ In the 2012 General Election, the Tsipras-led Syriza gained 26.9 per cent of the vote against incumbent New Democracy’s 29.7 per cent.