The people have spoken and the Franco-German axis of austerity has suffered a big stroke. The people of France and Greece seem to have punished those supporting austerity measures by giving rise to left parties, as well as the extreme right. The French people ousted Sarkozy and elected a socialist government for the first time after 17 years while Greece has been steered into political instability.
The two traditionally dominant Greek parties, New Democracy (conservatives) and PASOK (socialists), have suffered huge losses with a combined 70% of votes in the past dropping to 30% after elections in May. New Democracy did manage to regain most of its power by finishing first in last week’s most recent elections, garnering 30% of votes, but PASOK slipped to third with 12%, giving way to SYRIZA, a radical left party and possible successor as Greece’s socialist alternative.
Even though the conservatives, who campaigned on a pledge to keep Greece in the Eurozone, came first, one could describe the election result as a people’s reaction against austerity measures. It is clear that many Greeks still do not want to acknowledge the inevitability of the situation; a staggering 27% of the population voted for the ‘magic’ solution offered by the anti-memorandum party Syriza.
Syriza’s supporters have been lured into thinking Greece will get through the crisis without great austerity. The party has some laughable, but lamentably popular, solutions. One included Greece writing off its debt, hiring an additional 100,000 employees in the public sector, paying back tax-payers €2 billion worth of taxes that were collected earlier in 2011 and at the same time staying in the Eurozone.
When asked how they would finance the state’s vital sectors and operations – public education, health – they advocate nationalising banks, and using the people’s deposits as a means of keeping the state running. June’s elections gave that party the second place in parliament with just 3% separating it from first.
Even if one believes in the success of such a utopian scenario with Greece not shown the euro’s exit door by letting it default, the country will certainly be returning to its previous state of affairs. A state that will be characterized by thriving bureaucracy and corruption while a shrinking private sector will be subsidising an ever larger public one. The current modus operandi of the Greek state is what has led to today’s overbearing state; political parties should be focusing on changing this while remaining part of the Eurozone.
A positive outcome of the elections is the fact that 30% of votes went to the pro-euro New Democracy, which is now under intense pressure to re-negotiate the terms of the bailout to avoid another political collapse and social unrest. In any case, vital changes should not be postponed as structural reforms, such as establishing a stable taxation system and reorganising the state, are necessary to regain investors’ confidence and overcome bureaucracy and corruption.
All the parties that ruled Greece for the past fourty years have proven to be incompetent and totally unwilling in bringing change and one of these parties has been New Democracy; today, that party has to prove it can make the difference by changing its own core.
It is apparent that support has increased for the parties that oppose any structural reform but at the same time people are aware of the great danger of leaving the euro. These elections can be seen as a decisive step for Greece towards staying in the Eurozone. It is crucial for the markets to see a unified Greek government ready to follow the European path by reorganizing its state in such a way that will lead to sustainable growth.