After a tumultuous election day, a little more clarity seems to be coming from Greece today. The election gave the center-right and pro-euro New Democracy party the opportunity to form a government that will try to rescue not just Greece but Europe as well, and perhaps the entire global economy. ND leader Antonis Samaras will have to try to accomplish that task without the far-Left Syriza party, which had a disappointing second-place finish and refuses to participate in a pro-euro government under conditions of the bailout:
Two elections, two interim prime ministers and 221 days since Greece last had an elected government, Greek President Karolas Papoulias asked the leader of the center-right New Democracy party Monday to try to hammer out a coalition.
Antonis Samaras has three days to cobble together a government after parliamentary elections Sunday put his party in first place. The party that came in second, the radical left group Syriza, said Monday it would not back him.
The vote was widely seen as a Greek referendum on staying in the euro, the currency used by 325 million people across 17 countries in Europe. The possibility of a “no” vote caused near-panic in world markets, with analysts warning that the collapse of the euro would cost $1 trillion. …
Samaras said he would build a government of “parties that believe in the nation’s European orientation, that believe in the euro.”
A minority government would be a bad outcome, and the harbinger for more instability. Having Syriza as part of a governing coalition might have been worse, however. The socialists don’t want to take the necessary steps to reform Greece’s debt overhang, which is what has driven the crisis; in fact, they thought that they’d get a lot more Greeks to agree with them on that point. It’s a mildly optimistic sign that Syriza might have made itself irrelevant, at least for the moment, especially if Samaras can form a majority government that will hold together on real reform measures.
Not everyone shares that view, of course. At The Fiscal Times, Patrick Smith laments Syriza’s hardline position and says that the real reform target should be Europe rather than Greece:
Samaras himself is also a worry. A right-wing nationalist by sentiment, he stood squarely against Greece’s first international bailout, in 2010. Even in his own party, senior business executives say he has little grasp of Europe or the restructuring plan to which Greece has submitted. The hope is that he can be persuaded to step aside in favor of a leader who can build the “government of national unity” numerous Greek politicians are now calling for.
The remaining question on the ground in Athens is Syriza, or the Coalition of the Left. Although it finished second on Sunday, the results are considered an immense step forward for the party and its leader, 37-year-old Alexis Tsipras. With 71 seats in the 300-seat legislature, it now has an influential political presence in government for the first time. This should not be underestimated.
Countless news reports have demonized Tsipras and said Syriza wants to “tear up” the bailout agreement, but this is a misreading. As Tsipras wrote in the Financial Times last week, Syriza endorses a version of the growth-and-stability blueprint the rest of Europe has been talking about since the election of François Hollande as France’s president in May. Counting minor parties, that is what 46 percent of Greeks voted for.
Except, of course, that what Hollande wants is even more borrowing and stimulus spending — and Syriza isn’t even on board with what Hollande proposed, only “a version” of it. Borrowing and stimulus spending put Greece in the position it finds itself in today … and Spain, Italy, Ireland, and Portugal, too, as well as the US.
In the end, the real lesson is that sharing one currency between a number of sovereign nations with wildly different senses of fiscal discipline is a bad idea. Europe might be able to patch a solution together for the short term, but the long term solutions have to involve either separate currencies or one political sovereign in Europe, and that is exactly what the varied cultures and peoples of Europe have spent millennia fighting to prevent.