It’s still nearly two years until our elections, but the Greeks are going to the polls today in an early election to decide the members of parliament. You remember Greece, right? The country which finally learned that not everyone can live on a government pension from the time they get out of high school when their economy finally cratered? They’ve been on something of a conservative course for a while now, cutting their costs and trying to rebuild the shattered economy. There have been positive signs of success, but their citizens have also experienced some understandable and predictable hard times during the belt tightening. Well, the leftist Syriza party, behind their leader Alexis Tsipras, has had enough of this nonsense and is ready for the good times to roll again.
The leader of the leftwing Syriza party, Alexis Tsipras, has pledged to write off Greece’s huge debt and revoke austerity measures.
However, the current conservative prime minister, Antonis Samaras, says the austerity measures are working.
He’s urged voters not to take Greece to the brink of catastrophe…
After casting his vote, Syriza leader Alexist Tsipras told the BBC that “the vicious circle of austerity is over”.
He has said his party would restore “dignity” to Greece by rolling back on cuts to jobs, pay and pensions which have hurt millions of people across the country.
Tsipras wasn’t shy about his goals.
“In Greece, democracy will return,” the party’s 40-year-old leader Alexis Tsipras told a throng of cameras as he voted in Athens. “The message is that our common future in Europe is not the future of austerity.”
You have to give the guy credit for innovative thinking. He wants to write off the country’s debt and restore everyone’s government funded benefits. Who even knew that was an option? And more to the point, we’ve just passed the $18T mark for our own debt in the United States. You mean we could have just written that off? We need an immediate investigation to find out why somebody wasn’t on top of this idea back in the 90s.
All kidding aside, the Greeks are far from being out of the woods in terms of their tenuous fiscal position. The country’s debt currently represents 175% of their GDP. The economy has shrunk by 25% in recent years and they are an additional 240 billion euros in debt to the EU, the ECB and the IMF for the bailouts they have received. Throwing in their lot with the EU may not have been the smartest move in history, but their courses are pretty well locked together for the foreseeable future. But if the leftist party takes over and they go back into a mode of bleeding out cash, it’s difficult to imagine how anyone else would extend them further credit. Greece could still become, in effect, a failed state if they’re not careful. And if that happens, it will affect everyone, as Forbes was warning this week.
While the Greek economy is growing moderately, and Greece is likely able to continue its debt service under existing austerity measures, a Syriza-dominated populist government would likely bring about an economic crisis worse than the one Greece and the Eurozone saw in 2010…
Even the possibility that Greece will default on its sovereign debt could push up the cost of borrowing in its private sector, very possibly tilting its modest economic recovery into recession. This would further exacerbate the country’s already troubling debt-to-GDP ratio, thereby further raising private interest rates, thereby further slowing the GDP, thereby further raising private interest rates…In other words, it could cause an economic death spiral for the Greek economy.
What Forbes sees coming is the possibility of yet another bank run, and this time there won’t be any net below them to slow the fall. If that happens, everyone who is invested in the debt of Greece will be taking a huge hit and it will send shock waves through the rest of the global economy. That’s what you have to look forward to if the Greeks actually put the Syriza party in power. (For those playing along at home, “Syriza” is an acronym for a Greek phrase which literally means, “coalition of the radical left.”)