Impossible Greek algebra
“A new growth narrative” was the promise eurozone made impatient world financial leaders at the IMF World Bank spring meetings last month.
The Brussels-Frankfurt-Berlin axis have been planning a renewed focus on growth, partly to accommodate the arrival of Francois Hollande at the Elysee. In an interview with Jon Snow on Sunday, Laurent Fabius, a likely leading cabinet minister in an Hollande government, indicated pretty clearly that the existing fiscal treaty was to be supplemented by a “growth plan”.
Besides as mighty a force as the prime minister of Luxembourg (elected by 80,000) told the president-elect of the Republic of France that it was “not possible” to renegotiate the cherished eurozone fiscal treaty.
If you want to cut through this all you have to do is listen to the ECB president last week. Mario Draghi said a number of extraordinary things at his press conference in Barcelona. There is clearly a significant plan to redeploy massive financial resources towards infrastructure spending. The fact that eurozone unemployment is now at a record for the lifetime of the single currency has prompted action. the ECB pumping hundreds of billions of euros into the eurozone banking system has provided only temporary respite.
“What we’ve learnt is that a trillion euros doesn’t buy you much time,” one of the world’s leading bankers told me recently.
Implicitly there is recognition that what you might call German sado-austerity will not work, and certainly will not work on its own. The tanker is turning a little.
But at this precise moment, the Greek public give the eurozone bailout what appears to be the strongest possible rejection. The two mainstream “pro-memorandum” parties got less than a third of the vote, compared with their habitual 80 per cent. It is only the oddity of the winner of the election getting a top up bonus of 50 seats that even makes it appear respectable for ND’s Antonis Samaras to start to claim any sort of mandate. A joke going round financial analysts: beware countries where the leading political party has a vote share lower than the rate of VAT.
Yesterday Samaras got the three-day mandate to negotiate coalition at 3pm. He gave up five hours into his three days. Today 37-year-old Alexis Tsipras, leader of the Syriza Coalition takes up the baton to create a leftist anti-bailout but pro-euro Greek government. He wants to suspend debt repayments and renegotiate the deal. I fear that some Greek political parties are overplaying their weak hand versus European nations that would prefer to let them leave the euro than further renegotiate Greece’s bailout.
In any case, right now, the algebra seems to make any sort of government impossible. That means even more elections.
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