Greece, Europe and a matter of accepting reality
What we considered a threat over the last few weeks became reality on Sunday,
January 25, 2015, when Syriza, the Greek left-wing populist party, won 149 seats
and the Greek elections, writes Prince Michael of Liechtenstein.
Its leader Alexis Tsipras is, at 40, the youngest prime minister in Greece and has
formed a coalition government with populists from the right.
The loser was Prime Minister Antonis Samaras, whose New Democracy party came
second with 76 seats, while PASOK, the Social Democrats who have been
historically prominent were wiped out with just 13 seats.
Mr Tsipras promised electors he would limit Greece’s unpopular - and hardly
effective - austerity measures and cancel most of its public debt.
But it is hard to understand the horror the rest of Europe is showing. It is obvious that
Greece is unable, and will not be able, to service its debt, let alone to pay it back. Mr
Samaras’ government promised measures, ordained by the troika of the European
Union, the European Central Bank and the International Monetary Fund, to reduce
its deficit. This provided an excuse not to write it off.
European policy in economic and fiscal matters, as we can see from the ECB's new
Quantitative Easing programme, is ‘kicking the can down the road’ rather than real
reform, which should allow healthy competition between EU member countries.
Greece's inability to deal with its deficiencies is negligible in a European context. The
only reason for European agitation about cancelling the Greek debt is that writing it
off is unavoidable. Any calculation at all makes it obvious that Greece will never be
able to repay the money it owes. Writing off the debt was always going to be
Responsible accounting has to reflect the fact that some debts cannot be repaid. The
concern was understandable at the start of the fiscal crisis when banks had to hold
government bonds considered as Triple A. These included Greek debt. It is hard to
understand, in hindsight, how those bonds were ever rated Triple A, but it fitted the
The banks’ balance sheets have been cleared of toxic sovereign debt. Sixty per cent
of Greece’s 320 billion euros of bailout was provided by the European Stability
Mechanism and eurozone member countries, 10 per cent by the IMF and six per
cent by the ECB. The rest is held by a range of other creditors, including some
Mr Tsipra's victory threatens to force eurozone governments, and these other
institutions, to accept the truth and make the necessary write-offs, as accounting law
would ask of any business.
From the size of Greece's economy, it really does not matter to Europe whether
Greece continues to use the euro or not, so long as no further transfer payments are
made. This should be Europe's position. But this is very important for Greece, so Mr
Tsipras should think long and hard about what action he takes.
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