Every week, The WorldPost asks an expert to shed light on a topic driving headlines around the world. Today, we speak with economist Edward Hadas about the significance of Syriza's victory for the Greek economy and the eurozone.
The left-wing party Syriza won national elections in Greece last Sunday with a program promising to roll back the stringent austerity measures imposed on the country in the wake of the financial crisis.
Syriza wants to renegotiate the terms of Greece's bailout agreements with its creditors -- the troika made up of the European Commission, the European Central Bank and the International Monetary Fund. Troika leaders have insisted that Greece must fulfill its commitments, raising the prospect of a confrontation that could destabilize the eurozone, 19 of the 28 members of the European Union using the euro as their currency.
In his first week in power, Greece's new Prime Minister Alexis Tsipras signaled that he would not relinquish his anti-austerity campaign pledges. He moved quickly to block the privatization of state assets and promised to rehire public workers, causing the Greek stock market to tumble. "We are coming in to radically change the way that policies and administration are conducted in this country," Tsipras vowed at his first cabinet meeting.
Economists have disagreed over the right approach to save the Greek economy and whether Syriza's economic proposals will be effective. Some have warned that austerity is a painful necessity and Greece just can't afford the financial instability caused by Syriza's policies. Others argue that austerity is actually harming the Greek economy.
Edward Hadas, the Economics Editor at Reuters Breaking Views, told The WorldPost in a Q&A that while Syriza is inexperienced, the new government could actually be good for Greece.
Do you think Syriza is right to oppose the austerity program?
A lot of serious economists agree that by squeezing cash out of the economy, the austerity measures have made it very difficult to drive demand, increase wages and curb unemployment. The troika plan was badly designed. It made a bad situation worse.
Syriza's finance minister does recognize the underlying problems that led to the bailouts in the first place. The Greek economy has many structural problems, including dependence on imported capital from the rest of the eurozone.
Some of Syriza's policies could make this better, others could make it worse. For example, they've proposed reversing the increase in the retirement age for civil servants, which would be a waste of human capital. However, they have also said that a serious effort must be made to widen the tax base, which would clearly be very good for Greece.
What has Syriza promised to do exactly?
The fact that you have to ask shows their policies are not very clear. Various members of Syriza have made lots of radical noises. Yet their suggestion to walk away from the reconstruction plan is not reconcilable with their pledge to stay in the euro.
Have Syriza's decisions in its first week in power made things any clearer?
Several things they've said have alarmed people, but they are mostly a sign of inexperience. Syriza is clearly not used to being part of the government. Many members of the new government are academics not accustomed to the world of politics.
What does all this mean for the eurozone?
I think Greece will compromise over the bailout and will not end up leaving the euro. European debates tend to include lots of ultimatums and then a last-minute deal.
If Greece does leave the euro, the financial markets will react out of fear the eurozone could break up. Yet financial markets don't get the idea of a political project. The political determination to keep the euro together has only increased in the last three years.
There is always a chance that things could go badly wrong. Currently, there is wide recognition that the European project is a good thing. This could change if an anti-Europe party came to power in an important European country, for example the National Front in France.
How bad are the challenges facing Greece right now?
It's a mess: Unemployment is high, investment is low, the tax base is narrow, and educated people are leaving in droves.
These are longstanding issues. Greece faced a civil war after World War II and was later ruled by military regimes. Some social divisions have not been resolved. Economies need strong civil institutions and these have not taken root in Greece.
It is promising that Syriza is made up of political outsiders, and is willing to consider more unorthodox policies. They appear committed to breaking the cycle of those who have governed Greece so badly in the past.
This interview has been edited and condensed for clarity.
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