Anticipation of Greek "snap" elections on January 25 has brought renewed global financial market turmoil as global observers assess the uncertainties around Greek election risk and evaluate the likelihood that the ECB, EU and Greek leadership can manage to avoid yet another EU integration policy crisis, or even the unlikely event of a Greek "exit."
European Union 2015 and Greek elections: Would a Syriza win be good for EU integration?
While Greece's political party Syriza's (the Coalition of the Radical Left) potential win in the elections on January 25 increases the uncertainty for Greece, a win for Syriza could be good for EU integration policy. Syriza is challenging the status quo of fiscal austerity policy.
The rise in popularity of Syriza is the result of social discontent with the prolonged financial crisis and a backlash to the implementation of austerity-based policy. Syriza exemplifies a political force with which the EU's institutions will need to contend, as anti-establishment movements across the EU find their political voice, as well as representation in both national and EU levels of office.
How could EU integration benefit from a Syriza win?
Austerity-based EU integration policy must evolve to meet the needs of the post-financial crisis EU. While fiscal austerity has been the cornerstone of the EU integration policy since the signing of the Maastricht Treaty in 1992, the implementation of the policy has been driven by the political will of the stronger member countries, Germany in particular. Syriza has risen to power on an anti-austerity platform based on humanitarian grounds, to alleviate poverty and give voice to the social backlash from the austerity policy that has been implemented since 2010.
If Syriza wins and forms a government, it aims to challenge the status quo of EU austerity policy on the view that the policy has contributed to the despair and poverty in Greece and created a humanitarian crisis in the country. A Syriza win on January 25 might bring changes to policy that need to be made, both on the country level and on the EU level. Greece is an extreme case, as its output has fallen 30 percent since 2008, but not a unique case, as peripheral Europe has suffered disproportionately in the post-global financial crisis era.
EU integration policy must evolve in order for the EU region to transform itself and return to broad-based and sustainable economic growth. The aggregate economic growth numbers for the Euro region, as anemic as they are, mask trends that run against EU integration.
The underlying reason for the ongoing EU crisis is one of divergent competiveness between member states: In the post-global financial crisis era, what has evolved in the EU region is a crisis between divergent economies, between stronger and weaker member states, roughly divided between core and periphery, resulting in a two-tiered European Union composed of creditors and debtors. Upon the launch of the Euro in 1999, all qualifying member states believed they were joining a "first tier" of Europe.
Unfortunately, weaker countries are now locked-in to a subjugated relationship with the core, dominated both politically and economically with little influence over EU integration policy. While the divergent competitiveness of the underlying economies is the source of the economic crisis, the subjugation of the weaker countries to the political will of the stronger countries is a source of the social backlash.
Much of the root of the problem is evidenced in the labor markets: High absolute unemployment, growing long-term unemployment, staggering youth unemployment, structural unemployment, and "brain-drain," the most productive workers emigrating. Without broad-based, inclusive employment growth, there will be no sustainable recovery for Greece or other EU member countries, and no sustainable EU integration.
While the Maastricht Treaty of 1992 requires austerity and cost-containment as the policy foundation of fiscal integration, the debate around how the austerity plans have been implemented in the post-crisis era, since 2010, continues to be a central question around the viability of EU integration policy. In the case of Greece, Syriza is arguing that structural reforms are not a substitute for stimulus, by calling for growth and investment to return Greece to prosperity. In doing so, Syriza is challenging the foundation of the EU integration policy and the political will of the stronger EU member states, Germany in particular.
Syriza points out that without growth and investment, Greek indebtedness is unsustainable. Furthermore, Syriza believes that the Greek debt problem is a European debt problem, which, to a degree, is also true, as the debtor-creditor relationship is now an aspect of the structure of the Eurozone itself. Syriza wants to lighten the Greek debt burden in order to fund higher spending, to stimulate internal demand, investment and consumption.
Syriza's call for a "European debt conference" to renegotiate the current loan debt is certain to provoke policy conflict, but may also facilitate broader discussion which may, in the best case, benefit EU integration in resolving an untenable Greek debt situation.
Will a potential post electoral debt crisis be managed and Greek exit be avoided?
While Syriza may have a plan to return the country to prosperity, the immediate risk is that Syriza's plan for debt relief from creditors will be unacceptable to Troika. A confrontation is certain. However, financial markets have likely overreacted to the possibility that Greece might choose to exit or be forced to exit the Eurozone. Greece is unlikely to exit the Eurozone, as Syriza is "pro-Euro:" Syriza does not want despair and poverty; it will avoid the immeasurable consequences of leaving the Eurozone voluntarily. The best predictor of a successful resolution between Syriza and Troika is that it is in no one's best interest to see Greece leave.
The real risk for EU integration is not a Syriza win, nor a Greek exit, but that EU integration policy fails to evolve and adjust to the shifting political will of its citizens, particularly now that populist and anti-establishment parties are finding their political voice on national and EU levels of representation, a trend that is more likely to grow than to reverse.