The left-wing SYRIZA party led by Alexis Tsipras won the Greek general election on Sunday after campaigning on a pledge to renegotiate the country’s international bailout and reverse years of austerity.
The party’s ambitions have already sent shockwaves through financial markets and the rest of the eurozone, and alarmed Greece’s international creditors, who fear a SYRIZA government might default on its massive debt.
Here is a look at SYRIZA’s aims and the difficulties they could encounter:
Question: How does SYRIZA propose to tackle what they call a “humanitarian disaster” caused by the demands of Greece’s bailout?
They want to immediately raise the minimum salary from 580 to 751 euros ($650 to $840) a month. People working and those already retired would have a “13th month” of pension restored if their monthly pension is less than 700 euros. Coupons for food and electricity would be given to at least 300,000 households and peoples primary places of residence would be protected from repossession.
Other SYRIZA priorities include guaranteed access to free medical care and scrapping tax on heating fuel. The party believes the “emergency” plan will cost 12 billion euros ($13.5 billion) which they say they will raise from securing reduced repayments on the national debt, by re-directing EU funds, and by cutting tax fraud and smuggling.
The problem is that releasing these funds cannot be done overnight. Analysts at Eurobank believe a SYRIZA government would have “a very narrow margin for manoeuvre” and Greece could soon see its debt repayments climb.
Question: Would a SYRIZA victory poison relations between Greece and its lenders, the European Union and the International Monetary Fund?
SYRIZA’s demands to write off part of the colossal Greek debt (which stands at 318 billion euros, or 175 percent of GDP) combined with the possibility of public finances getting out of control could create tensions between Athens and its creditors. The party is also challenging measures demanded in return for the bailout, such as liberalisation of the labour market, Goldman Sachs investment bank said Friday: “The gap that separates the economic philosophy of the two sides is large in key areas (such as budget targets, pension system sustainability, labour market reforms and legislation, privatizations and public sector headcount).”
German Chancellor Angela Merkel has tried to calm the rhetoric by talking of a need to “find solutions.”
Question: Would SYRIZA’s policies put Greece’s place in the eurozone at risk? SYRIZA say they have no intention of leaving the eurozone.
On the other hand, European officials have gone to great lengths to put out the fire sparked by rumours from Berlin that Greece could leave. Merkel said Friday that Greece must «remain part of our (European) story.” Nevertheless, Goldman Sachs said “lenders are willing to pay the cost of heightened default uncertainty in Greece rather than provide funds for policies that reverse the reforms that have taken place and deviate from economic orthodoxy.”
However, Greece could also exit the eurozone “by accident,” according to Finance Minister Gikas Hardouvelis. If it defaults on debt repayments and the markets panic it could trigger a bank run. The European Central Bank could then refuse to step in to help a SYRIZA government.
Question: What could the implications of a SYRIZA government be for the rest of Europe?
Except for the hopes that SYRIZA’s success could boost other leftist European parties in Spain and France, its policies raise the question of how much independent decision-making is possible for eurozone members, according to the French economist Jean Pisani-Ferry.
“If the constitutional obligations were interpreted in a really strict way, the EU would stand accused of denying Greek people their right to democratic choices,” he said.
“On the other hand, too much flexibility would mean that the commitments for reform and fiscal discipline would not worth much.”