By Mary Burger – Staff Writer
Elections can radically alter the political landscape within a country. This was recently seen on Jan. 25 when the Coalition of the Radical Left (SYRIZA) party won the Grecian election.
The election has the potential to dramatically affect not only Greece, but the majority of Europe. In order to understand the complications, one must look back a few years.
Government debt in Greece increased in 2009, which led to recessions in 2010. Ultimately, this forced other Eurozone countries, specifically Germany and France, to explore ways to get Greece out of debt.
Greece was subjected to austerity measures, structural reforms, and the privatization of government assets. All of this was done to boost the economy.
But these measures are now threatened with the election of the SYRIZA. This party ran on ideals of anti-austerity, or the idea to overthrow these forced economic measures on Greece.
“The anti-austerity position of the SYRIZA party, in my mind, is the culmination and not the beginning of the euro crisis,” Assistant Professor of Economics Dr. Ravi Radhakrishnan said. “Whether austerity was the cause or not, the Greek economy has suffered immensely from the time that austerity measures were put into place. The Greek GDP has fallen by nearly 22 percent and the unemployment rate increased sharply and now sits at 25 percent. So more than anything, the vote for SYRIZA is the Greek people saying that austerity caused the severe downturn in their economy and they want no more of it.”
At this point, according to Dr. Radhakrishnan, there appear to be three different directions in which Greece can go. The European Commission, European Central Bank, and the International Monetary Fund can restructure the debt and give Greece some type of relief to pursue anti-austerity measures. This may allow them to rise out of the deep financial crisis.
A second option is a Grecian exit from the euro. The third possibility includes no change and the continued implementation of the austerity measures.
The whole of the Eurozone, or the states in the European Union (EU) connected by the common currency of the euro, would be dramatically affected if Greece exited their economic zone.
“A Greek exit will definitely mean that the euro takes a hit. Investors will be extremely wary of their investments in other Eurozone countries (especially Spain, Portugal and Italy) and one could see a mass exit of capital out of these markets. So, in the short-run we will most likely see a devaluation of the currency,” Dr. Radhakrishnan said.
There is no existing protocol for a Eurozone exit, although formal Federal Reserve Chairman Alan Greenspan and other economists suggest that this may be the only way Greece can fully get out of this financial mess.
“The uncertainty already led to the European stock indices to fall. An exit would only make it worse. It will take some time for confidence to restore and for the Eurozone to recover if Greece exits. In fact, I would not be too surprised if a Greek exit leads to the end of a single currency altogether,” Dr. Radhakrishnan said.
Assistant Professor of International Studies Dr. Robert Bosco agrees that a Grecian Eurozone exit would cause major problems.
“There is no way Greece will leave the EU or the Eurozone. The most important thing to recognize is that, for all of the problems, according to the poll numbers, Greeks are very pro-EU. They want the EU and they want the euro. This impacts SYRIZA because they can’t sustain that anti-EU/anti-austerity radical discourse,” Dr. Bosco said. “The question now is what kind of party they’re going to be. It matters in Europe because it is really the first time we’ve seen a real possibility that there will be some sort of ‘Third Way’ alternative to the austerity-style vision of the EU coming from Brussels. So, what happens with Greece could set an important precedent. The bottom line is SYRIZA needs to find a way to maintain their staunch defense of Greece in the face of some pretty extreme austerity measures, while not isolating the majority of Greeks, who, though they have fallen on hard times, don’t want to go back to the drachma.”
These financial problems were brewing for several years now. The election of SYRIZA indicates a desire by Greek citizens to change the current austerity measures.
“The Greeks will have to commit to macroeconomic reforms and must do a better job of preventing tax evasion, which seems to be a big problem for their economy. The only way out of the crisis is for the Greek economy to grow, and it will only be prudent to help it achieve that,” Dr. Radhakrishnan said.