In the wake of a surprise re-election of Alexis Tsipras and Syriza, Thomas Piketty discusses the need for a more active approach from European leaders when it comes to the Greek question – and for a Eurozone parliament to be established.
The Tsipras victory has come as a surprise to some. What has changed for Greece?
Greece leaving the euro is old news. Since the former Greek Prime Minister, Alexis Tsipras, agreed to a third bailout in July, the perception of Grexit as an immediate threat has subsided – or at least disappeared from commentary.
Nonetheless, while appetite for Grexit outside Greece has abated, the traumatic seven months of wrangling over its bailout with Europe produced a significant domestic demand for a return to the national currency.
Greece has been struggling hard to meet the requirements needed to be a member in the Eurozone. Moreover, following the 2008 financial crisis in the US, Greece’s economy got smaller by 25% since 2009. Germany, France, Italy and Spain are the most important economies accounting for 29 percent, 21 percent, 16 percent and 11 percent of the Union’s GDP, respectively. The current economic crisis affecting some of the Eurozone peripheral countries is raising doubts over the euro’s future and it is the major obstacle to its growth.
Elections have become a national sport in Greece. The country has had five different prime ministers in the last five years. My prediction is that this number is not going to change anytime soon.
Greek Prime Minister Alexis Tsipras has resigned and called for new elections in a bid to consolidate his power and push through the country’s bailout deal.
The third Greek bailout is not a solution to either Greece or its creditors. Dan Steinbock explains how the talks led to an unsustainable deal that is likely to ensure subdued growth, debt and unemployment in Greece, and the eclipse of austerity politics in Europe.
Greece had been a dominant issue for investors for much of the first seven months of the year. The seemingly reversal by Greek Prime Minister Tsipras allowed Greece to move off the front burner. China stepped up to replace Greece as a key issue for investors. First, it was the slide in the Chinese share prices, and as stocks appeared to stabilize, officials altered the currency regime.
The capitulation of Greek Prime Minister Tsipras to the demands of the official creditors has split the Syriza coalition. About a quarter of the party refused to make the apparent U-turn with the Prime Minister. Those that were part of the cabinet have been replaced. However, they retain their seats in parliament, and apparently obstructing the government’s efforts.
Greece has loosened restrictions on capital flows for businesses, allowing companies to import more into the country.
In a sign of a return to normalcy, the Greek government has loosened capital controls that limited money transfers abroad. That restriction caused imports to grind to a halt, as limits on remittances caused importers to postpone shipments when they did not receive payment.
Observers have taken an almost prurient fascination with some sketchy details of the contingency plans then Finance Minister Varoufakis had developed for Greece if forced to leave the monetary union. They are hardly surprising in substance.
It is a bit too familiar, isn’t it? Greece received a new loan so it can service its debt to the official creditors. In exchange for the funds, of which practically none remains in Greece, the government has promised to carry out the reforms that the past few governments had agreed to but failed to implement. Greece may no longer be in arrears to the IMF, but it is making ends meet by delaying payments to local service providers.
