April 12, 2024

Greece owes Germany; moves toward Russia



Today’s Events in Historical Perspective

America’s Longest-Running Column, Founded 1932

Greece owes Germany; moves toward Russia

By Douglas Cohn and Eleanor Clift

WASHINGTON – A charismatic 40-year-old radical leftist is the new prime minister of Greece, embodying the rejection of the austerity policies that have deepened his country’s financial and societal problems. Older people have had their pensions reduced by 20 percent, and the widespread hardship and unemployment people are experiencing produced the political earthquake that brought the left-wing party, Syriza, to power, along with its leader, Alexis Tsipras.

The same dynamics are roiling Spain, which holds elections later this year. A new left wing party, Podemos, appears headed to victory with its 36-year-old leader, Pablo Iglesias, echoing the same themes as Tsipras. The two men, longtime friends and fellow activists, spoke at a rally in Athens shortly before the Greek election. “The wind of democratic change is blowing,” Iglesias told the pumped-up crowd. “It is called Syriza in Greece, and in Spain it is called Podemos.”

President Obama called Tsipras to congratulate him on his victory, and German Chancellor Angela Merkel  wished him “much strength and success,” words that convey little of the trepidation she must feel  at the looming showdown over austerity policies that she pressed on Greece and the other poorer cousins in the European Union.

Tsipras ran on promises to restore cuts made to his country’s social fabric, and to raise the minimum wage. He said he would re-negotiate the terms of the loans Greece received, loans underwritten mainly by Germany and made possible by Merkel. The winds of change in Greece and potentially in Spain threaten Merkel’s hold on Europe’s economy. These young leaders infused with passion will not bow easily, if at all, to Merkel’s demands. The question is whether a middle ground can be found that saves face for both the stern Merkel and the exuberant Tsipras.

Germany has won through the peace what it lost in the war, and is now the most powerful nation on the continent. Merkel sees herself as the grown-up tasked with keeping tabs on all the profligate spending by the countries that needed a bailout. But once a debtor gets in too deep with a creditor, there is shared responsibility, and Merkel will likely find herself forced into some kind of accommodation with Greece’s new leadership.

Tsipras appointed a well-known economist and blogger as his finance minister. Yanis Varoufakis has written tens of thousands of words decrying austerity, which he calls “fiscal waterboarding.” These new leaders have the people behind them, at least for now, and they seem prepared to force change even if it means threatening the stability of the European Union, and of the Euro itself.

Greece’s inability to get hold of its economy exposes a major flaw in the European Union, and in the Euro that most member countries have adopted. The United Kingdom is a major exception, sticking with the Pound as its currency. A country that cannot control its own monetary system can’t control interest rates or the amount of currency in circulation and expand or contract the money supply as needed, drastically limiting its choices when faced with recession.

It’s doubtful that Greece wants to return to the drachma, a near worthless currency, or that Merkel would want them to abandon the Euro. That would only undermine the Euro. The tough negotiations that lie ahead are made tougher by geopolitics. Tsipras is more sympathetic to Russia and less likely to side with Merkel and the Obama administration on imposing more sanctions on Russia. President Putin sent Tsipras a telegram of congratulations, and the New York Times noted that on the day Tsipras was sworn in, he met with the Russian ambassador in Athens.

A country that isn’t normally in the spotlight is now center stage, and everything Tsipras does is scrutinized for greater meaning. The job of defense minister went to the leader of the Independent Greeks, a right wing nationalist party that Syriza joined with to form a majority in the Parliament. The two parties don’t agree on anything other than a hatred of austerity, and for now, that’s enough.

Twitter @WMerryGoRound

© 2015 U.S. News Syndicate, Inc.

Distributed by U.S. News Syndicate, Inc.


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