Greece’s Uncertain Fate

That’s the title of my latest piece in The National Interest.Teaser follows

Although much remains uncertain about future developments in Greece and beyond, one thing can be predicted with certainty: no Greek government will voluntarily abandon the euro. The only parties favoring such a move are the (old-style Stalinist) Communist Party of Greece and the neo-Nazi Golden Dawn, neither of which has any chance of being part of a government. It is almost equally certain that no Greek government will take any further steps to implement the austerity measures previously agreed with the “Troika” of the European Central Bank, the European Commission and the International Monetary Fund.

New elections to be held on June 17 are most likely to produce substantial gains for the Coalition of the Radical Left (Syriza) at the expense of both the traditional governing party of the Left, PASOK, and the rejectionists of the Communist Party. Syriza advocates rejection of the current austerity package but is equally opposed to withdrawal from the euro. Given large enough gains, Syriza could potentially put together a government with support, or at least tolerance, from PASOK and the conservative but anti-austerity Independent Greek Party.

But the election outcome may be indecisive, perhaps leading to a government of national unity. Such a government would have little power to do anything decisive one way or the other.

The least likely outcome is a swing back to the traditional parties, with PASOK and its conservative counterpart the New Democracy Party gaining enough seats to form a coalition government. Even such a coalition would be unlikely to have the political will to enforce further austerity measures. On the other hand, it would certainly not abandon the euro.

45 thoughts on “Greece’s Uncertain Fate

  1. I do not see that a greek currency would help anyone.

    who would want it? the euro would become the de factor currency

  2. @BilB

    Those proposals would be significant palliatives. According to the New York Times’ LANDON THOMAS Jr. and ELENI VARVITSIOTI, many economists and the Greek Left (and the IMF) are trending the same way.

    Many economists say the oligarchs are a big part of Greece’s economic problem, because they have capitalized on the insular, quasi-monopolistic approach to business that is one reason their nation has long lagged the far more competitive economies of many other euro zone nations. The moneyed elite in Greece have always been secretive in nature, especially when it comes to their fortunes. Assessing the ultimate value of Greek private sector wealth is a nearly impossible task, because much of the money exists offshore, secreted away in Swiss bank accounts or invested in real estate in London and Monaco.

    Now, with the country’s top vote-getter, the leftist firebrand Alexis Tsipras, talking more and more about nationalizing companies and industries and, in the words of his top economic adviser, “taxing the rich,” there is even more incentive to lie low.

    Of course, the left is not alone in this view.

    “Let’s be frank — the well-off need to pay their fair share of taxes,” Bob Traa, the International Monetary Fund’s representative in Greece, said in a speech last year in Athens.

    Last year alone, an estimated 8 billion euros ($10.2 billion) in collectible taxes were in arrears — nearly half of the country’s budget deficit.

    The nation’s tycoons have every incentive to keep their country in the euro currency union. The question is, are they willing to bear the cost of doing so?

    “The oligarchs want to keep the euro — largely because of the banks which are so deeply integrated in the euro system,” said Costas Lapavitsas, an economist at the University of London. “But they are keeping quiet about it.”

    But as children go hungry in Greek schools because their parents have no money with which to feed them, and the streets of Athens become home to growing numbers of desperate, jobless people, pressure is mounting on the country’s rich to do what the state can no longer effectively do: write checks.

  3. @Peter Whiteford

    I am very uncomfortable with arguments which implicitly invoke the false analogy that you can’t unscramble the omelette. It is a standard tactic of the neoliberal right to do something regressive (introduce a flat tax like GST, privatise public utilities, reduce welfare, destroy the Commonwealth Employment Service etc. etc.) and then say it’s done now and it would be disruptive/inefficient/impossible to change it back. That’s always their mantra, “You can’t change it back”, usually uttered with smirking glee as they make off with money bags of common wealth transferred from the many to the few.

    It is nonsense to argue that Greece cannot go back to its own currency, Sure, there are practical obstacles just as there were practical obstacles to going to the Euro. Either way, the obstacles are never insurmountable. There is also pain in both paths. However, given the dysfunctionality of the Euro system and the loss of sovereignty and policy flexibility in not being able to issue one’s one fiat currency, the best course for Greece would be to go back the drachma or a New Drachma. Whilst changing to the Euro, European countries each ran a two currency system and changeover protocols. A two currency system could be run while changing back to the drachma. The technical and practical obstacles in changing back to the drachma are likely to be of roughly the same order as the orginal “Euroising” process.

    The bottom line is that a nation which does not possess its own currency and thus does not possess access to the full gamut of fiscal policy possibilities (self-determining its budget deficit/surplus position) is a nation hamstrung. Where it is a democracy it is democracy hamstrung and now partly run by the neoliberal technocrats of international finance. Iceland’s response and successful ongoing recovery from the GFC and its banking bubble collapse illustrate the importance not of only of better regulation in the first place but also of a nation state retaining currency sovereignty at all times.

    The key question is why would anyone want to hamstring democracy. The answer is of course that plutocrats hate democracy. It gets in the way of stealing all the wealth from the workers who generate it.

  4. @Jim Rose
    the 50 seat bonus to the leading party in Greece is an important point. Some news sites claim wrongly that a combined ND & PASOK vote beats a first placed SYRIZA.

  5. John, yes, a common source of error, and the greek constitution is strict on a new election.

    each of the three biggest parties is, in turn, giving three days to form a government and then there a new election. will the next election be decisive? will there be a furthur election?

    the government formation period is 45 days in israel. the dutch are close to a year into to their government formation talks, I think.

  6. @Chris Warren
    I too agree that the communist party of Greece (KKE) is its own thing. That is why they have survived for many decades and are still relevant. Labeling the KKE Stalinist is incorrect.

  7. btw, having greek election after election seems to be a good way of stringing out the drip-feed from germany etc. Sooner or later it will be cut-off, but elections seem to delay this.

  8. @Jim Rose
    In reality only the first placed party can practically form a coalition government because it holds so many seats (50 bonus seats). There is no chance of a SYRIZA and ND government, because they have totally different in how to deal with the dept crisis.

    The KKE also believes that the next government will be weak and not last long.
    The Greek public seem confused (with too much opinion rather than facts) and divided. They voted 7 parties into parliament ranging from very far right and left, some of these are new to the parliament.
    What is troubling is that the very far right probably have police and possibly military backing. Lets not hope history repeats itself there with a coup. Will the police obey SYRIZA’s orders?

    But Greece is also on the verge of possibly voting in SYRIZA, into government a party that has never ruled before, is not part of the dinosaur clans that have ruled Greece since time began and would be a new government. Unfortunately people only contemplate new governments when things go very bad.

  9. I was trying to figure out why printing money is inflationary, finally figured it out.


    have just found


    You will have to download their player to view the proliferation of visualisations.

    Here is a YouTube example

    You all may well have been down this road, but it is new for me.

  10. I was just watching the greek news there on SBS. These people need to learn how to smile. There’re all so serious.

  11. @Jim Rose

    It is Belgium that has trouble forming governments. The 2010 Dutch government formation took 126 days or about a quarter of a year. Minority governments like the Ritte cabinet are actually very rare there. It collapsed when the nativist/populist PVV refused to support the fiscal pact initiated by Merkel. The austerity parties are expected to get a drubbing at the general election in September.

    As I understand it the three-day rule in Greece is not for the whole government formation but to determine if a party will accept the position of formateur and go on to attempt forming a government. The Greek electoral law awards the 50 bonus seats differently for coalitions and single parties. At the last election the austerity parties got 149 seats of 300 on just under 1/3 of the popular vote.

    If Syriza remains a coalition it may be denied the bonus seats and the austerity parties, John’s ‘dinosaur clans’, may again get enough seats to block a Syriza government while unable to form one themselves. That electoral system is a recipe for chaos.

  12. alan, I hope I do not run into a belgin who knwos i counfsed them with the dutch.

    from greek constitution article 37

    “2. The leader of the party having the absolute majority of seats in Parliament shall be appointed Prime Minister.

    If no party has the absolute majority, the President of the Republic shall give the leader of the party with a relative majority an exploratory mandate in order to ascertain the possibility of forming a Government enjoying the confidence of the Parliament.

    3. If this possibility cannot be ascertained, the President of the Republic shall give the exploratory mandate to the leader of the second largest party in Parliament, and if this proves to be unsuccessful, to the leader of the third largest party in Parliament.

    Each exploratory mandate shall be in force for three days.

    If all exploratory mandates prove to be unsuccessful, the President of the Republic summons all party leaders, and if the impossibility to form a Cabinet enjoying the confidence of the Parliament is confirmed, he shall attempt to form a Cabinet composed of all parties in Parliament for the purpose of holding parliamentary elections.

    If this fails, he shall entrust the President of the Supreme Administrative Court or of the Supreme Civil and Criminal Court or of the Court of Auditors to form a Cabinet as widely accepted as possible to carry out elections and dissolves Parliament.”

  13. the current greek electoral law, which was used for the first time in the election in 2012, reserves 50 parliamentary seats for the party or coalition of parties that is supported by a plurality of votes cast, and apportions the remaining 250 seats proportionally according to each party’s total valid vote percentage

    for more confusion on this point see

  14. Sorry Jim you are simply wrong.

    For a coalition to get the bonus the members of the coalition must average a strength greater than the largest single party. I am aware that distinction is not picked up by the Wikipedia article.

    The 2008 electoral reform increased the reinforcement bonus to 50 (from 40) out of 300 and included the new rule denying the bonus to coalitions unless the average result obtained by the coalition is greater than the result of the biggest party.

    See the discussion at

    The dinosaur clans in Greece badly need a meteor to come along.

  15. the wiki is confusing, and I am not sure if there is one party list with a 3% rule or many districts and a national minimum of 3%

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