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The Precedent

Robin Copland

Well, the Greeks have finally gone and done it.  At the weekend, they kicked out the conservative New Democracy party – the dominant force in the coalition led by the outgoing prime minister Antonis Samaras and instead voted in Alexis Tsipras’s radical left Syriza party.  The rest of Europe has looked on askance; Greece has muscled her way onto the front pages of just about every serious newspaper in Europe; bankers and leaders Europe-wide have been keeping the Andrex puppy busy ever since the news came out.

 One twist in the tail: even though the New Democracy party was humiliated, retaining only 76 seats in the 300-seat parliament, Syriza was still two seats short of an overall majority.  They have formed an unlikely coalition with the populist right-wing Independent Greeks party, Anel, led by Panos Kammenos; a story of “opposites attracting”, perhaps.

You would have thought that the two would never agree on anything, but you would be wrong; it turns out that they agree on one issue and one issue alone – both are united by the desire to end biting EU-IMF-mandated cutbacks.  Therein lies the problem for the rest of Europe.

On Sunday, Mr Tsipras told jubilant supporters he wanted to write off half of Greece's debt, but was ready to negotiate "a viable solution" and wanted the country to stay in the Eurozone.  On the other hand and already, Greek expectations are being structured.  Immediately after the election result was announced, the head of the European Commission, Jean-Claude Juncker reminded him of the need to "ensure fiscal responsibility".

The BBC’s Economics Editor, Robert Peston opines that the reason the Euro has not collapsed is that most people realize that the Greek austerity package was unworkable and that common sense is sure to prevail.  That still leaves some interesting negotiating issues to be resolved.

  • If the EU refuses to negotiate, will the Greeks leave the Eurozone?
  • If the EU does make concessions to the Greeks, where does that leave them in relation to the other fiscally-challenged EU countries like Spain, Portugal and Ireland?  Will similar concessions need to be made, either immediately or even retrospectively to them?

The issue here is precedent.  Sometimes it is not the cost of the original concession that is damaging, but the precedent that it sets in either future negotiations, or negotiations with other parties.  Everyone will have to tread carefully.

Another possibility springs to mind though.  You know how credit card companies are desperate to offer you interest-free credit if you transfer other credit card debt to them?  The deal has you paying a percentage of the debt as an upfront payment in return for the credit.  Great scam for everyone.  I leave you with this thought.  The new Greek government is so left-leaning that the first thing that Alex Tsipras did was to honor the memory of a group of communists murdered by the Nazis; he also broke with tradition by refusing the blessing of the Greek Orthodox Church.  So I wonder if the Greeks might consider transferring their debt to another left-leaning, former communist country, Mother Russia.  And if they did, I wonder then how the threat of that might affect Europe’s position in the upcoming negotiations.

Oh – we live in interesting times!

Robin Copland

Robin Copland
More by Robin Copland:
Power Balance
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