With the Greek far left party Syriza widening its poll lead, we are in Act IV climax of the Greek general election. There are only four days left for any bank craziness to happen, meanwhile on Thursday the European Central Bank is set to unveil a major quantitative easing programme that is reported to exclude Greece.


At the weekend, the ruling New Democracy party dropped its claim that Greece would descend into chaos if Syriza wins, and started trying to outline a positive economic vision to pull Greece out of the IMF/EU austerity programme.

In that context, I met in a small room at the London School of Economics with a handful of economists, debt campaigners and investment analysts to quiz – via Skype – Syriza’s “big brain” of economic policy, Euclid Tsakalotos. Tsakalotos is a Syriza MP and effectively shadow finance minister. Within days, he could find himself at a meeting of the Eurogroup.

The questioning, by economists largely critical of Syriza, followed three lines: (a) what are they going to do if, in office, the EU rejects their request to renegotiate the debt? (b) how do they sell their micro-economic policy – which reverses many of the trade union reforms and privatisations – to European governments currently doing the exact opposite to what Syriza plans? (c) what do they do if Greece is excluded from the QE.

Tsakalotos outlined the answers as follows. There was, he said, a growing recognition among mainstream economies that Greece needs “fiscal space” – meaning in practice 6-7bn euros a year to spend on growth promoting measures. They would cancel the austerity budgets agreed with the EU/IMF, pay back the loans to the IMF, but focus on EU loans for rescheduling and write off.

The scenario many people fear is that the Troika judges Greece then to be in breach of its “programme” and stops disbursing bailout funds – which Greece vitally needs to get through a heavy year of debt rollovers in 2015. Tsakalotos said he thought Greece would be given time to negotiate, and its reasoning would be that they were seeking a bridge from the old programme to a new programme – and had not therefore unilaterally abandoned the status of being in a programme. This was the first time I had heard that rationale.

For many in the room, and many other professional economists I have discussed this upcoming clash with, there is a fear that a Syriza or Syriza-led coalition government has totally unrealistic expectations of the way the ECB negotiates, and the rationale from which it negotiates.

For example, for Syriza, the current deflation in Europe is proof of the need for radical policies that kickstart growth; those with knowledge of the way the ECB thinks have pointed out that, in Greece, it might judge that wages and prices have not fallen far enough.

So the danger of a Greek euro crisis emerging – in the event of a left government – for me remains, as the product of this mismatch of expectations.

On the issue of the micro-economic measures, Syriza’s problem is this. It has sympathy among the social democratic left in Europe over the debt, but for example the Italian PM Matteo Renzi  – who is said to favour some kind of debt forgiveness for Greece – is currently engaged in the kind of labour market reform Syriza opposes, and labels “neo-liberal”.

When quizzed on “why annoy the Europeans over market reform issues when your main problem is debt?”, Professor Tsakalotos’ answer illustrates the gulf that will open up if one or more European countries puts in power a party from the heterodox left:

“In any transition period there is a clash of realities. In the 1930s people considered the eventual solutions, at first, to be unrealistic. It’s the same this time round. At first, in the euro crisis there was to be no bailout. Then no buying of government debt. Then no QE. Each of these things have happened.  Some things which are now seen as unrealistic will change with the political balance of forces.”

On quantitative easing, Professor Tsakalotos, like others present, thought the negotiations on whether to exclude Greece and limit bond buying to national central banks buying their own country debt were still ongoing.

But he said Greece – and the other peripheral countries – should not accept being excluded from the programme, nor any limitation of their ability to print money to the so called capital ratios that measure economic size in Europe. There had to be real risk transfer from Germany and the north to the economies of the periphery, otherwise the only beneficiaries of QE would be Germany.

When asked about the future of the Troika – EU/ECB and IMF – the shadow Greek finance minister raised an existential question about the IMF’s role in Europe full stop.

“Lots of things happening which are illegal or bordering on the illegal from the Troika. They are interfering in social policy , which in the EU constitution is for states to decide. We want to go beyond the Troika and want the solution to be institutionally different in future.”

If Syriza stay on their current percentage in the polls they can only form a government with one of the small parties – either To Potami (The River) which I can best describe as a Blairite modernising centrist party – or the Independent Greeks, who are anti-bailout right wingers.

Asked what their red lines would be for forming a coaltion, Tsakalotos gave one of the clearest expositions of the likely baseline for Syriza in office.

“We’ve discussed our bottom line in negotiation with other parties. There is litttle point in being in government if we can’t over six months do some emblematic interventions; to alleviate humanitarian crisis, on energy, poverty and housing; two or three measures to kickstart the economy, including non-performing loans and alleviating the problem of people struggling with tax arrears. And some interventions in the structure of power: to rebalance the state and society – for example to address the incredible power of the [privately owned] media and large companies. If we felt we could not do that, and it’s a minimal programme, there would be no raison d’etre for a left government..”

There is of course a left in Syriza, numbering 25 per cent of its members, who would gladly see a more combative stance – on the debts, on bank nationalisation and ultimately on exiting the euro. Syriza’s candidates in urban areas heavily affected by austerity are being besieged by voters demanding demonstrative left-wing measures – for example the arrest of former ministers.

So , if he becomes a minister in a future left coalition, Tsakalatos will have his work cut out holding the line between an effectively Keynesian social democratic programme, a hardline pro-austerity ECB, and Greek voters who want immediate change.

But ultimately Syriza knows the fate of a left experiment in Greece would depend on the way the election result impacts around Europe. He points out that ECB boss Mario Draghi has already called not just for full quantitative easing, with risk transfers between solvent and busted countries, but also for the ECB to buy the bonds of governments direct, and for governments to loosen their austerity programmes.

Beyond the specifics, I was struck by the mismatch of expectations in the room between largely centrist, or centre-right mainstream economic thinkers, and a man prepared to say: end austerity, promote co-ops, rebuild the welfare state and workers’ rights, kick the IMF out of EU decision making and slash back the power of a political oligarchy that has gotten rich throughout every crisis.

If Syriza win – and it is still in the balance – these same levels of incredulity and mismatch will be played out in every European Union institution. For all its recent moderation, and the clear professional expertise of its economics team, no party like Syriza has ever been in power in a European democracy. And in the era of free market economics, most institutions and institutional culture have molded around the expectation that they never will: only if they get in will we find out whether those institutions can adapt – and they may have to adapt to heterodox right wing governments soon if the polls in France and the Netherlands stay consistent.

That’s the scale of what’s being decided this Sunday at the polls in Greece.

I’ll be covering the result live, here on the Channel 4 News website, and on Thursday bringing the full details of the ECB’s quantitative easing decision.

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