A new chapter begins

The recent Scottish Independence Referendum, has been held up as a shining example of democracy at work. Voter turnout was immense, at just under 85%. The campaign, for the most part, did not devolve into the dreadful political point scoring circus that is so often the case, and instead remained focused on the core issue. But perhaps most impressive of all, despite the passion felt by the Yes campaigners, they accepted their defeat as the will of the Scottish people. There were no protests on the streets, no riots , no paramilitary organisations threatening terror. While the Scottish nationalists have by no means given up, they are committed to achieving their independence through peaceful, democratic means. In a world plagued by voter apathy, electoral fraud and lobbyist, this was a boost which democracy sorely needed. Across the globe, from Russia to Thailand and even the European parliament, democracy has become a shadow of the ideal it once was, twisted and tortured to suit the ends of its masters.

If the Scottish referendum is democracy at its best, then surely modern Greece is democracy at its worst. There is perhaps a tragic irony to this; Greece after all, is the fatherland of the democratic process, yet it is in this state that it has been allowed to have such a destabilising and detrimental effect. In the time since the first Hellenic republic in 1822, there have been a staggering 186 prime ministers, an average of just under one per year. Britain for example, has only had 54 in the same time period. This is simply unsustainable, and leads to gridlock , instability and stagnation, and resulted incivil war in the 1940s and a military junta in the 1960s. The past decades have not been much better. Policy failure, fiscal profligacy and fraud led to the Greek being the worst affected Eurozone country by far, with little sign of recovery, despite its bailouts.

And thus we come to a new chapter in the tragedy of the Greeks; the ascension Alexis Tspiras and his far left SYRIZA party into power. The Irish socialist Paul Murphy called the event historic; this it will no doubt prove to be, although seen as the first step in Greeks recovery or its further descent into a failed state, remains to be seen. To be fair to Tspiras, his goals, while populist are laudable. Elected on an anti-auterity platform, he has promised to end the humanitarian crisis in Greece. And he is right; austerity has proved to be the antithesis of good economic growth. It is the malaise of the Euro, and has caused far more harm than any could imagined, and may yet wreak more destruction and chaos. What Greece, and indeed the entire European continent really need, is a stimulus, a boost to aggregate demand to get back to economic prosperity.

. In order to provide for such a stimulus, Greece would need to increase public spending. It would fund this via its central bank, which would print money. The resulting inflation would lead to lower actual wages for Greek workers, thus making them more competitive abroad. There is but one problem. Greece is no longer in control of its own currency; it uses the Euro. It would need the European Central bank, to unconditionally fund it, something which the Germans would never do. For one, it would be feckless economics. Greece has defaulted one too many times, its bonds have been downgraded to junk status and Europeans are loath to bail it out once again. Tspiras’s promise to rehire 12,000 civil servants and end privatisation will do little to quell these fears. But more than that, this victory of radicals will have sent shivers down the spines of governments across the Union. From UKIP in Britain, Podemos in Spain, the National Front in France and alternative for Deutschlands in Germany, populist anti-austerity parties have been exploding in support. The victory of SYRIZA will embolden them; economic success for Tspiras will send them into a frenzy.

There are three options which exist, none of which are overly attractive. The first is that the ECB give in to the demands of the new Greek government and start a policy of fiscal expansion in the country. This is highly unlikely. The next option, is for Greek to exit the Eurozone; a Grexit if you will. This plan is not without its merits. For a start, Greece should never have been allowed into the monetary union in the first place, and its inclusion has threatened the very stability of the entire Euro area. A reintroduction of the drachma would allow Greece to reclaim economic sovereignty and begin the fiscal stimulus it so desperately needs. But the resulting capital flight would decimate what little economic growth there is and lead to a sharp recession, and so this option should only be seen as a last resort. Thus the third option appears the most likely; the current quantitative easing plan is expanded to provide Greece with more support. In the meantime, European leaders sit and wait for the inexperience of SYRIZA’s newly formed government to topple itself, and be replaced by more acceptable, pro-European moderates. This is by no means an ideal plan, but it does seem to be the best of a bad bunch.

Greek prime ministers, on average, last little more than a year. On the 1^st of February 2016, Greece will have either left the Euro, or Alexis Tspiras will have left office. The chances of neither happening, are slim indeed.