A victory for the left-wing Syriza movement in Greece tomorrow will be a defining moment for the EU and could also have a very direct impact on the outcome of the next general election in Ireland.
The unexpected connection between Greek and Irish politics was illustrated by the fact that Sinn Féin leader Gerry Adams phoned the Syriza leader Alexis Tsipras on Thursday to wish him well, while Shane Ross tweeted, “Viva Syriza”.
A victory for the hard left in Greece will demonstrate once and for all what happens when “anti-austerity” political forces achieve power in an EU state.
If a Syriza victory results in a significant chunk of Greek debt being written off, it will prove that the arguments made by the alliance of Sinn Féin, Shane Ross and the Trotskyite factions in the Dáil are actually right.
The implications of that for the election here in a year or so are obvious. Sinn Féin and the left-wing Independents would be in a very strong position to achieve power on the basis that they could pull off an equally attractive deal for Ireland by the simple expedient of refusing to pay back what the country has borrowed.
Of course the converse is that a failure by Syriza to live up to its promises would prove that the “anti-austerity” arguments are fundamentally flawed and incapable of being realised, as the Government here has argued all along.
If Syriza sticks by its rhetoric of the past few years it will refuse to honour Greece’s funding deal with the troika regardless of the consequences. The outcome would ultimately be a Greek exit from the euro.
A more likely scenario is that Syriza will back away from such an outright confrontation with its EU and IMF sources of funding and will instead try and renegotiate better terms on the country’s bailout loans.
As a strategy for achieving that objective Syriza is seeking support for summoning an EU debt conference along the lines of the 1953 London conference that led to a write-down of German debt.
The party believes an orderly write-down of Greek debt would emerge from such a conference.
On the face of it the likelihood of an EU debt conference seems remote. For a start the Germans appear in no mood to indulge Greece. The German political and financial systems are already smarting over the decision of the European Central Bank to introduce quantitative easing to avert a deflationary spiral across the EU.
Agreeing to forgive a significant proportion of Greek debt on top of that seems the last thing that would appeal to the Germans in their present mood.
There are also serious worries in a number of other EU countries about the political implications of a debt forgiveness deal for Greece at the behest of Syriza.
Taoiseach Enda Kenny made in clear in the Dáil during the week that he is not enamoured by the prospect of a debt conference. To a direct question from Adams asking if he would support the call for such a conference, the Taoiseach’s response was a simple “No.”
A similar response can be expected from Spanish prime minister Mariano Rajoy, who is under pressure from Podemos, a newly minted anti-austerity party which has come from nowhere to be the most popular party in Spain, according to opinion polls.
Capitulation to Syriza’s demands would be a shot in the arm for all of the radical left- and right-wing parties with similar policies across the continent, so a serious debt write-down of Greek debt looks unlikely, at least in the short term.
What Syriza is hoping for is that other EU bailout states such as Spain, Ireland and Portugal will see the advantages for themselves in an EU debt conference, but it looks as if the reaction will be the exact opposite. Governments in the countries that have successfully completed their bailouts or are on the point of doing so have no desire to open up the issue again, particularly as it would expose them to the charge that they failed their own citizens by accepting the terms in the first place.
What is in the realm of the practicable is that the troika could come to a deal with a Syriza government for a moderate easing of the terms of the Greek bailout.
This would involve lower interest rates and an extension of the loan terms along the lines of the promissory note deal done for Ireland.
Whether Syriza would be willing or able to conclude such a deal is a moot point. If Tsipras is willing to edge in that direction he will inevitably face difficulty bringing all his followers with him, and he could see his party’s opinion poll ratings plunge rapidly and his movement begin to fragment.
The fate of PASOK, a moderate left-wing party that dominated Greek politics in a manner similar to Fianna Fáil in Ireland, will not have been lost on him. As recently as 2009, PASOK won 44 per cent of the vote in a general election but after implementing bailout terms it was wiped out in an election and it is now getting a derisory 4 per cent or so in polls.
The fall in support for the Labour Party in Ireland, which promised during the last election that it would be Labour’s way or Frankfurt’s way, is not nearly as dramatic by comparison but it does demonstrate the dangers of not fulfilling expectations about what can be achieved.