As Irish citizens took to the streets to protest against austerity measures imposed in part by the troika, another bailout country re-emerged onto the European political agenda this week.
Tensions that have been simmering in Greece over the country's imminent bailout exit erupted this week, culminating in the calling of early presidential elections which sparked a steep rise in Greek borrowing costs.
The trigger for the events was a dispute over the nature and timing of Greece's bailout exit. Unlike Ireland and Portugal, Greece's bailout structure is complex, with the IMF portion of the bailout due to run until March 2016, while the European component expires at the end of this year. The feasibility and manner of Greece's return to private markets has been a source of friction between Athens and Brussels in recent months. The government and opposition parties are united in one respect – all share a desire to be rid of the hated troika. During a tense euro group meeting in Brussels on Monday, finance ministers agreed a two-month extension to Greece's bailout, having originally suggested six months, a proposal rejected outright by Athens.
Catalyst
While the catalyst for the current stand-off is the choreography of the bailout exit, in reality the cause goes much deeper. Unlike the relatively harmonious relationship between the Irish government and the troika during the three-year bailout – a phenomenon that left many in
Europe
bemused – the Greek bailout has been beset with strife. In April, while protests took place outside parliament, the government passed a ferocious package of austerity measures, reforming everything from the shelf life of milk to the pharmacy industry, which allowed the fourth review under the second bailout to proceed. Problems remained however. The fifth and final troika mission has reached an impasse in Athens, with the government struggling to push through the outstanding austerity measures required to unlock the final tranche of €1.7 billion of European money due to it.
At €240 billion, the size of the two Greek bailouts is triple that of the Irish programme. The fact that Ireland’s financial collapse was predominantly due to a banking crisis meant it faced less pressure than Greece to reform the fundamental structure of its economy.
Athens has had to implement radical fiscal retrenchment that has seen the economy shrink by 30 per cent, youth unemployment hover at more than 50 per cent and government debt stabilises at around 174 per cent of GDP.
Protests have been a consistent feature of the bailout as Greek citizens have battled swingeing austerity cuts, and the government has struggled to maintain political cohesion.
As Irish people belatedly rise up against austerity through the water charges protests, it may well be tempting to look to Greece as an example of people power. But recent developments in Greece offer a salutary lesson for those counting on the radical left for political solutions. The past week in Greek politics has offered a glimpse into the possible economic consequences of the radical left gaining power, something that is as sobering as it is disheartening for disaffected citizens.
On Monday a sell-off in Greek bonds and equities began, as reports emerged in the financial press that Greece’s far-left party Syriza had held meetings with investors in London.
Snap election
Details of the party’s economic plans, should it assume power, alarmed investors, prompting a flurry of reassuring visits from Athens. Market fear accelerated on Tuesday following the announcement of a three-stage snap election beginning next week. Greek bonds and stocks continued to tumble yesterday, even as the main indexes recovered. Greece’s financial turmoil has flared up again.
The prime minister, Antonis Samaras, is hoping his gamble to bring forward the presidential elections will pay off – while struggling with a thin majority, he said he wants to "fully restore political stability" ahead of the final months of the bailout.
Meanwhile, Syriza's leader Alexis Tspiras has also appeared to soften his language, talking about a renegotiation rather than repudiation of debt and suggesting a commitment to fiscal responsibility. "We don't want to return to deficits," he told the parliament on Tuesday.
Ultimately, however, the message is disillusioning. For those pinning their hopes on a new dawn driven by the radical left, the uncomfortable truth is that the world of bondholders and high finance matters. It’s a message that centrist government parties across Europe, will be hoping to convey as they battle with the emergent power of the radical left.