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Greece's path is neither left nor right

Updated: 2015-02-01 15:06
By Fu Jing (China Daily Europe)

To return the country to economic viability, its new leader must seek compromises with lenders

Successes that political parties of the far left and far right have chalked up in Europe in the past year or so impede the continent's push towards integration even as its economic woes continue.

In European parliamentary elections last May, parties of the far right, which oppose European integration, won more seats than many had expected. In Greece on Jan 26 it was a party of the far left, Syriza, that won elections, and its leader, Alexis Tsipras, 40, was sworn in as prime minister of the debt-ridden country the next day.

The rise of far-right parties stirred a lot of debate last year, especially on the issues of how integration should be implemented across Europe and whether or not the United Kingdom would leave the European Union.

The Syriza party is not against EU membership and the eurozone. Rather, it advocate, the removal of austerity measures and renegotiating with its international debtors about how to pay its debt of 240 billion euros. At an election rally, Tsipras said his top priority would be to restore the country's lost dignity, which has been reduced by pension and salary cuts, jobs lost and an exodus of foreign investment over the past six years.

But whispers on the streets in Athens indicate that many Greeks are skeptical about whether Tsipras can deliver on his promises. There has been talk that Tsipras' success may cause a political quake and market shock waves.

But the European Central Bank's decision on Jan 22 to buy more government bonds until September next year has helped cushion the depth and width of impacts from the far-left's election success.

Is what Tsipras is advocating wrong? For a country, deep in economic recession, austerity measures are normally not sound policy options. On the other hand, Keynesian economics, featuring infrastructure construction, is the ideal.

Greece's situation is far from normal because it also has high fiscal debt, unacceptable based on European accounting rules. This means it cannot sustain its development by issuing more bonds.

This is the dilemma that Tsipras must face. While writing off the country's debt is not an option, he could start engaging with lenders to extend their payments.

Returning dignity to the country is about paying off its IOUs. It is highly likely that Tsipras and his team will invest a lot of energy and time to negotiate with Brussels and the International Monetary Fund to reach compromises.

The other important thing is returning the country to its social and economic dynamics.

The country's dignity is also about productivity.

But these are all easier said than done. To realize these goals, what is most important for Greece is to attract capital to set up factories and improve the efficiency of its state assets.

The previous government had announced extensive privatization plans, including selling the country's biggest port, Piraeus, which China Ocean Shipping (Group) Co had expressed an interest in. The new government has now put a halt to the sale.

That is because Tsipras' party opposes privatization and foreign investment. Is this feasible amid the current global situation? Tsipras needs a rethink, especially about his need to compromise, which could ensure Greeks choose between relaxing austerity and a return to economic dynamics.

Greece has many ways in which it could regain its competitiveness. But Greece needs a middle path that could trigger development without political uncertainties, which are an anathema for both Greeks and investors.

The author is China Daily chief correspondent in Brussels. Contact the writer at fujing@chinadaily.com.cn

 

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