End of austerity in the EU?

Christoph Hasselbach, Deutsche Welle, 29.01.2015

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Just as austerity advocates say reforms are bearing fruit, fears are growing in northern Europe that parties imitating Greece's Syriza may threaten the consolidation consensus. Is the EU about to reject austerity?

Many European governments see Alexis Tsipras' electoral victory in Greece as an accident - and a very serious one at that. When the leftist Syriza alliance campaigned in the previous elections in 2012, European heads of state and government with different political leanings like Christian Democratic Chancellor Angel Merkel, Socialist French President Francois Hollande and at the time independent Italian Prime Minister Mario Monti had warned against Syriza. [...]

Marking a new course

Tsipras immediately announced the end of austerity and he not only wants to halt reforms but also reverse them. Nonetheless, Janis Emmanouilidis, an expert on Greece at the Brussels think tank European Policy Centre believes there "is room for compromise.“ The new government's "false start" will lead to the "understanding that some things go too far" and ultimately result in long and difficult negotiations on the terms of debt repayment.

And despite all denials in Berlin and Brussels, many politicians can indeed imagine some debt relief for Athens. According to Emmanouilidis, the continuation of the basic agreement on loans in return for austerity and reforms will depend on what "Syriza has to offer." If Tsipras, for example, in his dealings with oligarchs or in his battle against tax evasion can contribute something that goes beyond what his predecessors have offered, "then a compromise is possible in the end," Emmanouilidis said.

Many think their hour has come


But this is not just about Greece. What troubles stability-oriented countries like Germany is the prospect of a wider European wave of protest that could throw out an arduously created consensus on finance policy. The new left-wing party in Spain Podemos (We can) is also hoping to win in parliamentary elections this autumn. Podemos is leading the governing People's Party and the Socialists in opinion polls. A movement based on the Syriza model is also forming in Portugal.

Italy and France -both led by socialist governments - have offered only reluctant support for austerity and have often tried to avoid reforms. They could use the Greek election as an "excuse to make compromises in austerity policy,“ Emmanouilidis said. [...]

Austerity bears fruit

Ironically, the consensus on financial austerity policies could be at risk now that they have been bearing fruit. The Spanish and French economies are growing again. Portugal could already leave the bailout program. Ireland is even more successful and is showing fantastic growth figures. No Syriza-like movement is anywhere in sight there.

Even in Greece things are picking up. Again, the interesting case is France. After long hesitation, the government in Paris finally tackled some reforms that deserved to be recognized as such, even though economic figures have as bad as ever. Paris started pursuing Berlin's course much later than the others.

But Emmanouilidis said he thinks the effect of the election outcome on European politics is "not as great as some people may assume," adding that Greece is a special case within the EU because of the gravity of its problems and the necessity for change processes.

He rejected calling the election a "turning-point" for Europe. To start with, it is much too early to predict the new government's success or failure. Furthermore, the Syriza victory is significant for domestic policy, but its effects on the European level will be minimal, he said.

See original text at Deutsche Welle here



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