Greek stocks got absolutely wrecked today, crashing by nearly 13%. That’s all on the back of the prime minister announcing early presidential elections. People don’t think he has enough support from Greece’s parliament to get a president approved, which would cause a snap general election.
And according to most polls, that election would be won by Syriza, a crew of radical left-wingers who are demanding an end to Greece’s austerity. Due to a weird Greek electoral law, if they got the most votes in a snap election, Syriza would be granted an extra 50 seats in parliament, strengthening them even more.
But what do they actually want?
The first thing to know is that Syriza isn’t really a political party as such: It’s a coalition. For example, although Syriza’s position isn’t to abandon the use of the euro, the Left Platform bloc that makes up a big chunk of the alliance does want to quit the single currency.
As a result they haven’t got a crystal clear manifesto full of policies, but between the statement of intent published at their conference in 2013, and a speech given by leader Alexis Tsipras in September, we can get a pretty good idea.
A lot Syriza’s economic platform relates back to the Memorandum of Understanding between Greece and its international lenders, known as the Troika (the IMF, European Commission and European Central Bank). The agreement has meant some severe economic changes for Greece, like heavy reductions to public-sector pay, and Syriza want the whole thing torn up.
Tsipras gave a speech in Thessaloniki three months ago that provides the building blocks of Syriza’s programme:
- A haircut for bondholders. This means Greece’s government getting a boost simply by refusing to pay its creditors what was agreed. This sort of thing happened to people who owned bank bonds in Cyprus last year, and similar debt restructuring has been common in countries like Argentina. It’s effectively a form of default.
- Free electricity: State spending would accelerate quite dramatically. Syriza’s basic programme includes a ration of free electricity and heating for Greek households, as well as food and rent subsidies, and the restoration of free health care, as well as a €13 billion plan to restore pensions which have been clipped by various reforms. This would all undoubtedly send the Greek deficit up significantly.
- Everything funded by the ECB: Since Greek bond yields (the typical cost of financing a government deficit) are elevated, Tsipras wants the spending to be financed by the European Central Bank, simply by buying up Greek debt directly from the government.
- Tax the rich: Syriza wants a lot of taxes that have been brought in over recent years to be removed, and for the income tax threshold to go back to €12,000, from the €5,000 it’s at now. They have clashed with the Greek finance ministry about this. They also want to crack down on tax evasion, especially on Greece’s wealthiest people.
- A massive job creation programme, which the coalition wants the EU to fund. Greek unemployment is above 25%, and youth unemployment is above 50%.
- Writing off the bank debt of people who can’t afford it. That’s one of the reasons that bank shares have been among the worst-hit in today’s brutal stock sell-off.
The bottom line of all of this is that it’s extremely expensive. The disagreements between Syriza and the finance ministry as to whether this will all cost are pretty cosmetic. With 10-year bond yields at over 8%, any extra spending will be very difficult. Government spending might well be a very positive thing for Greece right now, but borrowing in a currency that it’s not in charge of complicates that.
So the Syriza programme also implies almost no co-operation at all with European institutions. The coalition is demanding things from the ECB and European Union that it simply won’t do (like fund its programmes). That means that for the first time, there may be an entire EU member state just refusing to go along with European policy, which is a massive challenge for the whole continent.