Centre for European Policy Studies
January 30, 2015
The outcome of the Greek elections of January 25th did not present any great surprises. In the days running up to the polls, the debate was driven by a seemingly sincere desire to formulate policy options that would be both suitable for the EU and acceptable to the future anti-austerity Greek government. But immediately following his election, Alexis Tsipras surprised many observers by redefining his mandate with provocative statements and choices.
The first decision after his victory was to form an alliance between his left-wing Syriza party and the far-right and anti-European Independent Greeks. This somewhat ‘unnatural’ coalition signalled an unambiguous message: the new government would assign clear priority to domestic economic matters and to meeting the anti-austerity pledges he made during the campaign. But an uncooperative stance in the discussions with the EU could delay the negotiations and disrupt the relative calm in financial markets. Such a situation could quickly degenerate into a new crisis, dashing Syriza’s hopes of finding money in international markets in order to deliver on its promises to the Greek voters. One solution would be to print money, but such a unilateral action would automatically lead to an exit from the euro area. Many, in fact, have advocated this route as the fastest way to achieve growth, but this argument is facile. Since 2010 Greece has undergone a long process of internal devaluation which has been accompanied in recent months by significant depreciation of the euro. Nevertheless, this has not led to any significant recovery in the export sector. Why should it be any different if the economy returned to the Drachma? Structural problems are not solved by devaluation.
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