By Bill Wilson — Greece has set June 17 for new elections after a non-decision on May 6 left the Hellenic nation without a government.
Now all eyes are on Alexis Tsipras, who’s Coalition of the Radical Left party appears poised to overtake not only the once-ruling Socialists — which they already did on May 6 — but also the conservative New Democracy party, which had come in first place.
Combined, New Democracy and the Socialists — the traditional status quo parties that usually win — only got 32 percent of the vote, while more radical third parties garnered a combined 68 percent of the vote on an anti-bailout message.
Now, the most recent poll suggests that Tsipras’ party is leading, with his party garnering 25.5 percent to New Democracy’s 21.7 percent.
That is 9 points better than the Radical Left did in May, and is owed likely to Tsipras’ refusal to form a government that would accept the terms of the bailout agreement.
The deal cracked between the Socialists and New Democracy with the European Financial Stability Facility (EFSF), the International Monetary Fund (IMF), and the European Central Bank (ECB) was exceedingly unpopular with the Greek people.
Which is no wonder. Those terms were essentially imposed on Greece by Europe’s greater powers.
When Greek Prime Minister George Papandreou called for a national referendum on whether or not the Greek people even wanted to participate in the arrangement, he was promptly deposed in November by Brussels and replaced with a technocrat that would execute the deal.
Because of that, voters on the left have abandoned the Socialists in droves, and appear poised to put Tsipras into the driver’s seat.
That is the real key. Voters in Greece are not necessarily rejecting austerity per se. Spending was only cut by €6.3 billion from 2010 levels, or 5.5 percent. And the country still ran a €19.7 billion deficit, 9.2 percent of GDP, well in excess of the 3 percent provided for under the Maastricht criteria.
So the small cuts made in 2011 could have perhaps been tolerated. It is the loss of sovereignty by Athens that was unacceptable to the people.
After all, how would U.S. citizens react if China, Japan, and other foreign creditors suddenly started demanding that Congress raise taxes to pay back the gargantuan $15.6 trillion national debt? Citizens on the left and the right would reject the imposition by foreign countries on our fiscal sovereignty.
And any politician that went along with such a scheme would likely be deposed electorally.
So the ire of the Greek people against New Democracy and the Socialists is quite understandable. They were little more than quislings assisting an invading force.
Now the question is what Tsipras would do about it if he is elected to be prime minister.
For now, the Radical Left appears to be pretending that it is somehow possible to remain in the Euro without caving into the demands of the rest of Europe.
“We believe that if we have a negotiation we will win some things, because it’s very difficult for them to throw us out of the Eurozone,” said Gabriel Sakellaridis, the Radical Left’s economic coordinator.
Perhaps that is so. There certainly is no provision in European law for removing a country from the common currency. So, the radicals in Greece think they can impose terms on Germany and the other powers in Europe.
Maybe they will even argue Greece’s exit from the Eurozone poses such a systemic risk to banks across the continent, that Greece is too big to fail. And that Angela Merkel and the Bundesbank will have no other choice than to print all the money the Greeks demand to perpetually refinance their debts.
That may be an unreasonable proposition, but then again, they are radicals.
In the end, there will likely be one of two outcomes. None of the countries in Europe are following nor do they ever intend to follow the budget rules under which the Eurozone was founded in the first place. And the ECB lacks the capacity to monetize debts.
So either the Lisbon Treaty will be amended to allow the ECB to do so, and richer nations will be forced to monetize the debts of poorer nations, or the Eurozone will be broken up piece by piece.
The alternative would be for every country to sacrifice their fiscal sovereignty to Brussels, and to follow the budget rules they all signed up for. But that’s not going to happen. That ship has already sailed.
Similarly, it is hard to imagine a scenario where Merkel will ever accept the terms of the Greeks, importing their inflation brought on by being forced to print the money to refinance the gargantuan debts of Greece, Portugal, Ireland, Spain, and Italy. After all, that would be an affront to German sovereignty, too.
Which leaves a breakup of the Eurozone. Should Tsipras win and then negotiations with Berlin fail, Greece will be unable to make payments on its debt in Euros. The nation’s only recourse will then be to revert to the drachma — even if it sets off a chain reaction wrecking the Eurozone.
In fact, that may be the only solution that preserves the sovereignty of the Greek people — and of every other person in Europe. For the sake of freedom, it may be the only way. Liberty is always a greater priority than any temporary recession that might occur.
Bill Wilson is the President of Americans for Limited Government. You can follow Bill on Twitter at @BillWilsonALG.