Advertisement

SKIP ADVERTISEMENT

Greece’s Experiment With Populism Holds Lessons for Europe

Alexis Tsipras, front, ceded the office of prime minister on Monday to the New Democracy leader, Kyriakos Mitsotakis, left, in Athens.Credit...Angelos Tzortzinis/Agence France-Presse — Getty Images

ATHENS — With a quiet handshake at the door of Maximos Mansion on a tree-lined street in central Athens, Alexis Tsipras ceded the office of prime minister on Monday to the New Democracy leader, Kyriakos Mitsotakis.

It was the kind of uneventful handover of power that heralded Greece’s return to normality after being ground zero of one of the most tumultuous periods in global economic history.

The election victory on Sunday by a traditional center-right party was the end of Greece’s flirtation with radical left-wing populist politics, even as the radicals of Mr. Tsipras’s Syriza party transformed themselves into a mainstream force of the center-left.

The Tsipras experiment may hold important lessons for Europe and its new ranks of anti-establishment populists. While many, as in Italy, gleefully thumb their noses at the European Union and its rules, once in power the risks of following through on their rebelliousness may corral them from the extremes.

Greece represented a special, wrenching case, but its experience showed that, especially for small countries, if you are in the eurozone, “you’re not free to run a radical financial policy,” said Charles Grant, the director of the Center for European Reform. “The combination of E.U. rules and the financial markets forced a kind of orthodoxy on Greece, and will probably work similarly with Italy.”

Image
Patients waited to receive free medication in Athens in February. Greece’s unemployment rate of around 18 percent is the highest in the eurozone.Credit...Aris Messinis/Agence France-Presse — Getty Images

The other major lesson, Mr. Grant said, is that “the idea of a small country leaving the euro, whatever the good and bad of the euro, is bonkers, and that the euro itself is not going to fall to pieces.”

Mujtaba Rahman, managing director for Europe of Eurasia Group, underlined the point. “The Syriza experiment is consistent with the experience of other E.U. member states that also tried to defy the E.U. and capital markets and failed — such as Portugal, and more recently, Italy,” he said.

“When the E.U. and capital markets align, in seeking changes that will make a country’s finances more sustainable or improving the environment in which the private sector operates, governments — no matter how radical — have no real choice but to reform,” Mr. Rahman said. “Greece’s experience is a cautionary tale, but Portugal’s, Spain’s and Italy’s have all been, too.”

While all populists are hardly the same, and many of Europe’s newer ones, as in Hungary, have come to power on anti-immigrant policies, Greece could be an indication that populists in power can end up behaving responsibly, said Mark Leonard, the director of the European Council on Foreign Relations.

“Populists are not always as scary in office as they may appear,” he said, noting the continuing populist experiment in much-larger Italy, where euroskeptics are in power but remain reluctant to challenge the European Union and the budget rules of the euro.

Mr. Tsipras has won praise in Brussels and Washington for his transformation into an establishment politician, a shape shift that some regard as betrayal. His critics say that transformation came only after he did severe damage to the Greek economy.

Image
An election poster for Mr. Tsipras last weekend. His Syriza party lost decisively to the center-right New Democracy party.Credit...Alkis Konstantinidis/Reuters

If Greece has returned to normality, the new normal in some ways is a lot like the old, with Greece reverting to being a peripheral European country that no longer has the potential to destabilize global markets or bring down the euro.

“The last four years have been a waste and totally unnecessary,” said Maria Demertzis, deputy director of Bruegel, an economic research institute in Brussels, who is herself Greek. “Tsipras learned fast, but not before he had inflicted such a cost on the economy.”

Facing a choice between default on its debt in a crisis that began in 2010, and another bailout from creditors that would bring more austerity, Mr. Tsipras called for a referendum in 2015 and asked Greeks to reject it.

They did, only to have Mr. Tsipras accept even harsher terms to avoid expulsion from the eurozone, ushering in even tougher austerity policies and costing the economy billions of euros after he put the financial system on lockdown, destroying confidence in banks.

Mr. Tsipras ultimately did little, despite promises to Brussels and the International Monetary Fund, to confront and restructure Greece’s large civil service and its clientelist economy.

In many ways, Ms. Demertzis said, it was the waste of a crisis that could have been used to modernize the Greek state. For that reason, even though Greeks may be poor and exhausted by the long debt crisis, “there will be no honeymoon,” for the next prime minister, she said.

Image
Derelict office blocks in downtown Thessaloniki. Greece’s national output shrank by one-quarter during the economic crisis.Credit...Andrew Testa for The New York Times

While the economy is again showing modest growth, expected to be about 2 percent this year, Greece’s national output shrank by one-quarter during the crisis. Poverty is rife; unemployment, at around 18 percent, is the highest in the eurozone; and many of Greece’s smartest and best-educated are working abroad.

Mr. Mitsotakis, who is business friendly, intends to try to unblock some of the privatization projects Mr. Tsipras agreed to but never carried out. And he has promised to reduce the primary surplus — the budget surplus without counting debt service — to 2.5 percent from the current 3.5 percent of GDP demanded by Greece’s creditors, in an effort to free up more space for the tax cuts he has promised the middle class.

“He is right that the middle class in Greece needs saving,” Ms. Demertzis said. “But it has to be done in agreement” with Brussels, which has so far said that no changes can be made to the bailout deal. “Mitsotakis has said he won’t do it right away, to gain credibility with the creditors first,” she said. “But it’s not his decision alone.”

Mr. Mitsotakis’s biggest challenge is likely to be trying to change an overregulated and dysfunctional state as he tries to deliver quickly on promises of investments and reforms that will create higher-paying jobs.

Panos Tsakloglou, who teaches economics at Athens University and served as chairman of the Greek council of economic advisers from 2012 to 2014, says Mr. Tsipras’s government could not have pushed through public-sector reforms it did not believe in.

“To do market liberalization, you need to believe in market liberalization,” he said.

“Mitsotakis will be better placed to go ahead with some of these reforms, he understands what kind of reforms are needed and knows how to do them,” he said.

Image
Mr. Mitsotakis campaigning this month in northern Greece. His party won almost 40 percent of the vote and a majority of 158 seats in the 300-seat Parliament.Credit...Andrew Testa for The New York Times

And while Mr. Mitsotakis may be able to cut taxes as promised, if the international creditors decide to give him a little space to build good will, that is unlikely to be enough to speed up Greece’s growth or create decently paying jobs.

Ms. Demertzis noted that Mr. Mitsotakis had already moved to reduce the size of government with a smaller cabinet and has said that he will establish his office not in Maximos Mansion, but in the ministry for reform.

At the same time, said Mr. Leonard of the European Council on Foreign Relations, the European Union itself has learned from the Greek crisis that “you need to have a more balanced economic deal.” Greece, he said, “was an important petri dish for strict German economics, which haven’t succeeded.”

The actions of the European Central Bank have been crucial in restoring some stability by “allowing a bit more oxygen into the system,” he said, while noting that the most successful countries that had market-enforced austerity, like Spain and Portugal, were not led by populist governments and “now look mainstream.”

It is difficult to generalize too much from the Greek example, Mr. Leonard said. But it is also striking that a once-derided center-right party, New Democracy, could return to power with a majority.

Greece appeared to be back to what is a traditional two-party system, with the transformed Syriza taking over the role of the center-left opposition from the nearly defunct Pasok, which has suffered many of the same problems as other traditional socialist parties in Europe, like Germany’s Social Democrats.

“We’re back to the two-party system we had before the crisis,” Ms. Demertzis said. “Is that good or bad? It’s hard to say. But it’s what Greece knows, and it provides stability.”

Matina Stevis-Gridneff reported from Athens, and Steven Erlanger from Brussels.

A version of this article appears in print on  , Section A, Page 10 of the New York edition with the headline: Greece’s Experiment With Populism Holds Lessons for Others in Europe. Order Reprints | Today’s Paper | Subscribe

Advertisement

SKIP ADVERTISEMENT