The outcome of the 25 January Greek elections has been the emergence of a government led by Syriza, a new party which has committed itself to reopen all previous debt and fiscal policy commitments made by Greece to the European Union and the IMF since Greek debt crises began in 2010.
Syriza’s campaign promises to Greek voters included debt write-off and abandonment of the fiscal austerity pledges the government had to make during recent years to meet EU and IMF conditions for extension of debt obligations and new loans.
Greece’s debt management misfortunes began in 2010 but continued at frequent intervals. In 2011, the EU governments and the IMF reached an accord to provide new assistance under the guidance of a Troika, comprised of the European Commission (EC), European Central Bank (ECB), and the IMF.
In 2012 Greek’s finances appeared to be near collapse once again, and to prevent default and potential exit from the EU and the Eurozone, the Troika put together a second bailout intended to put Greece back on track to orderly return to solvency and economic growth.
More recently Greece relapsed yet again into a crisis of unserviceable debt and public unrest no longer tolerant of the fiscal austerity measures imposed by the Troika.
The new Greek elections thus have brought the debt problems of Greece back into crisis mode, only this time the crisis is not solely financial.
This time the political structure of Greece is directly at stake.
During the 2012 crisis, German officials did consider some form of Greece exit (Grexit) from the Eurozone (and possibly from the EU). Chancellor Merkel personally considered the Grexit option, but decided against that extreme outcome on the grounds no convincing analysis was available on whether the potential financial market consequences might generate a broader crisis in European and global financial markets.
At that time, the US (under Treasury Secretary Geithner) supported a special workout for Greece, and strongly encouraged the IMF to join with the EZ leadership in provision of a new rescue package.
In 2015, the circumstances may be different.
After the 2012 bailout, German officials and politicians decided the Greek problems might well recur, and that additional plans should be made for the next crisis if one should occur.
Since that time, a handful of German officials, assisted by one IMF aide and unknown but closely associated others, considered in great secrecy various mechanisms for the possibility of a “managed Grexit” that would contain or moderate the negative financial effects of a Greek default and exit from the Euro.
In Germany, the political mood has also become far more hostile to yet another Greek bailout or any debt writedown. At this juncture, the possibility of forcing a Greek exit from the Eurozone is no longer “unthinkable” in Berlin, and various scenarios for orderly withdrawal have been given much thought.
Markets and media continue to assume a Grexit would ultimately not be permitted by German or other EZ leaders, but that assumption may no longer be valid.
Key questions now may be whether a Grexit would encourage other Eurozone nations (or regions within other Eurozone nations) to seek exit as a means of debt default and escape from the dreaded fiscal austerity imposed by Germany and the EU Commission.
Alternatively, there is worry that a new relief package designed for Greece would result in new demands for fiscal and financial help from big countries like France, Italy and Spain, as well as from the weaker debt-ridden “Peripherals.”
A new wrinkle has just been added to the EZ-IMF confrontation with the Greeks, as the new leadership in Athens has taken a visible pro-Putin stance in EU talks on further sanctions on Russia.
Syriza Party Leader Tsipras has already surprised Europeans with abrupt and provocative statements and diplomatic initiatives regarding EU relations with Russia.
For example, he declared “We should not accept or recognize the government of neo-Nazis in Ukraine”, and his Foreign Minister expressed objection to a joint EU declaration of intention to intensify sanctions on Russia regarding Russia’s action in Ukraine. Initial Syriza contacts with the Russian Ambassador elicited an offer from Moscow to assist Greece should the need arise.
The Syriza Party has also adopted a 40-point manifesto, in which the 40th point is shocking for those concerned with strategic balance: “40. Closure of all foreign bases in Greece and withdrawal from NATO.”
Tsipras has already surprised Europeans with abrupt and provocative statements and diplomatic initiatives regarding EU relations with Russia.
For example, he declared “We should not accept or recognize the government of neo-Nazis in Ukraine”, and his Foreign Minister expressed objection to a joint EU declaration of intention to intensify sanctions on Russia regarding Russia’s action in Ukraine.
Initial contacts with the Russian Ambassador elicited an offer from Moscow to assist Greece should the need arise. It is, of course, possible that these are tactical moves to enhance his bargaining position with the EU members of NATO, in hopes that drawing in strategic and security interests of Europe, NATO, and even the U.S. might tilt the scales in favor of the Greek demands.
Markets and Western economic and financial officials are still probably overlooking potential Chinese and Russian interest in acquiring a larger financial and strategic positions in Greece.
The Chinese are already deeply involved in an effort to take control of the Port of Piraeus, and would no doubt be eager to seek a larger foothold as a hub for expansion of Chinese business in Europe and Eurasia.
Russia has already become deeply involved with wealthy Greek-Cypriot families in its very large scale financial interactions with Cyprus.
Many of these same families are major players in the mainland Greek economy. Russia’s interests in that region spanning Greece and Cyprus are both strategic and financial (including much interest in the oil and gas reserves known to be located from that area all the way to Israel).
We wrote earlier in a Defense News op ed published on September 2, 2012, that the evolving Greek crisis would be part of shaping a new European map. This article focused on the strategic impact of the Euro crisis at that time.
Now, with the Ukrainian crisis and Russian assertiveness compounded with an economic crisis, the prospects for further redrawing of the map of European security, including NATO, are clearly on the rise.
The Greek dynamic could reopen concerns on NATO’s southern flank.
The weakening of Greece, and the high probability that Athens will go its own way on currency and other economic issues, is occurring in the midst of the growing Chinese global economic reach and Russian activism in the Middle East. China and Russia will be eager to engage Greece with its geographic position on the Mediterranean Sea.
The Euro crisis is a key element in reshaping European defense and security challenges and in reshaping alliances within Europe itself.