The Election in Greece: Syriza Party’s Stunning Win

It was to be a grand thing, this Euro. It was the water that would raise all the boats of each European country and for 10 years it did just that. The headquarters was set up in Brussels. A troika would rule. It was the European Commission, The European Central Bank (ECB) and the International Monetary Fund (IMF). Each country could issue its own bonds. Interest rates fluctuated based on the relative economic strength of each country. Germany with its strong industrial capacity and exports rose to the top. The Southern countries of Greece, Spain, Portugal and Italy lacked the exports. Instead they relied on the money from their bonds to put people to work in the public sector. What no one realized at the time was that all the new debt being issued would eventually need to be repaid in Euros, not their old currency. This inflated the debt.

No one stopped to think-what happens when something goes wrong and of course it did. When the stock market crashed in 2008-09 the United States immediately took the lead and started printing money to buy US Treasury Bonds and Mortgage Backed Securities. They were buying “junk” and paying face value. From 2009-13 they “gave” the bankers $4.5 trillion to play with (When the Federal Reserve buys bonds it credits bank balances.) It was an easy move since the United States has only one bond. In Europe you had bonds outstanding from every county in the Euro. Central Banks in each country were free to buy the bonds of any other country. When the crisis hit there was no central authority except the Troika to manage how all this debt was to be repaid.

To add gasoline to the fire Germany saw the United States printing money at an astounding rate and assumed that there would be a hyper- inflation to follow.

Germany had suffered one the greatest inflationary periods in history and was determined not to let that happen in Europe. The German central bankers with their power prevented the Troika from taking decisive action. The result has been that the economy of Europe started declining. The bankers were fearful that the Southern countries would not pay off their bonds. Exports fell and the Southern tier ran out of money and had to be bailed out. The only hope was that the Troika would follow the United States lead. However, Germany blocked their every move still fearing inflation. There’s one thing about bankers. They want their money. They have no conscience when it comes to getting paid. So instead of a bailout a long and painful period of “austerity” followed. The deal was that the Troika would dole out the bailout money if and only if the Southern countries would cut their budgets. They imposed severe cuts. Now, after six years the unemployment has risen to at least 25% in these countries. In some of the Southern tier countries 60% of youth are unemployed.

This situation became intolerable for Greece. The Greeks are a proud people. But they had a conservative government that went along with the Troika and the austerity program. Finally, on Sunday 25th 2015 they said enough is enough. They elected a new Prime Minister, Alex Tsipras who headed the Syriza Party. The Greek people voted overwhelming for Tsipras giving his party 149 seats out of a 300 seat Parliament. His party is just 2 seats shy of having a majority. He promises to negotiate with the Troika to forgive some of the Greek debt. He has not said that he wants Greece to leave the Euro but that option is still available. The Troika and the German bankers now must try to cut a deal with Tsipras to keep Greece in the Euro. One crazy option is to give Greece 100 year loans interest free. Germany stands to lose some $90 billion in Greek debt if Greece defaults.

There is a showdown of sorts coming in February when another Greek loan is to be negotiated. .

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