Why A Bailout Deal That Keeps Greece In Europe May Endanger Greek Democracy

An emerging bailout deal between Greece and its creditors likely would continue the status quo of austerity. This ongoing economic pain may embolden Greek authoritarian political forces that have ties to Russia, experts say.

Greece is still negotiating with lenders over how budget-tightening in a bailout deal will be distributed. But the country has already agreed to targets that economists have said will depress Greece’s economy, regardless of who shoulders them. Without a bailout deal or an extension of payment deadlines, Greece will default on installments due in the next few weeks.

Greece has already committed to achieving primary budget surpluses, excluding interest payments, of 1 percent of GDP this year, and 2 percent of GDP in 2016. By removing these yet-unspecified billions of euros from the pockets of Greek consumers, the deal will depress demand for goods and services, further slowing the economic recovery.

The extraction of vast sums from the Greek economy will add misery to years of austerity that have already devastated the country. Greece's GDP has declined 27 percent since 2008, the result of an economic recovery that has been slower than that of the United States from the Great Depression, or Germany after World War II. The adult unemployment rate tops 25 percent, and for Greeks under 25, it's 50 percent. One of every three Greeks lives at or below the poverty line.

The Greek government, led by the left-populist Syriza party, may still be able to claim that it won modest economic relief. Prior to the bailout negotiations, Greece had been required to achieve a 3 percent primary budget surplus in 2015 — three times what the country has now accepted.

The economic impact of the concessions won by Syriza has been offset, however, by the economic contraction that Greece has experienced since Syriza took office in late January. The decline has worsened Greece’s budget situation, meaning that it will have to pay larger sums to reach the surplus targets.

A bailout deal this painful will be politically disruptive for Greece, and in the long term, for its eurozone creditors.

The New York Times reported on Wednesday that by preventing a Greek departure from the eurozone, German Chancellor Angela Merkel and other European leaders hope to keep Greece out of Russia’s orbit. Greek Prime Minister Alexis Tsipras has courted Russia in his attempts to negotiate a better deal from Greece’s creditors.

But some experts say that by thwarting Syriza's agenda after the Greek public elected it to secure economic relief, Europe will bolster anti-European and authoritarian forces in the country that could cause problems for Europe later.

Many Greek voters saw Syriza as a last hope for relief from austerity, after a series of governments proved unwilling or unable to get better debt terms from Europe, and the economy continued to deteriorate. A new deal that dashes people’s hopes once again, these experts say, will put Greece in uncharted political territory.

“Syriza seems to be offering the last classical, political and ideological solution to governing in Greece,” said Angelos Chryssogelos, an expert in European populist movements and European Union foreign policy at London’s Chatham House think tank. “It is a far-left ideology that I do not think is very feasible in today’s Europe, but at least it believes in Europe and believes in democracy.”

Instead of the rise of neo-Nazi extremist parties like Golden Dawn, however, Chryssogelos predicted the “emptying of the political arena” that would make politics in Greece “something like the post-Soviet states,” such as Belarus and Kazakhstan, in the 1990s.

“There was no ideology, no idea, no cohesion, no vision to keep society together,” Chryssogelos explained. “This gives rise to various hybrid forms of authoritarianism and flash parties, to businessmen taking over the state.”

Chryssogelos said he believes the potential rise of a non-democratic government in Greece adds to Europe’s “major democracy problem,” already evident in its relationship with an increasingly illiberal Hungary.

“This is a longer-term problem for Europe — having to deal with a country whose politics do not resemble much your European politics at all,” Chryssogelos said.

The new Greek political entity that Chryssogelos imagines would likely open the door to greater Russian influence. Chryssogelos said that's a risk Europe must weigh against the effects of treating Greece differently than other austerity-stricken countries on Europe’s periphery. Chryssogelos argued that Europe is calculating that preserving cohesion within the eurozone is more important to the continent’s geopolitical strategy for dealing with Russia than maintaining a pro-European foreign policy in Greece.

George Pagoulatos, a professor at Athens University of Economics and Business, who was a senior adviser to former Greek Prime Minister Lucas Papademos, is more optimistic about the resilience of Greece’s political system.

After a deal is reached, Pagoulatos said, extremist political parties may surge, particularly as a hardline element of rank-and-file Syriza voters looks for a new outlet.

But ultimately, Pagoulatos said he believes the Greek public’s support for remaining in the eurozone will prevail over other political forces.

“The mainstream of Greek society will be pro-EU and Tsipras will be closer to the mainstream as a result of graduating with the compromise,” Pagoulatos said.

The latest move by Tsipras may show the Greek public’s tolerance for additional sacrifices. On Friday, the prime minister called for a July 5 referendum on a bailout deal with unpopular reforms that would keep Greece in the eurozone. A referendum would have the advantage of circumventing parliament, where Tsipras risks a vote that may split the Syriza party and collapse his government. It is not clear whether Greece’s creditors will allow the referendum to occur. Greece needs the bailout to make a 1.6 billion-euro debt payment to the International Monetary Fund due on June 30.

In the meantime, Pagoulatos said Greece’s relative political stability through the worst years of the crisis is a promising sign for its ability to withstand more pain.

“I would stress that despite all of the setbacks … it is important to notice also the very significant degree of continuity and stability in Greece’s commitment to remaining in Europe” throughout the debt crisis, he said.