January 26, 2015


The eurozone's moment of insurrection

This was the moment of the eurozone's insurrection. Syriza achieved a historic landslide victory, and is now likely to form a coalition with another radical anti-establishment party - an option that was not considered very likely by pundits before. We expect the new Greek government to challenge the established order in the eurozone in fundamental ways. We also expect a positive impact on anti-establishment parties elsewhere, and possibly a change of direction among centrist parties, especially of the centre-left, all over southern Europe.

Syriza won 36.34% of the vote and 149 seats in parliament, just 2 seats short of an absolute majority.  With 99.77% of the votes counted the election results show a clear shift to more radical, anti-establishment parties in Greece, with Golden Dawn coming in third position, as Macropolis already predicted last week. Here are the results:

No of Seats% of Vote
To Potami176.04
Independent Greeks134.75

In the early hours this morning party officials announced a deal had been struck with the Independent Greeks, according to the WSJ. The two parties have little common ground except for their rejection of the austerity measures and their ambition to wipe out large parts of the public debt, but that might be enough to get them going. The Independent Greeks won 13 seats in Parliament, a coalition would thus have at least 162 seats—a comfortable governing majority. A meeting between Alexis Tsipras and Panos Kammenos is scheduled to take place Monday morning, Syriza officials said. Syriza has now three days to strike a deal with them. This alliance would be Syriza's first bold move, when everybody else was expecting them to team up with To Potami. Other surprises might follow.

Until January 15, it did not even look likely that the Independent Greeks would make it over the 3% threshold. Independent Greeks leader Panos Kammenos, a former deputy shipping minister who broke away from Samaras in 2012, says the troika bailout has reduced Greece to the status of a debt colony. "We will never go as beggars on our knees to Merkel, we will go standing tall as Greeks do. The Greek people are fighting united to restore national sovereignty and dignity," he said in Friday's campaign speech according to Reuters. A campaign advertisement showing Kammenos helping a small boy called Alexis to avoid derailing his model train illustrates the role he wants to play in a Syriza-led government. 

As for Syriza, its alliance with the Independent Greeks would only re-enforce its stance against the troika and the bailout memorandum. Alexis Tsipras said in his speech last night that Greek voters have "closed the cycle of austerity" and to "put an end to" MoUs and the troika, according to @MacroPolis_gr.  "Today was a defeat for the Greece of the elites & oligarchs. The Greece that works and hopes won." Nick Malkoutzis writes that Syriza's only chance  to win over European policymakers for a "mutual agreement" is to make clear that Greece can offer reforms in return for short term financing and/or debt relief. Malkoutzis says Syriza can dare to be more radical than previous governments on reforms for instititutional change. Syriza could for example champion the overhaul of the justice system, the tax system and bring more transparency to the political system, investigate party and media funding and to tackle corruption in the dealings between the public and private sectors. If it can deliver on this, it will have a platform for talks.

Corriere della Sera reports this morning that Mario Draghi, Jean-Claude Juncker, Donald Tusk and Jeroen Djisselbloem will be holding a mini-summit today, ahead of today's eurogroup meeting, to consult on what to do now. The paper reports that both Matteo Renzi and Francois Hollande are seriously concerned about the rise of an anti-establishment parties in Greece, as this might encourage the Five Star Movement and the Front National in their own countries. 

An important question now is what will happen in the rest of Europe, with elections coming up in Finland, Portugal and Spain later this year. While a lot has been said about contagion, and that the economic effects of a Greek crisis can be contained, what about the political contagion? The True Finns leader already said that the Greek election result will change what happens in Finnish elections in April. Portugal's Socialist leader Antonio Costa sees Syriza's victory as a sign of change in Europe. He calls for another policy in Europe, and to stop austerity which has neither succeeded in relaunching Portugal's economy nor its finances. 



Our other stories

Our coverage today is devoted almost entirely to the Greek elections and its aftermath, as well as some commentary on QE

Eurointelligence Professional Edition

For premium access, please log in or register 
for a free 14 day trial for the Eurointelligence Professional edition. The best independent intelligence on the eurozone anywhere in a fast and easy to read format.

A message from Wolfgang Münchau

Welcome to the eurointelligence.com homepage.

Since 2006 we have been providing our readers from central banks, European and international institutions and the financial sector with our daily morning newsbriefing, each morning, at 9am CET, Mondays to Fridays. We are independent from governments and institutions, so you get our honest, sharp and frequently humorous take on the news and the debate. The subjects we are currently focusing on are the now clearly visible economic slowdown, the sustainability of the Italian debt, whether the economic recovery in Spain is for real and our assessment of the impact of the geopolitical tensions in Eastern Europe in particular. Naturally we also follow the ECB and the European institutions as they work through the crisis.

You might ask, is the eurozone still important, since the acute phase of the crisis is over for now? Unfortunately, few of the problems have been resolved. This is something you will quickly notice once you start reading the briefing on a daily basis: there is no better and quicker way to keep yourself ahead of events in the eurozone.

I would like to invite you to register for a free 14-day trial, without commitment, so you can judge for yourself.

Wolfgang Münchau
Director Eurointelligence