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Syriza Victory in Greece Could Be a "Historic Turning Point" for Eurozone Economic Policy, CEPR Co-Director Says

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Left-wing party Syriza's strong victory in Greece's elections today marks a "historic turning point" for countries attempting to emerge from sluggish economic growth, high unemployment and other poor indicators more than six years after the Global Recession began, Center for Economic and Policy Research (CEPR) Co-Director Mark Weisbrot said today. Syriza has promised to enact alternative policy measures to the spending cuts and other regressive measures that the European authorities have imposed on Greece. Eurozone policies have left Greece with extremely high unemployment -- currently at 25.5 percent, with youth unemployment at 49.6 percent -- depression levels of output (down by about 26 percent from pre-recession levels), and a very weak and precarious recovery, as noted in a new CEPR paper. The IMF has projected that Greek unemployment will still be at nearly 16 percent in 2018, and almost all of their projections since 2010 have been over-optimistic.

"This is a great example for the rest of the eurozone," Weisbrot said. "Voters have rejected prolonged mass unemployment and elected a new government with a mandate to negotiate a better deal. And this new government will have bargaining power. A government that is willing to stand up to the European authorities can really help Europe move away from economic policies that have been a miserable failure."

As of 4:00 PM EST, media outlets were reporting that Syriza had won 36.5 percent of the vote, according to official projections. Syriza has vowed to enact a stimulus, including through boosting public investment; to seek renegotiation of Greece's debt; to clamp down on tax evasion; and to take advantage of the new quantitative easing (QE) program announced by the European Central Bank (ECB) last week. The party has expressed opposition to the current government's stated intention to cut the salaries and pensions of public employees even further, as Syriza leader Alex Tsipras explained in a January 20 op-ed in the Financial Times.

The CEPR paper noted that "The amounts of money needed to guarantee a robust Greek recovery are extremely small for the European authorities, especially given the size of the ECB's announced 60 billion euro per month QE." Since the beginnings of the Global Recession, CEPR has criticized the austerity policies that European authorities have promoted in the eurozone.

Weisbrot noted in a recent op-ed in U.S. News and World Report that the German government and other proponents of eurozone austerity have hyped up fear that Syriza would lead Greece to exit the euro, despite the party's statements to the contrary. Weisbrot suggested that these European authorities may fear the possibility of successful exit, however: "The fear is not what will happen to financial markets [but] that Greece would, after an initial crisis, recover so much faster than the rest of the eurozone that other countries will also want to exit."

Tsipras and other Syriza politicians were joined in the final days of campaigning by the leader of the Spanish anti-austerity political party Podemos, Pablo Iglesias.

"If Syriza succeeds in bolstering recovery, bringing back economic growth and putting people back to work, then voters in Spain might take notice," Weisbrot said. Elections will be held in Spain later this year.

 

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