Syriza Wins Election

He formed a (rather odd) coalition with the, "populist right-wing Independent Greeks party," as he secured only 149 seats in the 300 seat assembly, Syriza chief Alexis Tsipras has been sworn in as Prime Minister:

A new chapter in Greece’s uphill struggle to remain solvent – and in the eurozone – has begun in earnest as anti-austerity politicians assumed the helm of government following the radical left Syriza party’s spectacular electoral victory on Sunday night.

Ushering in the new era, Alexis Tsipras was not sworn in, as tradition dictates, in the presence of Archbishop Iernonymos but instead took the oath of office in a civil ceremony. At 40, he becomes the country’s youngest premier in modern times.

The leftist, who surprised Greeks by speedily agreeing to share power with the populist rightwing Independent Greeks party, Anel, was on Monday afternoon handed a mandate by president Karolos Papoulias to form a government following his investiture at the presidential palace. Afterwards, the new prime minister pronounced that he will give his all “to protect the interests of the Greek people”.

Earlier, Panos Kammenos, Anel’s rumbustious leader, emerged from hour-long talks with Tsipras saying the two politicians had successfully formed a coalition.

“I want to say, simply, that from this moment, there is a government,” Kammenos told reporters gathered outside Syriza’s headquarters.

This was a bit of a surprise.

It was generally expected that the centrist/center left The River (To Potami) party would be a likely coalition partner, who would be expected to be more attuned with Syriza's stated policies.

I think that there were 7 reasons for him to go with Anel:

1. To Potami was formed roughly a year ago by a TV news personality, Stavros Theodorakis, and as such its existence beyond this election cycle is not by any means a sure thing.  (Anel is only a bit older, having been formed in 2012)
2. Theodorakis is very much not a Euroskeptic, and drew "Red Lines" (German) on leaving the Euro and a deposit levy, and taking the first item off the table fatally weakens the Greek negotiating position.
3. To Potami has very much focused on "Structural Reforms" (which appear to be defined as the reduction in patronage and corruption) to the exclusion of everything else, which would also make them an unreliable.
4. Anel has a history of working left wing parties on issues of common interest. (Panhellenic Citizen Chariot)
5. Anel is Euroskeptic, and really hates the Germans. (It has a demand for reparations from Germany for WWII).
6. The founder of Anel is a long term politician, the founder of To Potami is a news talking head.  I think that the latter is far more likely to channel the behavior of pastry chefs.
7. To Potami seems to be kind of a "Seinfeld" party, in that it doesn't seem to be about much beyond platitudes, and Theodorakis' personality.

 In any case, it is significant that Tsipras' first act as PM was pretty clearly a bit "F%$# You" to the Germans:

His first act as prime minister was to lay flowers at the National Resistance Memorial at Kaisariani, which commemorates 200 Greeks who were killed by Nazis there in the second world war. The highly symbolic act was interpreted by Greek TV commentators as “another up yours to the Germans”.

I would call it a very well deserved "Up Yours" to the Germans.  Merkel has been "n***er baiting" the southern tier of the Eurozone for domestic political consumption, .

As to what it means, a lot of ink (electrons?) has been spilled about how little leverage Greece has, but this has been the same media sources who try to cast Syriza as the new Khmer Rouge.

Two Nobel Prize economists, Joseph Stiglitz, and Paul Krugman, have both weighed in on the damage inflicted by "confidence fairy" based austerity today, and they both gave it a thumbs down.

Stiglitz is very clear, and he blames Germany, not Greece for the disaster that is the policy for Greece: (And Ireland and Portugal, and to a lesser degree, Spain and Italy)

Nobel Prize-winning economist Joseph Stiglitz told CNBC on Monday that the euro zone should stay together but if it breaks apart, it would be better for Germany to leave than for Greece.

"While it was an experiment to bring them together, nothing has divided Europe as much as the euro," Stiglitz said in a "Squawk Box" interview.

………

Greece is not the only economy struggling under the euro, and that's why a new approach is needed, Stiglitz said. "The policies that Europe has foisted on Greece just have not worked and that's true of Spain and other countries."

………

He said the real problem is Germany, which has benefited greatly under the euro. "Most economists are saying the best solution for Europe, if it's going to break up, is for Germany to leave. The mark would raise, the German economy would be dampened."

Under that scenario, Germany would find out just how much it needs the euro to stay together, he added, and possibly be more willing to help out the countries that are struggling. "The hope was, by having a shared currency, they would grow together." But he said that should work both ways.

I've been saying that Germany is the problem, and not the solution for a while.

Prof Krugman sees it as primarily a failure of policy brought on by adherence to thoroughly discredited economic theory:

To understand the political earthquake in Greece, it helps to look at Greece’s May 2010 “standby arrangement” with the International Monetary Fund, under which the so-called troika — the I.M.F., the European Central Bank and the European Commission — extended loans to the country in return for a combination of austerity and reform. It’s a remarkable document, in the worst way. The troika, while pretending to be hardheaded and realistic, was peddling an economic fantasy. And the Greek people have been paying the price for those elite delusions.

You see, the economic projections that accompanied the standby arrangement assumed that Greece could impose harsh austerity with little effect on growth and employment. Greece was already in recession when the deal was reached, but the projections assumed that this downturn would end soon — that there would be only a small contraction in 2011, and that by 2012 Greece would be recovering. Unemployment, the projections conceded, would rise substantially, from 9.4 percent in 2009 to almost 15 percent in 2012, but would then begin coming down fairly quickly.

What actually transpired was an economic and human nightmare. Far from ending in 2011, the Greek recession gathered momentum. Greece didn’t hit the bottom until 2014, and by that point it had experienced a full-fledged depression, with overall unemployment rising to 28 percent and youth unemployment rising to almost 60 percent. And the recovery now underway, such as it is, is barely visible, offering no prospect of returning to precrisis living standards for the foreseeable future.

………

Still, in calling for a major change, Mr. Tsipras is being far more realistic than officials who want the beatings to continue until morale improves. The rest of Europe should give him a chance to end his country’s nightmare.

I'm inclined to go with Stiglitz' here. 

I think that once again, the German sense of exceptionalism has screwed up the Eurozone from day one, and until the rest of the member nations get together to challenge Merkel's fairy tail, the Euro will continue to circle the drain.