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Another Greek tragedy

26/01/2015 13:46 GMT | Updated 28/03/2015 09:59 GMT

For almost five years now, Greece has avoided a possible "Grexit", the exodus of the "hard core" of Euro and a return to the national currency, the drachma. The Greek Parliament's failure to back the prime minister's presidential candidate by the end of December has triggered yesterday's general election that ended with a sounding victory of Syriza. Alexis Tsipras, the current Prime Minister and leader of the left-wing party Syriza, insists on a rhetoric that makes the "Grexit" scenario more likely.

Meanwhile the international lenders of European Commission, European Central Bank and International Monetary Fund (Troika) have plans for Greece. The last loan instalment to the country is in February. Greece is certain to require a new bail-out loan. This new deal won't be called a memorandum again --- that term bears sour connotations regarding policies and financial sacrifices. It will be 'marketed' as a 'support programme', 'social contract', 'ease mechanism', or 'resolution' instead. Then, no matter who will be the next Greek government, somewhere between 2015 and 2016 the Troika will probably decide to extend the duration of the instalments of the payment maybe up to 50 years. This may ease the annual instalments for the repayment of loans but in the long term actually means turning an already default Greece into a "debt colony". During 2017-2019, there will be another brave debt "haircut" or some other type of debt restructuring, similar to the one that occurred in 2012, the so-called PSI, but it will be more complex.

None of this is helping the grim situation in Greece. According to the 2014 Legatum Prosperity Index, an Index that measures 142 countries in 8 sub-indices and uses 89 variables from different sources with the most recent available data, Greece was the lowest ranked Western country in overall Prosperity in 2014 (ranked 59th). Greece came out just above Romania (60th) and Ukraine (63rd) in the whole of the region (including Western and Eastern European countries). This low rank in overall Prosperity is mainly due to low ranking in the Economy (103rd), Personal Freedom (121st) and Social Capital (129th) sub-indexes.

The political environment seems more polarized than ever. Unemployment remains high at 25.8%. One in five Greeks lives below the poverty line. On perceptions of widespread corruption, Greece is the fourth country most concerned with corruption in the world (after Indonesia, Italy, Lebanon and Bosnia) with 88.2% of people declaring that corruption is widespread in government and business in Greece in 2013. Taxes are not collected, bureaucratic red tape blocks investments, deregulation is stalling, and justice is not delivered due to the heavy volume of cases and institutional problems of the judicial system.

Some progress was made under the previous coalition government: Tourism enjoyed a record of 21+ million visitors this year, recession slowed down and a possible recovery with small growth was predicted. Unemployment wasn't getting worse and above all, primary budget surplus was achieved for the first time in decades. But there was more to be done. Property taxes should have gone down, decrease of VAT was essential, at least on restaurants, bars and cafes, investments on tourism and agriculture should have followed a "fast-track" highway, privatisations should have accelerated, public sector should have shrunk and entrepreneurship should have been supported so as to return to the path of growth.

Meanwhile Syriza and its populist leader, Alexis Tsipras, promised an economic miracle. Syriza, an alliance of 11 factions of Socialists, Marxists, Trotskyists, Leninists, and Communists, seems to have managed to convince the electorate by its economic programme. Yet, billions of deposits have been withdrawn from bank accounts since December and since Tuesday Greece's banks survive only through the emergency liquidity assistance (ELA). When deputies of Syriza keep on talking about policies like the restoration of the minimum wage to 750 euros, gradual restoration of all lost pensions, enforcement of absurd laws protecting labour layoffs, no public sector excesses cuts, then, all these positions formulate unilateral movements that threaten the future of Greece in the European Union.

But it is not the policies of Syriza that have raised fears of an irreversible socialist downward spiral; it is rather Syriza's principles. They support government ownership and the reversing of the privatisations that have been made in the past. They believe that growth comes through imposing heavy income taxes and more spending on an already over-expanded public sector. Their ideas come with a price: corruption, nepotism and languishing entrepreneurial activities.

In the midst of their difficulties, Greeks were tempted to put a new party in power, especially one that was selling a softer option. But Tsipras is not bearing gifts, just promises.