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Tough bailout implementation lies ahead in Greece - Dr Dennis Novy

Dennis BBCUniversity of Warwick economist Dr Dennis Novy reacts to the result of Greece's election on Sunday 20 September.

He said:

“For the second time this year, the Greek people voted in a new parliament on Sunday. The Greek economy is on its knees and unemployment is sky-high. Nagging deflation increases the burden of debt. So the stakes could hardly be higher.

“Alexis Tsipras couldn't crush European resistance towards his left-wing election promises when he was prime minister earlier this year. As a result, his Syriza party is split, and he has lost some of his shine.

“However, it is remarkable how he could pull off another major election victory. He is a charismatic leader, and trust of the Greek people in the establishment politicians is clearly very low.

“In terms of style, the contrast with his opponent Vangelis Meimarakis from the conservative New Democracy party could not be starker. But despite all the differences, both leaders want to keep Greece in the Euro, and both leaders are committed to implement the conditions of the latest EU bailout programme.

“But that bailout programme came with harsh terms attached. Greece is supposed to enact further spending cuts and tax rises.

“Alexis Tsipras has little room for investing in the economy, certainly not from the bailout money. In fact, the bailout programme is like a gigantic money recycling machine. The lion share goes back straight to creditors to pay back loans.

“A critical issue is whether the IMF will join the bailout. Many European governments, Germany in particular, are keen on having the IMF on board. This would lend the bailout programme international credibility. So far the IMF position has been that it cannot participate in new loans to Greece because it does not consider Greek government debt sustainable. In other words, if there is no serious debt restructuring, the IMF will not join the fray.

“Other European countries will closely watch the Greek election result. A radical left-wing party has just been resoundingly endorsed by the electorate. With elections coming up in Spain and Portugal, the Greek election has wider significance for the future and direction of the European project, in particular institutional reform such as a common fiscal policy and banking union.”

Notes to Editors:

Dr Dennis Novy is based in central London and is available for interviews. Contact Lee Page, Communications Manager, Press and Policy Office, The University of Warwick. Tel: +44 (0)2476 574 255, Mob: +44 (0)7920 531 221. Email: l.page@warwick.ac.uk.

Watch one of Dr Novy's previous TV interviews with Sky News:

Contact

Lee Page, Communications Manager

Tel: +44 (0)2476 574 255.

Mob: +44 (0)7920 531 221.

Email: l.page@warwick.ac.uk