When elections are a crisis – because the market tells us so: The case of Greece


By Jan Eich­horn.

© pixs:sell - Fotolia.com

© pixs:sell — Fotolia.com

Over the past week I found myself rather dumb­found­ed on mul­ti­ple occa­sions. Read­ing news­pa­pers from Ger­many, the UK and the USA I kept find­ing head­lines that sug­gest­ed Greece was in cri­sis – a mas­sive cri­sis with huge con­se­quences for Greece itself and the Euro­zone over­all.

Now, I agree with that of course. Greece is in cri­sis indeed. Unem­ploy­ment remains incred­i­bly high, indus­tri­al activ­i­ty has dimin­ished in unprece­dent­ed lev­els, emi­gra­tion increased mean­ing that in par­tic­u­lar bright peo­ple leave the coun­try to find oppor­tu­ni­ties else­where and there is no real sign of a great improve­ment for the lives of the major­i­ty of the peo­ple who have been hit so hard by the aus­ter­i­ty mea­sures of the past years. But that was not what most of the media out­lets I read referred to.

They had paint­ed a dif­fer­ent pic­ture of Greece in recent months. As recent­ly as Novem­ber 2014, we could see titles such as “Greece Returns to Growth”[1] from a vari­ety of ana­lysts. That this was small growth on the basis of a strong­ly con­tract­ed econ­o­my was less fre­quent­ly men­tioned. Also, that it did not mean tan­gi­ble improve­ments in liv­ing stan­dards for most cri­sis-affect­ed Greeks often stayed out of the pic­ture. The cri­sis was under con­trol and the worst over in the eyes of many com­men­ta­tors who seem to mis­take sim­ple indices for actu­al mea­sures of real cir­cum­stances.

But now we have a cri­sis again. Why? Greece has an elec­tion. The gov­ern­ment-favoured can­di­date for the pres­i­den­cy did not receive the required num­ber of votes and accord­ing to the Greek con­sti­tu­tion that requires the elec­tion of a new par­lia­ment. To me that does not meet the def­i­n­i­tion of cri­sis, in par­tic­u­lar not a polit­i­cal cri­sis – as many claimed this would be. The rea­son is sim­ple: All that is hap­pen­ing is that a nor­mal con­sti­tu­tion­al process is being run. That would imply that any time in any coun­try where a par­lia­ment did not see through its full term and ear­li­er elec­tions were held, com­plete­ly in con­gru­ence with the rules stip­u­lat­ed by the country’s respec­tive con­sti­tu­tion, we would have a polit­i­cal cri­sis at hand in that coun­try. We’d live in a world of polit­i­cal cri­sis infla­tion in that case.

The prob­lem of course is a dif­fer­ent one. This time polls sug­gest that the left-wing par­ty Syriza may win the elec­tions. They oppose the cur­rent direc­tion of the con­trac­tionary, aus­ter­i­ty based pol­i­cy for Greece. There is noth­ing wrong with dis­cussing the eco­nom­ic and polit­i­cal con­se­quences of what changes to cur­rent deci­sions would imply. But if the Greek peo­ple vot­ed for this direc­tion in a demo­c­ra­t­i­cal­ly legit­i­mate elec­tion, then labelling this a polit­i­cal cri­sis is sim­ply wrong at best and unde­mo­c­ra­t­ic at worst. It would imply that the sov­er­eign will of a peo­ple is only legit­i­mate when it match­es the pref­er­ences of the elect­ed par­lia­ments and gov­ern­ments of oth­er states – and that of opin­ion mak­ers in the mar­kets and media out­lets.

The label cri­sis is pater­nal­is­tic and arro­gant at this point in time. The sit­u­a­tion is not ade­quate­ly reflect­ed by head­lines such as “Greece plunged into cri­sis as fail­ure to elect pres­i­dent sets up snap elec­tion”.[2] Of course, there are pos­si­bil­i­ties of fur­ther crises fol­low­ing any changes. But right now, the exist­ing main cri­sis in Greece is that of a dec­i­mat­ed econ­o­my and mas­sive­ly reduced liv­ing stan­dards for the major­i­ty of peo­ple. What we see in Greece this week sim­ply is not a polit­i­cal cri­sis. It is democ­ra­cy.

What has hap­pened of course is that mar­kets, in par­tic­u­lar bond and stock mar­kets react­ed to this. Their neg­a­tive reac­tion in antic­i­pa­tion of pos­si­ble, cur­rent­ly only hypoth­e­sised elec­tion results, fol­low­ing pol­i­cy deci­sions and sub­se­quent results, is seen as the mark­er of cri­sis. And while in many coun­tries we are made to believe that this is because there is only one pos­si­ble response to the cri­sis (i.e. aus­ter­i­ty poli­cies, the effec­tive­ness of which is high­ly ques­tion­able — but that would go too far to dis­cuss here), and that we ought to be very con­cerned about this polit­i­cal “cri­sis” in Greece, we should be a bit more crit­i­cal. What the actu­al inter­ests by mar­ket actors are might be bet­ter sum­marised by com­ment pieces such as “The stocks to buy if the Greek cri­sis hits U.S. mar­kets” from 5 Jan­u­ary 2015.[3]

If the Greek peo­ple decide to define what they have right now as cri­sis and vote for alter­na­tive poli­cies hop­ing to bet­ter their sit­u­a­tion it is the most nor­mal demo­c­ra­t­ic process imag­in­able. If we want to debate the con­se­quences for cer­tain mar­kets, coun­try bud­gets and the Euro as a cur­ren­cy, that is fine, too. But what is utter­ly inap­pro­pri­ate is to use a par­tic­u­lar pref­er­ence of how things should devel­op in our inter­ests in oth­er places to frame con­sti­tu­tion­al­ly legit­i­mate process­es and sov­er­eign deci­sions of the Greek peo­ple as a polit­i­cal cri­sis thus try­ing to dele­git­imise their deci­sion.

[1] http://www.nasdaq.com/article/greece-returns-to-growth-20141128–00082
[2] http://www.theguardian.com/world/2014/dec/29/greece-crisis-president-snap-election
[3] http://blogs.marketwatch.com/cody/2015/01/05/the-stocks-to-buy-if-the-greek-crisis-hits-u-s-markets/

The author of this arti­cle, Dr Jan Eich­horn, is the research direc­tor of d|part and over­sees the work on the Voic­es on Val­ues project. He also teach­es Social Pol­i­cy at the Uni­ver­si­ty of Edin­burgh.

Dis­claimer

The views and opin­ions expressed in this arti­cle are those of the author.

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