The finance ministers of the European Monetary Union are locked in complex negotiations over how to keep Greece under the umbrella of the Euro while satisfying both the Greek public’s demand for less austerity and the country’s creditors’ demands that Athens stick to its promises of government reform. But the talks are complicated by the fact that anti-austerity movements are gaining ground in other European countries, including Spain and Italy, which are also subject to onerous conditions tied to bailout loans.
The countries of southern Europe were hit especially hard by the financial crisis and the Great Recession, and accepted massive financial aid packages in exchange for promises of wholesale reforms to their economies and governments. While the aid packages kept them from complete financial disaster, they did not produce the promised economic growth, and now citizens of the affected countries are calling for relief from years of reduced spending on public services and benefits.
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It looks increasingly likely that Greece is only the first example of outright rebellion against the loan terms imposed by the European Central Bank, the International Monetary Fund, and the finance ministries of the various creditor nations.
In Spain, the far-left Podemos party is now polling well ahead of any other political group, including the current ruling People’s Party, and could well take power when elections are held in November. Podemos’ leaders, including Secretary General Pablo Iglesias, have railed against the austerity requirements imposed as part of their bailout package, and have praised the Greek rebellion against onerous spending cuts.
In his public appearances, Iglesias frequently refers to the “tick, tock” that the current government should be listening to as the country counts down toward the next election. He has left no doubt that among the first steps a Podemos government would take would be to demand an easing of the terms of Spain’s bailout agreements.
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Italy, while not quite as adamant as Spain, has a powerful movement with a significant presence in its parliament that is already calling for a return to the lire, which would allow the Italian government to issue debt in a currency it controls, and on terms it has more leverage to negotiate.
There can be no doubt that the outcome of the debate over Greece’s debt will be watched closely by Europe’s other debtor nations. If concluded in a way that Syriza and its backers find favorable, it could serve as a template for restructuring the debt of Spain, Italy, and perhaps other indebted nations including Portugal. If the Greek government can’t secure a deal that its base supports, the next step could be an exit from the Euro, and Athens might just be the first of several.
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