Could Greece and Russia Crush the European Union?

Athens and Moscow teaming up could spell geopolitical disaster for Europe.

The ushering of Alexis Tsipras into the office of Prime Minister of the Hellenic Republic in late January 2015 represents a major change in Europe’s geopolitics. Tsipras and his left-wing Syriza party rode to power on a wave of acute voter dissatisfaction caused by the country’s severe economic downturn starting in 2009. Many Greeks believe this situation was rooted in austerity and reforms imposed by Brussels’ unelected bureaucrats taking orders from Berlin. There is now a new geopolitics of debt that encompasses relations within the European Union (EU), Europe’s relations with Russia and to a lesser extent, China. For the United States, the new geopolitical terrain only complicates an already complicated Eurasian political arena.

Greece’s new government is an alliance composed of the hard-left Syriza party (149 seats) and the strongly nationalist and populist Independent Greek party (thirteen seats). Syriza itself is a broad coalition of former communists, socialists, Greens and anarchists. It favors a large role of the state in the economy, increased social spending and keeping the euro. Greece’s two bailouts (2010 and 2012), worth €240 billion in loans, are a particular sore point, as they have left Greece with an ultimately unpayable debt burden.

The bailout was engineered under the auspices of the Troika, which is the EU, European Central Bank (ECB) and International Monetary Fund. The massive injection of loans kept Greece from defaulting on its debt and helped Greece remain in the Eurozone. It also helped stabilize acute financial-market turmoil that threatened to spread to Spain, Italy and France.

In return for the financial assistance, Athens agreed to implement structural reforms designed to make its economy more competitive. Greece’s fiscal picture did improve, but the cost has been brutal. The country has undergone an economic contraction by over 20 percent in the 2009-2014 period, unemployment has been in excess of 25 percent and youth unemployment sits above 50 percent, according to Eurostat.

The country’s debt has also climbed to more than €320 billion—around 175 percent of GDP—one of the highest levels in the world. Syriza’s reasoning is straightforward: cut the debt burden down to a more manageable level and get rid of austerity measures; the economy can return to growth.      

The Tsipras government’s intention to end the current bailout program (which ends in February) has raised concerns that another crisis is looming. Without outside help, Greece is set to run out of money in the months ahead, possibly resulting in a default and an exit from the Eurozone. The threat of such an event has economic policy makers and international markets concerned. Even if a temporary deal is put in place, the problematic forecast for economic growth remains a major concern and will dominate the dialogue between Athens and Brussels (and Berlin).

While Greece is a victim of bad decisions on the part of its own past political leaders, there is considerable questioning of the correctness of the Troika’s economic medicine, in particular the austerity measures. Berlin’s well-articulated preference for living within one’s means has not gone over well with people hit by the lack of economic growth in not just Greece, but many other EU countries.

Europe’s economic-growth crisis coincides with Germany’s rise as the clearly dominant power in continental Europe. For his part, Tsipras wants to rewrite European geopolitics, tapping into a growing anti-austerity mood in other European countries, and undercut Berlin’s influence. Indeed, during his election campaign, the Greek leader accused German chancellor Angela Merkel of conducting a “social Holocaust.”

While it can be argued that Tsipras has the right message that Greece’s debt is too high, he is probably not the best messenger. He is a polarizer and enjoys confrontation. Staunchly left wing, he spoke out against Western sanctions on Russia shortly after Moscow’s annexation of Crimea, repeatedly called on Germany to pay billions of euros in war reparations, and in general, has little love for capitalism.

In its first weeks, the Syriza-led government aggressively signaled Greece’s new policy direction. One of Tsipras’ first acts as prime minister was to visit a site where the Nazis executed Greek partisans, followed by a very cordial meeting with the Russian ambassador. He and his finance minister, Yanis Varoufakis, quickly declared that they would no longer work with the Troika, demanded debt reduction, took measures to roll back austerity and froze the privatization program.

Varoufakis took to the air with an early February tour to other European capitals seeking support for debt forgiveness and bridge financing. Although Athens sought to convert its debt problem into a broader European debate on economic policies, Varoufakis came back with little to show. His meeting with German finance minister Wolfgang Schauble on February 8 can only be described as frosty, with the Greek finance minister observing: “We didn’t even agree to disagree.”