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Meet the Greek Leader Who Sent Global Markets Reeling
Started:May 8th, 2012 (07:16 PM) by kbit Views / Replies:202 / 0
Last Reply:May 8th, 2012 (07:16 PM) Attachments:0

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Meet the Greek Leader Who Sent Global Markets Reeling

Old May 8th, 2012, 07:16 PM   #1 (permalink)
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Meet the Greek Leader Who Sent Global Markets Reeling

The man behind much of Tuesday’s market selloff is a 37-year-old Greek named Alexi Tsipras, the leader of the Coalition for the Radical Left.

When handed the right to try and form a coalition government in Greece, he told the world that the Greek bailout agreement is “null and void” and should be abandoned.

This sent global markets reeling because he could potentially unleash a series of events that would force Greece to leave the euro zone.

Besides abandoning the bailout, Tsipras said he’d like to nationalize the banks permanently, restore all salaries and pensions to their previous higher levels and bring back collective bargaining rights.

It isn’t the first time Tsipras has said these things. But it’s the first time he’s been even close to a position of power to make it happen.

In an interview with CNBC back in September, he said many of the things he said Tuesday.

At the time, when asked what the solution to Greece’s problem was, he pointed straight at the requirements set out by the so-called troika — the International Monetary Fund [cnbc explains] , the European Union, and the European Central Bank [cnbc explains] .

“The solution," he said, "is to be able to get out of the memorandum (the troika plan) and to be able to get rid of the destructive policy that is being implemented right now...I think the medicine they have given us is worse than the disease itself and I think it’s going to kill us.”

In order to receive more than 200 billion euros in long-term, low-interest loans, the troika has demanded that the Greece reduce its spending. The Greek government has responded by laying off thousands of government workers, cutting the salaries of those who are left, and cutting pensions to retirees. They’ve nullified collective bargaining agreements in an effort to get wages lower so that Greeks will be more competitive in the world economy.

Additionally they’ve raised taxes and fees on everything under the Greek sun. The moves have angered Greeks, and they demonstrated this in last weekend elections by punishing the parties that agreed to the troika’s requirements, and giving many more votes to Tsipra’s Coalition for the Radical Left.

In his CNBC interview, Tsipra said: “I think this will totally destroy the middle class. So I think that what is really needed is a plan which involves growth and I think fiscal consolidation can be achieved through other means. I think the rich should pay and not just the poor and middle class.”

While Tsipras believes in government control of most sectors of the economy including the banks, Tsipras doesn’t call himself a communist, but rather a leftist or a socialist.

That’s because there is another official communist party in Greece that is anti-European. Tsipras is not. Or at least he wasn’t back in September when asked if he would prefer if Greece would leave the Euro.

“No," he said. "On the contrary, I don’t think it would be wise to leave the euro zone because Greece is a member of the euro zone and that is our competitive advantage. We should try to capitalize on it to make use of it.”

On the face of it, the two positions seem impossible to hold at the same time. If he doesn’t stick to the terms of the bailout, the loan money will stop, and Greece won’t have money to pay government salaries, the army, retirees pensions. They’d have to fire hundreds of thousands of people immediately, or they’d have to drop the Euro and print their own money, to pay people in a new currency.

But Tsipras was convinced that the EU shouldn’t be trying to change Greece. Rather, that Greece should be trying to change the European Union.

“What I think that is really important is to have a change in direction in the EU," he said. "I think it would be good, for example, if the European Central Bank could lend directly to member states, just like the Fed lends money directly to the different states in the U.S.” (The Federal Reserve [cnbc explains] does not lend money to states. It has, however, bought US Federal Government debt, as part of its quantitative easing program.)

“Another good idea would be to have euro bonds because in this way we would be able to overcome certain problems. Because now we have the national governments falling prey to speculation and I think what we really need is a strong community budget. But also an investment plan along the lines of the Marshall plan, which would lead to investment opportunities in Greece and this of course would create jobs which are much needed in the country.”

And he said he felt the financial sector should come under the control of the government.

“We have the solution: to have the banks under the state control," he said. "We have the solution: to have the banks under the control of the European Central Bank. We have the solution: to take loans for European Central Bank in the same interest that the commercial banks take for the European Central Bank. We have the solution: to have the euro bond to take loans in the same interest that the Germans and France take.”

Repeatedly in the interview, Tsipras said: “The main question is who will pay for the crisis? The rich or the poor?”

He showed a familiarity with American politics when he spoke about the Buffet rule: “Do you know what (Warren) Buffett said? He said come on, “let me pay.” Why did he say that? He said that because he could understand the danger, the danger for his class if everything is burned.”

Political observers believe Tsipras will be unable to form a coalition government in the next three days (the time allotted by Greek law) because very few of the other parties will go along with him. They believe the most likely outcome is a new round of elections in June.

But for another two days, expect Tsipras to continue his campaigning for his view of how to fix Greece’s ills. One that clearly more and more Greeks are listening to.

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