Last week’s shock formation of a left-right coalition, led by Greek radical party Syriza, has led many commentators in the UK to consider what it might mean for the upcoming UK general election.
In the highly unlikely event that the fallout of the result were to reach its full potential – that is, achieving an overturning of austerity measures – then it could have an impact on the three broad bases of election influences in the UK; social policy, economic policy, and the general politics of…politics.
Social reform has been high on the UK agenda since 2010, and conversations around the reform of social policy have generally been conducted through references to the NHS, the ‘bedroom tax’, benefits and labour market policies. These topics have contributed to the social framework of the UK coming under closer scrutiny, with this in mind, the NHS and the cost of living will be the main battle ground in the run up to the elections.
However, these conversations are guided by what is considered to be an acceptable state subsidy in the ‘age of austerity.’
Chancellor George Osborne’s emergency budget of June 2010 was unprecedented; its repercussions are still being felt, and still stoke political tensions. This is in some ways comparable to Greece, whose bailout, largely provided by Germany, left the country arguably under the management of a fiscally cautious Treasury. We’ve seen how public tolerance of austerity measures can wane, if concerns are not addressed properly, and the Greeks have shown their distaste for it at the polls.
This could bode well for Ed Miliband MP, who has staked his leadership of the Labour party on what he calls ‘the cost of living crisis.’ His line is that Conservative policies have led to a sharp reduction in real incomes (hotly contested by the Conservatives who frequently point to their steps to remove low pay earners from the income tax threshold) and that a Labour government can minimise the sting of austerity by ensuring large consumer-facing businesses, such as energy companies, increase their contributions to society. The rising stock of left-wing celebrity ‘campaigners’ such as Russell Brand will embolden this view.
Ultimately, the ability of any party to take meaningful action to reduce austerity levels will be guided by the UK’s relative economic success. Recent positive growth and job figures will allow the Conservatives to argue that their chosen course is the correct one and that the public need not look to Greece as an example of a left wing alternative. The Prime Minister may even point to the FTSE’s reaction to the Greek election results as an indicator of a lack of business trust in left wing policies.
What happens across the wider European market, however, is out of the control of Cameron, Clegg and Miliband. Syriza has been elected to renegotiate its debt repayments to the EU, which were largely underwritten by Germany. Both Greece and Germany are committed to the EU. But Germany has been quick to react that fresh debt cancellation is not an option, and Syriza is unlikely to argue it has fulfilled its mandate unless substantial concessions are secured, therefore a Grexit remains a possibility – even if only accidentally. In such a case, all eyes will be on a) how the Greek economy manages in the aftermath of an exit and b) how the post-Greece EU manages. Were an exit deemed to be successful, several countries across the Eurozone would take great interest. The UK would be one.
The Conservative party is generally united at the moment but it does not take much to spark its Eurosceptic element into action. They can be quick to demand action from the Prime Minister on any issue they feel necessary, with immigration and the balance of payments to the EU being prime examples. Along with Labour, they are also equally keen to address the challenges posed by UKIP. Growing popular support for reform of the UK’s EU membership would not go unnoticed among the leadership of the UK’s parties, especially with the potential of a referendum lurking in the background.
If the coming weeks are poorly handled by both Greece and the EU, there is every chance an impact could be felt at UK’s polling stations – particularly on levels of anti-austerity sentiment, euro scepticism and economic confidence among voters.
While businesses will mainly go unharmed with the FTSE 100 finishing in positive after weeks of nervous anticipation, the Greek election could certainly have a significant impact on the general election, dependent on how it is managed both at EU level and UK level – but this makes it no easier to predict who will be in 10 Downing Street after 7 May.