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6 July 2015

David Cameron and Alexis Tsipras forget the same thing: Germany has an electorate, too

Far from making David Cameron's prospects for a deal better, events in Greece show how poor the prospects for renegotiation are.

By Stephen Bush

A charismatic and controversial politician is elected with 36 per cent of the vote promising European reform. Our country can’t take anymore of this, he says. It’s time for change, he says. 

Unfortunately, the other constituent nations of the European Union don’t quite see it that way. They have their own problems: the German tabloids are all against a deal. The social democratic parties of the North are worried about political contagion and emboldening their own populist rivals. And Eastern Europe simply doesn’t want to play ball. 

For Alexis Tspiras on Greek debt in 2015, read David Cameron on immigration in 2016?

Well, the comparison is potentially a little unfair: to Tspiras. No economist seriously disputes that Greece is not going to be able to pay back all of its debts –  no economist really believes that access to tax credits are the real reason why immigrants from Eastern Europe choose to come to Britain. It’s the prospect of work, rather than in-work benefits, that makes Britain’s labour market attractive. 

But broadly, the big miscalculation is there: forgetting that given a choice between short-term appeasement of their own electorates and long-term thinking, most politicians will choose the former. The one point in the last German election when Angela Merkel looked vulnerable was over the issue of further Greek bailouts. None of the beleagured social democratic parties – those few that remain in office, that is – want to provide any further signs that voting for a populist party to their left is a better bet. 

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Even given the risk of crisis spreading throughout the Eurozone, the incentive for politicians in fiscally-hawkish Eastern Europe and Germany is still to hold out against a deal, although economic reality may force some form of climbdown. Britain’s Prime Minister, however, lacks a carrot or a stick: he has nothing to offer the leaders of Latvia, Poland, the Czech Republic, Slovakia and the rest of “new Europe” in exchange for taking away tax credits from their own voters. (Taking away tax credits, Cameron may learn in short order, is not very popular with voters.) 

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So, far from making “Europe” more willing to do a deal, the Greek crisis shows just how difficult Cameron’s prospects are. He won’t even have the IMF’s research department on his side.