Today’s decision by the Greek government to present a budget for 2015 that is in open defiance of the wishes of its European Union and IMF paymasters is of singular importance. Since it signals that not only the far-left Syriza Party but the whole of the Greek political establishment is now hostile to further fiscal adjustment and structural economic reform. This would seem to put Greece on a clear collision course with Germany that could have serious consequences for the Greek economy next year.
The Greek government’s budget presentation was made in the context of its expectation that general elections might need to be called early next year. Under the Greek constitution, the government needs a 60% parliamentary majority to elect a replacement for the country’s current president, whose term expires in February 2015. In the all too likely event that the government fails to muster the required majority, the Greek parliament would be dissolved and a general election would be called.
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