Despite rising political risk in Greece and increasing economic uncertainty in Europe, China’s EU strategy will thrive in and benefit the Old Continent.
On Christmas Eve, Li Keqiang had a phone conference with Greek Prime Minister Antonis Samaras, who told the Chinese premier that the Hellenic Parliament had voted through the agreement on the Piraeus Port project of the Chinese global shipping carrier COSCO.
Barely a week after the phone conference, Athens was swept by a political crisis which led to a snap-election in late January.
That, in turn, will have critical repercussions to Greece, Brussels – and China’s plans to use Greece as a gateway to Europe.
From Greek turmoil to EU uncertainty
Before the New Year, the Hellenic parliament rejected the nominee of Prime Minister Antonis Samaras for president. In accordance with the Greek constitution, that necessitated a general election on January 25.
Greek progress remains reliant on an external lifeline. Greece did not return to markets on its own, but after two huge bailouts of €73 billion ($88 billion) and €164 billion ($199 billion), respectively. Behind-the-façade talks had already begun over a third bailout amounting to some €20 billion-€30 billion ($24 billion – $34 billion).
Today, the Greek economy is moving toward a very fragile recovery, but its civil society has been devastated. As I predicted some four years ago, the austerity policies would cause a 25-30 percent collapse of Greek living standards. Between 2008 and 2015, Greek GDP per capita, adjusted to inflation, tanked from $30,820 to $21,570 – that is, 30 percent.
After half a decade of austerity policies, the conservatives have lost their lure and the Pasok socialists have shrunk, whereas the support of Radical Left Syriza support has exploded. Led by the young and shrewd Alexis Tsipras, Syriza has played down its radical left roots, while becoming more populist.
To win the election, Syriza seeks to expand its constituency by policy measures (e.g., a raise of tax-free threshold, an increase in the minimum wage, free electricity and food stamps for poor families, an added check for poor fixed-income pensioners). Most importantly, it seeks to organize an international conference for debt relief, vis-à-vis “official sector involvement” (OSI).
Even after bailouts that amount to some €250 billion, Greece’s financial needs in 2015 are estimated at almost €20 billion (including interest payments, IMF funds repayments, ECB’s maturing bonds, and arrears).
China’s EU strategy
The course of Athens matters in Beijing. In mid-December, Premier Li Keqiang addressed a summit in Belgrade with 16 leaders of Central and Eastern European (CEE) countries. To facilitate cooperation, China launched a new €2.4 billion investment fund targeting CEE economies.
In Belgrade, a consensus was created to create a Land-Sea Express Passage linking China and Europe; on the basis of the Hungary-Serbia railway and the Piraeus Port.
China’s CEE cooperation took off in 2012, when Beijing announced a $10 billion credit line for the region. These projects were aligned with Beijing efforts to expand Chinese presence in the main Greek port Piraeus, where the Chinese shipping giant COSCO won a 35-year concession in 2009 to upgrade and run two container cargo piers, as a gateway to the Balkans and into CEE economies.
Beijing’s talks with Athens began when the PASOK socialists were still in power. Bilateral cooperation moved to a new level with the New Democracy conservatives. If Syriza takes over, Tsipras, who has his sympathies for the Chinese way, is likely to continue cooperation with Beijing.
Overall, China’s EU strategy is a part of Beijing’s grand strategy, which stresses the role of regional integration and connectedness in an increasingly multipolar world economy.
In Europe, Chinese foreign investment and portfolio allocations mean capital and jobs – both of which the Old Continent desperately needs to overcome its structural challenges.