The Telegraph: However Greece votes, there is no way out of austerity

It’s funny, Twitter: everyone is suddenly an expert on Greek politics. All of these political and economic correspondents, whom I am more used to seeing talking about George Osborne, David Cameron and our budget deficit, are suddenly tweeting about “people close to Syriza” and their sources in Greece. I’m impressed.
Anyway, it seems from the mass of information emerging that Syriza, the hard-line left-wing group, has won almost many votes as the conservative New Democracy Party, and the original socialist party, PASOK, is refusing to join any government without Syriza in it. Which seems to mean that there is unlikely to be a working government any time soon.
But whomever is in power, the key fact for Greece is that it is running a current account deficit of between 7-8 per cent of GDP, and a fiscal deficit of around 7-8 per cent of GDP. Or in other words, Greece – the entire nation – is borrowing around 8 per cent of its national income from abroad every year. All in bail-out funds.
The reason for that is because between 2002 and 2010, the euro masked a fundamental loss of competitiveness; cheap money flooded in from German savings, funding a profligate and corrupt government’s deficit, and pushing up wages and prices. Over the period, Greek wages increased by 30 per cent, while German ones fell by 8 per cent. In the single currency, that was unsustainable, and when it stopped, it stopped very suddenly indeed.
That competitiveness gap now has to be undone, either painfully, through austerity and default, within the euro, or equally painfully, through external default through devaluation and euro exit. Both are nightmare scenarios, but they are both unavoidable, except through perpetual transfers from the north of Europe to the south. Only if Germany increases its own wages can the necessary reduction in Greek ones be made less severe.
Presumably, whichever parties form a government now, they will push for concessions on austerity in exchange for not leaving the euro and defaulting completely. And presumably, recognising the costs of contagion, the troika of the EC, the ECB and the IMF, as well as Germany, which backs all of those institutions, will grant some token concessions. The July instalment of the bailout fund will be paid, and the “crisis” will continue.
And then in sixth months time, we’ll confront this all again, because the real problem – that Europe has no growth to pay for these ever-expanding debts – is still no closer to being solved.