There’s a new and growing faction in the Tory party. It includes several members of the Cabinet, various senior backbenchers and many of the brightest members of the 2010 intake. They are the Syriza Tories, united in their belief that the best thing for Britain and the government would be for the anti-bailout Syriza party to triumph in the Greek elections on Sunday.
Syriza, a party of the radical left, is hardly a natural bedfellow for the Tory right. But these ministers and MPs have come to the conclusion that the eurozone crisis must be brought to a head, and a Syriza victory would do exactly that. Indeed, the Chancellor appeared to endorse the logic of the Syriza Tories on Tuesday when he suggested that a Greek departure from the single currency might be required for Germany to do more to try to resolve the crisis.
Under such a scenario, Athens would renege on the commitments made by the last Greek government; Germany would respond by forcing the country out of the single currency; and Angela Merkel would either have to propel the eurozone down the path to fiscal union or accept country after country falling out of it.
It is not the official government line to support this denouement. Downing Street still says that a eurozone break-up is not to be wished for; that it poses too many risks for anyone to desire it. Off or on the record, they paint a grim picture of the consequences of the single currency fragmenting.
But a growing number of Tories are convinced that as long as the euro crisis goes on, confidence will not return to the global economy. A resolution would be better than the status quo. One senior figure remarks, ‘the one thing worse for the British economy than a eurozone break-up is this crisis dragging on for another couple of years’.
The ranks of Syriza Tories are growing rapidly because the eurozone shows little sign of resolving its problems. In the past few days, David Cameron has met both Cathy Ashton, the British Commissioner in Brussels, and Jon Cunliffe, Britain’s EU representative. These meetings have left many senior Conservatives despondent about Brussels’ handling of this crisis. There are reports that tensions between José Manuel Barroso, the president of the European Commission, and Herman Van Rompuy, the president of the European Council, have got worse. These two rival presidents are said not to be on speaking terms as the European project tries to deal with its greatest crisis.
The botched Spanish bailout is another example of the eurozone’s leaders failing to get its act together. Uncertainty about where the money was actually coming from and what the terms of the bailout were meant that panic returned within hours of the markets opening on Monday. By the end of the day, the cost of borrowing for Spain was considerably higher than it had been before the bailout. By mid-afternoon on Tuesday, these borrowing costs were greater than at any time since the country entered the single currency. These events have led some of those involved in crafting UK policy to see break-up as inevitable. One source tells me, in despair, that ‘there’s nothing we can do. We just have to prepare for it.’
Government figures feel considerable frustration at how the proposals for a banking union are being mishandled. The British are adamant that this project is related to the single currency, not the single market. This means that any reform should be done at the level of the 17 eurozone countries. Countries that plan to join the euro should opt in.
However, the Commission, which hopes to run the system, wants it to be established at a European Union level with a British opt-out. The Treasury worries that this will lead to the banking union affecting the single market. It was the government’s concern about the integrity of the single market that led Cameron to veto a proposed EU treaty last December.
The Syriza Tories are not just motivated by a desire to see the euro crisis resolved one way or the other. They also believe that a Greek exit from the single currency is necessary to break the growth log-jam inside the coalition. There’s a sense that, in the words of one Tory MP, the government is ‘currently in limbo’. They hope that the shock of a debt-laden country leaving the single currency would offer an opportunity to push through domestic reforms to increase Britain’s competitiveness and raise its long-term growth rate.
This being politics, there is an element of partisan calculation involved. The Syriza Tories think that the euro splitting up would enable Cameron and Osborne to override Liberal Democrat objections to various measures that the Tories believe would boost growth. This view is bolstered by their conviction that, in the aftermath of a euro exit, the normal rules about what is politically possible would be suspended. One senior backbencher calls it ‘a fantastic opportunity’. There would also be an opportunity to create a new political dividing line. One senior Tory says that Cameron could cast himself as the man who ‘favours no more bailouts and taking powers back from the EU’, in contrast to the other party leaders.
Even Cabinet ministers loyal to Cameron are coming round to the idea. Their concern is that, without some external prompt, the Prime Minister will not be able to devise a proper growth strategy and that three more years of the economic failure would doom the Tories at the ballot box.
Perhaps the most important thing about the emergence of Syriza Toryism is how much concern there is on the Tory benches about the government’s current direction. The feeling is that we are living through momentous events and that its response has not matched the gravity of the situation.
Defenders of the government point out that the constraints of coalition have hugely reduced the Prime Minister’s room for manoeuvre: it is hard to get a decent Europe policy past Nick Clegg, or the necessary supply-side reforms past Vince Cable’s business department. But when a country leaves the euro, Cameron will have to show his party that he is in power as well as in office. For it is on his reaction to this moment that hopes for a Conservative majority rest.