Is Greece heading for a euro exit? Photo credit: Stephanie Jones http://flic.kr/p/awo1jA
The Background
Greece remains in political deadlock after negotiations failed to produce a coalition government. Parliamentary elections saw a significant drop in support for mainstream parties New Democracy and Pasok as voters expressed their fury at the stringent austerity measures that are a condition of Greece’s EU bailout deal. Anti-austerity far left coalition Syriza surged to second place.
The deadline for forming a new government is 17 May; if talks founder, this will trigger fresh elections. And commentators predict the result would be greater support for anti-austerity parties – making the prospect of a Greek exit from the euro ever more likely. The Financial Times reported that European central bankers have started talking publically about the consequences of Greece leaving the single currency.
According to The Guardian, 78.1% of Greeks want any new government to retain the euro at all costs, despite the prevailing anti-austerity mood.
Is this the end of austerity? Read more at The Periscope Post.
Bailout plan was always doomed to failure
“The complete fragmentation of Parliament and the power vacuum that has followed this process should hardly come as a surprise,” wrote Nikos Xydakis at Ekathimerini. The punitive conditions attached to the EU bailout deal meant the rescue plan was “so one-sided and so tightly organized in terms of scheduling that no country would have been able to implement it without exhausting its people”.
The election result does not show that Greek voters are anti-eurozone, wrote Prince Pavlos of Greece at The Periscope Post: “They have decided to be anti-establishment and punish the traditional two parties and now just don’t know where to look for guidance and security.”
Greece political crisis part of wider austerity antipathy
“Greece’s problems are merely an intense manifestation of an allergy to austerity which is breaking out everywhere,” said a Guardian editorial. A Greek euro exit would cause chaos in the country; “but when the pensions of older Greeks have already been cut by a quarter, and when half their young compatriots are unemployed, it is getting tricky to argue that things would necessarily be worse.”
Default would be dangerous but not necessarily disaster
“I would risk leaving the euro if I were Greek,” wrote Bill Emmott in The Times (£). “Greece’s economic predicament is so bad that it is hard, probably impossible, to see how it can continue on its current course.” Leaving the euro and defaulting on sovereign debts would certainly be “dangerous” for Greece, but at least it would allow the possibility of international investors returning to the country, Emmott argued.
Greek exit could have ‘horrible’ consequences for Eurozone
“For Europe’s banking system, once the Rubicon has been crossed of a country leaving the euro, once it is demonstrated that there is an exit, all sorts of horrible things follow,” wrote Robert Peston at the BBC. One possible consequence is that companies would swiftly withdraw money from banks in countries perceived to be at risk of following Greece’s exit example. “The most likely outcome is that the banking system of the eurozone would become significantly more nationalised, kept alive on the drip of exceptional central bank credit. This is neither healthy or sustainable,” Peston said.
