9 Dec 2014

The Greek endgame begins

The Greek crisis, grinding away at the periphery of Europe, has thrust itself back into the limelight. After EU finance ministers agreed to extend its current bailout for two months, on Monday, the Greek government called a snap presidential election.


This is a vote in parliament, not at the ballot box – but if there is no president elected the government has to call a general election. And if that happens the opinion polls are saying Syriza, the far left party, will win.

Syriza has been in the City of London and other financial centres outlining its plans: it will demand a 50 per cent write off of the outstanding debt and that the ECB buy all Greek debt for the next 60 years at zero interest rates.

An executive from Capital Group, a major investment firm, produced this leaked summary of one investor briefing with Syriza in which he described their plan as “worse than communism.”


However, other City analysts realise Syriza will have a strong hand in such negotiations. One investment briefing I’ve seen says there is a chance Angela Merkel will agree to a comprehensive Greek bailout, signalling the first steps to a fiscal union.

But the danger is that in Spain, where Syriza’s ally Podemos also tops the polls, momentum builds there for a general write off of peripheral European debt. Given that even the Financial Times thinks this is the best way out for Europe we might then be at a tipping point.

Read more: is Europe’s economic house of cards about to collapse?

There’s a lot of ifs in this scenario: the presidential election has to fail, Syriza has to win, its leader Alexis Tsipras has to stick to his hard line. But none of it is impossible – which is why the Greek stock market fell 9 per cent on Monday night’s news.

And the social background is stark. 25 per cent unemployment, with riots on the streets as a convicted anarchist armed robber, Nikos Romanos, is on the 30th day of a hunger strike for the right to study while in prison.

Read more: chill wind blows across the world’s economic landscape

Amid hugely symbolic anniversaries – of the British Army’s battle with the communist resistance in December 1944 and the mass uprising of December 2008 – there is acute political tension.

Greece was the country that triggered the Eurocrisis. Strangely, amid the possibility of the first Marxist prime minister in the eurozone, we can begin to see how it might trigger closure.

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