16 Jun 2012

Greece: what could possibly go wrong?

Greeks, fed up with five years of a bitter recession and almost 23 per cent unemployment, weigh the consequences of voting with their hearts or minds on the eve of a crucial election.

“My heart says I should vote for the left, for all the horrible things these politicians have done to us, but my mind says vote for the right, so that Greece does not leave the euro,” part-time teacher Kostas Manitsas, 28, said.

Greece’s liberal left daily newspaper Ta Nea advised readers to base their vote on hope, not anger: “It must be based on the Greece of the euro, not the Greece of the drachma.”

With a ban on polling results two weeks before the election, the last figures put the radical leftist Syriza party neck-and-neck with the conservative New Democracy party.

“Public opinion polls, as well as the May 6 vote, show that those who want the euro overwhelmingly outnumber those who reject it or are willing to sacrifice it for their own party-political purposes,” the centre-left daily Ethnos wrote.

What’s at stake?

A victory by anti-IMF, anti-austerity left wing politicians would likely lead to Greece exiting the euro and European Union, magnifying problems in cash-starved Portugal, Cyprus, Italy and importantly Spain, Europe’s fourth largest economy. Capital flight would accelerate. The future of the euro would be in doubt.

A victory by the right-wing, pro-EU and IMF candidates would mean more belt-tightening, tax hikes, job losses and pay cuts in a country where one in five people are already unemployed. Greeks have been pummelled by a bitter recession since 2007 and see a return to the drachma as inevitable. Why drag out the pain for several more years?

Right wing New Democracy leader Antonis Samaras, 61, told supporters on Friday night that rejecting the 130bn euro IMF-EU bailout deal would result in greater economic calamity.

“We are going into an election to decide the future of Greece and of our children,” he told voters.


While G20 leaders will head to Mexico on Sunday night for a summit, all eyes will be on Athens and the results of the second election in six weeks. The world – not just Europe – fears the economic fallout if anti-IMF, anti-austerity politicians gain enough votes to form a government.

A Greek exit, or ‘Grexit’ has put central banks on standby to boost liquidity to counter any negative market reaction on Monday if opponents of the multinational bailout form a coalition or there is no clear winner and no government at all.

Eurogroup head Jean-Claude Juncker warned Greeks in a newspaper interview on Saturday not to turn their backs on the euro, saying a win by anti-bailout politicians would have “unforeseeable” consequences.

A third election?

“If the radical left wins – which cannot be ruled out – the consequences for the currency union are unforeseeable,” Mr Juncker, head of the group of eurozone finance ministers, told Austrian paper Kurier.

“We will have to speak to any government. I can only warn everyone against leaving the currency union. The internal cohesion of the euro zone would be in danger.”

No matter who wins, Mr Juncker said, European leaders will have to quickly address Greece’s reform programme with the country’s new leadership. “A third election would not be a solution,” he said.