Likely victors in Greek election may pull nation out of eurozone

January 23, 2015
Opposition leader and head of radical leftist Syriza party Tsipras waves at supporters during a campaign rally in central Athens

Opposition leader and head of radical leftist Syriza party Alexis Tsipras during a campaign rally in central Athens, January 22, 2015. REUTERS/Yannis Behrakis

Greece’s radical anti-austerity Syriza party, led by Alexis Tsipras, appears poised to win Sunday’s snap parliamentary elections. It now leads in most polls.

The Greek public supports Tsipras even as his rhetoric instills fear among wealthy Greeks that a Syriza victory could wreak financial havoc and pave the way for the nation’s exit from the euro zone.

Syriza leaders insist they will ignore all austerity measures that the European Committee, the European Central Bank and the International Monetary Fund imposed on Greece as the cost of a 240-billion-euro bailout. They also vow to renegotiate the country’s debt – and threaten to leave the euro zone if they cannot do this.

There is precedent for this. If a portion of Germany’s World War Two debt could be forgiven, Syriza leaders argue, Greece’s lenders should be able to forgive some of Athens’ mountain of debt. This would clearly help speed Greece’s economic recovery — an outcome that would benefit the entire European Union.

Greek state workers hold banners and roses as they shout slogans during a rally in Athens

Greek state workers hold banners and roses during a rally in Athens, July 9, 2014. REUTERS/Alkis Konstantinidis

The threat to renegotiate Greece’s debt does not sit well with the European Central Bank, the IMF or the European Commission. Yet a new debt arrangement could lead to a more sensible approach because it would acknowledge that Greece may never be able to fully repay its creditors while also expanding its economy.

Eurozone members, particularly Germany, continue to view austerity as the key to their efforts to force Greece to reform its economy. But Syriza is strongly pushing back. It contends that growth and investment are crucial. If Syriza can negotiate a reduction in Greece’s outstanding debt, more funds could be allocated to encourage consumer spending and investment in the country.

In addition, Syriza pledges to cut property taxes, reduce unemployment, increase wages and stimulate the economy — all of which may help stem the flight of young Greeks to other nations.

To stop Syriza, Antonis Samaras’ conservative party, New Democracy, has mounted an aggressive campaign. It warns that a Syriza victory could result in chaos and bankruptcy for Greece.

Should Syriza win Sunday, the conservatives’ worst-case scenario looks highly unlikely, however. Greece’s gross domestic product is now less than 2 percent of the European Union’s overall GDP. So financial catastrophe is improbable.

Policemen are set ablaze on fire by a petrol bomb thrown by protesters during clashes near the Parliament building in Syntagma (Constitution) square in Athens

Policemen are set ablaze by a petrol bomb thrown by protesters during clashes near the Parliament building in Syntagma (Constitution) square in Athens, October 20, 2011. REUTERS/ Yannis Behrakis

Regardless of who wins, the new government will have to grapple with a deep recession that has lasted for seven years. Thousands of companies have gone bankrupt. Many storefronts are vacant. Greece has endured severe declines in productivity and personal income, and an alarming spike in unemployment. It reached roughly 28 percent by March 2013.

An estimated 20,000 Greeks are now homeless — a relatively new problem for Greece. More than a half million people now rely on soup kitchens for food. Nearly one in 10 Greeks lacks unemployment benefits or health insurance.

Unemployment is highest among young people — roughly 65 percent cannot find work. Many are seeking to emigrate. Which is ironic, because one reason Greece’s population is growing is because of a wave of immigrants, from eastern Europe as well as Asia and Africa .

The new government would have to develop growth strategies to counteract this rampant unemployment and youth migration.

Tzipras could be the kind of leader who will fight to regain Greece’s sovereignty. He needs to understand that Greece’s socio-economic and political structures are far different from Western Europe’s.

Consider, one reason Syriza has widespread support is that it pledges to reduce property taxes — a foreign concept to Greeks, who only pay income taxes. Many assert that a property tax would be as if they were paying rent to the government for homes they own.

The new leader will also have to tackle the serious problem of tax evaders. Past efforts to collect taxes from the wealthy have been unsuccessful — often because government officials proved weak or complicit. But Syriza is pledging to pursue tax cheats aggressively, as well as to root out corrupt politicians who abet them.

For too long, Greece has been a second-class member of the European Union. Many of its economic woes are self-inflicted. But some flow from Athens’ status as a creditor and a perceived scoff-law. It’s time for smart leadership inside and outside of Greece.

Perhaps we will begin to see such leadership after Sunday’s election.

20 comments

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If Greece does not follow the agreements signed with EU then they should be thrown out. Borders should be put up and no credit given. EU need to send a very clear signal. Greece is in this situation because they cheated and lied. They borrowed and used far more that they could according to the contracts signed and lied about it. EU has written off very much Greek debt. The help little Greece achieved is more than 10 times more than what has been offered (but not yert given) to Ukraine. And Ukraine is not guilty of the situation they are handling – Greece is !
Many greetings Jacob Schønberg

Posted by jacobsch | Report as abusive

The Greeks will NEVER pull out of the Eurozone which is the goose that lays their golden eggs.

Posted by pbgd | Report as abusive

Several things need to be corrected with respect to this article:
(1) Greece has not been in a deep “recession” for the last 7 years, it has been in a deep “depression”. With rampant bankruptcies and unemployment well in excess of 50% in some groups that is NOT a recession, just like the 2008 crash in this country was NOT a recession, but a second depression.
(2) The term austerity is also being misused. Sensibly prioritizing and budgeting government spending is NOT austerity it is simply a common sense policy that has been absent in Greece and most of Europe for a very long time. It’s partly why these countries are in the mess that they’re in.
(3) Stop perpetuating the fantasy that Greece will ever payoff their sovereign debt, that is practically and mathematically impossible. If given the choice, no government or individual wants to be a debt slave for very long.
(4) At this point in time, Syriza’s threat to stop servicing the country’s debt is posturing. There will be a renegotiation since the European banks holding all this garbage debt have no choice but to accept some payment. The problem with this eventuality is how it will affect Italy, Spain, Portugal, etc. ALL the rest of the Euro basket cases will also demand debt renegotiation.
(5) The fact that Greece is only 2 percent of the Eurozone’s GDP completely misses the point. As discussed above, Greece will set the tone for all of the junk Euro debt no matter how much the idiots at the ECB buy. Remember it only takes one domino (certainly less than 2% of those on the table) to begin the chain reaction that causes all the dominoes to fall down!

Posted by Riobrava | Report as abusive

Tsipras is misleading the Greeks, that debt can be forgiven. They can refuse to pay and rank as bankrupt but will not be able to borrow. More responsible politicians will lose out as mob law takes hold.

Posted by ThomasOne | Report as abusive

Austerity clearly has not worked but instead has inflicted extreme hardship on the Greeks who may have no choice but to either renegotiate for better loan terms or leave the Euro. In any case, Greece would greatly benefit through reforms to eliminate corruption, cronyism, and tax evasion. Without these reforms, the country will always be a basket case.

Posted by Greenspan2 | Report as abusive

“But Syriza is strongly pushing back. It contends that growth and investment are crucial”. Acting like morons that don’t understand basic 101, the buck stops with the Greeks not with other nations. There is no free lunch and we all need to pay as we go and not thieve with fake promises to repay.

Posted by ThomasOne | Report as abusive

All political parties in the Western world and usually all over the world are totally controlled by powerful entities and they are the paymasters so I doubt very much that after a short “Honeymoon” the leftest party in Greece will fall into line and will not be coming out of the Euro zone and the situation in Greece will get far worse and so will the rest of the countries that have joined this CABLE as it is nothing more than a PONZI scheme and there is no other word for it, a fraud if you will.

Posted by mirab | Report as abusive

One must at some point ask the obvious question. Why should the lenders and debt buyers not lose their investment for being greedy enough to lend to Greece? Moral hazard, or as I prefer to call it, Darwinism.

Posted by AZWarrior | Report as abusive

However important for the creditors is not to write off assets, it is equally important not to create the sense that being in an economic union leaves people worse off than if they were out of it.

Because if this happens, either misery and grievances and misery accumulate and erode the whole union, or desperate people fall pray in the hands of populists, extreme left or right, who won’t make things better either for the debtors or the creditors.

Neither solution helps in the long run, as the Treaty of Versailles, Argentinian default etc, etc have shown.

Hence, it makes sense that both debtors and creditors take a step back and come up with a win-win outcome rather than a lose-lose failure.

It’s to everyone’s interest that the EU flourishes and not punish the new generation for mistakes that their grandparents made. Either at political or financial level.

Posted by Cals | Report as abusive

greece is a failed state although important historically. top priority should be to protect the cultural heritage. it has been disintegrating bit by bit and now faces rapid destruction as chaos looms. there is little option now other than a broad scale military operation. this could reposition important sites like the acropolis in protected setting where many can visit. this and hard assets would help repay creditors. corruption stamped under hobnail, and every greek put to working like trojans under spartan conditions

Posted by ic555 | Report as abusive

Congratulations from Macedonia!!!

Posted by Macedonian | Report as abusive

All trade unions without union of business laws and courts (bankruptcy and fraud in particular) are temporary.

There will losers in trade and there has to be rules in place to deal with it other than the winner take all. There will be politicians who commit fraud or otherwise attempt to circumvent the rules who must be arrested while they are in office to avoid punishing whole nations.

Posted by SamuelReich | Report as abusive

Southern Europe naps a lot. Northern Europe is more rigorous.

Ever since the first barbarians from the north wandered into Rome and found all the nappers, and sacked the place…. the course of history in Europe was sealed. North does the work, North gets the wealth.

Posted by AlkalineState | Report as abusive

The Greek government is in a total crapshoot with Germany, Sweden and Finland. The French and the Italian have already called quits in trying to get some of their money back from this on-coming default by Greece. It is very likely that Germany won’t waver very much in their efforts to bring Greece to the standards of the EU. The problem with Greece being in the same league as the rest of the EU has been an on-going problem since the inception of the EU. Now, neither side wants to give-in to the other side, nor it may force the Greek government and country to run an economy without the EU. This is a crapshoot. If the German’s and other countries are not willing to forgive 80% of the Greek loan dept, then Greece will be forced out of the EU, and loan money will be cut for Greece at the lower interest rate. Let’s make one thing clear, and that is Greece can’t afford the lower interest rate, and getting money to run their government and jump start their economy will be very problematic at the 10% interest rate, or higher. The provisions in the loan from countries in the EU called for state run utilities, ports, and airports to be privatized, and now the Greeks have stopped any further privatization, and most likely will default on their loans. The good news is that someone will loan them money, but at a high interest rate, and the bad news is that Greece will have to ship their goods and services to distant locations to repay these loans. Greece has lost a major portion of it ability to sell their products to close European countries. The danger is that Greece is basically socialistic, and border’s on communism, and they could find that Russia would become a willing partner for their goods, and Russian military bases in Greek territory. This would solve some of the short-term problems, but the Russian bases on their territory would remove them from NATO, and alienate every country left in the EU. Once again it seems like the Greeks don’t really have a plan for dumping austerity, and every move that they make has the element of the dice hitting their number, or…

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