Can Greeks Reject Austerity And Still Stay in the Euro Zone?
The prospect of new elections in Greece, and of the country exiting the euro zone, looms larger after Syriza, the Coalition of the Radical Left, refused to join a national unity government for the second time in two days. The sticking point was, once again, austerity: Syriza’s leader, 27-year-old Alexis Tsipras, has made more than clear that his party opposes the terms of the bailout imposed by the “troika, “the European Commission, the International Monetary Fund and the European Central Bank. “Syriza won’t betray the Greek people. We are being asked to agree to the destruction of Greek society,” Tsipras said to state-run NET TV on Sunday.
His remarks were made following a meeting overseen by President Karolos Papoulias and including Tsipras and the leaders of the center-right New Democracy and Socialist Pasok parties. The latter two parties have dominated Greek politics since they were formed following the re-establishment of democracy in 1974. Both had signed the loan agreement with the troika. While they had won an average of 80 percent in previous elections, the two parties won only 32 percent of the vote in the May 6 elections. Syriza came in second, winning 16.8 percent.
According to a Kapa Research poll for the newspaper center-left paper To Vima, Syriza would win 20.5 percent of the vote in new elections, still short of a clear majority. New Democracy would receive only 18.1 percent and Pasok, 12.2 percent.
Can Greece Reject Austerity Measures Yet Still Remain in the Euro Zone?
Syriza has promised to keep Greece in the euro zone while raising wages, putting a stop to public sector layoffs and repudiating the country’s debt. Analysts are skeptical about how this might be possible. Gikas Hardouvelis, a senior economic adviser to Prime Minister Lucas Papademos, says to the New York Times that “there is no getting around the fact that Greece must enforce steep budget reductions in the coming years” and that Greeks need to have explained to them that “you cannot have your cake and eat it, too.”
Austerity is simply a “false choice” for many Greeks, according to the New York Times article. It is a sentiment also noted in an op-ed by Arianna Huffington. What she describes as the “punitive path of austerity and relentless economic contraction” — a sure “dead-end” — will only lead to Greeks choosing to exit the euro zone. Others interviewed by the New York Times echo the same views: Giorgos Liatsos, who owns a cafe in central Athens and who has seen his earnings fall from 600 euros (about $775) a day two years ago to 80 to 100 euros, voted for Syriza and believes that it is possible for Greece to stay in the euro zone and still reject the terms of the bailout. Vasilis Nikolopoulos, a taxi driver whose business has declined by 60 percent, had voted for New Democracy until the most recent election; he believes that it and Pasok have been too quick to kowtow to the troika’s demands.
The possibility of Greece leaving the euro zone has been posed in apocalyptic terms. Back in February, after the terms of the loan agreement were set by European finance ministers, Papademos stated that “the only alternative to today’s agreement is a catastrophic default.” European leaders have repeatedly stated that Greece receiving the $220 billion bailout — and new loans and a huge write-down of its debt — is contingent on its government imposing harsh austerity measures in the form of higher taxes and salary and wage cuts.
Papoulias is meeting with the leaders of several smaller parties to persuade them to join in a two-year coalition with New Democracy and Pasok that would still stick to the loan agreement, but with a possible renegotiation of some of the conditions. Papoulias will focus on talks with the smaller Democratic Left party, says Bloomberg.
Last Friday, Wolfgang Schaeuble, the German finance minister, said that Greece would not receive any more bailout money without carrying out the cuts, which amount to about 5 percent of its gross domestic product. Greece has only about 2 billion euros in cash left, enough for it to function into July or August. As Bloomberg quotes Riccardo Barbieri, chief European economist at Mizuho International Plc: “‘If new elections are called, they will indeed amount to a referendum on staying in the euro.’”
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Photo of Syriza supporters taken May 7, 2012, by Popicinio_01