Greece & the Euro: Drachmageddon Can Wait (Video)
The center-right New Democracy party won Sunday’s election in Greece and its leader, Antonis Samaras, is now trying to form a coalition government with its traditional political rival, the Socialist Pasok party led by Evangelos Venizelos. Both parties have indicated their wish to keep Greece in the euro zone while seeking to renegotiate the terms of the billion-euro bailout that has kept Greece afloat since 2010. Bloomberg reports that deposit withdrawals in Greece have slowed following the election.
President Barack Obama and European leaders have all breathed a size of relief at Greece yet again avoiding a “Drachmageddon,” a “Grexit” from the euro zone and a return to the drachma that, as has repeatedly been noted, would portend economic gloom and doom for Greece, Europe, the US, the global economy.
But already Monday morning, some analysts declared New Democracy’s win a pyrrhic victory:
“The election has solved little and in our view is actually just another iteration towards the risks of a euro exit,” said Harvinder Sian, senior rates strategist at RBS in London. ‘The adjustment path is likely to remain too much for Greece to bear.”
The reason for all the uncertainty is that the radical left party Syriza won a significant share of votes on Sunday. New Democracy won 29.7 percent of the votes but Syriza, 26.9 percent — an all the more notable figure as Syriza only had 4.6 percent of the vote in 2009. Syriza had surprised everybody (certainly EU leaders) by winning 17 percent in the May election.
In addition, exit polls show that those 34 and under voted by a wide margin for Syriza, while those over 55 voted for New Democracy. Disturbingly, the right-wing extremist Golden Dawn (Χρυση Αυγη / Chrysi Avgi) party came in third among young voters and won 6.9 percent of the vote, a sign of the deep discontent the younger generation in Greece feels about the current state of things which was not of their creation, as economist Paul Krugman underscores.
Sryiza will hold 71 seats in Greece’s Parliament, the Vouli; New Democracy will have 129 and Pasok, 33 (and the Golden Dawn, 18; three other parties including the Communists, KKE, also gained some seats). New Democracy and Pasok have been the two main parties in Greece for 40 years and, with Syriza having gained so many votes, that balance has been shaken up.
Having New Democracy in power means more of the status quo in Greece. As Kostas Kallergis writes on his blog When the Crisis Hits the Fan, New Democracy (like Pasok) engages in “Greek old-school political practices, and … nothing will change with the traditional parties in power no matter how much they express their regret for their old sins.” Kallergis posts this clip from an official pre-election advertisement New Democracy ran to suggest how awful life would be if Syriza won:
The video has been characterized as immoral for its use of children. Paradoxically, the classroom of the imaginary post-elections, SYRIZA-ruled, drachmaggedonized Greece looks much nicer than most of the classrooms in Greek schools today. The kids look healthy, no one is fainting because of malnutrition and, oh yes, they even have books! One might even think that we will be better off if we go back to the drachma.
It could still happen. But for now, Drachmageddon will have to wait.
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Photo of Antonis Samaras taken June 15, 2012, by Νέα Δημοκρατία