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


Huber F.
Huber F5 years ago

Giving up on austerity now would mean drinking wine after supper.


Robert Miles
Robert Miles5 years ago

There's another way to finance governments - just keep printing money with more and more zeroes at the end of the amounts.

Zimbabwe did it recently.

Germany did it in the 1920's, which may have helped bring Hitler to power.

The result is hyperinflation - roughly equivalent to a heavy tax on all money owned.

Isthis something you want?

Toby Seiler
Past Member 5 years ago

Yes Luvenia your right. The status quo is so firmly entrenched that any real change seems remote. But who in their right mind thinks this FED debt machine (money made by issuing debt) is working for people?

We need a monetary system that works for citizens, not only the 1% (and top 25% who cater to them). Ron Paul was for such a least he was not assinated...just made politically minimal.

Nothing at all has been done to change from debt based money...nothing. Stopping it stops growth of the money supply, which then starves business, consumers and stops entrepreneurs.

Making a US Treasury Dollar is, in my opinion, the only sane alternative to anarchy that a real financial collapse will bring. It's well beyond Greece and Spain...the entire Euro is a debt based money, just like the FED Note.

Funding government with borrowed money is insanity.

Jen Carrago
Jen Carragp5 years ago

> DAVID F: what is wrong with this? I'm sure you are a republican and hate Obama's presidency

Nadine Hudak
Nadine H5 years ago


Martin L.
Martin L5 years ago

Its what the Greek people want that is important, so it was interesting to watch a television program yesterday “The Great Euro Crisis” hosted by Michael Portillo (a British journalist, broadcaster and former Conservative Party politician and Cabinet Minister and Euro skeptic) in Greece, talking with and interviewing Greek people. What he discovered was, they all wanted to remain within the Euro Zone rather than going back to using the Drachma; which to say the least, rather surprised him and made him wonder if what was more important to the Greek people was individual prosperity with the help of a stronger Euro that had allowed them to buy into a lifestyle of relative luxury; over a competitive Greece, using the Drachma, which might help Greece and its People to grow their way out of their current economic depression.
It appears from the television program, which I felt was balanced and well presented, that the Greek’s associate a return to the Drachma is bad for their economic prosperity than staying within the Euro Zone and facing years of crippling austerity cuts and mounting dept. Who knows what will happen in Greece before the Greek People are forced to realise they need a currency that is competitive for growth rather than riding on the back of a currency that has doomed Them and their economy.

Risto S.
Risto Siljanoski5 years ago

European Union would be much better without Greece! Greece should drop Euro and have their Drachma back!

Ray C.
.5 years ago

The Euro, that is the death of the EU, in my opinion and Germany and France should bail out the Countries in the euro-zone as they wanted the euro-zone in the first place

As soon as we have Referendum on leaving the EU in the UK the better, it was a foolish error to join in the first place in 1973, it's been nothing but taking power from Parliament, indeed it's that bad even the European Laws now over ride the English Laws.

What ever the EU say goes, irrespective of a Countries own laws and the best about all what comes out of the EU is no more than poppycock

David Fletch
David Fletch5 years ago

Continued: Employers cannot dismiss female employees during pregnancy and until the child is one year old, except in certain circumstances
• After childbirth, in addition to the maternity and paternity rights above, male and female employees can take parental leave for up to six months each (with an overall limit of ten months together), until the child is eight years old. Single parents are entitled to ten months' leave. Employees receive an allowance amounting to 30% of their salary during parental leave, for an overall maximum of six months, until the child is three years old.
• Both employers and employees must pay social security contributions. Contributions are paid on a monthly basis and the rate depends on the type of business that the company carries out and the employees' position within the company (that is, whether they are blue-collar employees, white-collar employees, managers or executives).
• Social security contributions are payable on employees' gross annual earnings. The basic rate for employers' contributions is currently 23.81%, while the current rate for employees is 8.89%,
The governments quest to help and assist the workers by compelling onerous requirements and expense against the employer has had the unintended consequences of sending the country into poverty. The country cannot compete on a world market. Harming those it intended to help. I feel sorry for a woman looking for a job over there.

David Fletch
David Fletch5 years ago

The employee benefits that employees are required to pay prevent the countries like Italy and Greece from competing on the world market to produce anything. They are mostly relinquished to tourism. Some examples round in Greece and Italy:
• All employers are also obliged by law to pay your social security called IKA in Greek. Few like to pay it though, since they have to pay a serious amount of money per month per employee. They will also have to give you a Christmas and Easter bonus equivalent to the time you've worked for them. For example, if you work full time for a whole year, your bonus at Christmas and Easter will be a whole months pay on each occasion.
• All employees are entitled to a minimum of four weeks' paid annual holiday.
• There are 12 public holidays.
• There are some professions such as child care that limit the work week hours to 30. (how does that work for the parents that have to work longer?)
• Female employees must not work for two months before, and three months after, childbirth. This compulsory period of maternity leave can be changed to one month before and four months after childbirth, if a medical certificate is produced.
• During maternity leave, employees receive an allowance from the National Social Security Body equal to 80% of their salary.
• After maternity leave, employees are entitled to return to the same job in which they were employed before taking leave. Employers cannot dismiss female emplo