Tweet
Here’s the latest on the post-election tumult in Greece. After New Democracy (center-right) Party leader Antonis Samaras failed to form a government, the number-2 party, the Coalition of the Radical Left (known as Syriza), was given a chance. And they basically ruled out a coalition government.
Greece’s post-election political and economic chaos deepened on Tuesday, when the leader of a leftist anti-austerity party that gained in the balloting ruled out a coalition with the two formerly dominant parties that had backed hugely unpopular budget cuts.
In a meeting with President Karolos Papoulias, the leader of the upstart party, Alexis Tsipras, ridiculed his counterparts of the two other parties, Antonis Samaras of the center-right New Democracy Party and Evangelos Venizelos of the Socialists, whose coalition lost its governing majority in the Sunday parliamentary election [...]
“If Mr. Samaras and Mr. Venizelos genuinely regret their disastrous decisions, let them write to the E.U. and I.M.F. leaders tomorrow, revoking their signatures,” Mr. Tsipras said. “If they don’t, I call on them to stop duping the Greek people,” he said, referring to appeals by the New Democracy and Socialist leaders for the formation of a national salvation government based on the terms of the bailout.
This was expected, but it was quite blunt and humiliating to the legacy parties, and considering the results of the election, it almost assures a new round of voting. The legacy parties only have 32% of the vote, and the biggest party outside the legacy just said they would never join such a coalition. So getting to 50% looks impossible. Tsipras wants to build a leftist coalition that would abolish the bailout deal with European leaders, restore some of the labor rights from changes put into place last year and put a moratorium on Greek debt payments. This would almost certainly lead to an exit from the euro. Furthermore, there don’t seem to be enough votes in Parliament yet for such a coalition, especially because the Communist Party, which received around 7%, said they would never join a coalition government with anyone.
But the new elections in and of themselves may lead to a euro exit. Greece is required under the current agreement to cut the budget up to 11 billion euros by June. But new elections would probably not even lead to a sitting Parliament by that time. And anyway, the current trajectory assures that anti-austerity lawmakers will hold a majority in that Parliament; 2/3 of the votes last week when to parties opposed to the terms of the rescue deal. European leaders have a new deadline of August to release another tranche of aid. I think it’s becoming clearer that they will withhold it. After all, Tsipras just essentially ruled out the entire deal.
So now we’re back to worrying about a disorderly exit and contagion across the eurozone. The markets have begun to price in this anxiety. I think some of the fears are outsized, and the status quo badly needed a shakeup. Greece was sunk if they adhered to the current program, and anyway it was far too draconian for their public to tolerate. It’s not so much that Greece will cause whatever chaos emerges from the euro crack-up as they were forced into that position. When they leave it will be the right call in the long run.
2 Comments
Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About FDL News Desk
I don’t have the link now, but a few months ago WSJ had a piece about Greece exiting the EZ.
When the Euro was adopted it took two years to get into circulation simply for time to print the new currency and distribute it to banks. During the interim the existing pesos, franks, etc., had their respective exchange rates frozen against the Euro and against each other. When the Euro switch was finally thrown, the old currencies were destroyed.
WSJ indicated that more than once financial wizards had pondered whether the Greek gov’t might have kept an enormous horde of old drachmas secretly hidden in vaults, just in case. The risk of getting caught, however, and severe consequences would make such a scenario very unlikely. Anyhow the PTB had to insist there was no such horde in reserve. Having to deny was a problem in itself.
For Greece to return to the Drachma would be very difficult simply due to the waiting for new drachmas to be printed and distributed. They would have to suffer with the Euro for quite awhile longer, and a new Drachma might give little relief anyhow. Also Greece doesn’t have the capacity to print a new currency — it would have to be done in Brussels, the UK, or even maybe the US. It would be very expensive.
The expense of printing new money can be covered by cutting the 5% of the budget going toward defense where defense equates to buying US MIC toys. Of course the US would have a fit if our MIC rich had a problem, so the US will print the needed currency (hell – we print Egypt’s currency, postage stamps, etc etc – not a big deal).
BTW – the 32% of the vote need not get to 50% because of the gift of 50 seats that the party with the largest percentage gets. The left needs only to get 5% more so as to beat out New Democracy, thus picking up the extra 50 seats, and then they will form a gov with a massive majority – even without the communist KKE’s 26 seats.