In the US, Republicans like to call accurate descriptions of their plans to destroy our old-age health care system the “Mediscare.” Putting aside the accuracy part, I guess we can call EU leaders’ apparently somewhat successful effort to influence the Greek elections the “Euroscare.” EU leaders, and primarily Germany, have been doing everything they can to publicly position the choice in the second round of Greek elections as a referendum on the country staying in the euro. The euro is still popular in Greece, and mindful of that, the German leadership has basically associated a win for the far-left Syriza party as synonymous with a Eurozone exit. More important, financial entities – from individual firms to central banks – have whispered out loud about their preparations for a Grexit (shorthand for a Greek exit from the euro), which has probably had a greater impact.
Syriza has said repeatedly that they don’t want to exit the euro, and that they simply want to renegotiate the terms of the bailout deal. This is actually also the position of the legacy parties in Greece, though they have no credibility on that front, having negotiated and signed the deal themselves.
Anyway, this is all working out in favor of the legacy parties. Greeks, spooked by the prospect of a Grexit and the negative consequences already felt by a stalemate in the first round of elections, are starting to abandon Syriza.
Three weeks before Greece has another election, opinion polls published Sunday indicated the election will result in no single party gaining a majority in parliament, but two parties that favor implementing Greece’s bailout programs could be able to form a coalition government.
The four surveys show that Greek voters, tired of more than two years of austerity that have seen salaries and pensions cut and new taxes imposed, nonetheless want Greece to keep the euro and not revert to its own currency, the drachma [...]
The polls indicate that pro-bailout New Democracy party and anti-bailout Syriza would probably finish first and second again, but that New Democracy would win more seats in parliament than during the May 6 national election, allowing it to team up with Socialist PASOK in a governing coalition.
Syriza was previously in the lead, before outside actors put their thumb on the scale. These polls probably didn’t take into account Christine Lagarde’s comments blaming Greeks for their own problems, which just seemed unnecessarily cruel (it’s true that Greece has a major tax collection problem, but defunding the government structures that would collect the tax is no solution). We’ll see if Syriza can try to capitalize on the remarks.
The result of this would be some fig leaf of a “renegotiation” of the bailout deal, followed by the imposition of more austerity. But that’s nowhere near a solution, as Greece’s economy would be guaranteed to stay mired in depression. In fact, despite the Euroscare, this would represent a worst-case scenario, with the Greek people doomed to suffering with no hope of escape.
This can be seen by the persistent rise in borrowing costs for both Spain and Italy today. The bond increases are keying off the $23 billion bailout of Bankia, the fourth-largest bank in Spain, but also the general financial and economic crisis in those countries. Spanish Prime Minister Mariano Rajoy insisted that the Spanish banking sector would not need a bailout, but those words are ringing hollow. Spain did use the European Central Bank in an indirect way for the Bankia bailout, by doing a debt-for-equity swap with Bankia and then depositing the bonds at the ECB for cash. The ECB won’t print money to alleviate the situation in Europe, and this is the closest alternative.
However, I don’t see it as sustainable, and of court that money-printing is only going to rescue banks, rather than to rescue people. So the result is a kind of status quo, which is completely mindless at this stage. And it won’t save the euro, either.