Regardless of whether Germany bends on the euro crisis, we will still have a fairly desperate situation in Greece. New unemployment figures show an all-time high in the country, and economic activity is practically non-existent. Many workers are staying on their jobs without pay, in contrast to the stereotype of the lazy Mediterrenean workforce. And withdrawals at Greek banks have risen, with fears growing that anyone who leaves their deposits in those banks will eventually get paid off with cheaper drachmas.
Per the law, there hasn’t been a poll in the country in two weeks, in advance of the June 17 Parliamentary election re-run. The election is expected as a contest between the center-right New Democracy party, which helped negotiate the terms of the bailout/austerity deal, and the far-left Syriza party, which has rejected those terms. However, New Democracy, in a bid to blur the differences, now wants to delay the terms and hold off further austerity for a period of two years.
The leader of Greece’s conservative New Democracy party on Wednesday pledged to seek a two-year extension on deadlines set under the country’s painful austerity program if he wins Sunday’s general election—a campaign promise likely to run into stiff opposition from Athens’s international creditors.
Antonis Samaras said his party will do all it can to form a government after last month’s inconclusive vote, provided potential coalition partners support Greece’s efforts to stay in the euro zone and help renegotiate terms of the country’s €130 billion ($160 billion) second bailout agreement […]
Among the first tasks of the new government will be approval by the end of June of €11.5 billion in cutbacks needed to fill fiscal gaps in 2013-2014.
Mr. Samaras said he will seek to spread those cuts over four years. He said conditions are more conducive to softening Greece’s reform program after Spain recently secured a €100 billion bank-rescue plan underwritten by the European Union and the International Monetary Fund.
This is one part of a two-step to undermine Syriza’s support. The other basically equates a Syriza victory with a Eurozone exit, which is an unpopular position in Greece. So the idea is to scare voters away from Syriza, and then convince them that New Democracy is offering virtually the same thing, a break from austerity. Talk of “secret polls” showing New Democracy in front today has boosted the markets, which shows you what side the money men are on.
Greece’s creditors basically rejected this, which means that New Democracy’s positions threaten Greece’s place in the Eurozone as much as Syriza. But that’s not the way it will be spun.
Because austerity won’t work to bring back the economy, and because the creditors want to force it at all costs, in some sense the election doesn’t matter. However, who’s in charge in the aftermath, especially in the event of a Greek exit, will determine their response. They could go the way of Iceland, or deeper into a spider hole of despair.