For additional information check out this and this.Governments and investors across Europe braced for renewed economic upheaval on Monday after the Parliament in Greece failed to avert an early general election, reviving the toxic debate over austerity as the way to cure the Continent’s economic woes.
Senior European Union officials immediately urged Greek voters — now headed to the polls on Jan. 25 — to focus on continuing the policies that have enabled the country to ride out its previous monetary crisis and remain part of the eurozone, and that have begun to restore the country’s battered reputation for fiscal management.
But with household incomes down by a third from what they were before the policies were adopted, and unemployment higher than 25 percent, polls have indicated support for Syriza, a leftist party that opposes the deep budget cuts Greece has made in recent years as a condition of financial bailouts.
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Syriza has said it wants to renegotiate the two bailouts, worth 240 billion euros, or about $292 billion, obtained from Greek’s so-called troika of lenders — the European Commission, the European Central Bank and the International Monetary Fund — since 2010, and get its creditors to write off some of Greece’s crippling debts.
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Alexis Tsipras, the leader of the opposition Syriza party, called it “a historic day for Greek democracy.” Credit Alkis Konstantinidis/Reuters
Greece’s prime minister, Antonis Samaras, has been working with the lenders on a precautionary credit line next year, but negotiations on a tough economic program have been dragging as opposition to austerity has risen.
European leaders immediately began to warn of the possible consequences of a shift in Greek policies. The European Union’s economic commissioner, Pierre Moscovici, warned that a “strong commitment to Europe and broad support among the Greek voters and political leaders for the necessary growth-friendly reform process will be essential for Greece to thrive again within the euro area.”
And a top German official warned that continued European aid would be conditional on Greece’s continuing to make major cuts in public services and other changes to control spending.
“We will continue to help Greece to help itself on its path of reforms,” Wolfgang Schäuble, the German finance minister, said in a statement. But he added, “If Greece embarks on a different path, it could be difficult.”
The possibility of a new confrontation over the policies of the last decade was set off by Parliament’s failure on Monday to elect a new president in a third and final round of voting.
Though the coalition government lobbied furiously for its candidate — Stavros Dimas, a former European commissioner — he received only 168 votes in the 300-seat house, 12 short of the 180 votes required for election. That was the same number he received in the second ballot last week, and eight more than in the first vote on Dec. 17. That set in motion constitutional procedures to hold early elections.
Mr. Samaras said he would visit the current president, Karolos Papoulias, on Tuesday and ask him to dissolve Parliament immediately so that an early general election could be held on Jan. 25.
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“The country has no time to lose,” Mr. Samaras said. “We did what we could to elect a president and avert early elections and the dangers they entail. Now, what Parliament failed to do, the people must do.”
The development inspired jubilation among Syriza’s members. After the vote, Alexis Tsipras, the party leader, called it “a historic day for Greek democracy.”
“Greek M.P.s showed that democracy cannot be blackmailed, however much pressure is exerted,” he said. “Today the government of Mr. Samaras, which has looted society for the past two and a half years, belongs to the past.”
Opinion polls show the leftists firmly ahead of Mr. Samaras’s conservative New Democracy party, although Syriza’s lead has narrowed in recent weeks with growing concerns about protracted political and financial uncertainty.
The prospect of more upheaval in Greece and thus in the eurozone has loomed for several weeks, but politicians and markets alike have kept most fears to themselves. The worries are likely to resurface strongly once the New Year’s holiday is over, exacerbating other continental differences over economic policy.
Most notably, the European Central Bank faces a dilemma of whether to do more to stimulate Europe’s wilting economy at the same time as bracing for more trouble for the euro.
The election outcome battered financial markets in Greece, though the worst of the damage faded as the day wore on. Stocks plunged more than 10 percent on the Athens bourse after the vote, but regained more than half of the lost ground in late trading. The yield on the 10-year government bond, which moves in the opposite direction of the price, spiked nearly one full point to 9.3 percent as investors sold off.
But, in keeping with predictions that the eurozone was better equipped to handle Greek turmoil than it was at the start of the currency crisis, there was little impact on the broader market. Both the Euro Stoxx 50 blue-chip index and the euro ended the day almost unchanged.
Still, larger ripples may yet be felt in some of the bigger states using the euro if Greece radically alters the policies that have largely been favored by the more prosperous north.
“In this period we believe the euro’s second and third largest members — France and Italy — will be the most vulnerable to contagion, rather than Greece’s neighbors in the southern periphery,” Mujtaba Rahman, the director for Europe for Eurasia Group, a political risk consultancy, wrote in a research note on Monday. France and Italy, wrote Mr. Rahman, “have done the least in terms of reform since the days of the debt crisis and therefore remain the most vulnerable economically.”
On the other hand, he wrote, Portugal and Ireland “look stronger as a result” of thoroughgoing reforms and were benefiting economically from lower oil prices and the depreciation in the value of the euro.
The Frankfurter Allgemeine Zeitung, a center-right daily, summed up what is likely to be a widespread feeling among politicians in Berlin and bankers in Frankfurt.
“Is all that going to start up again?” said the headline on a commentary by the newspaper’s foreign editor, Klaus-Dieter Frankenberger.
Greece had seemed to be on a hopeful, if difficult, road to recovery, Mr. Frankenberger said, and “right at the turn of the year, we could have done without this.”
As for myself it's hard not to feel sympathy for the people of Greece, especially the youth who are toiling under 50% unemployment and more under the demands of old men in suits. At the same time we have to remember this is happening because successive Greek governments resolved to lie and cheat their way into the Euro that the Greek are increasingly determined to leave.
