Updated 5:48 pm, June 15, 2012
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Will Greek voters sleepwalk into a potentially calamitous exit from the euro?
Around the world central banks, investors, governments and economists are holding their breath. But in Greece a surreal fatalism infects the body politic. “Euro? Drachma? If you have no money then it doesn’t matter if Greece has the euro or the drachma,” one voter told me in Athens.
Because it is an election the normal process of promise and seduction prevails. But the disconnect between what Greek political parties promise, and how the country’s international creditors see things, could prove fatal.
So far the message from Brussels, Berlin and Paris is that Greece should remain in the euro, but the terms of the bailout must be kept. The subtext is that if Greek voters choose a party that tears up the memorandum of understanding underpinning the country’s â‚¬240 billion rescue, then they will de facto be voting themselves out of the euro.
It’s that formulation which has triggered a steady flight of deposits from Greek banks, and has prompted fears that a disorderly exit could tip the already escalating eurozone debt crisis over the edge and foment the break up of the currency union itself.
So what are the likely outcomes on Sunday, and what are the parties saying in the run up?
All eyes are on Syriza, the radical left coalition. It has emerged from the relative obscurity of far left European politics a few years ago to winning 17pc of the vote in the last inconclusive election on May 6.
According to the most recent opinion polls it is poised to win anything between 23pc and 30pc, thus potentially becoming the main party of government.
At a rally in Athens its firebrand leader Alexis Tsipras, 37, savaged the mainstream parties, accusing them of “looting” the country, and handing the Greek flag to German Chancellor Angela Merkel as a trophy.
“On Monday Greece will remain in the euro BECAUSE the [EU-IMF bailout] memorandum will cease to exist,” Tsipras declared to an ecstatic crowd of supporters.
The party message, however, was more nuanced when I met one of Syriza’s chief economic spokesmen George Stathakis, a professor of economics at the University of Crete and a new Syriza deputy.
“Our strategy is to remain in the euro, and this has been our strategy all along. Obviously we will negotiate with our partners, trying to find a solution that makes the Greek economy viable and the fiscal adjustment possible. Because with the current programme the fiscal adjustment is impossible.”
Syriza argues that the bailout program can be replaced by a plan for national growth. Public expenditure, wages and pensions would be frozen at the current level. Reforming the tax system and placing a much higher burden on the wealthy would make up the fiscal gap, the party argues.
Many Greek economists, though, say the figures simply don’t add up, and a unilateral repudiation of the bailout would almost certainly trigger a bank run and the possible suspension of emergency credit from the ECB.
But Syriza is gamely insisting that the Greek debt crisis has been swept up into the general European debate about growth over austerity, and that the country can benefit if admittedly elusive “growth” policies prevail in the grander scheme of things.
“We want to avoid default at any cost and we are certain we will avoid all the accidents that could arise during the coming weeks and months,” says Professor Stathakis. “I think the next euro summit has to tackle the problem not only of Greece but quite a number of countries that are in deep crisis, Spain, Italy, Cyprus and so on. A new signal might come from this [June 28] euro summit which can change things and allow the Greek people to have a better policy.”
Syriza’s chief rival is now New Democracy, a party which accuses the radical left of playing a dangerous game of bluff with Germany and other creditor countries. Opinion polls say it could win over 24pc of the vote.
New Democracy is one of the mainstream parties blamed for the rampant borrowing and political patronage which fuelled the country’s debt over the past 15 years.
It also has a credibility problem in eurozone capitals because its leader, Antonis Samaras, initially rejected the terms of the Greek bailout, only to change his tune when it looked like the country might be forced out of the single currency.
Party members, though, say his objections to the austerity program accompanying the bailout have been justified. Like every party New Democracy wants a relatively modest renegotiation of the bailout, including an extension for the deadline to implement â‚¬11 billion in cuts and tax increases, an increase in the minimum wage and a restoration of some of the pension cuts already implemented.
“The key objectives,” says Dimitrios Tsomocos, an Oxford University lecturer and New Democracy candidate, “the targets for the loan objectives, the party is committed to those, namely to reduce the deficit, and to reduce the debt to GDP ratio.”
He argues, as does Syriza, that the disarray following the â‚¬100 billion bank rescue for Spain, has prompted a eurozone rethink.
“After the Spanish crisis we firmly believe the eurozone woke up, so they’re more than willing to negotiate in a mutually agreed manner a replacement of some of the extreme austerity measures with some growth measures, to expedite the jump start not only of the Greek economy but the entire south,” he says.
This may be wishful thinking. While Berlin and Brussels have been extremely cautious in offering any sweetners in advance of the election in case they add to the legitimacy of Syriza’s ambitious claims, suggestions emanating through the Financial Times of some concessions appear minor indeed (an extension of loan maturities, a decrease in the – already low – interest rate, and more funding from the European Investment Bank). And according to the EU officials quoted, the sweetners would only be offered if New Democracy wins.
The smaller Democratic Left party could play an intriguing role. It won 19 seats on May 6 and it appeared to offer a pragmatic approach to forming a coalition that would not at least immediately tear up the bailout program. On that occasion it insisted on bringing Syriza into any coalition, mainly because it would be a hostage to the far left if Syriza remained in opposition while a putative new coalition forced through more austerity measures.
Now though the party seems to be shifting its position. “There may be troubles in the European Union, but outside Europe – that leads to the Middle East, to Africa,” says party spokesman Gerassimos Georgatos. “That would be a catastrophe.”
It wants a seven point program which all parties to a new coalition would sign, the key first point being an option, negotiated with the eurozone, to delay the full implementation of the â‚¬11 billion in cuts from 2014 to 2017. It would prefer Syriza to be in the new coalition but this time it would not be “an absolute condition.”
But analysts remain concerned about the apparent contradiction between the fact that most Greeks want to remain in the single currency, but may vote for parties which oppose the bailout wholesale.
“Most people want the country to remain in the eurozone, but that doesn’t necessarily mean they will vote for New Democracy or PASOK,” says Dr George Tzogopoulos from the think tank Eliamep. “They want to keep the common currency but they believe we can have different policies in the eurozone which can guarantee growth.
“There are many people who believe that Germany and the European Union are bluffing, but in my view that’s not correct, because the EU it seems to may has already started preparations for a possible exit from the eurozone.”
Exit polls should give an indication of the results around 6pm Irish time on Sunday. Experts predict it will be very close, with an initial three days set aside for coalition negotiations.