News / Europe

Greek Election a Referendum on Its Eurozone Membership

A man passes by election posters of the conservative new Democracy party and the left coalition Syriza party in central Athens, June 13, 2012.
A man passes by election posters of the conservative new Democracy party and the left coalition Syriza party in central Athens, June 13, 2012.
VOA News
Greece's parliamentary elections on Sunday have effectively become a referendum - will Athens keep its eurozone membership or become the first to quit the 17-nation currency bloc?

It is a simple question, but one with potentially far-reaching implications for Greece, the rest of Europe and the world economy. The Greek government has piled up a mountain of debt over the years, but its European neighbors and the International Monetary Fund have twice bailed out the country, sending it billions of dollars in the last two years. Foreign creditors have eliminated more than half the debt Greece owed them.

But many Greeks are angered at the terms of the rescue packages -- that the government impose far-reaching austerity measures, cut wages and pensions, and eliminate thousands of government jobs. On the other hand, Greece's European neighbors say they will cut off the flow of bailout funds if a new government reneges on the country's earlier austerity pledge.

(Click to Expand)(Click to Expand)
x
(Click to Expand)
(Click to Expand)
Greece's fractious political parties were unable to forge a new coalition government after splintered parliamentary elections last month, necessitating the new vote Sunday.

One of the leading candidates to head a new government is Alexis Tsipras, head of the radical left Syriza party who is calling for cancellation of the bailout terms. Surveys show Tsipras running close with conservative leader Antonis Samaras, who supported the austerity measures along with socialist party chief Evangelos Venizelos.

A close vote could leave the parties deadlocked once again, and Greece's continued membership in the euro currency bloc in question. While Greece's economy accounts for just 2 percent of the eurozone economy, some analysts think a default on its financial obligations and a eurozone exit could easily lead to turmoil on world financial markets and a sharp downturn in the U.S. and world economies.

The country's biggest bank, the National Bank of Greece, recently said that a eurozone exit "would lead to a significant drop in living standards for Greek citizens." The bank said Greeks would lose more than half their income and the value of the reinstated drachma would fall 65 percent. The country's already high jobless rate would soar to 34 percent, and inflation would surge to 30 percent.

Despite the dire predictions, Syriza leader Tsipras says the bailout terms are worse for Greeks. He declared this week that the bailout deal "is already in the past" and "will be history for good on Monday."

Yet Tsipras says he wants to keep Greece in the eurozone, but with renegotiated bailout terms. Surveys show 80 percent of Greeks want to stay in the currency union as well.

Numerous European leaders say they want Greece to remain in the eurozone, while adhering to its earlier austerity pledge. But one international finance expert, Andreas Hauskrecht of the Indiana University business school, said he thinks it is almost certain Greece will default and leave the eurozone.

"The reasons are very simple," he said. "Let's take the most optimistic way. They are able to form a government after the election June 17. They are able to hold to their promises on the fiscal side, and they still will default because the Greek economy is shrinking so quickly that the numbers that were the basis for the original plan to cut fiscal deficits are insufficient.

"So basically, they are in a vicious circle, and it's only a question of time until they will have to default," continued Hauskrecht. "The less optimistic say they cannot build a stable government, which is much more likely, and then they will default already in July 2012."

Hauskrecht, like the National Bank of Greece, says a eurozone departure will not produce better times for Greeks.

“Greece for me looks almost like a failed state, with all the categories that we have for failed states," he said. "So basically, there is no government structure left. There is very irresponsible behavior from the different power groups in the society, and they are basically digging the hole deeper and deeper every month. We will have [significant] wealth losses, [significant] losses and decline in the further economy. They’ll face very, very hard times for the next year. Leaving the euro is the end point of a catastrophic development that went over years. It certainly is not the turning point that will give them wonderful perspective soon.”

Syriza leader Tsipras says it is not in Europe's interest to force Greece out of the eurozone. He said that if one of the 17 countries is "brought to collapse ... the fire will become unquenchable" - and will result in the eurozone's demise.

Some information for this report was provided by AP, AFP and Reuters.

You May Like

Obama: I Will Do 'Everything I Can' to Close Guantanamo

US president says prison continues 'to inspire jihadists and extremists around the world' More

Sierra Leone Educates on Safe Ebola Burials

Also, country is improving at rapid response to isolated outbreaks, but health workers need to be even faster, officials say More

Religion Aside, Christmas Gains Popularity in Communist Vietnam

Increasingly wealthy Vietnamese embrace holiday due to its non-religious glamor, commercial appeal More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
US Decision on Cuba Underscores Divisions Among Miami Cubansi
X
Sharon Behn
December 19, 2014 9:34 PM
For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video US Decision on Cuba Underscores Divisions Among Miami Cubans

For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video Three Cities Bid for Future Obama Presidential Library

President Barack Obama still has two years left in his term in office, but the effort to establish his post-presidential library is already underway. The bid for the Obama Presidential Library is down to four locations in three states -- New York, Hawaii, and Illinois. As VOA’s Kane Farabaugh reports, each of them played an important part in the president’s life before he reached the White House.
Video

Video Cuba Deal is Major Victory for Pope’s Diplomatic Initiatives

Pope Francis played a key role in brokering the US-Cuba deal that was made public earlier this week. It is the most stunning success so far in a series of peacemaking efforts by the pontiff. VOA religion reporter Jerome Socolovsky has more.
Video

Video Fears of More Political Gridlock in 2015

2014 proved to be a difficult year politically for President Barack Obama and a very good year for the U.S. Republican Party. Republican gains in the November midterm elections gave them control of the Senate and House of Representatives for the next two years -- setting the stage for more confrontation and gridlock in the final two years of the Obama presidency. VOA National Correspondent Jim Malone has a preview from Washington.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.

All About America

AppleAndroid