Greece Flirts with the Unknown

Political events in Greece over the next few weeks risk bringing leftist populist group Syriza to power. Ex-communist Alexis Tsipras could become prime minister but it’s not yet clear what that would mean for the country or the euro zone.

Handelsblatt Global, December 17, 2014

After two years of relative calm, the Greek crisis is back.

The country may well be embarking on a path that would bring to power a  former communist who belongs to a party that is determined to reject the European Union’s austerity measures.

The Athens stock market has already fallen on fears that the government may lose a presidential election that begins on Wednesday evening, paving the way for charismatic ex-communist Alexis Tsipras to become the new Greek prime minister.

Mr. Tsipras’s Syriza party has toned down some of its rhetoric since the 2012 election, but still insists that the current bailout program, which has imposed punishing austerity on the country, must be renegotiated.

“Syriza will not stick to the current program, that is quite clear,” the party’s economics affairs spokesman George Stathakis, told Handelsblatt Global Edition.

That prospect has raised fears that the country, which has just emerged from six years of recession, could return to the brink of bankruptcy and even a departure from the euro zone, a so-called Greek exit or Grexit.

 The president is a ceremonial role, but the constitution requires that the government candidate must receive  200 votes on the first round, which are being held on Wednesday evening, or 180 by the third vote on December 29. If the candidate fails to win these votes, new national elections must be called.

Prime Minister Antonis Samaras’ New Democracy party only has 155 seats in the 300-seat parliament. He is banking on the fact that independents and some small parties will want to avoid a snap general elections as much as he does and agree to back his candidate, Stavros Dimas, a former E.U. commissioner as president.

“Syriza will not stick to the current program, that is quite clear.”

George Stathakis, Syriza economics affairs spokesman

If Mr. Samaras fails to persuade other parties to back his candidate, snap elections will be held on January 25 or February 1.

The political crisis comes at a crunch time for Athens. Greece is currently in the midst of negotiations with the troika of international creditors on how to exit its €240 billion bailout program, which was supposed to end this year but has been extended by two months.

The troika is looking at whether to then provide Greece with an enhanced credit line. But convincing a Syriza-led government to agree to its conditions could prove difficult, raising the prospect of Athens being cut off from funding, and possibly defaulting – and leaving the euro zone.

Syriza, the leftist umbrella group that came from nowhere to be the second biggest party in the Greek parliament in the 2012 elections and won the most seats in the European elections in May, is currently leading in the polls. It looks unlikely, however, that the party will win an absolute majority of seats. In that case, it will probably enter into a coalition with one of the smaller center-left parties.

The 40-year-old Mr. Tsipras and his party have spent the last few months preparing for power, crisscrossing Europe to hold meetings with politicians, officials, bankers and hedge fund managers. While the party leaders insist they won’t adhere to the punishing bailout terms agreed with the so-called troika of lenders – the European Central Bank, European Union and International Monetary Fund – they are also trying to reassure the world they are not about to act on their own.

There is no longer any talk of defaulting on debt, or tearing up the memorandum.

“Syriza would be bound by any program conditionality that binds the country,” George Pagoulatos,  professor of European Political Economy at Athens University of Economics & Business, told Handelsblatt Global Edition. “It has clarified more recently that it is not going to be making any unilateral moves.”

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