Political brinkmanship in Greece once again roiling world markets

Political brinkmanship in Greece once again roiling world markets
Former government office cleaners, laid off under austerity measures imposed in return for bailouts, rally in support of the leftist Syriza party leader's promises to restore jobs and raise wages. (Kostas Tsironis / Bloomberg)

Political turmoil in Greece has stirred fears of a resurgent Eurozone crisis as a fiery leftist politician is gaining traction with a vow to ease the painful reforms demanded of the heavily indebted country in return for triple-digit billions in bailouts over the past five years.

Syriza party leader Alexis Tsipras has been campaigning for the Jan. 25 parliamentary election on a platform promising new government jobs, wage hikes and a writing down of Greek debt to the European Union — steps likely to lead to default and a Greek exit from the 19-nation alliance that uses the euro as its currency.


Tsipras said at a campaign rally Saturday that the austerity measures imposed on Greece in return for the bailouts are "unreasonable and catastrophic," casting the terms as an infringement on Greek sovereignty and calling for the same debt write-off given postwar Germany in 1953.

Prime Minister Antonis Samaras, whose governing New Democracy party is trailing Syriza in polls less than three weeks before the election, has countered with warnings that abandoning the bailout terms will force Greece out of the Eurozone and into disaster.

"What Syriza is saying would lead to bankruptcy," Samaras said Saturday in a speech in the central city of Larissa. He said departing from the bailout conditions would plunge Greece into "a huge adventure."

Tsipras has insisted on the campaign trail that recovering control over the country's finances wouldn't necessarily mean exiting the Eurozone, a calculation that appears to be based on the assumption that the more affluent countries would rather renegotiate the terms of their loans to Greece than bear the consequences of the Eurozone's first pullout.

The common currency's vulnerability to Greek political drama was reflected in its fall at one point Monday to $1.1864, a nine-year low against the dollar.

But European economic analysts point out that the currency union is in far better shape than three years ago, when the threat of a Greek departure had a higher potential for spreading to other troubled states. Since the 2010-2012 height of the Greek crisis, Ireland and Portugal have successfully reformed their finances and the European Union has created a sustainable bailout fund and integrated banking union.

In 2012, German Chancellor Angela Merkel put an end to the debate about whether the Eurozone could survive a Greek exit — or "Grexit," as the scenario has been dubbed — saying there was "no alternative" to keeping the alliance intact.

Germany's influential Der Spiegel magazine, however, quotes unnamed senior officials in the Berlin government as saying that a Greek pullout from the Eurozone could be managed. The finance leaders noted there was little disruption of euro exchange rates or markets when the latest Greek political crisis evolved last month and said government economists and strategists were "calmly" examining ways of keeping Greece in the 28-member European Union even if it departs the Eurozone.

"Chancellor Merkel and Finance Minister Wolfgang Schaeuble are likewise no longer afraid that a Grexit could result in the collapse of the entire Eurozone," Der Spiegel reported in its lead story this week. "Both are confident that the common currency of today is better able to weather such a scenario than it was a few years ago."

The cost of Tsipras's promised wage increases and job creation exceed 10 billion euros, or nearly $12 billion, Der Spiegel calculated, noting that is money the Greek government doesn't have and would find difficult, if not impossible, to borrow.

Greece is already accorded the most favorable interest rates in the bloc on its sovereign debt, at an average of 2.4%, the Frankfurter Allgemeine Zeitung reported last week, citing records of the European Union, the European Central Bank and the International Monetary Fund.

As the largest economy in the European Union and the Eurozone, Germany would bear the brunt of a Greek default on alliance loans. Its liability for the Greek bailouts since 2009 would amount to at least 77 billion euros, or $92 billion, the Bloomberg financial news agency has reported.

Merkel's spokesman, Steffen Seibert, was asked about the reported change of attitude toward a Greek Eurozone exit at a news conference in Berlin on Monday. He said Germany's position hasn't changed.

"From the beginning, it's been the policy of the German government and European partners to stabilize and strengthen the euro area — the euro area with all of its members, including Greece," Seibert said.


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