Greek leftists flirt with bailing on the bailout, no immediate takers

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Leftist politicians changed the conversation in Greece on Tuesday from what further sacrifices the heavily indebted nation needs to make to stay in the Eurozone to bailing on the common currency and reneging on promises to make deeper spending cuts and pay down debt.

A day after the front-place finisher in Sunday’s elections gave up on forming a new government that would remain committed to keeping Greece in the 17-nation Eurozone, Alexis Tsipras of the Radical Left Coalition, or Syriza, called on other political forces in the country to “end the agreements of subservience” threatening more job cuts in the coming weeks.

Although there were no immediate joiners for the fiscal about-face, talk of Athens abandoning the euro unsettled world markets and sent alarm bells ringing around the continent. Economists warned that Greece could leave the Eurozone within the year, perhaps as soon as next month, and European Union leaders scrambled to urge reason and responsibility in the political vacuum after elections that fractured Greek votes across a broad array of parties with seemingly irreconcilable aims.

“The bailout parties no longer have a majority in Parliament to vote for measures that plunder the country,” Tsipras told reporters in Athens after laying out a five-point plan for a new government he hopes to form with other leftist forces. It includes “immediate cancellation” of further public spending cuts and a moratorium on debt servicing, according to the Mediterranean news site.


Those cancellations would include the 150,000 state job cuts and $14 billion in new austerity measures expected next month in order for Greece to get the latest tranche of a bailout deal reached last year.

Tsipras, whose party finished a surprising second in Sunday’s voting with 17%, called on the two Greek parties that have dominated national politics for four decades to respect the message of voters and renounce their support for the bailout by the EU, the World Bank and the International Monetary Fund. The conservative New Democracy party and the socialist PASOK group, longtime rivals, had entered an uneasy governing alliance to commit to the austerity terms imposed in exchange for the triple-digit billions needed to keep the Greek economy afloat.

New Democracy leader Antonis Samaras, whose party finished first in Sunday’s elections but with less than 19% of the vote, tried Monday to form a governing coalition that would live up to the Eurozone commitments but gave up after about six hours when none of the smaller parties heeded his call.

But Tsipras also failed to lure any factions to his anti-austerity platform, even others on the left, noted Fabian Zuleeg, chief economist of the Brussels-based European Policy Center think tank. The Communist Party rejected partnership with the 37-year-old Tsipras’ party, and PASOK cannot realistically change its position on the euro after signing off on the brutal austerity measures during its ruling collaboration with Samaras’ New Democracy, Zuleeg said.

“There isn’t much choice for Greece, so I would wish that whatever parties come into power that they would work constructively at the European level, work with countries like Italy and France to correct mistakes made in the austerity measures that can be done without rejecting the whole process,” Zuleeg said.

He worries that the uncertainty over Greece’s future in the Eurozone will compel voters to reconsider what he sees as their protest vote against the biting cutbacks, and urged EU leaders to offer help to Athens in the form of “flexibility” on the impending deadlines for further public spending cuts.

“Europeans should give a signal to the citizens of this country that they are not being left alone, that European solidarity means something, not just to save the euro but the European project as a whole,” Zuleeg said in a telephone interview, urging German Chancellor Angela Merkel to get on board with other European leaders’ calls for combining austerity measures with spending aimed at growth.

German Foreign Minister Guido Westerwelle told reporters in Berlin that he viewed the Greek leftists’ threats to abandon the euro ‘with great concern.’

“We call on the authorities in Greece to quickly move toward stability so that a government of reason can be formed,” Westerwelle said, adding that the terms to which Greece agreed to get the EU bailout “are not up for negotiation.”

Economic analysts reacted with predictions that Greece will choose to leave the Eurozone, or be forced out for violating the austerity measures ordered to protect the euro’s value.

Citigroup currency strategist Valentin Marinov revised the bank’s forecast of the chances of Greece leaving the Eurozone from 50% to up to 75% by the end of next year.

John Taylor, founder and chief executive officer of the FX Concepts LLC hedge fund in New York, told Bloomberg Television’s “InsideTrack” show that Greece could be out of the Eurozone by next month with the prospects of its getting new loans unlikely while threatening to cease payments on past borrowing.


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