ATHENS – Anxiety over whether the likelihood of a new anti-austerity government would renege on debts to international lenders has raised the prospect that Greece could be forced out of the Eurozone and left on its own and sent the euro plummeting.
Prime Minister and New Democracy Conservative leader Antonis Samaras’ party is trailing the major opposition Coalition of the Radical Left (SYRIZA) by 3.1 percent in a poll just three weeks ahead of the Jan. 25 elections.
SYRIZA leader Alexis Tsipras has vowed to negotiate new terms with the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that put up 240 billion euros ($306 billion) over the last four years but demanded big pay cuts, tax hikes, slashed pensions and worker firings in return, as well as the sell-off of state enterprises and properties.
Tsipras, backing down from his original stance to walk away from the debt, said he wouldn’t act unilaterally if he wins and is able to form a government but the notion of a radical Leftist who opposes the conditions that came with the loans has rattled EU and Eurozone officials as Samaras warned a SYRIZA administration would bring chaos and collapse Just as a recovery was looming.
France’s President has raised the possibility of Greece leaving the shared euro currency, but says that’s a decision for “Greece alone” to make.
Francois Hollande said on France-Inter radio that Greece’s new leaders “will have to respect the commitments made by their country.” Samaras, who imposed austerity on orders of the Troika, is being backed by EU officials.
But Hollande insisted that it’s not up to others to say whether the result of the Greek vote means they should or shouldn’t keep using the euro currency.
“The Greeks are free to choose their own destiny. But, having said that, there are certain engagements that have been made and all those must be of course respected,” Hollande said.
The Der Spiegel weekly quoted German government sources as saying that Berlin sees a Greek exit from the Eurozone as “almost inevitable” should SYRIZA win the snap poll.
That comes far ahead of the 2016 national elections that were moved up when Samaras’ coalition, which includes the fast-fading PASOK Socialists, was unable to get enough votes in Parliament to elect a symbolic Greek President.
Repeating a much-expressed view that the Eurozone needs to focus more on growth and less on reducing its deficit, Hollande also said, “Europe cannot continue to be identified by austerity,” although he supported it for Greece but not for France.
Germany is the biggest contributor to the bailouts but Chancellor Angela Merkel insisted on the Draconian conditions and had supported Samaras for following her wishes but has begun to say Greece could be left alone if there is a change of government.
The German government wants Greece to stay in the euro zone and there are no contingency plans to the contrary, Vice Chancellor Sigmar Gabriel said, Agence France Presse and Reuters said, responding to a media report that Berlin believes the currency union could cope without Greece.
Gabriel, the Economy Minister and leader of the center-left Social Democrats (SPD), also told the Hanoversche Allgemeine Zeitung that the Eurozone had become more resilient in recent years and could not be “blackmailed”.
“The goal of the German government, the European Union and even the government in Athens itself is to keep Greece in the Eurozone,” Gabriel said.
“There were no and there are no other plans to the contrary” he said, and noted the Eurozone had become far more stable in recent years.
“That’s why we can’t be blackmailed and why we expect the Greece government, no matter who leads it, to abide by the agreements made with the EU,” he said referring to the Greek elections.
Earlier, Georg Streiter, a spokesman for Merkel, said the German government expects Greece to stick to the terms of the bailout no matter who is in power.
Streiter declined to comment on the report that Berlin had shifted its view and now believed the Eurozone would be able to cope with a Greek exit, or “Grexit,” if necessary.
The report said that both Merkel and Finance Minister Wolfgang Schaeuble now believe the Eurozone has implemented enough reforms since the height of its debt crisis in 2012 to make a potential Greek exit manageable.
The Eurozone now has an “effective” bailout fund, the European Stability Mechanism (ESM), another source added. Major banks would be protected by the banking union.
Samaras won the 2012 elections on the back of his warning that SYRIZA would push Greece out of the Eurozone and is using the same strategy again but after being pounded by austerity while the rich, politicians and tax cheats have largely escaped have tuned out.
Peter Bofinger, on the council of economic advisers to the German government, warned against a Grexit. “There would be many high risks for the stability of the Eurozone with such a step,” he told Welt am Sonntag. “It would let a genie out of the bottle that would be hard to control.”
The euro sank to a nine-year low Jan. 5.
“Greece could spoil the party in coming weeks as talk of a ‘Greek exit’ resurfaces. The past year has been hard enough for the European Central Bank as the region fought severe economic challenges and attempted to resuscitate growth,” said Stan Shamu, market strategist at IG in Melbourne, Australia.
“Investors will be monitoring polls very closely heading into the elections. Opposition party SYRIZA has already started being vocal, talking about a Greek debt haircut and cancelling the austerity measures and bailout package,” he said.
(Material from the Associated Press was used in this report)