In the aftermath of the Greek Parliament’s rejection of the presidential bid of Greek Prime Minister Antonis Samaras’ handpicked nominee, Stavros Dimas, Business Week reminds why Greece matters.
“The fallout of this round of turmoil,” the magazine says, regarding the vote, “will be a critical sign of whether European leaders can hold on to power long enough to stay the course on the fiscal reforms needed to lift economies in the region.”
In explaining what went wrong the last time, Business Week wrote: “From 2010 to 2012 there was a general panic that countries deep in debt—such as Greece, Italy, Portugal, Spain, and Ireland—would be forced to default and leave the euro zone. Greece’s position was clearly the worst. It had the highest debt and the weakest economy. The fear was that Greece would default on its sovereign debt and stop using the euro as its currency, destroying people’s faith in the ability of other countries to pay their debts and creating a domino effect that could cripple global markets.
“This led to massive strain in government bond markets and the financial system. Ultimately it was solved when, in the summer of 2012, European Central Bank President Mario Draghi announced a plan to provide a de facto sovereign backstop to government bond markets. Specifically, the ECB said it would buy government bonds as long as countries agreed to fiscal reforms. This quieted down the market significantly.”
PAPANDREOU TO THE RESCUE?
Ironically, former Prime Minster and PASOK leader George Papandreou, under whose watch the crisis took root in the first place, may turn out to save the day in the oddest of ways. Declaring that he is forming a new third party, Papandreou may take enough votes away from poll-leading SYRIZA – the Coalition of the Radical Left – to clear the way for Samaras, who is favored by the Troika, to win reelection. SYRIZA’s bold language about reforms it expects to undertake have caused concern among Eurozone leaders, prompting speculation that Greece might exit – or be exited – from the euro.
If Papandreou can muster even 5% of the vote from SYRIZA Business Week writes, then it is possible to pave the way for a win by Samaras’ New Democracy Party
In any case, Business Week opines, things are not as bad this time around because the turmoil in Greece is due to internal politics, not economic calamity.