Greek Leftists Rule Out Coalition With Incumbents
Published: May 8, 2012
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That, financial experts say, could have repercussions far beyond the deceptive serenity of Greece’s olive groves and azure waters. “Greece is lurking as a problem, not so much because it could leave the euro and tear things apart, but because it could before that default and trigger financial events that could cause the crisis to spread,” said Carl Weinberg, the chief economist at High Frequency Economics, a financial research group in Valhalla, N.Y.
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Just months after the biggest debt write-down in history, a default could come as soon as August, when Greece’s creditors are to decide on whether to release another installment of financial aid. That would lead to problems at the European Central Bank and the International Monetary Fund, which are using taxpayer money to foot most of the bill for the bailout.
Other countries that lent directly to Greece would also face steep losses, including Spain, which many analysts believe may need a financial bailout of its own. With the Spanish economy suffering in a deepening recession, unemployment near 25 percent and rising borrowing costs, any credit event in Greece may make investors wary of continuing to lend to Spain.
At the extreme, analysts worry that a Greek default might also hurt Germany and France, which are on the hook for a large portion of the bailout bill.
“If that does happen, then the fiscal problems will spread to countries that are not seen as being in trouble now,” including these, Mr. Weinberg said.
Although Germany is still the strongest economy in the euro zone, a handful of influential hedge funds, including one run by the Wall Street investor John A. Paulson, have started to bet against Germany and the “core” of strong wealthy northern countries in the euro zone, with the view that the crisis will become more serious and spread further.
For Greece, the election results also marked the end of a political era for the Socialists and New Democracy.
“The established parties collapsed — they had too much pressure from Berlin and Brussels and the I.M.F.,” said Nikos Xydakis, an editor at the Kathimerini daily and a political commentator, referring to Greece’s foreign lenders. “We were expecting that, but not so violently and so quick, but they broke everything.”
The far-right, ultranationalist Golden Dawn Party, whose members perform Nazi salutes at rallies and who routinely scuffle with illegal immigrants in downtown Athens, received 7 percent of the vote, enough to enter Parliament for the first time, with 21 seats. At a televised news conference on Sunday evening, the party’s leader, Nikos Michaloliakos, demanded that journalists stand upon his arrival as a sign of respect, and banned those who did not, a move that outraged many Greeks.
The success of Golden Dawn is one of the most vivid signs of the depths of anger and fear among voters today, who feel Greece has been slipping out of their grasp after two years of tax increases and wage cuts. The Socialists and later New Democracy had told Greeks that those sacrifices were necessary to save the country, a position that came at a high political cost.
This article has been revised to reflect the following correction:
Correction: May 8, 2012
Because of an editing error, an earlier version of this article misattributed a quote. It was the leader of an upstart leftist party, Alexis Tsipras – not President Karolos Papoulias — who said: “If Mr. Samaras and Mr. Venizelos genuinely regret their disastrous decisions, let them write to the E.U. and I.M.F. leaders tomorrow, revoking their signatures. If they don’t, I call on them to stop duping the Greek people.”
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that nation states. (see the writings of Simon Johnson of MIT on this topic.) Unless sensible financial regulations can be put in place, the financial sectors will continue to rule the game, replacing not only democracy but the ability of states to manage their own affairs. In the wings stand right wing parties willing to eliot the distress, anger, and fear of the people.
One has to wonder what the Greeks are really asking for. Perpetual handouts?
Let the Greeks return to the drachma and try to fund their generous social programs with purely local resources. Most likely, Greece will eventually repudiate its sovereign debt. This will mean 15 to 30 years with no access to external funds and possibly hyperinflation.
What a wake-up call! It's like an American family cutting up its credit cards: both liberating and scary.
the Marshall Plan was about $100 Billion in today's dollars. Greece has already received bailout of more than $170 Billion, for a population of about 10 Million. I think Greece has had its Marshall Plan already a few times over. Time to stop the whining and get to work.