Greek Elections 2012: Greece Likely to Leave EU Unless They Change Austerity Stance

Greeks are going back to the polls in June to elect a new parliament. Those parties previously elected were unable to negotiate a coalition with a sufficient majority to form government. This bodes well for Alexis Tsipras, leader of the radical left Syriza party, which came in second place in the May 6 vote, and is poised to win the re-vote. Tsipras emerged as the leader of the anti-austerity movement in Greece by taking a particularly hard-line on the bailout measures. He is prepared to rip up the bailout and austerity agreement, and force the EU, and Germany to renegotiate conditions to include stimulus measures.

Kelly McParland of the National Post in Toronto, Canada, in his article "Greece’s crazy left-wing radicals outsmart Europe with Wall Street tactics", believes that this stance by Tsipra is a shrewd strategy. He says that it is playing a “game of chicken” hoping that the EU sees Greece as too big to fail, and that Germany will want to bail them out under any condition to save the euro zone. He states “Greece is betting the Germans enjoy the benefits of the euro more than they want to force Greece to takes its medicine.” Germany for its part is gambling that Greeks value the euro too much to risk the economic disaster they may endure if they leave the union. McParland believes that Greeks have the upper hand, and will likely win this gamble. However, McParland is diminishing the resolve of the German government, and the ability for the EU to protect itself.

McParland has a strong case. There has been much discussion about the affects of a potential Greek ejection from the euro zone. The Greek state owes large amounts of money to the EU and IMF, and the European Central bank and other banks throughout Europe hold billions of dollars in Greek bonds. Estimates have it at $500 billion. If Greece were to leave the euro zone the fear is that they will default on this debt and cause instability in these financial institutions.

McParland also seems to imply that the Greeks are showing no change in attitude, though that could be because they have not been able to organize a government as of yet, and the German government seems to be showing cracks in their hard stance. He points out that Germany is the largest beneficiary of the Euro, and that Merkel has indicated that she would be willing tweak requirements in negotiation, if necessary.

These points are valid, however it is clear that Germans do not really want to pay for Greece’s financial problems if they can avoid it. German Chancellor Angela Merkel famously stated “ ... Germans will not work to 65 so that Greeks can retire at 55.” This sentiment seems to be the dominant one in Germany. Though Merkel has reached out to negotiate reasonable changes to the bailout, she has made it clear that its fundamental structure cannot change. She has also recently lost ground in regional elections to anti-austerity parties; it is likely that Germans prefer not to feel duped by a nation they feel is more corrupt, and irresponsible then they are. If Merkel were to give in to Greek demands, she could face political suicide when she stands for reelection.

The opportunity for Germany to hold its position came on Monday. At a meeting in Brussels, Belgium, Finance Ministers of the EU called on Greece to keep to its bailout commitments, or face the very likely possibility of ejection from the euro zone. They claim the alleged fears of financial chaos are mitigated by protective measures put in place in the past few years. Global financial institutions would have nothing to fear from Greek ejection. The positive language from the EU alone, should put some people at ease. It will certainly strengthen the resolve of the German government.

The game of chicken that Tsipras is playing in Greece seems to be working for him at the polls. However, when he finally steps up to the negotiation table with Germany, he may already be fried.