Greek Elections Round 2: Turning Point in the European Debt Crisis

The second round of Greek elections on Sunday, June 17, will likely yield a new government and determine the trajectory of a new chapter in the European Debt Crisis.

Public opinion polling is banned in Greecetwo weeks before an election and predictions swing as wildly as the talk in the cafeneia. We have distilled four possible scenarios and one overarching trend going into the second round of polling. Whatever the outcome, Greece’s next government faces a dual challenge of securing its second bailout and avoiding bankruptcy with or without extra help.

Continued political deadlock threatens to bring down Greece and Europe with it, leading to a consensus among Greeks and their creditors that a new government must emerge and the terms of the second bailout will have to be lightened. The question is execution.

If the conservatives win, the old regime will return, resulting in a quick settlement to the second bailout issue but not to the Greek debt crisis. If the upstart leftists win, they could earn a more favorable agreement for Greeks and start the country back on the path to recovery. Or they could alienate Brussels, Berlin, and each other, deepening the crisis. Finally, the crisis shifts shape so often that new factors could emerge. It is that ‘unknown’ that Greeks and Europeans alike want to see come to an end.

A different sentiment ruled in the run-up toGreece’s May 6 polls, as commentators sounded off on how voters were ready to “punish” the leaders who agreed to an unpopular austerity program with the country’s “Troika” of international creditors; the European Union (EU), the European Central Bank (ECB) and the International Monetary Fund (IMF).

To a certain extent that logic rang true. The two-party system, long in distress, had utterly failed. Together socialist PASOK and liberal New Democracy both approved the unpopular second bailout and denied consensus prime minister Lucas Papademos enough time to work in the hopes of a return to Greek politics as usual.

Greeks chose not to stay home or tear up their ballots in protest as they have done in recent years. Instead they voted for smaller parties that reflected their interests. No party managed to muster 20% of the vote, and the Coalition of the Radical Left SYRIZA, long the voice of the young and well-educated, found its voice after years of stuttering.

Voting for the small parties was an attempt to prevent a workable coalition from forming. In essence, it was like yanking the air brake on the austerity train, which some would argue had strayed from emergency fiscal management into a Wisconsin-style attack on labor and the European welfare state.

Greeks want a government from this round of polls. The May 6 poll was not in vain. It sent a message toEuropeand world markets that austerity had gone too far, the weaker countries have leverage and the Greeks still have some control over their destiny. This time, the challenge is to keep the government funded and pursue some kind of a vision other than averting disaster.

The smaller parties will lose strength. The question is whether New Democracy or SYRIZA will be able to form a government. The polls swung between the two before the cut-off but neither gathered much more than 30%. Parties need about 37% to form a government outright.

The first possible outcome is Greeks opt what they already know and give New Democracy another turn at government. Such an outcome does not mean Greeks necessarily trust or feel more optimistic about this specific party. Fear of the unknown has overcome a large share of the electorate, especially among the elderly. Such a vote would mean a quick adoption of the second bailout terms, including more punishing austerity, but the Greek state will almost definitely make payroll in July. If ND does not win 37%, its old rival PASOK might put it over the top. In other words, after all the tumult from the last elections we would arrive at the same result. This outcome would be like having an Arab Spring country turn back its revolution.

SYRIZA will not likely win outright. But if it can poll well over 30% and form a leftist coalition with the Democratic Left, and possibly PASOK, the parties could appeal for a slight modification of the second bailout agreement and keep the country in the euro zone. Europe can turn its attention toSpainand turning the corner on the crisis.

Or SYRIZA could form such a radical leftist coalition, squabbling and alienatingBerlinandBrusselslong enough forGreeceto go into default. If that scenario happens,Spainmay need a lifeline for more than its banks. American and Asian markets will tumble and the European Debt Crisis will reach a depth unfathomed.

The fourth and final scenario is the unknown. This type of electoral crisis inGreeceis unprecedented, with the ripples felt in the smallest Greek island struggling to make it through tourist season to capitals abroad trying to avoid another recession.

The new government, when formed will face a dual mandate. The first goal is to deal with the severe financial issues and find common ground withGreece’s European partners. The second, the most significant and often overlooked one, is to manage and achieve the reversal of the insecurity and fatigue among Greeks (especially youth since one out of two is unemployed) to overturn the deep social crisis that came as an inevitable consequence of the financial one.

Step one in addressing that fatigue comes Saturday in the election of either a “grand” coalition of the old regime or a new alliance on the left.

Kyriaki Kafyra co-authored this story. Kafyra is an attorney based in Athens, Greece. She is a graduate of the University of Athens School of Law and Master's Programme in Southeast European Studies. She has also studied international law and peace building at the Hague Academy of International Law and the American University.