Eurozone awaits outcome of crucial Greek vote
by Daniel Mason
15 June 2012
Greeks will head to the ballot box on Sunday for the second time in quick succession to vote in elections that could decide their country's future in the eurozone and the wider fate of the single currency. The closely watched contest will see Greeks pass judgement again on two years of austerity and bail-outs, after political parties failed to form a coalition government on the back of inconclusive elections six weeks ago.
It also comes a week after Spain became the fourth eurozone country to request a bail-out, as it sought up to €100bn to recapitalise its banks, marking a new test of the resolve of euro area leaders to prop up the ailing currency. In Greece opinion polls published before June 1 suggested no party would win a majority, with the left-wing alliance Syriza vying for first place with the mainstream centre-right party New Democracy.
Alexis Tsipras, leader of Syriza – which finished second in the May 6 poll –has said he wants Greece to stay in the eurozone but abandon the so-called 'memorandum of understanding' that sets out the strict terms of European Union and International Monetary Fund rescue loans. Speaking on state television this week, Tsipras said he aimed to "re-examine and replace" the agreement with a new deal to stabilise the economy, and that European leaders "ought to realise that the policy of austerity has failed". Should he win the election, he has reportedly given himself 10 days to negotiate a fresh arrangement.
Meanwhile New Democracy and the socialist Pasok, which were in government together when the latest bail-out was agreed, support the package but have indicated a preference to renegotiate the details.
Eurozone and EU leaders have consistently said that Greece must stick to the commitments it made in return for a total of €240bn of loans – otherwise the funds will dry up and the country will face an exit from the single currency. In an interview with Greek Mega Channel television this week, French President Francois Hollande said he wanted Greece to stay in the eurozone but urged the country to comply with the bail-out conditions. "I respect the Greek people," he said. "They will decide what they want on the occasion of the election.
"But I must warn them, because it is my duty, because I am a friend of Greece, that if the impression is given that the Greeks want to move away from the commitments that were taken and abandon all prospects of revival, then there will be countries in the eurozone that will want to end the presence of Greece in the eurozone."
Greece is in its fifth year of recession, with unemployment running at 22.6 per cent. According to Reuters, Greeks have been withdrawing around €800m a day from banks in the run-up to the election, fearing the impact of a potential exit from the eurozone. Although opinion polls are banned in Greece in the last few days before an election, rumours yesterday of secret surveys showing New Democracy establishing a lead over Syriza sparked a rally on the country's stock exchange in Athens. The index closed 10.1 per cent higher while banking shares soared by 23.6 per cent, in anticipation of a pro bail-out government.
Finance ministers from all 17 eurozone countries may hold a conference call once the result of the election is known on Sunday evening, AFP reported, citing an unnamed diplomatic source.
It also comes a week after Spain became the fourth eurozone country to request a bail-out, as it sought up to €100bn to recapitalise its banks, marking a new test of the resolve of euro area leaders to prop up the ailing currency. In Greece opinion polls published before June 1 suggested no party would win a majority, with the left-wing alliance Syriza vying for first place with the mainstream centre-right party New Democracy.
Alexis Tsipras, leader of Syriza – which finished second in the May 6 poll –has said he wants Greece to stay in the eurozone but abandon the so-called 'memorandum of understanding' that sets out the strict terms of European Union and International Monetary Fund rescue loans. Speaking on state television this week, Tsipras said he aimed to "re-examine and replace" the agreement with a new deal to stabilise the economy, and that European leaders "ought to realise that the policy of austerity has failed". Should he win the election, he has reportedly given himself 10 days to negotiate a fresh arrangement.
Meanwhile New Democracy and the socialist Pasok, which were in government together when the latest bail-out was agreed, support the package but have indicated a preference to renegotiate the details.
Eurozone and EU leaders have consistently said that Greece must stick to the commitments it made in return for a total of €240bn of loans – otherwise the funds will dry up and the country will face an exit from the single currency. In an interview with Greek Mega Channel television this week, French President Francois Hollande said he wanted Greece to stay in the eurozone but urged the country to comply with the bail-out conditions. "I respect the Greek people," he said. "They will decide what they want on the occasion of the election.
"But I must warn them, because it is my duty, because I am a friend of Greece, that if the impression is given that the Greeks want to move away from the commitments that were taken and abandon all prospects of revival, then there will be countries in the eurozone that will want to end the presence of Greece in the eurozone."
Greece is in its fifth year of recession, with unemployment running at 22.6 per cent. According to Reuters, Greeks have been withdrawing around €800m a day from banks in the run-up to the election, fearing the impact of a potential exit from the eurozone. Although opinion polls are banned in Greece in the last few days before an election, rumours yesterday of secret surveys showing New Democracy establishing a lead over Syriza sparked a rally on the country's stock exchange in Athens. The index closed 10.1 per cent higher while banking shares soared by 23.6 per cent, in anticipation of a pro bail-out government.
Finance ministers from all 17 eurozone countries may hold a conference call once the result of the election is known on Sunday evening, AFP reported, citing an unnamed diplomatic source.
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