Greek voters gave Europe a bit of a reprieve by not voting to tear up the nation’s loan agreements. As it is, most have chosen to stay in the euro zone, but that remains a wish without much leverage in renegotiations for less punishing austerity terms. New Democracy leader Antonis Samaras, whose party won the biggest share of the votes, might now find it less difficult to form a coalition government than after the election last month. But even with the socialist Pasok and Democratic Left parties as partners, Samaras might not have the broad support he needs to persuade the European Union and International Monetary Fund to give Greece more leeway. He might get deadlines extended, but only to make up for the last few months when Greece should have started on the required reforms.
If Syriza had emerged with the biggest share of the vote, the party’s more adamant stand against the February bailout agreement would have sent global markets into a tailspin. But, like the unions of the public sector, the party can still give a coalition government a hard time when the nation is forced to act on a tough program of necessary reforms. The knock-on effects of a possible collapse of Greece are such that markets around the world will remain on tenterhooks while the Greeks muddle along in search of redemption.
One would think the interconnected nature of the global economy would nudge key players to adopt a broader perspective in dealing with the crisis. But regrettably, politics remains the order of the day. Despite pledges of unity and resolve by Group of 20 countries to do what it takes to address the crisis, the odds are against European leaders taking any action at their summit later this month which would allow Greece to avoid defaulting and/or exiting the euro. That would be another missed opportunity, all the more unfortunate after so many incremental and ineffective steps to contain the crisis.
Germany, the zone’s main bailout paymaster, faces a hard choice: Give Greece more time and money and risk having to rescue other troubled economies, or cut Greece loose and risk splitting up the common currency that has benefited Germany in trade and investment. Chancellor Angela Merkel is in an especially difficult spot: she will be assessing what action would be the least damaging to Germany, other euro zone and EU members, and the global economy ― in that order. She will have to weigh up the political cost of taking steps which many European and world leaders have been urging and which might upset voters at home. If she fails to act, she could be blamed for breaking up the euro and precipitating a global economic slump. As political paralysis lingers, confidence continues to ebb slowly away.
