Greek Elections: A Referendum on the Euro?

Greeks go to the polls on Sunday in an election that could determine whether the country stays in the euro zone — and perhaps the future of the currency union itself

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Louisa Gouliamakilouisa Gouliamaki / AFP / Getty Images

People walk by pre-election posters of the conservative New Democracy party in Athens on June 15, 2012

Greeks go to the polls on Sunday in a closely watched election that could send tremors through the euro zone — and the global economy. Many are framing the election as a referendum on the euro, the coveted currency of 17 European nations, including Greece. Others say it’s a choice between hope for an alternative to the country’s painful austerity measures and fear that such an alternative will force Greece into a devalued life with its previous currency, the drachma.

“Are we doomed either way?” asked Stefanos Kosmidis, a taxi driver from Athens who said Thursday that he was still trying to decide who to vote for. “For us here in Greece, this election seems to be about choosing the politician who will do the least damage. But even a little bit of damage is too much for us. There is so much pressure from the outside — from banks, from Germany, from Brussels — and it feels like we have run out of time.”

(MORE: After the Fall: Greece’s Former Prime Minister Assesses the State of His Nation)

Indeed, Greece has run out of time. The country could go broke in a month if its troika of lenders — the European Union, the European Central Bank and the International Monetary Fund — decide to pull the plug on billions in international bailout loans. That could happen if there’s a standoff between the next Greek government and European leaders like Germany’s Angela Merkel who insist that Greece must stick to the original terms of the bailout loan. “There is an overall concern in Europe as to whether the country is going to be able to fulfill its obligations,” says Janis A. Emmanouilidis, an analyst at the European Policy Centre in Brussels. “There is a feeling of suspicion because some political leaders are telling Greeks that an in-depth renegotiation of the bailout agreement is possible. But that’s not how policymakers here see it.”

Emmanoulidis singles out Greece’s rising leftist, Alexis Tsipras, leader of the Syriza party, as the politician who most worries European leaders. Before the country’s May 6 elections, Syriza was a motley coalition of socialists, communists and Trotskyites who held just a fraction of seats in parliament. The party was best known for anti-austerity protests as its members shouted down pro-bailout politicians in parliament. Older lawmakers from established parties dismissed Tsipras, who’s 37 but looks young enough to be a college student, as a young punk who talked out of turn.

But as austerity measures such as wage and pension cuts and tax hikes dragged the country into a deep recession and doubled unemployment, Tsipras expertly tapped into growing public anger. He told Greeks that he would cancel the memorandum between Greece and its lenders which forced the austerity measures on the Greek public, and negotiate a new loan-repayment plan that would be tied to economic growth. He doesn’t advocate a return to the drachma, however. After Syriza came in a surprise second in last month’s elections, Tsipras tempered his fiery rhetoric and stuck to a main talking point — that forcing Greece out of the euro zone would have deep repercussions. “A Europe without Greece is a disabled Europe, and a Europe without democratic principles has no future,” he told cheering supporters at a campaign rally in Iraklion, a city on the island of Crete. “We may be a small country, but in the European Union, we are all equals. Greece should not be used as a guinea pig for a failed economic policy.”

(PHOTOS: Protests in Athens)

It’s a message that resonated deeply with Dimitris Koumarelas, a 24-year-old graduate student in biology at the University of Crete. “It’s about time someone stood up for Greece and didn’t let the bullies of Europe and the corrupt bankers roll over us,” Koumarelas said at Tsipras’ rally. “They’re trying to blackmail us into voting for parties who destroyed this country just because those parties will go along blindly with austerity measures. The Europeans should talk to us — we are part of Europe and we want to stay in the euro zone. We just want a plan that will help us pay back our loans.”

But that plan is never going to materialize under Syriza, according to Antonis Samaras, the leader of the conservative New Democracy party, which is one of the two main political parties that have run Greece for the past 40 years but won only about 19% of the vote in the May 6 elections. He told reporters on Thursday that Syriza’s economic plan is “written in drachmas” and warned that Tsipras was “playing poker” with Greece. New Democracy and Syriza are running close in polls, though neither party is expected to win a majority of seats in Sunday’s election, which means they’ll have to work with other parties to form a coalition government. The parties already failed to do this once following last month’s elections, but both Samaras and Tsipras say it’s absolutely crucial to form a government immediately after the new polls to avoid a panic that would induce devastating ripple effects, like bank runs.

Samaras has already said he’s open to a coalition, and there’s broad speculation that it might be formed with PASOK, the once-mighty Socialist party that accepted the bailout terms from Europe and suffered the public’s anti-austerity wrath. PASOK is now running a distant third in polls. But no matter which parties end up in a governing coalition, Tsipras has already had a major impact on both Samaras and PASOK leader Evangelos Venizelos; they now say they want to renegotiate the bailout terms too.

(MORE: Is a Greek Exit from the Euro Inevitable?)

Just how much wiggle room Greece’s politicians have, though, remains to be seen. “Yes, you can renegotiate the memorandum, but there’s not a lot of room to do so, and you have to be specific,” says Gikas Hardouvelis, who served as top economic adviser to former technocratic Prime Minister Lucas Papademos. “I would have really liked to see the political debate discussed in this way — on particular characteristics of the memorandum that Greeks do not like, and whether we can change them and how.”

Greece has not had a rational discussion about the bailout terms and austerity measures because emotions have spiraled out of control over the last two years, says Michalis Dekastros, a 25-year-old doctoral student in economic law. He attended a recent pro-euro rally in Syntagma, the square across the street from parliament in Athens, which attracted only a couple of hundred people. He says he’s frustrated that Syriza and New Democracy are heavy on ideological slogans but light on concrete details.

“I don’t trust the leftists because they are hot-headed, and I don’t trust New Democracy because they are part of an old, rotten political system that got us into trouble,” Dekastros said. “Our country is in desperate need of reform and rebirth — and it would be much easier to do this if we stayed in the euro zone. We must do whatever it takes to remain part of Europe.”

MORE: Crisis in the Euro Zone: Alexis Tsipras Is the Greek Who Makes Europe Tremble