Greeks will go to the
polls on January 25. The outcome may lead to debt repudiation, other severe
losses on assets and the beginning of the end of the common currency. Even if
Europe avoids the worst, the best anyone can hope for is heightened levels of uncertainty.
Uncertainties inside Uncertainties
It is entirely
possible that Samaras will return to office. Syriza’s lead has already shrunk
from double-digits not too long ago to only three percentage points according
to some polls, well within their statistical margin of error.
But even with a
Samaras victory, uncertainties would remain. No doubt chastened by his defeat
in the presidential poll and by the need to have called an election, he could
easily show a greater willingness to soften austerity policies and delay other
reforms still longer. Europe, in time, might find him and his new coalition
much less cooperative than he or it once were. And this is the most stable and
predictable of the potential environments that could emerge from the Greek
vote.
A Syriza victory, with
its volatile leader, Alexis Tsipras, as prime minister, would open a myriad of
possibilities, and there is no way to know what sort of agenda he might put in
place. Over the last couple of years, he has talked out of so many sides of his
mouth that Greeks going to the polls later this month really cannot know for
what or against what they are voting.
When Syriza first
gained popularity, Tsipras expressed unrestrained hostility to Greece’s
membership in the euro and argued that Athens should repudiate much of its
debt. More recently, he has softened his resistance to euro membership, though
he still espouses a determination to tear up the austerity conditions imposed
by the Troika. His current position on debt repudiation remains ambiguous.
Against such a
backdrop, the election promises anything from an ambiguous moderation in
Greece’s playbook all the way to an exit from the common currency, what
journalists in the early days of the current crisis referred to as a “Grexit.”
It is little wonder, then, that markets quickly upped the interest rate charged
on Greek borrowing from about 5.5 percent a few weeks ago to 9.5 percent right
after the election was called.
Possibilities: Some Helpful, Most Destructive
For the Greeks, these
more extreme possibilities could cut two ways. On the positive side, an exit
from the euro and a return to a depreciated drachma would aid growth by making
Greek goods and services cheaper to the rest of the world and accordingly more
competitive.
Debtors within Greece
would benefit, too, having the ability to discharge their obligations in a
currency much depreciated against the euro. On the negative side, such a
prospect would destroy wealth. Greek savers would see the global purchasing power
of their assets drop with a drachma depreciation, whatever initial conversion
rate the government determined.
(Πηγή: nationalinterest.org)
