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Greece clings to euro as elections edge closer

By Jason Martin

Date: Friday 25 May 2012

Greece clings to euro as elections edge closer

As Greece prepares to hold new elections on June 17th, Eurozone leaders are finding the need to repeat more and more often that they want the Hellenic Republic to stay in the single currency, but only if it keeps to its commitments to be fiscally responsible and follow its bailout terms.

“We want Greece to remain in the euro area while respecting its commitments. We expect that after the elections, the new Greek government will make that choice,” said the EU leaders in the joint statement issued after this week’s summit.

A GAME OF CHICKEN

That is exactly the choice that both the European leaders and the markets are worried about. An assortment of anti-bailout powers threw the wrench in the works during the last elections with the radical left wing Syriza party coming in second place. Its leader Alexis Tsipras has a hardline stance against the bailout measures and yet also insists that his party doesn’t want to leave the euro.

Experts from Zero Hedge have aptly defined this as a game of chicken between the Eurozone and Athens. It’s “the latest episode of what can now simply be described as the world's most entertaining yet terrifying mutual assured destruction showdown, because should Greece leave, the destruction, at least in the short-term, will impact both Europe and Greece”. The Eurozone’s game appears to be to convince Greeks via the fear factor to vote for political parties such as New Democracy and Pasok that have agreed to abide by the bailout terms…or else.

It’s a scare tactic that may work. Some experts feel the first elections were used by Greek citizens as a punishing stick for the conservative New Democracy and socialist Pasok coalition government and that it may now be time to face reality. A recent poll showed that 85% of Greeks wish to stay in the euro, while just 62% oppose the terms of the emergency financing received from the EU, IMF and ECB.

One might also question the recent “leaks” that have half the Eurozone members preparing contingency plans for a Greek exit from the euro all while several leaders join the constant chorus of “stick to your agreements, stay with us”. Both sides seem to be asking the same question: “In or out?”

THE LATEST POLL

Right now it’s far from clear who is winning the political battle in Greece. The most recent poll conducted yesterday by Public Issue for the Greek newspaper Kathimerini and television channel Skai showed a fierce struggle taking place between Syriza and New Democracy.

According to the poll, both parties have gained four points in the last 10 days. Syriza leads with 30% while New Democracy follows closely with 26%. Pasok has also edged forward to 15.5%, while most of the other parties have registered a fall in their popularity.

Independently of what those surveyed said they would vote for, 54% were sure that the conservatives would win, while 35% thought Syriza would come in first.

So far the game of chicken has the Eurozone trying to convince Greeks to vote for pro-bailout parties. What could be more worrying for the markets is what happens after the elections if Athens is once again unable to form a government or, even worse, if it turns out that the possibility of Greece leaving the euro is much more than a bluff.

JM

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