Greece: Left-Wing Party Coalition and Departure from Euro

Following the Greece elections, Greece’s left-wing party Syriza has been given the opportunity to construct a coalition government after the conservative New Democracy party, given the same opportunity, gave up within a few hours.

Tsipras’ Political Base Threatens the Global Financial System

The leader of Greece’s left-wing party Syriza, Alexis Tsipras, seeks to form a new government on the base of rejecting all EU and IMF-backed austerity measures.  Tsipras has 3 days to reach a coalition deal and has told the two major parties to end their support for the austerity measures if they want to take part in the government.  With the election of Hollande in France in favor of conservative Sarkozy, the shift in the  political atmosphere following the Eurozone crisis is becoming evident.   It also bodes ill for the future of the stability of the union as the socialist victories represent a drawback from EU credibility about its ability to manage the supranational federation. Tsipras plan includes cancellation of sever budget-cutting measures forced on the country by international lenders, plans that ensure its survival from budget failure.  This proposal would result in Greece exiting the Eurozone, a reality that has scared investors and markets worldwide and has dropped stocks dramatically.  Though rumors of Greece dropping out of the Euro have been discussed since the beginning of the perpetuating debt crisis, Greece will probably leave the Euro as soon as next month as the government runs out of cash and European institutions fail to lend it more. The critical attitudes of Tsipras have not helped the situation either; rather, Tsipras demanded an examination of Greece’s still massive debt and a moratorium on repayment of the part that is ‘onerous’, statements that drove Greek shares down another 3.6% from the 7% loss of Monday.  Although the public vehemently opposed the conservative party for its pro-austerity basis, it is unlikely Tsipras’ anti-austerity base will form a coalition either.

“The pro-bailout parties no longer have a majority in parliament to vote in a majority in parliament to vote in a destructive measures for the Greek people.  The popular mandate clearly renders the bailout agreement invalid.” – Alexis Tsipras, head of left-wing party Syriza

The Greek government hangs on a precipice, with Tsipras having 3 days to form a government.  Communist Party leader Aleka Papariga refused to meet with him in person, only talking to him on the phone about possible party agreements.  Fotis Kouvelis of the Democratic Left, which splintered from Syriza in 2010, told Tsipras that he needed the support of more than just the left.  Backing the hodgepodge of parties from the Stalinist left to the neo-Nazi right, the public is as divided as the political infrastructure.  Thus, it has become widely expected that in June the final decision will likely fall to a cross-party caretaker government that may be formed in the next few days to lead the country to fresh elections.  The financial chaos has sparked huge social unrest  in Greece and led to a deep mistrust of the parties considered to be the architects of austerity, but not unity is found on the issue of who should replace said parties.  I the country hopes to continue having a running government, it requires billions of Euros in further austerity cuts in June and the country would require a 30 billion Euro installment in EU-IMF funds, funds that would not be received under Tsipras’ plans.  So saying, there does exist a dilemma between the political proposals and practicality of the decisions being made.  In response to the volatility of the continent-wide elections, the European Commission has stated that the country leaders would be expected to abide by the terms of a bailout program mean to avoid a crippling financial meltdown.

“Mr. Tsipras is doing everything to prevent a government being formed.  Nothing can be done if we leave the Euro, because the country’s catastrophe would be certain and unprecedented.  He is asking me to place my signature on the destruction of Greece – and that I will not do.” – Antonis Samaras, head of the winning conservative New Democracy party

In retrospect, the deadline for the formation of a new government is May 17.  The chance to form a coalition will pass in turn to every party, in order of the current election results.  In the event that no party can form a coalition, new elections will be called.  Greece’s potential withdrawal from the Euro could have drastic consequences for the country which would have no chance of fiscal re-cooperation without the life line that has essentially been afforded to it by the EU.  Moreover, its withdrawal would hold consequences for the EU’s credibility and the stability of the Euro, a common currency for the 17 member-states.

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