– Greece Votes With Euro at Stake on Eve of Global Leaders’ Summit (Bloomberg, June 16, 2012):
Greece voters go to polls for the second time in six weeks in an election that may determine the fate of the euro currency as global leaders gather for their annual summit.
With 21 parties on the ballot, the main event pits Syriza leader Alexis Tsipras, who has promised to renege on budget cuts demanded by creditors in exchange for a pair of bailouts, against New Democracy’s Antonis Samaras, who says his challenger is risking an exit from the currency union.
“The first thing we must determine in the elections on June 17 is to choose between the euro or drachma,” Samaras said in his final appeal June 15 in Athens. The night before, Tsipras told supporters to “turn your backs on the two parties of bankruptcy,” urging them to reject the two main parties.
The vote will turn on whether Greeks, in a fifth year of recession, accept open-ended austerity to stay in the euro or reject the bailout conditions and risk the turmoil of exiting the 17-nation currency. Group of 20 leaders begin their annual gathering in Los Cabos, Mexico, tomorrow, though France’s Francois Hollande and Germany’s Angela Merkel won’t leave until after the outcome in Greece is known.
Exit polls will be released when voting ends at 7 p.m. in Athens, with a first official estimate due around 9:30 p.m. The final polls, published on June 1, showed no party set to win a majority. The election marks a revote after the May 6 ballot failed to yield a government.
Tsipras and Samaras ran even in final opinion polls. The socialist Pasok party, which won the 2009 election and led the country into the bailout, was third at about 13 percent.
Returning to Greece
Now in its third year, the European debt crisis has rounded back to Greece, which sparked the turmoil in October 2009 when Pasok Prime Minister George Papandreou revealed a deficit four times more than European rules allowed. Greece has since gotten two rescue packages totaling 240 billion euros ($303 billion) from the European Union and International Monetary Fund.
The ballot will also mark the first test for a 100 billion- euro firewall for Spain, which on June 9 became the fourth euro country after Greece, Ireland and Portugal to seek a rescue.
Central banks intensified warnings that Europe’s failure to tame its debt crisis threatens to roil the world’s financial markets and economy as Greece’s election looms as the next flashpoint for investors. European finance ministers plan to issue a statement at the G-20 summit.
The Greek turmoil has cast a pall around the world, with Bank of England Governor Mervyn King calling the euro debt crisis a “black cloud” over the global economy.
The euro, created in 1999 and adopted by Greece in 2001, has lost 3.3 percent since May 6, when Syriza’s second-place finish increased the prospect of a Greek exit from the currency union. New Democracy won 18.9 percent in the May 6 election and Syriza got 16.8 percent.
Tsipras has pledged to keep Greece in the euro even while scrapping state-asset sales, civil-service job cuts and wage and pension reductions. Samaras says Tsipras’s policies risk forcing Greece out of the euro and causing hyperinflation, bank runs and widespread poverty.
Samaras said the choices facing Greeks at the ballot-box are government or instability; the euro or drachma. A vote for Syriza “means Greece out of the euro,” he said.
Tsipras told Athenians June 14 that he was sending a message that nobody should bet on Greece leaving the euro area.
New Democracy and Pasok “lowered the Greek flag and surrendered it to Angela Merkel,” the German chancellor who led the demand for austerity, he said.
Standard & Poor’s said in a June 4 report that the chance of Greece leaving the euro in coming months was one-in-three. Citigroup Inc. (C) said it maintained its 50 percent to 75 percent probability of a Greek exit over the next 18 months.
“The durability of any new Greek government will be limited due to implementation changes, continuing public opposition to austerity and vested interest opposition to structural reforms and privatization,” Tina Fordham, senior global political analyst at Citigroup Inc. in London, said in a June 15 note.
New Democracy led Syriza by 22.7 percent to 22 percent, according to an ANT1 TV poll on June 1, the last date surveys were made public in accordance with Greek election law. Neither party has enough support to rule outright.
Samaras said in his June 15 speech that the country couldn’t survive a third round of elections and that he’d work to form a government to save the country with partners on two conditions: that Greece remain in the euro and that a new administration would renegotiate the terms of the bailout accords.
The spending reductions demanded by the troika of creditors from the EU, the European Central Bank and the IMF to bring the country back to financial health have included cuts to pensions and the minimum wage amid tax increases, sending unemployment to a record of more than 22 percent.
Worried Greeks have stepped up the pace of withdrawing their savings before the elections on concern the nation may move closer to abandoning the euro, bankers familiar with the situation said on June 13.
Deposit outflows jumped in the days following the May 6 election and were as much as 6 billion euros in May, Athens- based Kathimerini newspaper reported June 9, without saying where it got the information. Greek bank deposits by businesses and households rose to 166 billion euros in April from 165.4 billion euros the previous month, according to a statement by the Bank of Greece on its website on May 31.
The outflow is increasing the strain on a banking system that has suffered since the beginning of the crisis. An exit from the euro would cut lenders off from access to ECB funding.