Thursday, 16 April 2015

The cruellest month?

April is likely to be the month when Greece's fate as a member of the euro zone is decided. The government has yet to persuade its creditors to release new funding and the country is very close to running out of money and defaulting on its debt repayments. That the government is talking about holding a referendum on reform less than three months after coming to office is a sign that an impasse has been reached. The lesson of the years between the 2012 and 2015 elections is that it has become well-nigh politically impossible for any Greek government to implement the reform policies being demanded by euro zone leaders. That was the import of Syriza's victory in the January 25th election.

The previous New Democracy-Pasok government collapsed not because of a technical failure to elect a new president, but because it became politically impossible to implement reforms tied to Greece's bailout programme. In its final six months in office, the government failed to pass any significant reforms. It therefore failed to complete the fifth and final review of the bailout programme, exit from which would have brought some relief from the austerity squeeze of the past six years. Now a radical left government elected on a mandate to reverse bailout reforms is expected to accomplish what its centre-right predecessor could not.

Some euro zone leaders have lost patience with the Greek government and appear to believe that a Greek exit from the euro zone ("Grexit") is inevitable and perhaps even desirable. The government has sought, fairly successfully, to present Greece as the victim of a harsh and unyielding policy stance, tapping a deep well of popular resentment of the euro zone's leaders. It is telling that support for Syriza's left wing has risen sharply since the election. Most Greeks feel that their country has been treated unfairly, particularly by the EU's most powerful country, Germany. There is little doubt that if Greece were to default and be forced out of the euro zone, there would be a strong popular reaction. In the ensuing economic chaos, there would be a high risk of violent popular unrest and a surge in support for political extremism, including for the neo-fascist Golden Dawn.

More Greece country analysis

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