After Greece’s effective bankruptcy in May 2010, and two years of unprecedented austerity measures in return for massive emergency loans from the eurozone, voters chose to punish the country’s two major political parties and catapulted the once-fringe Coalition of the Radical Left (Syriza) into second place in last month’s inconclusive poll (see background).
The formation of a coalition or unity government proved impossible and new elections were called for 17 June, amid stern warnings from eurozone leaders and EU officials that if Greece does not implement the Second Adjustment Programme, which was agreed in March, then bailout funds would be cut off and the country would be forced to abandon the eurozone.
However, during the weeks that followed May’s elections, erratic opinion polls showed that those warnings had limited impact on Greek voters’ attitudes and that Syriza not only increased its influence, but it might also score a stunning victory in Sunday’s polls.
Alexis Tsipras, the coalition's leader, insists that he wants to keep Greece in the eurozone, but has vowed to scrap the memorandum of understanding between Athens and the troika of its international lenders - the European Commission, the European Central Bank and the International Monetary Fund.
Brussels and Berlin have responded that Greece cannot have it both ways.
Commission President José Manuel Barroso told the European Parliament this week that the Union wanted Greece to remain in the eurozone, on the condition that it would respect its commitments.
Hannes Swoboda, the Socialist leader in the European Parliament, told EurActiv on 12 June that if Tsipras wants to blackmail the eurozone, this was “not going to work”.
More recently, Tsipras has toned down his rhetoric. In an op-ed published in the Financial Times on Tuesday, Tsipras wrote: “Lest there be no doubt, my movement – Syriza – is committed to keeping Greece in the eurozone.”
Rumours spread yesterday that “secret polls” show the centre-right New Democracy enjoys a comfortable four-point lead over Syriza. The publication of opinion polls is forbidden in Greece during the last two weeks before the elections.
Although Tsipras decided to take it down a notch, he warned that if Europeans do not accept his demand to ease the austerity measures, then the return to Greece’s old currency, the drachma, “should not be a taboo”.
If he wins the elections on Sunday and repeats his warning, then many analysts fear that a bank run may occur, not only in Greece, but in other European countries as well.
Reuters reported earlier this week that Greeks have been withdrawing as much as €800 million per day from their bank accounts, fearing their country’s expulsion from the eurozone.
Already, the eurozone has withheld part of last month’s bailout installment and the pre-election paralysis has caused an unprecedented fall of public revenues.
The Greek state will therefore completely run out of cash within the next three to four weeks if the stalemate continues. The situation in other sectors of the economy is equally severe: the Athens Stock Exchange Index has fallen by more than 90% in comparison to pre-crisis levels. The economy is shrinking for a fifth year in a row and GDP is expected to contract by 20% in comparison to pre-crisis levels. House prices have collapsed by almost 50%.
Unemployment has reached 22%. More than half of Greek youths have no job, or prospect of finding a job.
All private electricity providers have gone bankrupt and the only utility provider left (the state-owned DEI) is facing imminent bankruptcy, due to the huge number of unpaid bills. The state owned gas provider has also ran out of cash, and it is possible that very soon no one will be supplying oil or natural gas in Greece.
The country is facing problems in importing medicines. Tourism, the country’s only “heavy industry”, is also in crisis, as a double-digit fall in both revenues and arrivals is expected this year. In short, the Greek economy is in danger of utter implosion as early as July.