Pressure on Greece 12 days before election

Agence France-Presse
The prospect of Greece leaving the eurozone was due to figure in an emergency conference call later Monday among Group of Seven finance ministers, as well as growing worries that shaky Spanish and Portuguese banks will mean fresh European turmoil

ATHENS, Greece (AFP) – Greece was under renewed pressure Tuesday, June 5, after Standard & Poor’s said there was a one-in-three chance it would exit the eurozone after its June 17 elections and Germany and France told Athens to stick to its commitments.

The prospect of Greece leaving the eurozone was due to figure in an emergency conference call later Monday among Group of Seven finance ministers, as well as growing worries that shaky Spanish and Portuguese banks will mean fresh European turmoil.

A “Grexit” could be brought about, SP said, if the new government that emerges from the vote rejects the austerity cuts Greece promised in return for international bailouts, leading to “a consequent suspension of external financial support”.

Angry with painful spending cuts that have slashed wages and pensions and an economy in its fifth straight year of recession, voters on May 6 turned their backs on Greece’s two established political parties.

Instead, a large majority supported parties that either want to negotiate less onerous terms with Greece’s creditors — the European Union, the International Monetary Fund and the European Central Bank — or tear up the agreements.

First among these was the leftist Syriza, which saw its share of the vote triple to 17 percent and whose firebrand young leader Alexis Tsipras last week called the terms of the bailouts an “automatic pilot to utter disaster”.

Forming a coalition proved impossible, forcing fresh elections for June 17. Surveys indicate the outcome will no clearer this time, with Syriza running neck-and-neck with the New Democracy conservatives led by Antonis Samaras.

Time though will be short, with the country committed to finding soon another 11 billion euros ($13.7 billion) in cuts for the next two years.

Tsipras, 37, while saying he believes Greece should remain in the euro — as do some 80 percent of voters, polls show — wants to boost the minimum wage, tax the rich more, freeze privatizations and nationalize banks.

The New Democracy conservatives and the more mainstream socialists Pasok, authors of the austerity promises, have sought to portray Tsipras as still wet behind the ears and his program as dangerous and unworkable.

They too now say they want the “troika” of creditors to cut Greece more slack, hoping for some understanding from new French President Francois Hollande, who wants to dilute Europe’s austerity drive with more measures to boost growth.

German Finance Minister Wolfgang Schaeuble on Monday indicated there was little sympathy for Greece in Berlin, telling the Handelsblatt daily there was no “easy path” for Greece even though “this will not always be fair.”

“We are dealing in Greece with a failure by the elite over decades,” he said.

His new French counterpart Pierre Moscovici meanwhile warned Greek voters that continued membership in the currency union was in their hands.

“We don’t have advice to give going into elections but if Greece wants to stay in the eurozone, the choices it makes will allow it to do so,” Moscovici said after talks with EU economy commissioner Olli Rehn in Brussels.

SP sought to soothe fears that other at-risk eurozone members with similar problems to Greece, such as Portugal and Spain — which also face difficulty borrowing money by issuing bonds — would leave.

“We believe that other sovereigns would be unlikely to follow any Greek exit, having witnessed the resulting economic hardships and long delay in harnessing benefits from national currency devaluation,” it said.

In the meantime “their European partners would provide additional support to discourage further departures,” it predicted. – Simon Sturdee, Agence France-Presse