The power struggle in Greece will destroy the Eurozone project. It is only a matter of time.
Greece is now going through a convulsive crisis where the extreme left-wing party, Syriza, could very well win the parliamentary election. Syriza has promised to forcefully end the austerity program forced upon Greece by its Troika of lenders: The European Central Bank, The European Commission, and the International Monetary Fund.
Today The Economist writes, “Although Mr Tsipras (head of the Syriza Party) says he wants to keep Greece in the euro, he also wants to dump most of the conditions attached to its bail-outs, ending austerity, reversing cuts in the minimum wage and in public spending, scrapping asset sales and seeking to repudiate much debt. Such a programme seems, to put it mildly, to sit uncomfortably with Greece’s continuing membership of the single currency.”
To put it mildly, this is really bad for the Eurozone. Greece is where the whole contagion started and it looks to be where the end begins. If Greece decides to shrug off the commitments it made over the last several years in return for hundreds of billions of dollars, then all of that money, stress, and austerity will have been wasted. The market will punish Greece upon exit; however, the market will then start looking for the next domino. Once Greece goes, where does it stop?
So now the Europeans have a decision to make. Zero Hedge relays from Reuters:
“If Alexis Tsipras of the Greek left party Syriza thinks he can cut back the reform efforts and austerity measures, then the troika will have to cut back the credits for Greece,” he said.
“The times where we had to rescue Greece are over. There is no potential for political blackmail anymore. Greece is no longer of systemic importance for the euro.”
The simple fact is that the Greeks simply do not want to live within their means. They want to continue having everything for free. This is the consequence of decades of socialism. The Germans and the rest of Europe have to come to terms with this fact.
The real question is, where does the Eurozone go from here? Do they protect other weak players in the economic union? Or does the Eurozone shrink in size or disappear altogether? Either way, this will not end well. There will be social unrest. Just like there was in Germany years ago which gave a young Austrian a shot at power.
Image Credit: Stephanie Jones (Flickr)
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