Greek Election Results May Mean the End of the Euro Zone


Greeks went to the polls Sunday and sent a loud and clear message to EU leaders in Brussels and Berlin. The complete flogging of the socialist Pasok party, which oversaw the signing of the deep austerity deal, indicated to the world that Greeks had no appetite for continuing the austerity-only approach to their deficit. As of Wednesday evening, it appears that Greeks will return to the polls next month for a second round of elections; the three leading parties were given three days to form a coalition government and, so far, they seem unable to do so.  

The task to form a coalition government was first handed to New Democracy leader Antonis Samaras. His New Democracy Party, a centre-right party won the most votes with 18.8%. Samaras gave up trying to run the coalition within hours. The task then fell on Alexis Tsipras, leader of the second-place finishers, Syriza. Syriza, formed through a coalition of left-leaning parties,  has demanded that Greek leaders renege on their commitment to a $170 billion loan deal signed in February. Tsipras was, however, unable to find the 151 seats needed for a coalition government in the 300-seat parliament. Greeks are waiting to see if Evangelos Venizelos, leader of the third-place socialist Pasok party, will be able to form the coalition government. This however, seems unlikely.  Due to the leading parties inability to form a coalition governement,  it appears that the president will be required to appoint an interim government and call for June elections.

No matter what party eventually leads a coalition, it seems unlikely that the next Greek government will be able to support the current bailout agreement. Seven parties entered parliament on this vote, ranging from the neo-Nazi Golden Dawn party to the hardline communists. Only two parties, however, support the current deal with international creditors; the socialist Pasok party and the centre-right New Democracy Party. These two centralist parties have alternated control of Greece since the demise of the military junta in 1974, and both are seen as the domestic architects of the austerity deal. While they have enough combined seats to form a strong coalition government, this move seems politically impossible.

With Germany’s refusal to back down from its calls for deep austerity, Greece’s future in the euro zone is once again an open question. The biggest question, however, is whether Greece will be the only country to leave the currency union. Deep austerity plans enforced by Berlin will be just as unpopular in Spain and Italy. If Spain, Portugal, Ireland, and Italy follow Greece in exiting the euro zone, economies across Europe will suffer. German politicians must remember that if Southern Europe's countries return to their radically devalued currencies, consumers in those countries will no longer be able to afford German exports, which drive Germany’s economy: Even at the height of the European recession, 60% of German exports went to fellow EU member countries. Without these countries in the euro zone, Germany -- and all of Europe -- can expect a big economic decline.