“There is a dismal symmetry,” says The Economist, “in seeing the euro crisis flare up again” five years after it began – and in the same place, Greece.
Prime Minister Antonis Samaras has called an early presidential election. If he can’t get 60% of MPs to approve his choice in three rounds of voting, culminating on 29 December, he will have to call a general election.
And he may well struggle to get enough votes due to defections triggered by the austerity imposed by the European Union and the International Monetary Fund (IMF).
If there is an election, the likely winner is left-wing populist party Syriza, which seems determined to water down austerity and renegotiate Greece’s debt. This will create “a tricky choice”, says Buttonwood in The Economist.
If Syriza’s demands are unreasonable, the rest of Europe could be tempted to eject Greece from the eurozone. The danger then is that markets will start to worry that other countries might leave, which drives up borrowing costs for other struggling countries – Italy’s debt pile in particular looks unsustainable.
But if policymakers reach a deal with Greece, other nations will demand similar concessions. That would then undermine the EU’s credibility and make it harder for it to insist on the fiscal reforms southern Europe needs to boost long-term growth.
In the longer term, more political turmoil in the eurozone is on the cards. Ongoing stagnation and the descent into deflation will make debt loads even heavier; German opposition may keep delaying quantitative easing (QE); and structural reform is agonisingly slow. All this means a sudden growth spurt is unlikely, and popular resistance to austerity is growing.
“The really significant development” of the past three years, says Roger Bootle in The Daily Telegraph, “has been the growth of political opposition to the euro.”
In Italy, all three main opposition parties are anti-euro. Spain, Portugal, and Italy are due to hold elections too next year – and anti-euro populists are set to do well, says Bloomberg.com. In France, the anti-euro National Front has topped an opinion poll for the first time.
In short, the odds of a messy collapse of the eurozone have risen. “The economics of this vanity project have been dodgy all along,” notes Bootle. “Now the political foundations have started to shake.”