Return of the drachma? Radical left party in Greece poised to take power

Everyone knows that the radical left Syriza party in Greece is going to win the general election being held today. The question on everyone's mind - especially at EU headquarters - is what the anti-bailout party is going to do about the bailout?

No country has gone through the pain of austerity that Greece has endured. Then again, no country had such monumental debt problems. With fully 20% of Greeks employed in one way or another by the government, and social spending piling up an unmanageable deficit, the EU made a deal with the Greek government that it would help reduce it's huge debt obligations through a bailout and a severe investor haircut that forced most bond buyers to take less than 50% on the dollar.

But the socialists make it sound easy; they want to "restructure" the debt deal (translation: a managed default on some of the debt), and return to the free spending ways of yesterday.

Not surprisingly, the EU is taking a dim view of these plans and is openly discussing kicking Greece out of the eurozone.

Fox News:

"Today, the Greek people are called to decisively make the remaining step toward the return of hope, the end of fear, the return of democracy and dignity in our country," he said outside the polling station. He said a vote for Syriza would ensure that Greece negotiated "a tough bargain to rejoin Europe on an equal basis. I am optimistic this will be a historic day."

Syriza has promised to renegotiate the country's 240 billion euro ($270 billion) international bailout deal. It has pledged to reverse many of the reforms that international creditors demanded in exchange for keeping Greece financially afloat since 2010.

The anti-bailout rhetoric has renewed doubts over Greece's ability to emerge from its financial crisis that has seen a quarter of its economy wiped out, sent unemployment soaring and undermined the euro, the currency shared by 19 European countries.

Greece's creditors insist the country must abide by previous commitments to continue receiving support, and investors and markets alike have been spooked by the anti-bailout rhetoric. Greece could face bankruptcy if a solution is not found, although speculation of a "Grexit" — Greece leaving the euro — and a potential collapse of the currency has been far less fraught than during the last general election in 2012.

Samaras' campaign focused on the improving economy, which grew for the first time in six years in the third quarter of 2014. He has promised to reduce taxes if re-elected and has warned of the potentially dire consequences of reneging on bailout conditions. Opponents accused him of using fear tactics.

Syriza's promises to end Greece's era of crushing austerity have attracted many voters infuriated by the deterioration in their standard of living and ever-increasing tax bills.

So, runaway socialism caused the crisis in the first place, and the Greeks think the way to fix it is to bring back runaway socialism. Makes perfect sense - if you're a socialist.

While there have been some threats from the EU about forcing the Grexit - especially from the Germans who end up largely funding these bailouts - most EU officials prefer to take a wait and see attitude toward Syriza. If it is at all possible they can renegotiate the terms of the bailout, they will probably do so. But holders of Greek debt want the government on a short leash, and it isn't likely that Syriza will get the leeway to negotiate they think they will get.

One quick way for Syriza to get out of debt is to devalue the currency - go off the euro and bring back the drachma. But the financial chaos that would ensue probably makes that a last resort move and would not be considered unless the EU forces the Grexit.

 

Everyone knows that the radical left Syriza party in Greece is going to win the general election being held today. The question on everyone's mind - especially at EU headquarters - is what the anti-bailout party is going to do about the bailout?

No country has gone through the pain of austerity that Greece has endured. Then again, no country had such monumental debt problems. With fully 20% of Greeks employed in one way or another by the government, and social spending piling up an unmanageable deficit, the EU made a deal with the Greek government that it would help reduce it's huge debt obligations through a bailout and a severe investor haircut that forced most bond buyers to take less than 50% on the dollar.

But the socialists make it sound easy; they want to "restructure" the debt deal (translation: a managed default on some of the debt), and return to the free spending ways of yesterday.

Not surprisingly, the EU is taking a dim view of these plans and is openly discussing kicking Greece out of the eurozone.

Fox News:

"Today, the Greek people are called to decisively make the remaining step toward the return of hope, the end of fear, the return of democracy and dignity in our country," he said outside the polling station. He said a vote for Syriza would ensure that Greece negotiated "a tough bargain to rejoin Europe on an equal basis. I am optimistic this will be a historic day."

Syriza has promised to renegotiate the country's 240 billion euro ($270 billion) international bailout deal. It has pledged to reverse many of the reforms that international creditors demanded in exchange for keeping Greece financially afloat since 2010.

The anti-bailout rhetoric has renewed doubts over Greece's ability to emerge from its financial crisis that has seen a quarter of its economy wiped out, sent unemployment soaring and undermined the euro, the currency shared by 19 European countries.

Greece's creditors insist the country must abide by previous commitments to continue receiving support, and investors and markets alike have been spooked by the anti-bailout rhetoric. Greece could face bankruptcy if a solution is not found, although speculation of a "Grexit" — Greece leaving the euro — and a potential collapse of the currency has been far less fraught than during the last general election in 2012.

Samaras' campaign focused on the improving economy, which grew for the first time in six years in the third quarter of 2014. He has promised to reduce taxes if re-elected and has warned of the potentially dire consequences of reneging on bailout conditions. Opponents accused him of using fear tactics.

Syriza's promises to end Greece's era of crushing austerity have attracted many voters infuriated by the deterioration in their standard of living and ever-increasing tax bills.

So, runaway socialism caused the crisis in the first place, and the Greeks think the way to fix it is to bring back runaway socialism. Makes perfect sense - if you're a socialist.

While there have been some threats from the EU about forcing the Grexit - especially from the Germans who end up largely funding these bailouts - most EU officials prefer to take a wait and see attitude toward Syriza. If it is at all possible they can renegotiate the terms of the bailout, they will probably do so. But holders of Greek debt want the government on a short leash, and it isn't likely that Syriza will get the leeway to negotiate they think they will get.

One quick way for Syriza to get out of debt is to devalue the currency - go off the euro and bring back the drachma. But the financial chaos that would ensue probably makes that a last resort move and would not be considered unless the EU forces the Grexit.