Moment of truth for Greece

Greeks go to the polls on Sunday faced with a simple choice; re-elect the coalition of socialists and center right parties that negotiated the bailout with the EU and IMF last year or elect anti-bailout parties that would scotch the deal and drive Greece out of the euro.


"Sunday will decide if we stay in Europe and in the euro ... or if we send the country down the road of bankruptcy and its people to massive poverty," Socialist leader Evangelos Venizelos told voters on Friday, before campaigning drew to a close.

The International Monetary Fund and Greece's euro zone partners have warned that whoever wins the election must keep implementing austerity measures for Greece to keep receiving the aid it needs to stay afloat.

The acid test will come fast: the new government must next month come up with over 11 billion euros in extra spending cuts for 2013 and 2014 to keep getting bailout aid, and get the plan approved by parliament.

With an economy which has already narrowed its budget deficit from 15.6 percent of GDP in 2009 to 9.1 last year and is forecast to shrink by another five percent in 2012, that will be a tough task given a parliament that could feature as many as seven small parties opposed to the bailout, including the extreme-right Golden Dawn.

The anti-bailout parties are telling voters that the EU is bluffing - that Greece is too important for them to kick the country out of the common currency. No doubt Germany, whose people are tired of bailing out the rest of Europe, would love for the anti-bailout forces to call their bluff.

But the European Central Bank and the rest of the EU has somewhat insulated themselves from any Greek default by establishing an emergency fund and changing the rules governing the bank. That spells doom for Greece if they don't take the warnings of Germany and the IMF seriously.

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