As a caustic election campaign in Greece revives fears that the country could leave the euro, European officials are taking an increasingly hard line toward Athens, saying they want to keep Greece in the single currency, though not at any cost.
The admonishments have stacked up in recent days — from Berlin, Paris and Brussels — intensifying what is shaping up to be another high-stakes standoff between Europe’s leaders and the eurozone’s most troubled country.
Since the previous acute Greek political crisis in 2012, European leaders have spent their time building firewalls against the kind of financial contagion that has rocked the continent before and their stiff warnings to some extent reflect their confidence that the eurozone would survive Greece’s exit.
Yet the turmoil in Greece is demonstrating its potential to rattle financial markets, adding an untimely sprinkling of anxiety to a heaping of external factors that helped drive the euro to a nine-year low against the US dollar on Monday.
To the evident dismay of European officials — and international markets — the narrow frontrunner for the Jan. 25 election appears to be Alexis Tsipras, head of the leftist SYRIZA party.
Although Tsipras has made it clear that he would like to keep Greece in the eurozone, he has also vowed to repudiate parts of the nation’s debt, roll back the austerity measures required by its international creditors and renegotiate deals with them that have given Athens access to billions in aid.
Following through on such pledges could cost Greece’s creditors — and European taxpayers — tens of billions of dollars, particularly if financial markets become strained by uncertainty.
The possibilities are once again raising an existential question for European leaders: What cost are they willing to bear to keep Greece in the eurozone? Their answer, for now, has amounted to a tough line, particularly from austerity-minded Germans.
On Monday, German Minister of the Economy Sigmar Gabriel said that Europe would not accept undermining the stability that has returned to the eurozone over the past couple of years.
“We aren’t vulnerable to blackmail,” he said in an interview with German newspaper Hannoversche Allgemeine. “We expect from the Greek government — regardless of who will form it — that the agreements made with the EU will be respected.”
Last week, German Minister of Finance Wolfgang Schaeuble cautioned Athens against moving away from its current economic reforms, saying: “If Greece takes another path, it will be difficult. Any new government will have to stick to the agreements made by its predecessor.”
In an acknowledgment of the delicacy of the situation, German officials on Monday quickly backed away from a weekend report by Der Spiegel magazine suggesting that German Chancellor Angela Merkel and Schaeuble believed that the eurozone could cope if Greece quit the euro and returned to the drachma.
A Berlin government spokesman denied that contingency plans had been made for such a possibility and insisted that Germany wants Greece to remain in the eurozone.
Officials in Brussels also emphasized on Monday that membership in the bloc was “irrevocable,” although they left open to what extent Athens could renegotiate the terms of its bailout after the election.
“The euro is here to stay,” European Commission spokeswoman Annika Breidthardt said.
Former Belgian prime minister Guy Verhofstadt, who leads the Liberal group in the European Parliament, called the idea of a Greek exit, or “Grexit,” from the eurozone “nonsense,” not only because most Greeks do not want to leave the shared currency, but also because European taxpayers would wind up losing billions of euros that Athens owes them.
“Instead of talking about a possible Grexit, we should focus on solving the investment problem Greece and other countries are facing,” Verhofstadt said.
In Paris, French President Francois Hollande said in a radio interview on Monday that although the Greeks were “free to choose their own destiny,” there were “certain engagements that have been made and all those must be of course respected.”
Tsipras, for his part, has softened the fiery language he employed during national elections in 2012, when he threatened to rip up Greece’s bailout agreement and default on the debt. He insists that he does not want the country to leave the eurozone.
However, in a campaign swing last weekend, he said his party would ensure that much of Greece’s debt is written off as part of a renegotiation of its international bailout deal and reiterated plans to roll back many of the austerity policies required for the bailout.
“Austerity is both irrational and destructive,” he said. “To pay back debt, a bold restructuring is needed.”
On Monday, Greek Prime Minister Antonis Samaras, whom many Greeks blame for carrying out a harsh austerity plan that has deepened a recession, began his re-election campaign, warning that a victory for Tsipras would lead to a default and an exit from the euro.
Tsipras has brushed off such arguments as a scare tactic, but most European governments would still prefer to deal with Samaras, who has overseen the slow but steady accomplishment of many reforms required by Greece’s creditors, at the political cost of angering many Greeks who see austerity as having devastated their lives.
Samaras also improved the country’s overall financial figures enough so that it could return to borrowing in international financial markets last year for the first time since 2012.
His term was supposed to end in 2016 and he had forecast a return to meager economic growth this year after a devastating five-year recession that has left unemployment at a staggering 25 percent. However, Samaras has insisted that if the early election empowers SYRIZA, the gains Greece has made will fall by the wayside.
Greek businesses have reported that foreign investments have all but stopped amid the uncertainty, while billions of euros in value has been wiped off the Athens stock exchange over the past several weeks.
Tsipras continues to run about 3 percentage points ahead of Samaras in national political polls, but it is not entirely certain that SYRIZA will garner enough seats in the Greek parliament to have a solid majority. If it does not gain enough seats, Tsipras would be forced to form a fragile coalition government, raising questions about his ability to carry through on his election promises.
Nearly 20 percent of Greek voters say they have not yet decided who to vote for on Jan. 25, according to an analysis by economists at Commerzbank. Adding to the uncertainty, former Greek prime minister George Papandreou on Monday formed a new political party that could cost SYRIZA some votes.
Still, most observers expect that a Greece run by Tsipras would stay within the eurozone and that a new government in Athens would reach an agreement with its European creditors after a period of turmoil. After all, if Greece were to return to the drachma, it would likely face new economic upheaval that it can ill afford.
Preventing a Greek exit is also still desirable for Germany and other countries, since billions of euros in European taxpayer money could be wiped out if the country were to leave the euro, raising the risk of a political backlash against leaders in those countries, Commerzbank economists.Jorg Kramer and Christoph Weil said.
“It would be much easier politically to renegotiate a compromise with Greece, albeit a lame one, and thus maintain the fiction that Greece will pay back its loans at some point in time,” they said.
James Kanter contributed reporting from Brussels.
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