The Likelihood of ‘Grexit’ is Lessening – Greeks May Want the Euro More Than They Want to End Austerity

Their Election is the Choice Between the Terrible and the Awful – Let’s Hope They Vote Correctly

The upcoming election is June for Greece’s legislature and Prime Minister has two themes.  The first is that the election is a referendum on the austerity program imposed on Greece by Europe, (mostly Germany) in return for hundreds of billions of Euro’s of bailout money.  The second aspect of the election is that it is a referendum on whether or not Greeks want to stay in the European Union and continue with the Euro as the country’s currency.

Unfortunately for Greece a vote one way is a vote against the other way.  What Greece would like is to modify the austerity package so that it does not produce economic disaster and the remain in the Euro since leaving it would produce economic disaster.  But voting for the Syriza party that is committed to disavowing the austerity program is also seen as a vote to leave the Euro.  Voting for New Democracy (center/right) or Pasok (center/left) is a vote to continue in the Euro but also a vote to sustain the austerity program.

A further complication is that the Greek parliament, which will choose the Prime Minister awards 50 bonus seats to the party that finishes first.  So if New Democracy can win the largest percentage of votes and if Pasok can win enough votes so that combined with New Democracy the two parties would have a majority in the parliament, Greece will have voted to stay in the Euro.  That is what the polls show at this time.

Several opinion polls over the weekend showed support for the conservative New Democracy party climbing to 23% to 24%, up from its dismal 18.9% result in Greece's May 6 elections, which failed to produce a viable governing majority and forced the repeat elections next month. Some polls suggest that New Democracy could yet win a majority in Parliament when its votes are combined with center-left coalition partners the Socialists, known as Pasok, who are also edging up in opinion polls compared with their 13.2% result in the May 6 election.

So how will it turn out?  We don’t know, that’s why they have elections.  But if New Democracy/Pasok do have a narrow victory some good may come of all of this.  Greeks will have voted to stay in the Euro, but they will also have sent a message to Europe that they can only be pushed so far.  And Europe in a spate of relief may decide to put pro-growth policies in place in Greece to ameliorate some of the disaster their austerity program is creating.  All in all, not a good outcome, but maybe the best that can be achieved.