Monday, June 18, 2012

Greeks Avoid Triggering Immediate Disaster; Now for the Tricky Part

by Douglas J. Elliott

Brookings Institution

June 18, 2012

Europe dodged a bullet yesterday, as Greek voters narrowly resisted the temptation to elect a government committed to ripping up the agreement with Europe which provides funding for much of their budget. Instead, New Democracy, the center-right party, should be able to form a coalition government with a narrow majority, with the participation of the other traditionally dominant Greek party, the socialist party PASOK. (It is a sign of how far they have fallen that the two parties gained only a bit over 40% of the vote when, for years, they garnered about three-quarters.)

Greeks are torn between several profound but conflicting feelings. On the one hand, they hate the austerity measures contained in the agreement with the “troika” of institutions that provide the bailout funding. They also are very disappointed in the two traditionally dominant parties that got them into this mess and remain quite flawed. These factors pushed many voters to go with Syriza, a coalition of left-wing parties led by the charismatic Alexis Tsipras. Syriza promised to force sharp changes in the agreement with the troika.

On the other hand, Greeks strongly support staying in the Euro. The problem comes because the only way to stay in the Euro is likely to be accepting the existing agreement with substantially more modest changes than Syriza is demanding.


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