If Greece were to exit the euro, it would do so with painful consequences for itself and uncertain ones for the rest of Europe and the global economy. At the beginning of the crisis, economists had worried that Greece’s exit from the currency zone would set off a market panic in other weak European countries. Now European leaders hope they have done enough to prevent that from happening. A deepened recession in Europe would also weaken the United States’ fragile recovery.
Greek President Karolos Papoulias met with politicians Sunday in an effort to construct a unity government that could guide the country through the bailout program, and he planned to continue discussions Monday. But with top leaders expressing little hope for compromise after a week of efforts, it appeared likely that Papoulias would be forced to call new elections, most likely for June 10 or 17.
Hopes for compromise have rested on Alexis Tsipras, the leader of the anti-bailout Coalition of the Radical Left Party, also called Syriza, which won a second-place 17 percent of the vote this month. Opinion polls released Thursday and Sunday put the party on top, registering 28 percent support and 21 percent respectively. But Tsipras has refused to go along with the pro-business New Democracy party, which won 19 percent of the May 6 vote, and the Socialists, who won 13 percent.
“After today’s meeting it is obvious they are demanding that Syriza become an accessory to a crime,” Tsipras said Sunday after meeting with the president, the Associated Press reported. “In the name of democracy, of our patriotic duty, we cannot accept this shared guilt. We call on all Greeks to condemn once and for all the forces of the past and to realize that only one hope remains: unity against blackmail in order to prevent the continuing barbarity.”
For all the fireworks of the past week, Greeks remain overwhelmingly in favor of remaining with the euro and inside the European Union, according to opinion polls. But years of biting recession, 22 percent unemployment, rising taxes and slashed pensions have made them rebel against a $171 billion bailout deal reached in February. That deal extends a financial lifeline to the country in exchange for cuts that shrink the size of the public sector, further push down public spending and require other changes that even the International Monetary Fund and other emergency lenders acknowledge will make the short-term situation more painful, before – they hope – making Greece’s economy more competitive in the long run.
Politicians such as Tsipras who are pro-euro but anti-bailout appear to be gambling that euro-zone leaders including German Chancellor Angela Merkel and European Central Bank President Mario Draghi are willing to ease their austerity demands significantly while continuing to pay to keep Greece from bankruptcy. But those leaders have shown little willingness to extend major concessions.
“There is no easy path for Greece,” German Finance Minister Wolfgang Schaeuble told the Welt am Sonntag newspaper in Berlin. “The program stays. If the Greeks have an idea about what we can do in addition to promote growth, we can always talk about it and consider it.”