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Greece political crisis becoming a war of wills

The impasse pits Greek politicians opposed to more austerity cuts against officials in other European nations who say the Eurozone can do without Greece.

May 14, 2012|By Henry Chu and Anthee Carassava, Los Angeles Times
  • A pedestrian passes graffiti on a post office facade in Athens' Syntagma Square. Greek leaders are to resume talks Tuesday on forming a government.
A pedestrian passes graffiti on a post office facade in Athens' Syntagma… (Petros Giannakouris / Associated…)

ATHENS — As Greece lurches along without a government, its deepening political crisis is fast turning into a war of wills in which Europe's economy potentially hangs in the balance.

On one side are the Greek politicians who accuse other Europeans of trying to "terrorize" their country into accepting more draconian austerity cuts and who warn that if Greece gets kicked out of the euro, "Europe will be doomed."

On the other are officials in Brussels, Berlin and other capitals, who say that expelling Greece from the Eurozone would be regrettable but "can be managed" if Athens reneges on the tough terms to which it has agreed in exchange for two international bailouts.

Only one of the antagonists can be right. The outcome of the high-stakes staring contest could determine whether Greece becomes the first European nation to default in decades and possibly pulls neighboring countries down with it, in a cascade whose waves would crash through the global economy.

Which side will prevail, nobody can predict. Even London's famous bookies have stopped taking bets on whether Greece will remain a member of the Eurozone, the club of 17 nations that use the euro. But as Athens hurtles toward another possible election next month to try to break the impasse created by this month's inconclusive vote, neither side is showing any sign of backing down.

The May 6 election saw Greeks spurn their two traditional powerhouse parties in favor of fringe groups campaigning for an end to austerity. On Monday, talks to try to cobble together a coalition government came up short, with President Karolos Papoulias calling for another attempt Tuesday, perhaps with the aim of forming a nonpartisan administration of technocrats.

The man many either applaud or curse for blocking a deal, Alexis Tsipras of the hard-left Syriza party, is also the brash young leader whose pledge to rip up the bailout agreements has raised the political temperature across Europe.

A handsome, motorcycle-riding 37-year-old who cultivates a rebel image, Tsipras is adamant that Greece can abandon its commitments to international lenders and reverse the brutal austerity policies of recent years yet still remain in the Eurozone and keep on borrowing, despite warnings from European officials that those are irreconcilable goals.

Tsipras' argument is winning over many of his compatriots, the majority of whom say they want their government to preserve Greece's place in the euro community yet reject austerity as the price of it. Polls in recent days have shown support for Syriza rising, with voters shrugging off the strong rhetoric out of Germany and other nations. The party is now on track to improve on its surprise second-place finish May 6 and draw the most votes in next month's balloting, though not enough to control Parliament outright.

Christos Staikos, a senior Syriza official, dismissed European officials' threat of a euro expulsion as a "pseudo-dilemma intended to terrorize" Greeks into acquiescing to further belt-tightening. His party says that a better solution is for Athens to cancel the bailout packages and renegotiate less onerous ones, including another deal to forgive some of the country's crippling debt.

"When you go to the bank and ask to remortgage your home loan, does the bank kick you out? No, because it needs you as a customer, and it wants to collect money owed," Staikos said. "We're in the exact same situation."

In any case, the treaty that set up the Eurozone contains no provision for a member nation leaving it. Forcing Greece to go would set off a catastrophic chain reaction, Staikos warned, with investors pulling out of other financially weak nations such as Spain and Portugal, which would then have no choice but to follow Greece out the door.

"Legally they can't" expel us, Staikos said. "And we don't believe it will come to that, because the cost of a Greek exit will be catastrophic for the European project as a whole. If Greece goes … Europe will be doomed."

But the retort from other parts of the continent is: Don't be so sure, and don't get too big for your britches.

In an unusual flurry of comments from a normally taciturn bunch, the governors of various central banks in Europe have come out in the last few days with statements that the region would weather the storm of a Greek departure from the euro just fine. Other high-profile European politicians have made the same point.

While unwanted, a Greek exit is "not necessarily fatal," Patrick Honohan, the head ofIreland'scentral bank, said Saturday.

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