The Greek president is still valiantly trying to persuade Greece’s politicians to come together in a coalition of national emergency to avoid the necessity for new elections next month. The establishment fear is that a fresh round of elections would give a clear mandate to leftist elements to abandon the austerity measures agreed with the EU and IMF as a condition for two bailout loans.
There is no appetite amongst Greece’s EU partners for renegotiation of the loan packages and the talk is becoming increasingly blunt that if Greece will not live up to the obligations that it entered into to avoid a disorderly default on its debts, it can always leave the Euro. Whilst nobody is yet calling for Greece to be ejected from the 17 member Eurozone club, the fact that a Greek exit is being talked about as a real possibility should focus minds in Athens. Senior bankers in Germany and Ireland have openly suggested that if Greece fails to honour its commitments that no new aid would be forthcoming. German central bank chief, Jens Weidmann said: "If Athens doesn't keep its word, it will be a democratic choice. The consequence will be that the basis for fresh aid will disappear."
Whilst a Greek exit from the Euro would no doubt be damaging, it would not be fatal to the Euro. I would be inclined to go further than that: if Greece is not serious about meeting its obligations and digging itself out of a hole of its own making, throwing her out of the single currency would underline the seriousness of the rest of the bloc about ensuring fiscal credibility. After all, Greece did fudge the admission criteria when it joined the single currency and its accounting since joining the bloc has not been of the highest standard.
Analysts imagine that if a second election is held, the left-wing Syriza party would emerge with the mandate. Their leader, Alexis Tsipras has been unequivocal in his condemnation of the bailout and austerity measures imposed on Greece and pledged to freeze payments to creditors and renegotiate the second bailout. It seems that some in Greece are not prepared to believe that their EU partners would abandon them if they insisted on renegotiating less painful terms for the second bailout, but this could well prove to be a costly misjudgement.