At the weekend, a series of Greek opinion polls showed that the pro-bailout conservative party, New Democracy, had gained an advantage over the left-wing Syriza party. Syriza, whilst remaining in favour of Greece continuing in the Euro, has taken the populist position that the terms of the second bailout must be renegotiated. They want the austerity measures which were associated with it to be torn-up; a position which both the IMF and the EC find completely unacceptable. The Germans have also made it clear that for Greece to remain in the Euro, it must honour its obligations under the two bailouts.
According to Reuters, the margin of New Democracy’s lead is anywhere between 0.5 and 5.7%. The election will be held on 17th of June and until now; opinion polls had shown the major parties running neck-a-neck between those supporting continued austerity and those opposing it. The international community is making it clear to Greece that everybody wants to see the nation stay in the Eurozone – but the subtext is very clearly that a vote to abandon the bailout deals is a de facto vote to leave the bloc. Even the UK which is outside the Euro, has put its oar in the water with the government drawing up plans for a potential break-up of the Eurozone and measures to hold back a flood-tide of Greek economic migrants turning up on Britain’s shores to open huge numbers of kebab shops (one assumes). Whilst the Treaty of Rome ensures the rights of EU citizens to work freely anywhere within the Union, this piece of political theatre is quite absurd. Not to be outdone, Lloyds of London also announced that it was making contingency plans to deal with a Eurozone break-up whilst stressing that it did not believe that such an event would occur.
In principal, Greeks are faced with a choice between pain and financial Armageddon. The opinion polls at the weekend seem to suggest that sanity will prevail. If that happens, it will become politically expedient for all concerned to find a way of tempering austerity such that deficits can be reduced, but employment and growth will not be sacrificed. The news was enough to see European markets open about 1% higher on Monday. However, the optimism did not last because of on-going concerns over Spain’s debt problems which saw the differential between German and Spanish bonds hit a new record.