THE BLOG

Grexit and the elections: What next for Greece?

19/01/2015 17:49 GMT | Updated 21/03/2015 09:59 GMT

We live our lives planning for the future, but we understand the world from looking at the past. Even the legendary investor George Soros has been warning for some time now that the European financial crisis has morphed into a political crisis. "Everyone knows that (Greece) can never pay back its debt," he said (Der Spiegel, 2013).

For many years, since the Troika came to Greece, many analysts have expressed a view that Greece is like a patient in a coma. In intensive care, not allowed to die but not able (according to some not allowed) to recover. Greece is plagued by widespread unemployment, increasing poverty and depression about the economic plight. A head of steam for political and economic change has been building up for some time and if further hope is lost we could see extreme decisions and painfully radical answers.

Many Greeks would agree that it is better to leave the Euro in order to fully recover with a fresh start. The idea seems terrifying for many reasons, but remaining in an economic coma could compromise the future for Greece's next generations and the EU's future policies.

In the case of Grexit, the best scenario would be to minimise liquidity and for Greece to receive financial support from countries outside the Eurozone. The worst scenario could be a default on previous commitments leading to bankruptcy with a major impact on Greek social policies like pensions and education.

In Greece people are very worried and voice strong concerns over who they should vote for on election day (25 January). At least 15% of Greeks remain undecided and this hiatus will remain until the last minute. There is no getting away from the fact that for many, the 'lost generation' (no job, no savings and no hope), a no vote remains the preferred option.

However, the majority of polls suggest that the new government would be lead by the left wing Syriza party. So far, many members of that party have suggested that writing off the country's debt would be the party's main objective. If Syriza win we will definitely see some radical changes within Greece and an effort to re-negotiate the terms of Troika - but not necessarily a Grexit.

Depending on how Syriza act if in power, a debt write-off could be requested or at least a deep restructuring. Antonis Samaras, the current prime minister, is warning that efforts made over the past few years through the harsh austerity measures would be lost and Greece risks becoming internationally isolated. Still, those statements do not seem to affect many voters as the average citizen has lost its trust in the political system and, despite the harsh measures, political corruption, bureaucracy and tax avoidance remain unsolved.

An added complication has been made by the decision of former Prime Minister Georg Papandreou to create a new political party (Democrat Socialists Movement) which will weaken his former allegiance to PASOK which his father created. A new centre-oriented party 'To Potami' (means The River) is gaining strength and unfortunately Golden Dawn, a fascist party is now in third position out of the four parties on the ballot paper, using its anti-immigration and anti-EU rhetoric to gain support. These political developments would have been unthinkable just five years ago.

Fears of a domino effect, as a result of a Grexit, on countries like Spain and Portugal should not be considered lightly. Yes, the EU is now collectively stronger than its weakest links and a Grexit is considered by some as a manageable option, but it would still give the EU bigger problems that anyone could expect.

While a Grexit option could be catastrophic, it may offer the potential of a more sustainable future and better long-term growth potential. The short-term results would be extremely painful. I On the other hand, if George Soros is correct and Greece cannot pay its debt no matter what, then we need to go through that pain without further delay. It would essentially mean that EU experiment has failed and as Martin Feldstein [professor of economics at Harvard University] said ''all the attempts to return Europe to healthy growth would have failed''.

Let's hope that Greece's long history of being able to recover at the very last minute will be our salvation. Like a Phoenix rising from the ashes, it is time for our nation to show its strength under pressure once more.