What Does the Pro-Austerity Party’s Victory in Greece Mean for the Euro?

The pro-austerity party declaring victory in Greek repeat election. Reuters/Aflo

A boat with four crew members is adrift. If one is sacrificed, the other three will be spared. Can the murder of a man be pardoned in a case such as this?
This is a well-known proposition of Harvard professor, Michael Sandel, but the issue of Greece bears a lot of similarity.

Greek repeat parliamentary election held on June 17 was a victory for parties in support of fiscal austerity including the New Democracy party, with a withdrawal from the euro averted for the time being.

Greece will therefore adopt fiscal austerity measures as a condition of receiving support such as funding from the EU. If the anti-austerity parties had won, it is possible that Greece would not have been able to get help from the EU and its exit from the euro would have been inevitable.

 

The possibility of the Euro collapsing remains

However, measures for fiscal austerity including cutting back public servant salaries and reviewing pension payments have been fiercely debated. The policy discussions surrounding this election have all basically had a sense that it’s too late. In addition, with protests and strikes primarily involving public servants being held all the time in Greece, realistically it is doubtful whether fiscal austerity measures can actually be implemented.

This is because we catch glimpses of the Greek citizen’s true feelings of wanting assistance from the EU, but not wanting their salaries and pensions cut.
As for the euro, credit concerns have arisen not only in Greece, but also in Spain and Italy, so this aversion of a withdrawal from the euro is merely only delaying the issue temporarily.

The 17 countries in the eurozone are linked by a chain of the euro. Thus if Greece sinks, the whole of the eurozone will be dragged down. Therefore even though they may not want to, the EU has to help Greece. Greece is also expecting their assistance and seems to have no intention of seriously tightening its belt.

However, if Greece is not evicted from the euro and not being sacrificed, the other nations will also get into a situation where they will sink with it. We come right back to professor Sandel’s proposition that is mentioned at the beginning.

Do they sacrifice Greece and save the euro or do they all go down together with Greece? This difficult choice will continue to be questioned.

 


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What Does the Pro-Austerity Party’s Victory in Greece Mean for the Euro?
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