Greek elections: Athens plays with fire

"2015 may prove to be quite prematurely a "black year" for Greece. Five years of sacrifices and efforts will be literally lost, while they were supposed tobegin to pay back this year". 

This is what a leading member of the group of financial forecasts of The Economist notes, predicting at the same time that a non-continuation of the economic policy of the Greek coalition government will only lead the debt-ridden country to new adventures. 

In addition, the British journalist attributes serious responsibilities to the electoral system of the country as well, stressing out that it allows one third of the people to govern absentia real majority. 

Difficult days for Greece also predict both the rating agency Fitch and the Peterson Institute for International Economics. 

Both of them underline that the country’s main problem is not so much the level of its debt, but the inability to make the necessary structural reforms to its economy, which will make the debt viable. 

On the basis of this conclusion, the lenders will accept neither "haircuts" nor serious deviations from the program which is being implemented by the country, because the result will be of a zero-sum. 

"Greece will never be able to get into a profound and sustainable growth phase if its production structures are not redirected toward internationally saleable products," stresses Robert Murphy, consultant at Fitch, who has been monitoring the Greek economy developments from the beginning of the crisis. 

The Greek economy still faces major hindrances and cannot escape from a lending and foreign aid based consumer model. 

In this context, the analyst of Peterson Institute, Jacob Kirkergaard, says at his recent study that, given the structural functioning of the Greek economy, a SYRIZA government will have a serious problem to renegotiate the Greek public debt. 

In its report on the Greek perspective, he states that country's lenders will not make concessions on the debt issue, but instead will focus on small-scale extension for two main reasons.Moreover according to sources, the program implemented by Greece, which expires at the end of February, is likely to be extended. 

Generally, however, according to the Peterson Institute, currently the Eurozone is feeling much less threatened by a Greek crisis, compared to 2012. 

Today, the Eurozone has created stronger crisis management institutions, like the European Stability Mechanism (ESM) the bond repurchase program of the European Central Bank (ECB), the banking union, etc. 

In addition, the prospect the ECB to launch a round of bond buying - which of course will not include the Greek government bonds - will further enhance the stability of the Eurozone. 

"So, there is no need to fear of a Greek economic crisis spill-over further within the Eurozone, even though it gets worse," says the analyst. 

The other reason for the Institute’s pessimistic attitude has to do with political criteria. It argues that the parliamentary elections scheduled in countries such as Poland and Finland in March will mean that these countries will not accept a further provision of greater financial support to Greece. 

Moreover, the governments of Spain and Portugal, which also face election challenges by populists in late 2015, will have incentive to oppose to further concessions towards a SYRIZA government.

Thus it becomes obvious that, for Greece, the exit from the credit crunch passes through the extension of the “memorandum corridor”. 

There is not any issue regarding a "haircut" something that has been clarified also by the German Minister of Finance. 

All these lead to the conclusion that the Greek banking system will come difficult times, as the ECB may no longer accept Greek bonds as guarantee assets. 

This will lead to zero liquidity and to bad days for businesses. At this point, Peterson Institute stresses out that a possible government under SYRIZA will try to sustain a program which will avoid both the economic crisis, which would be caused by an open conflict with the creditors, and a government crisis caused by a possible withdrawal of far left groups from the party. 

However, according to the report, such a balancing perspective has little chance of success, and as a result the country would be dragged again in elections in spring or summer. 

Meanwhile, the country’s economic situation will significantly deteriorate and any fiscal improvements achieved by the previous government will be dissipated.

"Perspectives for 2015 for Greece are not favorable," the report concludes. "A dramatic deterioration of the current situation cannot be ruled out. 

The worst thing about the situation is that it is the result of wrong conceptions and assumptions of the Greek political leaders. Whatever political analysts may say, Greece is the last country to be exempted from the austerity policy. 

Greece remains a small bankrupt country, which needs external help and geographically is located in a "rough" neighborhood. 

To the extent that there is no risk of transmitting the crisis, Greece has no bargaining power and any attempt to blackmail its partners in the Eurozone, will result in a defeat. 

Greece will also lose its economic stabilization achieved coming through serious difficulties, and the "hawks" in the Eurozone will be given the right to use it as an example of what is happening to a country which violates the European agreements". 

The Peterson Institute does not mention as a possibility, the Cyprus-like scenario which would turn the Greek economy too many years back.

The question is if these arguments can be understood by the Greek voters, a point that should not be disregarded.