Greek vote good, but not enoughThe world has seen the economic jitters in Greece calm down a bit after the New Democracy Party eked out a victory in Sunday’s parliamentary elections.
Pro-bailout New Democracy prevailed in the runoff by defeating Syriza, a radical leftist coalition that pledged to renegotiate the country’s bailout deal. New Democracy is now expected to be able to build a majority coalition with the socialist Pasok without a hitch. The election result confirms the last-minute decision by the Greeks to remain in the euro zone.
With persistent worries over the possibility of “Grexit” — the country’s departure from the euro zone — mitigated for the moment, global stock markets rose sharply yesterday as seen in the Kospi, which topped 1,900.
It is too early, however, to be relieved because the fundamental cause of the fiscal crisis that has been sweeping southern Europe remains intact.
Even after a pro-euro coalition government is formed, it still has a long way to go. It will have to fight an agonizing tug-of-war with the troika — the EU, the European Central Bank and the International Monetary Fund — over how to meet the tough requirements demanded by lenders while persuading the Greek people to further tighten their belts in the midst of economic hardship.
Greek people lash out at the troika because it didn’t force strict austerity on Spain when it offered a relief loan to that cash-strapped country.
New Democracy vowed to initiate additional negotiations, though not a renegotiation. If the negotiation process hits a snag, it could lead to a another ferocious fluctuation of financial markets, not to mention debilitating political instability in Greece.
Although Spain and Italy have been hit by ominous signs of bank runs and skyrocketing interest rates of government bonds, a more fundamental issue is the future of the euro zone. A stop-gap measure of bailout funds cannot sustain the community. Whether Europe strengthens the union to encompass fiscal and financial integration or decides to dissolve the common currency system, there should first be a consensus on the direction of Europe. Otherwise, a financial crisis of this magnitude can occur anytime.
To avert that dismal scenario, strong political leadership is essential. But you can hardly find vibrant leadership in Europe because leaders are all tethered to the political interests of their individual countries. If the euro zone is to survive, someone has to pay the price. What is required is a leader who can propose a path for all Europeans and persuade them to follow it.