Newly elected Greek prime minister Alexis Tsipras – of the radical far-left Syriza party – is fighting the strict terms of the country’s bailout package.
Mr Tsipras – who won the election last month on the premise of reducing the Troika-imposed (the European Central Bank, eurozone and International Monetary Fund) austerity measures – wants to renegotiate Greece’s €240 billion international debt.
Eurozone finance ministers have scheduled an emergency meeting for this Wednesday in Brussels, following the failure of Greek finance minister, Yanis Varoufakis, to reach an agreement with the Troika, who now own 80 per cent of the nation’s debt.
But Warwick Business School professor of organisation studies Hari Tsoukas – who previously stood in the Greek elections – believes the terms of Greece's debt relief are unlikely to change.
“The terms of debt relief for Greece will be decided, ultimately, by politics. Power is what matters, and power is with the creditors, not Greece,” he said.
Professor Tsoukas claims that the Greek debt crisis is not limited to Greece, but is a crisis implicating the entire eurozone.
“The eurozone is a flawed structure. There is a common currency but no fiscal union and certainly no political union.
“The real source of the problem is that the euro is not supported by a political community that is willing to share risks.
“The problem is that northern eurozone members do not trust Greece that it will deliver on reform needed to stimulate growth,” said Professor Tsoukas.
Austerity conditions imposed on Greece included cuts to the minimum wage, state pensions, and state spending, stipulations that prime minister Tsipras has promised to reverse.
Grexit stage left?
There is considerable speculation over whether Greece will succeed in renegotiating its debt package, or if the nation, under Syriza, will leave the eurozone.
Ex-Fed chief Alan Greenspan is predicting the latter.
“I don’t see that it helps them to be in the euro, and I certainly don’t see that it helps the rest of the eurozone," Mr Greenspan said, quoted in The Guardian.
“I think it is just a matter of time before everyone recognises that parting is the best strategy,” said Mr Greenspan.
However, finance minister Varoufakis has stated that a Grexit would cause significant financial instability throughout European financial markets.
Professor Tsoukas also maintained that a Greek exit would be fatal for the eurozone.
“My sense is that Alexis Tsipras will not back off, for if he does, he knows he will incur the fate of his predecessor – sticking with austerity will cost him dearly.
“Besides, he may hope that by putting up a fight, he may ultimately force creditors to change their view, since a Greek exit will be potentially disastrous for the eurozone,” he said.
As the US election cycle draws to its close, investors must avoid getting distracted by the bluster around the result. ...