Does Greece's election really matter?

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Article Highlights

  • Greece's June 17 election may not really affect its continued membership in the euro.

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  • All that an election result will do is postpone Greece’s inevitable default on its debt and its unavoidable euro exit.

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  • Over the past three years, Greece’s GDP has contracted by 16 percent while its unemployment has risen to 22 percent.

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The election will just postpone Greece’s inevitable default on its official debt and its unavoidable euro exit by a month or two.

On June 17, all eyes will be on Greece’s second parliamentary election following an earlier May 6 election that did not allow a government to be formed. With bated breath the world will be watching to see whether Antonis Samaras, leader of the conservative New Democracy Party, can ward off the challenge for the prime minister’s job from Alexis Tsipras, the candidate of the radical left and the bête noire of the financial markets.

In the grand scheme of things, however, this election may not really affect Greece’s continued membership in the euro. Whoever wins the election will inherit a deeply troubled country that is in no condition to meet its budget commitments to the International Monetary Fund and European Union. All that an election result will do is postpone Greece’s inevitable default on its official debt and its unavoidable euro exit by a month or two.

The sad reality is that Greece’s economy is in a state of true collapse under the weight of an overly restrictive IMF-EU budget adjustment program within a euro straightjacket that precludes currency devaluation to boost Greece’s external sector. Over the past three years, Greece’s GDP has contracted by 16 percent while its unemployment has risen to 22 percent. Worse yet, the Greek economy is on track to contract by an additional 7 percent in 2012, which will cause the country to sink further into depression on a monumental scale all too reminiscent of the Great Depression in the 1930s.

Read the full article at The American.

Desmond Lachman is a resident scholar at the American Enterpise Institute.

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About the Author

 

Desmond
Lachman
  • Desmond Lachman joined AEI after serving as a managing director and chief emerging market economic strategist at Salomon Smith Barney. He previously served as deputy director in the International Monetary Fund's (IMF) Policy Development and Review Department and was active in staff formulation of IMF policies. Mr. Lachman has written extensively on the global economic crisis, the U.S. housing market bust, the U.S. dollar, and the strains in the euro area. At AEI, Mr. Lachman is focused on the global macroeconomy, global currency issues, and the multilateral lending agencies.
  • Phone: 202-862-5844
    Email: dlachman@aei.org
  • Assistant Info

    Name: Emma Bennett
    Phone: 202.862.5862
    Email: emma.bennett@aei.org

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