Reuters: How Greece Returned to Crisis

SamarasGreece is facing a new economic crisis after a series of wrong moves by the coalition government of Antonis Samaras, thus negating four years of harsh austerity measures, a Reuters report says.

The Greek prime minister made the mistake of trying to exit the bailout program earlier than it was agreed on. Then, a round of failed negotiations with the troika of international creditors in Paris on November 26, 2014 forced Samaras to take the daring decision to call an early vote for President of the Hellenic Republic.

The final troika review for 2014 that should have been completed in December never took place because Athens had not implemented the required reforms in fear of the political cost. The early vote for president and the subsequent failure to elect New Democracy candidate Stavros Dimas brought the dissolution of the Greek Parliament.

This series of events led to the January 25th snap elections. The steady lead of the radical left-wing SYRIZA party has caused great concern in international markets and generated a new euro zone crisis.

Commenting on the November Paris talks, one Greek official told Reuters in conditions of anonymity, “They were giving us the impression that no matter what we did, they would not conclude the review. After that Paris meeting, we knew it was over.”

According to the Reuters report, Greek officials said the stance of the inspectors was rooted in something neither side would openly admit: uncertainty over whether Samaras’ government would survive a presidential vote scheduled for February.

For Greece’s creditors, it would make little sense to declare the bailout program a success and disburse the final tranche of 7.2 billion euros in aid if an anti-bailout government was soon set to take over and renounce the pledges made so far.

For Samaras, the failure to exit the bailout program early left him without weapons to win the disgruntled electorate or the MPs for the February presidential election. The silent admission of defeat in negotiations led a chunk of the electorate to the arms of SYRIZA, according to Reuters.

The leftist party has gained popularity after promising to stop austerity measures and demand debt writeoff by Greece’s European partners, while at the same time claiming they would exit the euro zone if pushed by creditors. After the announcement of snap elections, Greek stocks plunged and 10-year bond yields soared beyond 10 percent earlier in January.

“SYRIZA policies would be unlikely to satisfy the lenders,” said Blanka Kolenikova, senior analyst at IHS Global. “Its policy program would likely complicate Greece’s negotiations with the creditors as it is unlikely to be received well.”