Greece election: The European countdown
- 15 June 2012
- From the section Europe
Europe is on edge, its leaders nervous and divided. The days ahead are full of uncertainty.
On Sunday the Greeks vote in an election that could determine whether Greece stays in the euro. Friday is the last day of campaigning.
The attention remains on 37-year-old Alexis Tsipras, the radical leftist leader of Syriza.
He is a young politician who has come from obscurity to challenge the terms of the bailout deal drawn up by Brussels and the International Monetary Fund. It has made him the anti-austerity candidate.
If successful he has threatened to tear up the deal, which could risk Greece leaving the single currency.
But Mr Tsipras insists he can reject the austerity conditions attached to the bailout deal and stay in the euro.
At his last meeting in a central square in Athens he denounced the bailout memorandum.
"No to the memorandum of bankruptcy!" he said, "yes to the euro and to a national plan for economic recovery that will protect the people from bankruptcy".
He accused the two main Greek parties of looting the country and handing over the national flag to the German chancellor.
His core message is this: "Greece has been a European and international experiment, and the Greek people have been the guinea pigs. In the past two years we have suffered a social catastrophe."
He believes he can persuade Europe's leaders to scrap the old deal and renegotiate another. Europe is saying "don't count on it".
There is no appetite for a full-scale negotiation and without the bailout funds Greece will face bankruptcy.
The French president has warned Greeks: "There are countries in the eurozone which would prefer to end Greece's presence in the eurozone."
So, if Syriza does well, it will come down to who will blink first. Alexis Tsipras believes that Europe will bend, fearing a Greek exit more than bargaining with him.
He has been encouraged by the bailout of Spain's banks. "We will vote on Sunday with our eyes on Spain," he said.
"It negotiated and succeeded, despite the lenders' threats and blackmail. It is still in the euro, without an austerity plan."
The polls indicate that Syriza is neck-and-neck with New Democracy, a centre-right party led by Antonis Samaras which supports the bailout deal with the EU and IMF, although will seek concessions if they win.
Many Greeks have heard the dire warnings of instability and chaos that would follow a departure from the euro.
Those fears may work to Mr Samaras's advantage. He accepts the basis of the bailout deal, but believes concessions can be won. Fear may be a key factor in the vote on Sunday.
If Mr Samaras were to succeed there would be relief in Europe, but he would have to convince the markets that he could govern effectively in the face of possible widespread protests and disruption.
Uncertainty over Greece is helping force up the borrowing costs for Spain and Italy. One of the major concerns of investors is that by agreeing a bailout deal for its banks, Spain has increased its debts whilst the economy is in recession.
The leaders of Spain and Italy increasingly argue that salvation can only come at a European level.
Once again European divisions have been on display. French President Francois Hollande was visiting Italian Prime Minister Mario Monti on Thursday.
They seemed determined to send not-very-coded messages to Berlin. Budget discipline should not come at the expense of economic growth, said the Italian prime minister. Again they argued that "public account discipline" was not enough to build growth and create jobs.
Mario Monti even pointed out that Italy and France contributed 40% of the eurozone' s bailout funds and so, by implication, should be listened to.
The French president wants a banking union with a joint guarantee of deposits and a joint fund to pay down debt.
He wants the bloc's permanent rescue fund (the ESM) to be given a banking licence so it can borrow directly from the European Central Bank.
Mr Monti favours eurobonds, common debt.
'Moments of truth'
Many of these ideas are rejected by Germany's Chancellor Angela Merkel. Her reply was that "Germany is strong, Germany is an engine of economic growth and a stability anchor in Europe. But Germany's powers are not unlimited".
She is not prepared for Germany to become the paymaster of Europe. She said that those clamouring for Germany to "pour billions into eurobonds, stability funds, European bank deposit guarantee funds" wanted a quick crisis fix that was unsustainable.
That persuaded French Prime Minister Jean-Marc Ayrault, in an apparent reference to Ms Merkel, to say that "the situation in Europe is sufficiently critical not to give in to simplistic talk".
So two moments of truth are approaching.
Will Greece gamble that Europe will agree to easier terms on its bailout, or will it go along with a rescue package that brings with it years of painful austerity?
Secondly, will Germany - under relentless pressure - accept it will have to pay more to ensure the euro's survival?
Angela Merkel believes there will have to be a political union in the eurozone, but will she tell the German people they will have to contribute much more to save the currency?
The days ahead will provide some answers. An analyst from CMC markets said: "We're at a tipping point. You either have to deliver or disband."