By : IRENE CHAPPLE (CNN)
LONDON : Greeks are heading
to the polls this weekend for the second time in six weeks, preparing to vote
in an election which could shift not only the course of the country, but of
Europe itself.
What is happening in Greece?
An election on May 6, the
first since Greece's financial crisis exploded - failed to deliver a majority
for any one party and talks to create a government failed. So, a second
election was called for June 17.
The election comes amid
collapsing support for the two parties - New Democracy and PASOK - which have
dominated Greek politics since the fall of the military junta in 1974.
Political support has splintered, and smaller parties have gained in response
to the financial crisis which has wracked the country for almost two years.
Syriza, the left-leaning party which wants to rip up the existing austerity
plan, has gained support on the back of Greek's discontent.
The main parties' support of
brutal austerity measures, demanded by the country's international creditors in
return for aid to keep the country afloat, has left many Greeks disenchanted
with the establishment.
The political landscape is
now deeply uncertain, and this is likely to be one of the most keenly watched European
elections in decades.
Why are they holding an
election now?
The Prime Minister,
Panagiotis Pikrammenos, is a senior judge appointed to lead the caretaker
administration which was put in place after talks to form a government
collapsed. He was preceded by Prime Minister Lucas Papademos, a former banker
and European Central Bank vice president, also an unelected politician who was
sworn in as head of an interim government on November 11, 2011, after four days
of political wrangling.
Papademos's mandate was to
implement Greece's second bailout package, which was finally agreed on February
21, and included €130 billion ($170 billion) in new financing.
His government was a
coalition made up mainly of the historically polarized New Democracy and PASOK.
That interim government was put in place after George Papandreou's dramatic
final days as Greece's leader last November, in which he announced he would
hold a referendum on the second bailout package before withdrawing the
suggestion.
Greece plays chicken with
its people
The flip-flopping sent
shivers through the world markets, ratcheted up fears Europe's bailout program
would fail and left Papandreou politically damaged.
The bailout deal included an
unprecedented restructuring of the country's debt which sliced the value of
private creditors' investments in the country in half, saving the country €100
billion from its total debt pile of more than €300 billion.
Austerity drives up suicide
However, the austerity
measures also triggered violent protests, with dozens of buildings burnt in
Athens earlier this year in protest. The suicide of 77-year-old retired
pharmacist Dimitris Christoulas in April, in central Athens' Syntagma Square,
also underscored the pain of the austerity measures.
Who's going to win?
Greece's May 6 election left
no single party with more than 20% support -- a dramatic turnaround for the
once powerful political parties New Democracy and PASOK, who had together
scooped 77% support in the previous election.
Greece's Syriza party --
which wants to remain in the eurozone but does not support the bailout program
-- has thus far reaped the benefits of voter frustration with the austerity
measures. It bumped out PASOK to come second in the May 6 election, with almost
17%. New Democracy, which supports the program, narrowly won the May 6 election
with almost 19% support.
Analysts expect the June 17
election to be a close race between Syriza and New Democracy. But neither is
expected to win an absolute majority.
What could happen?
Journalist Pavlos Tsimas says
the last election was 90% driven by anger, feeding the rise of Syriza. This
election, he said, would be 80% driven by fear. As such he expects New
Democracy to beat Syriza by around 3%. It could then form a coalition with
PASOK, and perhaps smaller supporters.
It is unclear how long New
Democracy and PASOK could maintain a long-term stable government. The longevity
of such a partnership could depend on its relationship with those dictating the
country's austerity measures, Tsimas said.
The election comes as the
country remains volatile and at risk of spiraling deeper into crisis, despite
the two bail-outs foisted upon it by the International Monetary Fund and its
eurozone peers.
Its economy is shrinking,
unemployment is rising and it remains unable to raise money in the capital
markets which it needs to unshackle itself from the aid packages.
How will the election impact
on the eurozone's debt crisis plan?
Under the terms of the
second bailout, in February, the leaders of the main parties were required to
agree to continue to the austerity measures after the elections were held.
However, the rise of the smaller parties has thrown doubt into the mix. Alexis
Tsipras, head of Syriza, told CNN he wanted the country the stay in the
eurozone, but that the austerity measures were pushing the country to
"hell."
Rise and fall of the euro
The election will therefore
be under close scrutiny by European leaders who have injected so much cash into
keeping Greece in the euro and the "European project" afloat.
Is Greece still at risk of
leaving the euro?
Yes. Ratings agency Standard
& Poor's has put the chance at a one-in-three. According to S&P, Greece
could lose its financial lifeline if voters elect a government that opposes the
terms of Greece's bailout program. Even if a pro-austerity government is
elected, bringing Greece out of its slump is a huge ask. The restructuring of
its private sector debt created some breathing space, but there is speculation
further restructurings may be necessary.
Is Greek restructuring still
not enough?
The debt crisis is also far
from over, with fears now centered on Spain and Italy. These economies - the
eurozone's third and forth biggest - have been sucked into the crisis.
If Greece exited the euro,
it would be liberated from the eurozone's fixed exchange rate, allowing it to
become a more competitive exporter and - as it unshackles its currency - an
attractively cheap tourist destination.
But it would come with a
heavy price. It would still leave Greece in debt and reliant on handouts that
former eurozone partners would be less willing to supply. It would also mean
Greeks would face higher prices for imported goods.
It is also likely to drive
people out of their homeland as they seek to escape lower wages and higher taxes.
This could set back the country's economic recovery by years.
As economic crisis bites,
Greece's children pay the price
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