Greece: What does their election mean for the rest of us?

From Huffington Post

Greeks were going to the polls Sunday for the second time in six weeks in what was arguably their country’s most critical vote in 40 years, with Greece’s treasured place within the European Union’s joint currency in the balance.

The political turmoil sparked by a two-year financial crisis has roiled markets across the world, with fears that victory by parties that have vowed to cancel the country’s international bailout agreements and accompanying austerity measures could see Greece forced out of the euro.

That in turn would likely drag down other financially troubled countries and rip apart the euro itself.

The last opinion polls published before a two-week pre-election ban showed the radical left Syriza party of Alexis Tsipras running neck-and-neck with the conservative New Democracy party of Antonis Samaras. But no party is likely to win enough votes to form a government on its own, meaning a coalition will have to be formed to avoid yet another election.

Inconclusive elections on May 6 resulted in no party winning enough votes to form a government, and coalition talks collapsed after 10 days. The vote, which also sent the formerly governing socialist PASOK party plunging to historic lows, sent a very clear message that Greeks have lost patience with the deep austerity imposed in return for the country receiving billions of euros in rescue loans from other Eurozone countries and the International Monetary Fund.

Tsipras, a 37-year-old former student activist, has vowed to rip up Greece’s bailout agreements and repeal the austerity measures, which have included deep spending cuts on everything from health to education and infrastructure, as well as tax hikes and reductions of salaries and pensions.

The cuts have left the country mired in a fifth year of recession, with unemployment spiraling to above 22 percent and tens of thousands of businesses shutting down.

Greece has been dependent on the rescue loans since May 2010, after sky-high borrowing rates left it locked out of the international markets following years of profligate spending and falsifying financial data.

Tsipras has argued that the terms of the loans were too harsh, but argues that repealing them will not mean Greece will have to leave the euro. Opinion polls show 80 percent of Greeks want to remain in the euro.

But his pledges, which include canceling planned privatizations, nationalizing banks and rolling back cuts to minimum wages and pensions, have horrified European leaders, as well as many Greeks. Tsipras’ opponents argue that the inexperienced young politician is out of touch with reality, and that his policies will force the country out of the euro and lead to poverty for years to come.

For his part, Samaras has cast Sunday’s choice as one between the euro and returning to the country’s old currency, the drachma. Although he voted against Greece’s first bailout in 2010, when his party was in opposition, he backed the second bailout agreed on late last year. He has vowed to renegotiate some of the terms of the accompanying austerity, but insists the top priority is for the country to remain in Europe’s joint currency.

Nearly 10 million people are eligible to vote in the country of about 11 million people. Polls close at 7pm (1600 GMT), with official results expected a few hours later.

What does this mean to the rest of the world?  Well, depending on how the election goes, Greece may or may not stay in the Eurozone.  Either way, the results could be profound for the EU.  That will spill over to the rest of the markets and the world’s economy.  We’ll just have to wait and see what the markets do Monday.

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