May 16, 2012
A debt deal negotiated to rescue Greece from default faces the threat of collapse, with those most responsible for agreeing to the pact's terms ousted in the nation's recent elections and Greek political leaders failing to cobble together a coalition government to replace them. European officials, led by Germany, agreed to bail out Athens in return for budget-tightening and other austerity measures. If Greece reneges and international bailout funds are withdrawn, Greece will begin to run out of money as early as late June and may have to return to its old currency, the drachma, and exit the eurozone. Austerity measures have been wildly unpopular in Greece, where there has been little economic growth and high unemployment in the last couple of years. Most Greeks say they do not want to abandon the euro, but the leader of the anti-austerity Syriza Party declared the bailout deal "null and void" after the May 6 elections in which his party placed second. The failure to form a coalition government has led Greece to call another set of elections for June. Syriza is now polling first, leading many financial analysts and traders to worry that a Greek exit from the eurozone is inevitable. Others are hopeful, however, that new numbers showing the European economy to be flat, and not slipping back into a recession as expected, will convince Greeks to stay in the eurozone, and that European officials may be willing to renegotiate the terms of the original deal to keep it there. A Greek departure from the eurozone would roil the global economy and cause chaos in Greece. However, some argue that a return to the drachma may allow Greece to become more competitive in the long run as it would allow Greece more control over its monetary and trade policy. Should Greece leave the eurozone?
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