It was almost exactly five years ago that the euro crisis erupted, starting in Greece. Investors who had complacently let all euro-zone countries borrow at uniformly low levels abruptly woke up to the riskiness of an incompetent government borrowing money in a currency which it could not depreciate. There is thus a dismal symmetry in seeing the euro crisis flare up again in the place where it began.
The proximate cause of the latest outbreak of nerves was the decision by the Greek government, now headed by the generally competent Antonis Samaras, to advance the presidential election to later this month.
The presidency is largely ceremonial, but if Mr Samaras cannot win enough votes in parliament for his candidate, Stavros Dimas, a general election will follow. Polls suggest the winner would be Syriza, a populist party led by Alexis Tsipras. Although Mr Tsipras professes that he does not want to leave the euro, he is making promises to voters on public spending and taxes that may make it hard for Greece to stay. Hence the markets’ sudden pessimism.
As it happens, there is a good chance that Mr Dimas, a former EU commissioner, will win the presidential vote at the end of this month (see “Greece’s crisis: Samaras’s gamble”). But the latest Aegean tragicomedy is a timely reminder both of how unreformed the euro zone still is and of the dangers lurking in its politics.
It is true that, ever since the pledge by the European Central Bank’s president, Mario Draghi in July 2012 to “do whatever it takes” to save the euro, fears that the single currency might break up have dissipated. Much has been done to repair the euro’s architecture, ranging from the establishment of a bail-out fund to the start of a banking union. And economic growth across the euro zone is slowly returning, however anaemically, even to Greece and other bailed-out countries.
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