Questions for the day after

Most discussions about economic developments in Greece revolve around two questions: First, what are our chances of survival if we enter a phase of instability or weak governance? And second: Is it likely that Greece will be kicked out of the eurozone in the coming months? The answers are not straightforward. But they must be sincere. People are sick of hearing politicians present them with tough dilemmas and, at the same time, making no effort whatsoever to convince them that they have changed.

Greece has not eluded danger. For example, a fresh wave of capital flight from Greek banks that would create an environment uncomfortably similar to that of Argentina?s bankruptcy. The scenario could materialize if Greece failed to form a government for a prolonged period of time, or if it broke ties with its foreign creditors. Those who see a solution in curbing capital movement are grossly underestimating international precedents and the huge risks involved in such a move. If that were to happen, staying in the eurozone will depend on the European Central Bank because only the Frankfurt-based institution can keep Greece?s banks alive.

At the same time, we must also consider the quasi-optimistic scenario. If France were to be targeted by the markets following a victory of presidential candidate Francois Hollande, that would also affect Spain and Italy, and it would become very difficult for Berlin and Brussels to pull the plug on Greece. Again, Greece will run the risk of becoming Europe?s Lehman Brothers.

Experienced observes believe that the next government will be given some time, perhaps until September, to experiment with some sort of mini-renegotiation that could extend the time of the fiscal adjustment by a year or so. However, no one expects an immediate and sensational policy shift from the troika. In fact, analysts are concerned that Greece could be used as a scapegoat. German Chancellor Angela Merkel could then point at punished Greece to convince her people to help out other countries.

What happens will depend on the government that will emerge after May 6. We will have to see how the new administration will deal with the troika and to what extent it will push for a renegotiation. If that sounds complicated, it?s because it is. In fact it?s especially complicated because several politicians have for months poured oil onto the flames of discontent and because a big chunk of the electorate think the country has nothing to lose if it falls off the cliff or returns to the drachma. It?s hard to blame them perhaps, but reality could prove even tougher than that.