TAKING SERIOUSLY THE DESTABILIZING POTENTIAL OF GREEK ELECTIONS

The destabilizing potential of Greek elections for the euro area should be taken seriously. They will have a significant impact on this year's elections in Spain and Portugal, and could also lead to the reshuffling of political decks in Italy, France and Germany.

Spain: Podemos (We Can), an upstart radical left party in Spain has surged to about 23 percent in the latest opinion polls (conducted by Spanish Sociological Research Center) as more than half of young people remain jobless, and some 13 percent of the population is being rescued by the Red Cross from extreme poverty. Meanwhile, the ruling center-right Partido Popular (PP) is losing support; it is now down to 27.5 percent  nearly half of the 44.6 percent it got during the last elections in 2011.

Portugal: Portugal's political landscape is unlikely to change to such radical extremes; its economy is improving and it has successfully exited the bailout program. But the country's large external debt (130 percent of GDP) will make it vulnerable to possibly major changes of Greek economic policies and unpredictable political developments in Spain.

Italy: Italy's struggling center-left government could be pushed into a closer cooperation with virulently anti-German center-right political units controlled, or strongly influenced, by the former Prime Minister Silvio Berlusconi. That means that Italy's shift toward looser fiscal policies  and toward a resolute opposition to German-backed Russian sanctions is very much on the cards.

France: France's beleaguered government is under even greater pressure from left and right to do the same thing with a difference. The difference is that the French political forces of all stripes want to shake off Germany's overbearing tutelage; they want France to reassert its independence and political leadership.

That moment may have arrived because German policies and pretensions to E.U.'s dominance are unacceptable to a vast majority of Europeans.

Germany: Germany's tenuous governing coalition of center-right and center-left parties is cracking up. The state of Thuringia is the latest example. That's where Social Democrats teamed up to govern with the (far) Left Party (Die Linke) and the Greens instead of joining their center-right coalition partners. These three leftwing parties now have a parliamentary majority to form a federal government. Take that as a presage of more political tremors in key state electoral contests leading up to Germany's general elections in 2016.

Although Mr Tsipras says he wants to keep Greece in the euro, he also wants to dump most of the conditions attached to its bail-outs, ending austerity, reversing cuts in the minimum wage and in public spending, scrapping asset sales and seeking to repudiate much debt. Such a programme seems, to put it mildly, to sit uncomfortably with Greece’s continuing membership of the single currency. Syriza’s economic platform will do little to improve the Greek economy. A return to the ways of the Greece of old would only scare away foreign investment and discourage domestic business creation.

The only positive element Syriza brings to the table is a desire to restructure debt terms, as the country’s two immense bailout debts, worth $292 billion, are a huge burden on its struggling economy. Greece’s debts are likely never to be paid back in full, so it makes sense to ease the pain to some degree. However, if Greece’s troika of lenders the European Commission, the European Central Bank and the International Monetary Fund do write down some of Greece’s bailout debts or offer generous restructuring terms, other highly indebted Eurozone countries like Italy and Spain will certainly expect similar treatment. Thus, letting Greece off the hook could translate into letting most of Europe off the hook, or force Europe’s financial power-brokers into a very tough game of picking winners and losers.