Why Europe and the U.S. have a lot riding on Greek elections

The results of upcoming elections in Greece could be critical to all of Europe, potentially setting up a showdown between a leftist Greek government and the German-led E.U. Hari Sreenivasan speaks with former U.S. Ambassador Nicholas Burns about the state of the Greek economy and the potential ramifications for both sides of the Atlantic.

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  • HARI SREENIVASAN:

    For more on the Greek elections, I'm joined by veteran diplomat and former U.S. Ambassador to Greece Nicholas Burns.

    So, tell me, why is this election so significant?

    NICHOLAS BURNS, Former U.S. Ambassador to Greece: It's a momentous election, I think, very significant, Hari, for the future of Greece, but also perhaps for the future of the European Union.

    The Greeks themselves, some of the commentators are saying this may be as important as two other big events in modern Greece history, the civil war in the 1940s, the military dictatorship and return to democracy in the 1970s, because it may by a big point of departure.

    If Syriza, the left-wing party, wins this elections, if it governs alone or governs in a coalition, it is very likely going to challenge the compact between the Greek people and the European Union, these hundreds of billion of dollars in loans to the Greeks. Will the Greek government under new leadership play by the rules, meet the commitments, and pay off those loans, or will they effectively challenge European Union to renegotiate them?

    It will be a showdown or sorts between a leftist Greek government and the German-led E.U.

  • HARI SREENIVASAN:

    All right, so if Syriza wins, and if they say, you know what, we want to renegotiate, is there a possibility that Greece could get kicked out of the E.U. or that they could opt out? That would set a precedent in itself, wouldn't it?

  • NICHOLAS BURNS:

    It would and it would be consequential for — perhaps for how financial markets see the stability of the Eurozone.

    The German government — and Germany, of course, is the key country now in the European Union — has been saying over the last couple of weeks that it's not going to tolerate a reconsideration or renegotiation of these loans, that it expects any future Greek government to pay off the loans and meet its commitments.

    So, I think you are going to see a struggle between a new very young leader, Tsipras of Syriza, and the German government and its finance minister, Wolfgang Schaeuble. The Germans may believe now that they can weather the eventual exit of Greece from the Eurozone and not have instability in financial markets.

    They clearly didn't believe that a couple of years ago, but I think that's one of the possibilities that could emerge from this.

  • HARI SREENIVASAN:

    So, if the Greek economy is better off now than it was three years ago, or at least the financial system in Europe is better off and more able to withstand this, how bad is the Greek economy? When we talk about youth unemployment at 50 percent — and that's not things that — America is unfamiliar with that since the Great Depression.

  • NICHOLAS BURNS:

    That's exactly right.

    Greece has gone through a depression since 2008 and 2009, 50 percent youth unemployment, 25 percent overall unemployment, massive contraction of the economy until just the last year. They're running a very, very slight surplus now, but the economy is not in good shape. They're not getting the investment, either from their own industrialists or from outside, because people are so unsure of the direction of the country.

    And, Hari, here's why it's so important for Americans. Europe is still the largest trade partner of the United States and the largest investor into the United States, the European Union countries. It's the biggest economy in the world, the E.U. And so if there is instability in the E.U. in future months because of these Greek elections, because of the new government, it's going to have some kind of impact on the United States as well.

    So we have a lot, in that sense, riding on this election.

  • HARI SREENIVASAN:

    And so there's actually possible repercussions, depending on the outcome of the elections on Sunday, what could happen in the financial markets here Monday and going forward, as that new government executes their kind of vision?

  • NICHOLAS BURNS:

    Well, I think everything will depend on what this new government says.

    It's very likely to win the elections. It's way ahead. It's far ahead in the polls over the center-right New Democracy Party.

    If they take a line of compromise and conciliation and if they convey a sense of responsibility for the financial future of Greece, then I think the markets are going to be reassured. But if they throw down the gauntlet and effectively have a showdown with the European Union, especially with the German government, then I think you are going to see nervousness on both sides of the Atlantic.

  • HARI SREENIVASAN:

    All right, Nicholas Burns, former U.S. ambassador to Greece, thanks so much.

  • NICHOLAS BURNS:

    Thank you.

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