Europe’s Make-or-Break Year

BERLIN – The euro crisis, it is said, is over. Calm has returned to financial markets, amid ironclad assurances by the European Union authorities – particularly the European Central Bank – that the monetary union will be preserved. But Southern Europe’s economies remain depressed, and the eurozone as a whole is suffering from stagnant growth, deflationary pressure, and, in the crisis countries, persistently high unemployment.

Not surprisingly, given the EU authorities’ obvious inability to end the malaise, many member states are losing patience with austerity. Indeed, some countries are facing a political upheaval.

When the turmoil comes, it is likely to be triggered – as with the euro crisis – by Greece, which is holding a presidential election that seems unlikely to produce a winner. If the Greek parliament does not elect a new president by a two-thirds majority in next week’s third and final round, it will be dissolved and a snap election will be called. The risk is that Syriza, a far-left socialist party, will come to power.

To win, Syriza must either mislead its voters about its options, or insist that it will renegotiate the repayment conditions imposed on Greece by the so-called Troika (the European Commission, the ECB, and the International Monetary Fund), all while pursuing unilateral action should renegotiation fail. But any renegotiation following a Syriza victory would undoubtedly unleash a political avalanche in the southern EU that would sweep away austerity and fully reignite the eurozone crisis.