The European Tipping Point: What Will Greece Do?
CNBC Chief International Correspondent
Greek people overwhelmingly want to stay with the Euro.
But polls also say that the Greek people overwhelmingly want to stay with the euro. The other leading party in the country, New Democracy (ND), led by Antonio Samaris, has painted the election as a choice between staying in the euro (by voting for him), or leaving the euro by voting for Tsipras. One of New Democracy’s political ads airing this week on TV in Greece shows a classroom sometime in the future with a teacher saying “Cyprus, Belgium, Portugal, Spain, France — these countries are in the euro zone.” Then a student asks, "And Greece? Why isn't Greece in the euro zone sir, why?" More voices, one after the other: "Why?
Why? Why?” and then a voice-over: "With our children's future we don't play games" as it does a slow zoom into the teacher's face, who looks strikingly similar to the leader of the opposition party, Alexis Tsipras.
European leaders have all maintained that for Greece to continue receiving bailout money, it must stick to the previous agreement, and that renegotiation is not an option. But at the same time, they’ve made enough comments to suggest there could be room for leniency, clouding the message.
If a future Greek government refuses to comply with the previously-agreed bailout terms, and European leaders refuse to give them the next tranche of aid, Greece will have not have enough money to function. The situation will almost certainly cause the country to abandon using the euro and return to printing their own currency.
The effects on Greece would be devastating. Dr. Lucas Papademos, the former technocratic Prime Minister of Greece, warned recently of gross domestic product declining another 20 percent on top of the 20 percent it has already fallen, along with inflation shooting up by 50 percent.
What is unclear is the effect on the rest of the world. Economists fear contagion — the spread of financial panic to other countries like Italy and Spain. Hence, why leaders scrambled this past weekend to ensure there would be money available to back up Spain’s vulnerable banks in case of capital flight in the wake of the elections.
Polls indicate the outcome of the election is too close to call, leading to an edgy week for investors.
-BY CNBC's Michelle Caruso-Cabrera