Greek election sets up long, hot eurozone summer

World leaders will be keenly watching fresh elections in Greece next Sunday that could herald its exit from the eurozone, with potentially dire consequences for Europe and the global economy. "Events in Greece could trigger financial fright in Spain, Italy, and across the eurozone, pushing Europe into a danger zone," Robert Zoellick, World Bank president, warned in the Financial Times on June 1.
The summer of 2012, Zoellick said, "offers an eerie echo of 2008," when the US subprime market breakdown and the collapse of Lehman Brothers triggered the worst financial crisis since the Wall Street crash of 1929.
Greece is not the only worry. Spain, the fourth-largest economy in the 17-country eurozone, on Saturday secured a European lifeline of up to 100 billion euros ($125 billion) to save its stricken banks
It thus became the fourth eurozone member to require a bailout, following Greece (twice), Ireland and Portugal.
Nervousness about the crisis is evident beyond Europe, with Japan calling on the EU to act "responsibly" and US Federal Reserve chairman Ben Bernanke saying the situation posed "significant risks" to the world's top economy and its banks.
With investors and credit rating agencies spooked by Greece having the highest debt-to-output ration in the eurozone - an estimated 161.7 percent in 2011 - Athens is effectively unable to raise money by issuing bonds.
This has forced the country to seek international help twice, first for 110 billion euros ($137.1 billion) in May 2010 and then for 130 billion euros earlier this year plus a 107-billion-euro private debt write-off.
The price though has been Greek promises of painful belt-tightening involving deep cuts in salaries and pensions that have added to the country's economic woes, with a recession now in its fifth year and one in five unemployed.
As became clear from the previous legislative elections on May 6, ordinary Greeks are thoroughly fed up, with some 70 percent of voters supporting parties that are opposed to more austerity.
After those elections no party leader was able to put together a workable coalition, prompting the need for Sunday's re-run.
At stake this time "is whether the country will stay in the eurozone," Vassiliki Georgiadou, a political scientist at Athens' Panteio University, said.