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Hard choices if a Greek tragedy looms for Europe

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MENACING: Supporters of the far-right Golden Dawn show some force at an Athens rally

MENACING: Supporters of the far-right Golden Dawn show some force at an Athens rally

MENACING: Supporters of the far-right Golden Dawn show some force at an Athens rally

This coming Tuesday marks the fourth anniversary of the first euro crisis summit. At that meeting, European leaders effectively removed what had been a cornerstone of the single currency project – the no-bailout rule. They did so to prevent Greece from defaulting.

From that time until the summer of 2012, when Greece's ejection from the euro appeared to be at hand, the Aegean state was rarely out of the international headlines.

And while the world's gaze has been elsewhere over the past 18 months, Greece remains by far the weakest link in the chain that holds the 18 states of the eurozone together. The Greek problem has not gone away.

The situation in the country is dire. It seems only a matter of time before its participation in the currency union will come back on the agenda, with potentially serious implications for Ireland and other peripheral states.

If the Greek economy remains on the floor and the political situation nears boiling point, the only half-decent news from Greece is how little societal breakdown there has been.

In the early months of the crisis, in the spring of 2010, waves of street protests took place, some of which ended in loss of life. With the economy melting down, the political system thoroughly discredited, and the forces of the extremes – which have long been prone to violence – eyeing opportunities, a slide into anarchy looked possible if not indeed probable.

But four years on from the initial bailout, and after five years of unrelenting economic contraction, Greek society has proved cohesive. While much international attention focuses on violent street protests, the truth is that rioting has been very limited and demonstrations poorly attended and often perfunctory.

Moreover, it should be recalled that the worst public disturbances the country has experienced in recent times took place in 2008, before the crash began to be felt, when a police officer killed a teenager in controversial circumstances.

The ensuing riots across the peninsula were more widespread and more protracted than anything that has accompanied the economy's collapse.

Other indicators also point to a society that is holding together despite everything. Most reported crime rates have fallen or remained flat over the past five years despite the real want that many have suffered in a country with a much smaller social safety net compared to other developed European countries.

Nor has industrial unrest erupted in the private sector, and normally assertive public sector unions have mostly sought to avoid confrontation given that their members are still doing better than those exposed to the collapse of domestic demand in the private sector.

It may be a mark of the maturity of Greek society that the clearest manifestation of the country's disaster is reflected more in its politics than in the streets.

With the current coalition, comprising the two traditionally dominant centre-right and centre-left parties, close to the half-way point in its term, opinion polls have consistently shown that the extremes are winning more support than the moderate centre.

Golden Dawn, a Nazi-like party with paramilitary features, that has been labelled a criminal organisation by the authorities, has seen its support rise to one in 10 Greeks.

But however nasty its thuggish elements may be, with six of its MPs in jail and no other party willing even to consider it as a coalition partner, the extreme right will not come to power and poses only a limited risk.

The extreme left is another matter.

The most recent poll, taken three weeks ago, showed the Syriza party – a ragbag of assorted hard leftists – winning the support of close to one in three Greeks. More significantly, it has been consistently ahead of the largest coalition partner, New Democracy, in multiple opinion surveys. That is important because under the Greek electoral system, the party which wins most votes in a general election receives a 50-seat bonus in the 300-seat parliament.

It matters even more because the coalition's parliamentary majority has been whittled down to just three seats and it almost lost a vote in parliament last month which would have triggered fresh elections.

Given its slender majority and the raft of painful changes it has yet to implement, the risk that it will fall at some point over the course of the year is high and rising.

With very little chance of the current centrist administration winning re-election and a high probability that Syriza will become the largest party, the question of Greece's membership of the euro looks likely to return to the European agenda in the near term.

Syriza says that if it wins power it will tear up the bailout programme and reverse the budget cuts and reforms already implemented. To gauge the likely reaction in the rest of the eurozone to a Syriza-led government, one need only consider how bad relations already are between the current (moderate) Greek government and the Troika.

On Friday, the development minister Kostis Hadjidakis sounded deeply aggrieved speaking at a conference. Greece's budgetary adjustment has been the biggest in the eurozone, he said.

Previously unimaginable reforms have been implemented and even measures to counter clientelism, string-pulling and nepotism have been put in place. His view, that Greece had dutifully done everything asked of it, was echoed by all other Greek speakers at the event. But that view contrasts starkly with the view of outsiders.

The members of the Troika are increasingly frustrated in their dealings with Athens, and the latest mission by the technocrats from Brussels, Frankfurt and Washington has been put on hold repeatedly.

The last IMF report on Greece, published in July, blamed much of the pain suffered by Greeks on "the delayed, hesitant and piecemeal implementation of structural reforms". It went on ". . . amidst recurrent domestic political crises, vested interests opposed to reforms have been increasingly emboldened".

Plain speaking of this kind is unusual for the IMF – neither Ireland nor Portugal have been subject to that kind of public criticism from them.

Attitudes among their European counterparts and some of the continent's politicians are, if anything, stronger.

With both goodwill and patience towards Greece exhausted long ago, a new Syriza-led government making demands that other countries will not even discuss would bring matters to a head. And the dynamic could be different from the last time "Grexit" was on the agenda.

In the summer of 2012 when euro crisis contagion was at its height, Greece was saved from ejection only by the fear that cutting it loose would lead to panic in the rest of the periphery.

But today, many government leaders and officials declare the euro crisis over and (albeit less publicly) talk of Greece being "ring fenced".

If an extreme government came to power in Athens, the temptation for some northern European powers to deal with the Greek problem once and for all would be strong.

But this has its own risks. Not only would ejecting Greece trigger a scarcely unimaginable economic collapse in that country, but there is no guarantee that the effect could be ring-fenced as some now believe. Governments have repeatedly miscalculated since the crisis began in 2008.

Ejecting a country from the currency bloc would be a massive economic, financial and political event, and set a dangerous precedent, at least for peripheral countries.

Resolving the Greek problem is fraught with risks and uncertainties. There are no easy options. But sooner or later, very hard choices will have to be made.

Irish Independent