Governments and investors across Europe braced for renewed economic upheaval on Monday after the Parliament in Greece failed to avert an early general election, reviving the toxic debate over austerity as the way to cure the Continent’s economic woes. Senior European Union officials immediately urged Greek voters — now headed to the polls on Jan. 25 — to focus on continuing the policies that have enabled the country to ride out its previous monetary crisis and remain part of the eurozone, and that have begun to restore the country’s battered reputation for fiscal management. But with household incomes down by a third from what they were before the policies were adopted, and unemployment higher than 25 percent, polls have indicated support for Syriza, a leftist party that opposes the deep budget cuts Greece has made in recent years as a condition of financial bailouts.
Syriza has said it wants to renegotiate the two bailouts, worth 240 billion euros, or about $292 billion, obtained from Greek’s so-called troika of lenders — the European Commission, the European Central Bank and the International Monetary Fund — since 2010, and get its creditors to write off some of Greece’s crippling debts.
Greece’s prime minister, Antonis Samaras, has been working with the lenders on a precautionary credit line next year, but negotiations on a tough economic program have been dragging as opposition to austerity has risen.
European leaders immediately began to warn of the possible consequences of a shift in Greek policies. The European Union’s economic commissioner, Pierre Moscovici, warned that a “strong commitment to Europe and broad support among the Greek voters and political leaders for the necessary growth-friendly reform process will be essential for Greece to thrive again within the euro area.” And a top German official warned that continued European aid would be conditional on Greece’s continuing to make major cuts in public services and other changes to control spending.